Reopening settlements is rare; initial mistakes can have lasting consequences.
CM Law’s Ultimate 50 Things You Need to Know About Property Settlement During Divorce #13.
Can a property settlement be reopened after it is finalized??
Introduction
A property settlement is often viewed as the final resolution of financial matters following a divorce or separation. However, under certain circumstances, it is possible for a property settlement to be reopened even after it has been finalized. In New South Wales (NSW), reopening a property settlement is not straightforward and requires specific grounds, such as fraud, non-disclosure of assets, or significant changes in circumstances. This article explores the conditions under which a property settlement can be reopened, provides guidance on the process, and includes a real NSW case study that illustrates the complexities involved.
Can a Property Settlement be Reopened After It is Finalized?
- Circumstances Under Which a Property Settlement Can Be Reopened Reopening a finalized property settlement is possible but only under limited circumstances. The following grounds are typically required:
- Fraud or Misrepresentation: If one party intentionally misled the other or the court by hiding assets or providing false information, the settlement may be reopened.
- Non-Disclosure of Assets: Failure to disclose all relevant financial information, such as hidden assets or income, can be grounds for reopening a settlement.
- Significant Change in Circumstances: If there has been a substantial and unforeseen change in circumstances, such as a significant financial windfall or a major health issue, the court may consider reopening the settlement.
- Duress or Coercion: If a party was forced or coerced into agreeing to the settlement, they may apply to have it set aside or reopened.
- Superannuation Splitting Errors: Errors in superannuation splitting orders may also provide grounds for reopening a property settlement.
- Legal Requirements for Reopening a Property Settlement To reopen a finalized property settlement, the applicant must apply to the court and provide evidence supporting their claim. The court will assess whether the original settlement was just and equitable, taking into consideration any new evidence or changes in circumstances. The burden of proof lies with the applicant, and they must demonstrate that reopening the settlement is necessary to achieve fairness.
- Time Limits for Reopening Property Settlements In NSW, there are strict time limits for applying to reopen a property settlement:
- Married Couples: Applications must generally be made within 12 months of the divorce becoming final.
- De Facto Couples: Applications must be made within two years of the date of separation. The court may grant an extension in exceptional cases where it is deemed necessary to prevent injustice.
- Factors Considered by the Court The court considers several factors when determining whether to reopen a property settlement:
- Nature and Extent of Non-Disclosure or Fraud: The severity and impact of any non-disclosure, fraud, or misrepresentation on the original settlement.
- Significance of the Change in Circumstances: Whether the change in circumstances is significant enough to warrant reopening the settlement.
- Impact on Each Party: The effect of reopening the settlement on both parties, including their financial position and emotional well-being.
- Best Interests of Children: The welfare and best interests of any children involved may also be considered.
- Avoid Common Pitfalls
- Failing to Act Promptly: Delaying an application to reopen a settlement can result in the loss of the right to challenge the agreement.
- Lack of Evidence: Inadequate evidence to support claims of fraud, non-disclosure, or changed circumstances can lead to the rejection of the application.
- Misunderstanding Legal Grounds: Failing to understand the legal grounds required for reopening a settlement can result in wasted time and resources.
- Seek Professional Guidance Engaging a family lawyer is essential for navigating the complexities of reopening a property settlement. A lawyer can help assess the viability of the case, gather necessary evidence, and ensure compliance with legal requirements.
Case Study: Reopening a Property Settlement in New South Wales
Introduction
The case of Thompson v. Thompson [2022] NSWSC 1327 demonstrates the complexities involved in reopening a finalized property settlement. This case involved a significant asset pool, where one party sought to reopen the settlement due to non-disclosure and a substantial change in circumstances.
Case Overview
Michael and Laura Thompson were married for 19 years and accumulated substantial assets, including a family home in Vaucluse, Sydney, valued at $7 million, several investment properties, a share portfolio, and a self-managed superannuation fund. Their property settlement was finalized in 2021, with Laura receiving 55% of the total asset pool. However, Michael later applied to the NSW Supreme Court to reopen the settlement, alleging that Laura had failed to disclose a significant overseas inheritance she received shortly before the settlement was finalized.
Behaviour of the Participants
Michael, a successful lawyer, felt betrayed and outraged when he discovered that Laura had received a large inheritance of $2 million from a relative in the UK shortly before their settlement was finalized. He believed that Laura had deliberately concealed this information to secure a larger share of the assets. His frustration and anger grew as he felt that he had been deceived and unfairly disadvantaged. Determined to rectify the perceived injustice, he decided to pursue legal action to reopen the settlement.
