If I Receive Money After We Separate Will It Affect My Property Settlement?

The Husband and Wife were married for over twenty years, separating in July 2008. At the time they separated they had net assets.

Including a number of real estate and business interests, totalling approximately $2.4 million. The Husband continued to conduct and control the business interests after separation.

In early 2009, approximately six months after separation, the Wife won $6 million from a lottery ticket she purchased with her sister. The Wife retained $5 million from the lottery winnings and her sister retained the other $1 million. The Husband sought to have the lottery winnings received by the Wife included in the pool of assets to be divided between the parties. The Husband argued that the funds used to purchase the lottery ticket came from joint marital funds.

The Wife argued that the assets of the parties should be divided into two pools, the first pool comprising the assets and liabilities that existed at the time of separation and the second pool comprising the assets she had acquired with the proceeds of her lottery winnings. The Wife argued that the Husband had made no contribution to the lottery winnings, being the second pool of assets, and that there were sufficient assets in the first pool to satisfy the Husband’s property settlement entitlement under the Family Law Act 1975.

Was the lottery ticket purchased from joint funds?

The trial Judge carefully considered the issue of the lottery winnings. In relation to the Husband’s argument that the money to purchase the lottery ticket came from joint marital funds, the Court held:

“A significant issue in the proceedings was whether the husband made any contribution to the $5 million the Wife received from the gambling win. As noted, the wife had available funds from four sources when she purchased the winning ticket. The money could have come from funds provided by [the wife’s sister], money paid to her by [the parties’ business] and debited to her loan account, her own tax refund of $6,000.00 or an unquantified sum being the return of [the parties son’s] school fees. The money used by the wife to purchase the winning ticket could have come from any one of these sources or multiple combinations thereof. It is thus impossible to identify the precise source of the funds used by the wife to purchase the winning ticket. In my view, the husband cannot simply assert that the purchase money came from “joint funds”.”

The Court further noted:

“I am also mindful of the fact that the wife purchased the winning ticket six months after the parties’ separation.”

The Court ultimately accepted the Wife’s argument that the assets should be split into two pools; Pool 1 being the assets that existed at the time of separation and Pool 2 being the assets acquired by the wife from her lottery winnings.

What contributions did the husband and wife make to the assets?

The Court then considered the contributions made by the Husband and Wife to the Pool 1 and Pool 2 assets. In relation to the Pool 1 assets, the Court held:

“The parties cohabited for approximately twenty years and adopted traditional roles of principal breadwinner and primary homemaker and child carer.”

“…it seems to me that the complementary roles adopted by the parties and their resulting contributions weigh equally against each other. I thus find that the parties contributed equally to the net Pool 1 assets.”

In relation to the Pool 2 assets the Court held:

“I have found that the husband made no contribution to the purchase price of the winning gambling ticket. Nothing in the evidence suggested that he made a contribution of any other kind to the assets which comprise Pool 2. I thus find that the husband made no contribution to the net Pool 2 assets.”

Should there be any adjustment because the wife has retained the lottery winnings?

After determining contributions, the Court then considered each party’s future needs under s75(2) Family Law Act 1975, finding:

“It seems to me that the large disparity in the parties’ financial resources warrants an adjustment in favour of the husband from the net Pool 2 assets. He is 62 years old and must have a limited future working life.”

“In the circumstances of this case, I will make an adjustment in favour of the husband of $500,000.00 on account of s75(2) factors. That amount, in my view, will constitute a real recognition of his future needs but also take into account my finding that he made no contribution to the net Pool 2 assets.”

The Court ultimately held that the Pool 1 assets be divided equally between the parties, that the Husband receive the additional sum of $500,000.00 on account of the Pool 2 assets held by the Wife and that the Wife otherwise retain the balance of the Pool 2 assets.

The Husband appealed the decision on a number of grounds, including the trial Judge’s treatment of the lottery winnings.

The Full Court re-considers the husband’s contribution to the lottery winnings;

The appeal was heard by the Full Court of the Family Court. On the issue of the lottery winnings, the Full Court commented:

“We do not consider the source of the funds to be as relevant to her Honour’s ultimate determination as the husband contends. Nor do we consider that her Honour erred in determining that the husband did not contribute to the winnings.”

The Full Court ultimately upheld the decision of the trial Judge, stating:

“What is relevant, in our view, is the nature of the parties’ relationship at the time the lottery ticket was purchased….At the time the wife purchased the ticket, regardless of the source of the funds, the “joint endeavour” that had been the parties’ marriage had dissolved; there was no longer a “common use” of property. Rather, the parties were applying funds for their respective individual purposes.”

“We can see no merit in the challenge mounted to her Honour’s treatment of the lottery winnings.”

The Full Court dismissed the Husband’s appeal and the Orders of the trial Judge remained.

The significance of this case:

The receipt by one party of substantial funds after separation, such as lottery winnings or other windfalls, raises unique and important issues and the Courts will carefully consider how such funds should be treated as part of a property settlement.

Where the couple have clearly separated their finances and are leading separate lives it is unlikely that a party will be seen to have contributed to additional money received by the other. Where the separation of finances is not as complete or the funds are received as the result of a continuation of a joint enterprise then the treatment of those funds may be very different. In either scenario, consideration of the additional funds as a significant financial resource remains important and if they do not form part of the main asset pool to be divided there may still be an adjustment to the other party on account of that party having greater future needs.

If this situation is relevant to your circumstances or you would like further information please contact our family law team.