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When a relationship breaks down, people often assume their assets will be divided simply according to legal ownership. However, a fair asset division commonly involves greater complexity, especially where families have trusts, companies, informal loans, shared expectations, or financial help from parents.
Before the court decides how or if assets should be divided, it must first identify what assets (described as 'property') are available to divide. The principles of equity and equitable doctrines can be critically important during this task.
What does 'equity' mean in family law?
Equity is a body of law created to supplement common and statutory law. Its purpose is to ensure fairness or prevent unconscionable conduct when strict application of the common or statutory law may result in an injustice.
In family law, equitable claims can affect whether certain assets are included for division between the parties at all.
While equity seeks to achieve a fair outcome, it is not concerned with general predispositions of fairness or sympathy. The law will only intervene if specific legal requirements or key elements are met. Simply feeling that something is unfair is insufficient.
Common equitable claims
Some of the more common equitable doctrines that arise in family law include:
- Constructive trusts, where one person has made significant financial or non-financial contributions to property held in another person's name, and it would be unconscionable for the legal owner to deny their interest.
- Equitable estoppel, where one person makes a clear promise or encourages an expectation (for example, 'this will be yours one day'), another relies on and suffers a real detriment as a result.
- Resulting trusts, which can arise where one person pays for or provides funds to purchase an asset, but it is registered in someone else's name.
- Undue influence or unconscionable conduct, where one party essentially takes advantage of another's vulnerability to secure a transaction or agreement.
Each of these claims have strict elements that must be proven with evidence. The circumstances are unique to each family.
Why informal family arrangements often cause problems
Many disputes arise from handshake deals, family understandings, or assumptions about future inheritances. For example, adult children can often work for years in a family business on an assumption that they will inherit or retain the business later, or parents can advance funds believing that it is 'understood' how it will be treated later.
When relationships break down, memories differ and expectations collide. Without clear evidence, these disputes can become difficult, expensive, and emotionally charged. Particularly where parents, trusts, or companies are involved. They need to be carefully considered by experts.
The importance of evidence and proper preparation
Equitable claims usually require formal pleadings, which are detailed court documents that clearly set out the legal basis of the claim and the material facts relied upon. Courts take a strict approach to these types of claims. Vague allegations or poorly prepared cases may be struck out, sometimes with serious cost and other consequences.
Strong evidence is essential. What evidence depends on the particular case, however, may include bank records, emails or text messages, documents showing contributions, or proof that important life decisions were made in reliance on a promise.
What this means for you
Equitable claims can significantly affect what property is available to be divided in a family law matter. However, they are complex, fact-specific, and risky if pursued without proper advice.
If your situation involves property held by others, family trusts, informal loans, or promises about future ownership, early specialist advice is essential. Careful assessment at the outset can help avoid unnecessary cost, delay, and disappointment later.
Need advice tailored to your circumstances?
The family law team at Barry Nilsson can help you understand where you stand and what steps to take next. We invite you to get in touch to arrange a confidential initial discussion.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
