When negotiating a property settlement, all kinds of assets and liabilities are first placed on a balance sheet to create the so-called marital pool, which can then be fairly divided between the spouses. Assets can include everything from the family home, investment properties, cash and valuables, superannuation, as well as intangibles like shares and other investments – nowadays, including cryptocurrencies. But what happens if a splitting couple agrees to divide assets a particular way, and then down the track, the value of one parties’ share of assets dramatically falls?
This situation was recently raised in the UK by a divorcee who sought advice from a Financial Times columnist on whether he could reopen his property settlement due to having taken crypto as part of his share of assets, only to find he lost it all in the recent “Crypto Winter” crash.
The letter writer asked:
“I got divorced last year and as part of the financial agreement, my ex-wife and I agreed that I would keep my cryptocurrency assets while she got the lion’s share of my pension and other investments, and we split the family home. When we negotiated last autumn, the crypto market was riding high and I was convinced it would go higher still, but following the recent crash my digital assets have more than halved in value. I’m now considerably worse off than my ex and worried about my financial future. She says I only have myself to blame and won’t discuss the matter further. Can I go to court to renegotiate our financial order?”
The Financial Times advised the letter writer that it was unlikely that the courts would allow him to revisit his property settlement in these circumstances. The reason is simple: as is the case in Australia, courts are very reluctant to reopen a property settlement simply because values of assets have changed.
Here, although it’s possible to apply to reopen a property settlement once it is finalised, under a section 79A application in the Federal Circuit and Family Court of Australia, there are very limited circumstances in which you can apply for this to occur.
Courts do have the discretionary power to review, correct or alter judgments at any time until court orders have been “perfected”. This discretion is guided by the interests of justice, both for the individuals involved, and because it is in the public interest to ensure the finality of litigation.
The grounds set out in section 79A cover situations where there has been a potential miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose), or the giving of false evidence.
But parties can’t simply re-litigate every time the value of their assets changes, post-property settlement. For instance, a home or investment property might change in value dramatically after orders are made. However, the courts make an assumption (unless there is evidence otherwise) that values are fixed at a certain date and the courts deliberately ignore the economic or other circumstances that may exist which might influence property values.
As such, applications to reopen property settlements will fail if they are only premised on the idea that a division of assets is unfair due to external factors having impacted their value.
Applications to reopen property settlements have been unsuccessful even when people have sought to change final property orders on the basis that their financial circumstances have changed substantially due to major international economic events like the Global Financial Crisis or the COVID pandemic.
Aside from real property, other assets are similarly subject to fluctuating values. For instance, shares and other investments, including cryptocurrency. However, again, you can’t return to court every time your Bitcoin changes value after your property settlement is finalised.
If you have higher risk assets to split
If risky assets will form part of your marital pool, it’s a very good idea to see a financial advisor as well as a family lawyer when negotiating a property settlement.
Much will come down to how the assets are valued in the first place, making accurate valuation a critical step. In valuing higher risk assets like crypto, a careful risk assessment should be undertaken to consider the volatility or stability of the asset, any issues with liquidity, future prospects for growth or income and each party’s risk appetite. It’s also vital to get the right financial advice on the tax implications of your proposed asset split, whether you decide to sell the investments and divide the proceeds, or split the investment holdings equally.
As far as applications to set aside final property orders go, they can be difficult to argue due to the defined circumstances in which you can apply and it is therefore crucial to obtain legal advice first, if considering attempting to make an application in the courts, to ensure such action would be commercial. The danger is that if the application fails, you could be liable for the other party’s legal costs as well as your own.
If you need help with a property settlement or any other family law matter, please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.