A separation is never an easy process, and it gets all the more complicated when businesses such as intergenerational farming enterprises are thrown into the property pool mix.
Usually, farming enterprises are legacies that are passed down to each generation and there is a strong attachment to the land. Often these farms are acquired with one party, usually a family member of the farming owners, dedicates their life working long and hard hours on the farm, based on the promise that one day they take over the farm. Not only is there an emotional tie to the farm, which makes the property settlement process difficult, the other difficulty that arises is meeting the non-farming spouse entitlement (such as a cash payment) without selling the farm, as often farmers are asset rich but cash poor and would struggle to meet the non-farming spouses.
It then becomes difficult to explain the harsh reality to clients, that there are no special exceptions, made by a court for farming matters, even if you have spent your whole life living on the farm and working on the farm, it may need to be sold as part of your property settlement.
Prior to 1985 a Court did consider that land used for farming purposes and to produce a living income, were in a separate category to your normal real estate, such as the family home. In Scott v Scott (1977) FLC 90 – 251 Demack SJ held that land used for farming was to be put in a different category to that of the former matrimonial home. At paragraph 7 His Honour said “In my view land which is used for farming purposes and which I essential to the production of an income is in quite a different category from land which simply provides a place for the family home. If the continued availability of the land is essential to one spouse as a place on which to work and produce income, in my opinion, any property order affecting such land should not affect its production capacity or seriously reduce its income producing potential.”
The statement of Demack SJ was also agreed by Asche SJ in Magas & Magas (1980) FLC 90,995, however His Honour further stated at paragraphs 13 and 14 “I would agree, with respect, with what his Honour there says but with this rider: If arrangements can be made which would relieve the spouse who is working a farm as a farmer, from selling the farm but at the same time doing proper justice to the claim of the spouse who is not living on the farm, then of course those arrangements should be made. His Honour, the learned trial judge in this case, has arranged things so far as he can to that end. I appreciate that it is not an ideal situation but few of the cases which come before this court are. and further “If there is no other way to do that which is just and equitable then a sale must take place.”
However, in 1985 the courts historical view as to the treatment of farms shifted to a new direction, following the Full Court Decision made in Lee Steere v Lee Steere [1985]. His Honour stated:
“If there is no other way to do that which is just and equitable then a sale must take place. It becomes an incident of the sad fact that, when two persons separate, property which might have given them together a reasonable competence will not be sufficient for each when divided. That is an inescapable situation and cannot be used as an argument to deprive one party of that to which he or she is otherwise properly entitled.”
“The fact that the subject of property proceedings under sec. 79 is a farm may give rise to considerations as to the way and means by which property division should be effectuated, a matter which will be discussed later, but there is no “farming case” exception to the ordinary principles applicable under sec. 79 of the Act.”
“We must therefore reiterate that in relation to farming properties, as in relation to all other assets be they business assets or suburban land, the ordinary principles of sec. 79 of the Act apply.”
It was further considered in Lee Steere v Lee Steere that section 79(4)(d) already provides, that a court must take into account the effect of any proposed order upon the earning capacity of either party. His Honour stated, “an order which would deprive a party substantial of what he or she is entitled by reason of contribution would not normally be considered just and equitable.”
The courts will now consider farms no differently than any other business would be treated in family law proceedings and no “special consideration” is given when a spouse has inherited or acquired a farm, even if that means the farm is required to be sold.
For example, in the recent decision of Leeming v Estrada [2023] FedCFam C2F 729, the Court considered a 12-year relationship, the Husband was 65 and the Wife was 61 years of age, the parties did not have children however both parties had adult children from previous relationship. At the time of cohabitation, the Husband owned farming land.
The Husband’s evidence at the trial included that his livelihood is as a farmer, an occupation he has held for approximately 45 years, and is tied to the retention of the farming enterprises and the farming land from which it operates and that he will not be able to continue to earn an income if he does not retain the farming land (see paragraph 225). The Husband further contended that the farming land was owned by his family for many decades and there was a strong family connection to the land, which he also wished to continue to pass on through generations (see paragraph 226).
