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  • Gabriella Ferraro

Is your spouse purposely or recklessly disposing of assets?

Written by Dannielle Wright

In determining how to divide property of a marriage, or de-facto relationship, the Court considers many factors in their decision of dividing assets between parties. To ensure outcomes are just and equitable, the concept of add backs has been established to address situations where one party has recklessly, negligently or wantonly dissipated the assets available for distribution for their own benefit.

Concept of Wastage & Add Backs

The concept of “recklessly, negligently or wantonly” stems from the matter of Kowaliw & Kawaliw (1981) FCL 91-092 (“Kawaliw”). In this case, the Husband incurred a number of financial losses by permitting a third party to reside in the former matrimonial home, rent-free and without any contribution to outgoings for a 12-month period. Consequently, the parties were left with significant arrears in outgoings and an increase in their mortgage.

The Court held that the Husband had “embarked on a course of conduct designed to reduce or minimise the effective value or worth of the matrimonial assets.” The Court acknowledged that generally, financial loss incurred during the marriage should be borne by both parties, except in circumstances whereby one party has committed an act designed to reduce the assets or where they “acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduce or minimised their value.

Types of Add-Backs

As indicated in the matter of Kawaliw, add backs can encompass a range of actions or expenses that have unfairly reduced the value of shared assets. These commonly include:

  1. Excessive gambling or wasteful spending: If one party has squandered significant amounts of marital funds in gambling or frivolous expenses, the Court may consider adding back these amounts to the asset pool, or making an adjustment as necessary.

  2. Extravagant gifts or excessive cash withdrawals: In cases where substantial amounts of money have been spent on lavish gifts or withdrawn in cash without legitimate justification, add backs may be appropriate.

  3. Undisclosed or hidden assets: If one party purposely conceals assets during the proceedings, the courts may add back the value of these hidden assets to ensure a fair distribution.

Whilst the threshold for satisfying a wastage argument is high, if wastage is proven, the Court can adjust the property pool by either adding back the funds wasted or by making an adjustment in accordance with Section 75(2)(O) of the Family Law Act 1975. It is important to note that the concept of add-backs is completely discretionary and the Court is not obliged to follow a strict dollar-for-dollar approach.

The information contained in this article is general in nature and does not take into account your personal situation. This information should not be relied upon in place of appropriate professional advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a solicitor.

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