Section 79 of the Family Law Act 1975 (“the Act”) empowers the Federal Circuit and Family Court of Australia (“FCFCOA”) to make orders altering property interests between parties following the breakdown of a marriage. In these proceedings, there are a growing number of cases where one or both parties have an interest in digital assets, particularly cryptocurrency. Subsequently, the ownership of cryptocurrency has posed legal and practical challenges to the Court’s ability to make orders affecting a just and equitable division of matrimonial property.
Are digital assets “Property”?
Section 4(1) of the Act defines property as interests to which parties are entitled, ‘whether in possession or reversion.’[1]
Despite conceptual difficulties, family courts internationally, including the FCFCOA, have treated cryptocurrency as ‘obviously relationship property assets’ that make up the property pool and capable of division.[2]
Disclosure
To examine whether it is just and equitable to alter property interests, the Court must first establish the existing property pool of the parties which involves full and frank disclosure of assets by the parties.
If parties are determined to hide crypto assets, they may hide the digital trail by ‘mixing services’ or using ‘privacy coins,’ which offer higher levels of anonymity by way of ‘hidden transactions, no public blockchain, untraceable wallets and decoy coins.’[3]
The Australian case, Rasheem v Rasheem, concerning the financial capacity of the husband to pay spousal maintenance under sections 72, 74 and 83 of the Act, involved claims that the husband had hidden and failed to disclose significant cryptocurrency investments.[4] The FCFCOA found that, on the balance of evidence presented by the wife, the husband had significant cryptocurrency assets that he had not properly disclosed and thus sufficient funds to pay spousal maintenance.[5] Because of the nature of that application, the Court was not required to find an accurate valuation of the asset, though the evidence indicated the initial cryptocurrency investments had increased in value significantly.[6] The valuation of the asset would have posed significant difficulties given the husband’s non-disclosure.
Just and equitable adjustment of Property Interests
There are various types of orders the Court can make to achieve a just and equitable outcome in property division involving crypto assets. The following list of options is not comprehensive.
A. Sell the crypto assets
The Court may order that the crypto asset be sold and the proceeds split appropriately between the parties.
B. Add-back
The Court may “add-back” the value of an asset where:
a. the parties have expended money on legal fees;
b. there has been a premature distribution of matrimonial assets; and
c. there has been “waste”, meaning a wanton, negligent or reckless dissipation of funds.[7]
Add-backs are ‘exceptional’. The FCFCOA may make an order for an add-back where the cryptocurrency investment has failed and caused dissipation of assets.[8]
In Powell v Christensen, the de facto husband was found to have purchased cryptocurrency on behalf of the parties’ joint business for around $75,000.00. Despite arguing that the value of the cryptocurrency had decreased, the husband provided no disclosure that corroborated this claim. The FCA found that, where inadequate disclosure as to current value has been provided, the Court ‘should not be unduly cautious in inferring that the best evidence of value is that of the purchase price.’[9] The Court thus found it just and equitable to treat the $75,000.00 purchase price as an add-back in the de facto wife’s favour. This was just and equitable because the de facto husband had expended and lost funds in the failed investment.[10]
Similarly, in Jamieson v Jamieson (No 2), the husband alleged that he had lost a large sum of funds on cryptocurrency investments. He provided no disclosure regarding this and claimed he had no recollection in relation to which online broker he had deposited the funds. On the evidence, it was found that the sum of approximately $630,000.00 was withdrawn from his bank account and, allegedly, used to settle the debt. The FCFCOA made adverse findings against the husband for his lack of disclosure and deliberate attempts to retain and conceal funds, and the figure was treated as an add-back.[11]
C. Joint Ownership
Extraordinarily, the New Zealand Family Court in Beck v Wilkerson made an Order that cryptocurrency owned by one party to the relationship would be owned jointly and equally between the parties.[12] In some respects, this seems to be a preferable outcome in that it does not require valuation or even disclosure of the cryptocurrency addresses, which I have shown to be the major issues.
However, this decision has not, and is perhaps unlikely to be, followed in Australia. Firstly, section 81 of the Act sets out the Court’s duty to, as far as practicable, make such orders that will end the financial relationships between the parties on a final basis.[13]
In the Australian case of Chaves v Chaves, the Court considered submissions regarding a digital wallet of Bitcoins which both parties claimed they could not access. Loughnan J simply declined to make an order (albeit interim) regarding the wallet.[14]
Conclusion
Clearly, apart from the classification of digital assets as “property,” the law surrounding treatment of digital assets in section 79 proceedings is inconclusive and unsettled. The issues of disclosure and valuation continue to remain the main obstacle in effecting an efficient, just and equitable division of matrimonial property interests.
Written by Fiona Kennedy and Piper Frederickson
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[1] Family Law Act 1975 (Cth) s 4(1).
[2] Beck v Wilkerson [2019] NZFC 9883 (Ryan J).
[3] Andrew Childs, ‘How Cryptomarket Communities Navigate Marketplace Structures, Risk Perceptions and Ideologies Amid Evolving Cryptocurrency Practices’ (2023) Criminology & Criminal Justice 1, 3.
[4] Rasheem v Rasheem [2022] FedCFamC1F 248.
[5] Ibid [26] (Altobelli J).
[6] Ibid [23] (Altobelli J).
[7] Trevi v Trevi [2018] FamCAFC 173, [27] (Murphy J).
[8] See, eg, Fallins v Fallins [2022] FedCFamC1F 495.
[9] Powell v Christensen [2020] FamCA 944, [291] (Gill J).
[10] Ibid.
[11] Jamieson v Jamieson (No 2) [2024] FedCFamC1F 18.
[12] Beck v Wilkerson [2019] NZFC 9883.
[13] Family Law Act 1975 (Cth) s 81.
[14] Chaves v Chaves [2019] FamCA 1022, [43] (Loughnan J).