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Identifying the Assets and Liabilities in a Property Settlement and the Way in Which Loans From Parents May Be Treated by the Court

In a property settlement, the Court will adopt a four-step approach to determine what adjustment of property is appropriate in a particular matter. In the first step, the Court must identify and value the property, assets, financial resources and liabilities. That is, the Court identifies and values all the property of the marriage, less the debts of the marriage. All property, assets and debts are included in this marital asset pool which is available for distribution. It does not matter whose name the asset or debt is in or how the asset or debt was acquired.

In the case off Biltoft (1995), it was held that in relation to applications pursuant to the provisions of section 79 of the Family Law Act 1975, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset.

In some cases it is difficult for the net assets to be appropriately identified as parties may disagree in relation to values for certain assets and liabilities. Sometimes parties will argue that certain assets and liabilities do not exist and cannot form part of the asset pool or that they should not be included in the pool of assets at all.

The assessment of debts and liabilities for example is not necessarily arrived at by a strictly mathematical approach in all cases. While some liabilities are charges upon property which can be accurately assessed at a certain date, other liabilities are at large or have not been precisely determined or are contingent such as tax debts.

Some debts can be disregarded by the Court for example where the Court concludes that the alleged liability is unlikely to be called upon or if it is vague or uncertain or if it is unlikely to be enforced or if it was unreasonably incurred.

An example where a Court may disregard a debt is a loan from a parent of a party to a property settlement. In a recent case, Helen Irga, lawyer of our firm was involved in a case where the other party alleged that they were loaned a certain sum of money by their parents, however, there was no evidence of any of these monies being repaid by the other party nor did a loan agreement exist specifying the terms of the loan, how any loan repayments were to be made and who was able to make a demand for the loan to be repaid. The Court ultimately disregarded these monies as a liability in the asset pool.

It is also important to note that what may be determined to be a liability in one matter may not necessarily be considered a liability in another. Each case will be assessed having regard to its unique set of circumstances. If you are uncertain in relation to a particular liability or liabilities or are uncertain of how to ascertain what your assets and liabilities are, Doolan Callaghan Family Lawyers are able to answer your questions and assist you to obtain the information you require to understand your property settlement entitlements.

One Response

  1. Hello Helen,

    What legal document I need to proof the debt in the asset pool exist if my parents expect me to pay them back two houses’ deposit they paid for me ? We did not have written documents that time but we have land registry transaction record that I bought from my parents at a discount price and I only take out bank loan of 70% of the total price of the property. Can we ask solicitor to write a request of debt payment now from my parents to me now so that I have a proper proof of the debt to be added back to the asset pool?

    Your suggestions and comments appreciated.

    Thank you in advance.


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