When looking at a property pool, the Family Law Courts will usually consider all the parties’ assets and liabilities at the time of the hearing.
The Family Law Courts also have the ability to add property onto the balance sheet and identify joint assets that may have been wasted by one or more of the parties.
What is an Add-Back?
An add-back is a notional adjustment to an asset pool to treat an asset as though it still exists. Add-backs have been utilised by Family Law Courts to remedy a matter where a party has expended or used assets that would have otherwise formed part of the property pool. The ability for a Court to add back an asset to the balance sheet, prevents one party from benefiting unfairly from their choice to deplete or transfer an asset.
The three main categories established by case law include payment of legal fees, premature distribution of joint assets and wastage.
In the case of Trevi & Trevi [2018] FamCAFC 173, the Court determined that add-backs were not the norm and only to be applied in exceptional situations where justice and equity require it.
If the Court determines that if an expenditure does not meet the exceptional circumstance threshold, that expenditure may still be considered as a relevant factor when determining a just division of the assets.
The source and timing of the funds are also relevant considerations. If the funds were acquired by a party through their own efforts after separation, such as post-separation earnings or wages, these amounts are generally not included as an add-back in the asset pool for division.
What is Wastage?
In family law, wastage is a term that refers to situation where a party has reduced the value or dissipated joint assets in a deliberate, reckless, malicious or negligent manner.
Examples of situations that can be classified as wastage include gambling significant assets, selling assets below market value without justification for doing so and unreasonable expenditure of joint assets.
In the case of Kowaliw & Kowaliw (1981) FLC 91-092 the Court considered the behaviour of the husband that caused detriment to the joint asset pool including allowing a prospective purchaser of the matrimonial home live in that home rent free for 12 months and incurring business losses due to negligent and reckless conduct. The Court found that the actions of the husband amounted to wastage, reducing the value of the assets and the Court notionally added back the value of those wasted assets.
Issues arising from wastage and add-backs are complex areas of law which require specialised legal advice. If you have separated from your partner and would like advice regarding your property matter, please contact our firm to make an appointment with one of our family lawyers on (02) 4944 3322.
