Identifying and Valuing the Asset Pool

The court must identify and value the property of the parties or either of them before making orders altering the property interests of the parties under s 79(1) or s 90SM(1) of the Family Law Act (“FLA”). All of the parties’ property or the property of either of them must be taken into account. The property vested in a party’s trustee in bankruptcy must also be taken into account. If the court is unable to identify all of the parties’ property, or either of them, or that of a party’s trustee in bankruptcy, then it is unlikely that the court will be satisfied that the orders sought are “just and equitable.” This would be fatal to an application for an order under s 79(1) or s 90SM(1).

Once all relevant property has been identified, the court must then value that property. This is generally a two-fold process. First, the court will deduct the value of any encumbrances from the value of the property over which they are secured. This will result in the court’s determination of the net asset pool. The second element of this process involves deducting the value of all unsecured liabilities from the value of the net asset pool.

There are, however, circumstances where the court may disregard unsecured liabilities. Examples of when this may occur are when:

• The liability is unlikely to be enforced (e.g., a loan from a family member);
• The liability is unconnected to the parties’ relationship (e.g., a tax liability incurred post-separation in relation to income that was both earned by and used for the sole benefit of the party that incurred the liability); or
• The liability was unreasonably incurred.