Sunday, January 15, 2012

The erosion principle in a short marriage

There is a principle in law known as the erosion principle, which means that over time the value of the initial contribution reduces and the contribution of the other person increases.
The “erosion principle” later evolved as follows In a Pierce v Pierce (1999) FLC 92-844
This case involved a 12 year relationship with 2 children.  The husband made a significant contribution at the commencement of the relationship.  At the date of trial, the pool was $320,000.  The largest asset of the parties was the former matrimonial home, of which most of its value could be apportioned to funds initially contributed by the husband.
The trial judge found that the parties had contributed equally throughout the marriage and that the husband’s initial contribution had diminished such that his entitlement should only be 55/45 on the basis of contributions with no adjustment for section 75(2) factors.
While on appeal it was agreed that it was acceptable for the trial judge to have found equal contributions during the relationship, the trial judge’s conclusion that the initial contributions were diminished such that his entitlement should only be 55/45 was not accepted.
The Full Court held that the trial judge had not given proper weight to the husband’s initial contributions.  Rather than speaking in terms of “erosion” of his contribution, Ellis, Baker and O’Ryan JJ stated:
“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached in all the circumstances to an initial contribution.  It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and wife.  In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.”
The Full Court found that despite the length of the relationship (12 years), the initial contribution formed a major portion of the post separation pool.  The adjustment of 5% in favour of the husband was increased to an adjustment of 70/30 on the basis of contributions, with a further adjustment under section 75(2) of the Act to take the husband’s entitlements to 75% overall.
Initial Contributions in Short Relationships  Bearing those principles in mind, there are no hard and fast rules in relation to how initial contributions will be treated in short relationships.  However, it is clear that in a short relationship, initial contributions are likely to hold much greater weight in the circumstances than in a longer relationship.  This is because there is simply less time for the non-contributor to “off-set” a larger initial contribution made by the other party

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