The Facts
Wife buys winning lottery ticket after separating from husband
The couple had been married for 20 years at the time of separation in July 2008. They had two adult children and owned real estate together.
In early 2009, six months after they had separated and while they were still negotiating the terms of the property settlement between them, the wife purchased a lottery ticket and won $6 million.
The husband contended that the wife had purchased the lottery ticket with “joint funds”, he had therefore contributed to the winnings and they should be considered a joint asset of the marriage. The husband sought 50% of his ex-wife’s lottery winnings.
The wife disagreed, and the matter came before the Family Court for a determination on this and other matters that were in dispute between the couple.
Trial judge divides parties’ assets into two pools
At trial, Her Honour Judge Stevenson divided the parties’ property into two pools.
Pool 1 consisted of the parties’ asset pool at the time of separation, which had a net value of $2,437,990. Pool 2 consisted of the wife’s winnings and assets derived post-separation. This pool by that time had a net value of $3,368,530.
Her Honour divided Pool 1 equally (50:50), with each party receiving approximately $1.2 million.
Her Honour determined that although the husband made no contribution to the post-separation winnings, he was entitled to $500,000 or 10% of Pool 2 (90:10) due to factors such as the large disparity in the parties’ financial resources and the husband’s limited employment.
The husband appealed this decision to the Full Court of the Family Court.
Expert commentary on the court's decision
Full Court of the Family Court dismisses husband’s appeal
In the case Eufrosin & Eufrosin [2014] FamCAFC 191, the appeal court rejected the husband’s claim that because the winning ticket had been purchased with joint funds, the winnings should form part of a combined asset pool. The source of the funds was found to be irrelevant.
Instead, the court found what was relevant was the nature of the parties’ relationship at the time the lottery ticket was purchased. At that time, the marriage had dissolved, the parties had separate finances and there was no longer a common use of property. Rather, the parties were using funds for their respective individual purchases.
This led the court to determine that the lottery win post-separation should be excluded from the total net asset pool and that it was appropriate in this case to have a two-pool approach to the assets available for distribution.
Initial contribution to the marriage
The court considered the husband’s claim to “at least 66%” of the matrimonial assets, based on his assertion that he owned unencumbered properties at the time of the marriage.
This assertion was undermined by evidence that the properties had been used to secure loans for other property purchases prior to the marriage, as well as by the husband’s failure to produce any evidence that the properties were unencumbered at the time of the marriage.
Further, the court noted that when determining the asset split, weight must be given to a contribution which a party makes shortly before a separation. However, less weight is given to a contribution made by one of the parties early in the cohabitation period of a long marriage, particularly where the contribution has gone into the parties’ assets or been used in the payment of family expenses.
Responsibility for the business and claims of unexplained expenditure
The court disagreed with the husband’s contention that there was no option but to sell the business. The court found that the husband had had sole responsibility for the business up until the trial, that there was no evidence the business could not be sold and that the trial judge was correct in deciding the husband should retain the business.
With regard to conflicting claims of unexplained expenditure, the appeal found that there had been no error on the part of the trial judge.
Noting that add-backs of the type proposed by the husband were the exception rather than the rule, the court found that the adjustment of $500,000 made by the trial judge in favour of the husband was appropriate in light of the husband’s future earning capacity and the difference between the parties’ financial resources.
This adjustment was in keeping with section 75(2) of the Family Law Act.
Husband required to pay wife’s costs of the appeal
Section 117 of the Family Law Act states that subject to other sections of the Act, each party to proceedings under the Act shall bear his or her own costs.
The court decided that there were two reasons why the husband should pay the wife’s costs of the appeal.
The first was the sum of $1.2 million which the husband had received as a result of the trial judge’s orders (including a substantial cash payment from the wife). The second was the fact that the husband had been wholly unsuccessful on every ground of his appeal.
Given that the costs of the appeal would have been substantial, the husband harmed his own financial position by pursuing the appeal – the opposite of what he was trying to achieve by going back to court.
It comes back to the old principle: avoid litigation if you possibly can, because court outcomes can be unpredictable.
Factors taken into consideration when determining just and equitable orders
The case Eufrosin & Eufrosin is an example of the court dealing with the division of the property of a marriage at the time of the hearing, and in particular, the court taking into consideration the circumstances of each individual case before it.
Many factors are taken into consideration when determining just and equitable orders and often include a number of discretionary assessments and judgment of many components of contribution, only some of which are capable of measurement in money terms.
Section 79 of the Family Law Act allows for the essential task of assessing the nature, form and extent of the contributions of all types made by each of the parties within the context of their particular relationship.