Orders were made for the Wife to transfer her interest in the farming land to the Husband in exchange for a cash payment to enable the Husband to keep the farm. However further Orders were made that if the Husband was unable to pay the Wife her entitlement, then the Farming land would need to be sold. At paragraph 232 it was stated: “It is well established that although a party having owned land prior to cohabitation it is a relevant and important factor, particularly in the case of farming land that has been worked by that party, and owed by their family over an extended period of time, where there is no other way to achieve justice and equity between the parties, that land must be sold.”
In any property matter the Court will broadly look at a five-step process:
- Determine if it is just and equitable to interfere with the parties interests in property;
- Identify the assets, liabilities, and financial resources of the relationship.
- Identify the financial and non-financial contributions of the parties, including initial contributions, contributions made during the relationship and contributions post-separation.
- Assess a range of additional factors (called “future needs” factors) under section 75(2) of the Family Law Act These factors consider the needs of both parties, now and in the future. They include matters such as health, age and who has primary care of the children.
- Consider whether the proposed division is just and equitable in all circumstances.
While the principles set down in Lee Steere v Lee Steere provide that no special consideration is given to farming matters, there are characteristics in farming matters that are taken into consideration through the four-step approach. For example:
- Dealing with the initial contribution – for example, whether the farm existed at the time the parties commenced cohabitation and what the value was of the farm at the time of cohabitation. Another factor considered is whether the contributing spouse also was working as a farmer at that stage and whether he/she had been working on the farm for the entirety of their life reliant upon the promise that they will retain the farm.
For example, in the matter of Casper v Casper [2009] FamCA 989 (15 October 2009) the Court considered a longer marriage of 16 years. During the marriage the parties adopted what is seen as rather traditional style roles, whereby the wife was the primary home maker and carer of the children, and the husband operated the farm and was the primary income earner. On a contribution argument the Judge awarded 70% to the Husband for the weighting of his initial contribution. It was recognized that the Husband had significant assets at the time the parties were married, which comprised of units in a family trust, which were in the form of a farming property. At the time the parties were married the Farm, together with the plant and equipment had a value of close to $2,000,000. The farming property was worth $9,750,000 at the time of the trial, making up majority of the property pool.
Dealing with future factors – for example:
- What are the significant needs at the end of the marriage of each party? Does the party who worked on the farm have any other qualifications that would enable them to find alternate gainful employment? In the alternative, did the non-farmer spouse spend a significant period of time on the farm, which prevented them from pursuing their own career?
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- In comparison to the rest of the property pool, what is the portion of the pool that is made up of the farm – including livestock, land and plant and equipment?
- Does the farming spouse have the capacity to pay the non-farmer spouse their entitlement without forcing the sale of the farm?
Recent Farming Cases:
Cromwell v Cromwell [2006] FamCA1454
Fischer & Fischer [2014] FCCA 1088 (6 June 2014)
How can I protect my farm?
There are some measures you can put into place to protect your farm and family trusts, including entering a Financial Agreement in the early stages of the relationship. For example, if you are looking to bring a family member into a family business, such as a farming enterprise, but do not wish their current spouse to “have a share” if they separate into the future, then a Financial Agreement could assist with how the farm is dealt with in the event of a separation.
It is important for us to inform clients about the courts view on farming matters and the reality of the approach that may be taken if their matter proceeded to a trial.
At Ramsden Family Law, we are committed to guiding individuals through the complexities of the family court system and their property settlements. Our experienced team understands the emotional challenges you may face with your property settlements. Contact us to speak with one of our experienced family lawyers today for specialist farming and rural advice.
AUSTLII SOURCES
Lee Steere v Lee Steere [1985].
Magas & Magas (1980) FLC 90,995
Leeming v Estrada [2023] FedCFam C2F 729
Casper v Casper [2009] FamCA 989 (15 October 2009
