Initial contributions are the assets and sometimes liabilities that a party had when they entered a relationship. This could be real property, savings, shares and superannuation, or it could be a credit card debt or mortgage.
Assessing initial contributions is complex. There is no specific formula that stipulates how a Court should deal with these contributions in a property settlement.
The Court needs to consider initial contributions on a case by case basis. There are various factors to determine how they should impact the division of property:
- The nature of the asset. If a party owned a property at the commencement of the relationship, this would be a more significant initial contribution than owning a car, given the general principle that the value of real estate increases while the value of a car depreciates.
- The percentage of the asset pool that the initial contribution represents.
- The growth of the asset pool attributable to the initial contribution, which includes whether that growth was due to market forces or efforts of the parties. An initial contribution would be given greater weight if it has contributed to the growth of the asset pool, particularly where the growth was due to the effort of that party.
- Whether the other party maintained the assets, often through property repairs and maintenance.
- Whether the parties have children to the relationship.
- The length of the relationship. Historically, the shorter the relationship, the greater the weight given to initial contributions.
It is quite uncommon and only in specific circumstances, often in very short relationships, that the Court would embark on a dollar for dollar exercise of "reimbursing" parties for their initial contributions from the asset pool. Usually, the Court would take a "global" approach where the asset pool is figuratively grouped together and split between the parties on the basis of a percentage.
The primary approaches for assessing initial contributions have historically been the erosion versus the springboard principle.
The springboard principle refers to an assessment of initial contributions that have "springboarded" the asset pool to its present value. Under this principle, additional weight is given to reflect that the asset pool would not be what it is without the initial contribution.
The erosion principle says that as a relationship goes on, the weight placed on initial contributions erodes over time by the contributions of the other party during the relationship.
Nowadays, the Court is tending to move away from special treatment of initial contributions and taking a more holistic assessment. The Court makes their determination following a detailed assessment of a variety of contributions in a long relationship.
If a relationship is short enough, the Court might adopt an asset by asset approach. However, a short marriage does not automatically require that an asset by asset approach be taken.
Circumstances where the asset by asset approach may be more suitable are where parties have maintained distinctly separate assets and liabilities, or where there have been substantial post separation contributions.
The key takeaways here are that the Court will consider all aspects of a matter so parties should not get hung up on any one contribution, and it is usually not sufficient to rely on initial contributions alone.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.