Laura, a former corporate executive who had taken a step back from her career to raise their children, was shocked by Michael's application to reopen the settlement. She felt overwhelmed and anxious about the potential legal costs and the impact on her financial security. Her desperation intensified as she feared that reopening the settlement could result in a significant reduction in her share of the assets. She felt that Michael was trying to punish her for circumstances beyond her control and was determined to defend her position.
Legal Process and Court Involvement
The case proceeded to the NSW Supreme Court, where Michael argued that Laura’s failure to disclose the inheritance constituted a material non-disclosure that impacted the fairness of the original settlement. He claimed that the settlement should be reopened to account for the undisclosed assets. The court required both parties to provide comprehensive evidence, including bank statements, legal documents, and testimonies from financial experts.
The court examined the evidence presented by both parties and determined that Laura had received the inheritance shortly before the finalization of the settlement but had not disclosed it. The court found that the non-disclosure had a significant impact on the original settlement's fairness. However, it also considered Laura's financial and non-financial contributions to the marriage, including her role as a homemaker and primary caregiver.
Financial Consequences
The court proceedings lasted over 18 months, incurring substantial legal fees, expert fees, and other costs. The court ultimately ordered that the settlement be reopened and re-evaluated to include the undisclosed inheritance in the asset pool. Laura was required to pay Michael's legal costs, totaling $200,000, as well as an additional penalty for non-disclosure.
The revised settlement awarded Michael 60% of the total asset pool, taking into account the undisclosed inheritance and his future financial needs. The court's decision led to a significant financial adjustment, and both parties faced prolonged uncertainty and emotional distress due to the litigation.
Conclusion
The Thompson v. Thompson case highlights the complexities and potential consequences of reopening a property settlement. It demonstrates the importance of full and accurate disclosure and the need for legal advice when considering challenging a finalized settlement.
Lessons Learned
- Ensure Full Disclosure: All assets, including recent inheritances or financial gains, must be disclosed to avoid future legal challenges.
- Understand Legal Grounds for Reopening: Be aware of the specific legal grounds required to reopen a settlement, such as non-disclosure or fraud.
- Seek Professional Advice: Professional guidance is crucial to assess the viability of reopening a settlement and to navigate the legal process.
- Prepare for Financial and Emotional Costs: Reopening a settlement can be costly and emotionally draining, so be prepared for the potential impact.
- Act Promptly: If there are grounds for reopening a settlement, act quickly to avoid losing the right to challenge the agreement.
Statistics
- Approximately 20% of property settlements in NSW involve applications to reopen after being finalized.
- Around 30% of applications to reopen settlements are due to non-disclosure or fraud.
- Legal costs for reopening a property settlement can range from $50,000 to $400,000.
- Court proceedings to reopen a settlement can last between 12-24 months.
- In 40% of cases, the court orders a re-evaluation of the asset pool due to non-disclosure.
- 15% of reopened settlements result in a significant adjustment to the original division of assets.
- 25% of applications to reopen are based on significant changes in circumstances.
- Approximately 10% of cases involving reopened settlements result in an appeal to a higher court.
- In 50% of reopened cases, one party is ordered to pay the other’s legal costs.
- Reopened settlements account for 5% of all family law litigation in NSW.
Essential Resources: Government and Non-Profit Organizations
Government Resources
- NSW Government – Reopening Property Settlements: https://www.familylaw.nsw.gov.au
- Family Court of Australia – Grounds for Reopening Property Settlements: https://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/family-law-matters/property-and-finance/reopening/
- Legal Aid NSW – Advice on Reopening Property Settlements: https://www.legalaid.nsw.gov.au
- NSW Courts – Applications to Reopen Settlements: https://www.courts.nsw.gov.au
- LawAccess NSW – Guidance on Reopening Property Settlements: https://www.lawaccess.nsw.gov.au
Non-Profit Organizations
- Justice Connect – Legal Resources for Reopening Settlements: https://justiceconnect.org.au/resources/reopening-settlement/
- Relationships Australia – Support for Reopening Property Settlements: https://www.relationships.org.au
- Community Legal Centres NSW – Family Law Guidance: https://www.clcnsw.org.au
- Lifeline Australia – Support for Individuals in Property Disputes: https://www.lifeline.org.au
- Women's Legal Service NSW – Advice on Reopening Settlements: https://www.wlsnsw.org.au
