In the difficult times which follow a matrimonial or de facto separation, many people are heard to have asked the question: "I have just separated - would it be a good idea for me to sell the boat and spend the proceeds?", or "I'm thinking of taking $30,000 from our savings account and going on a holiday, so my ex can't have the money".

It is important to get legal advice from a family lawyer before acting on these ideas.

One of the first steps a family lawyer will take when determining their client's entitlement to property, upon the breakdown of a marriage or de facto relationship, is to identify and value the net property of the parties (usually as at the date the agreement is reached or as at the date of the trial).

It is a common occurrence early in a property settlement, that one party will allege that the other has disposed of an asset for their own use, thus depriving the other of access to the value of that asset. (eg "She sold the shares and won't tell me what she has done with the money").

It is important for people going through such circumstances to understand that in many cases the value of the asset disposed will be notionally added back to the asset pool. This is considered necessary in some circumstances to enable the court to determine what would be a fair division of the existing assets. It means that an asset which no longer exists is notionally added back to the list of assets and liabilities.

In Omacini [2005], the Full Court determined that there are three common categories of add backs as follows:

  1. Often a party is claiming a need to add back monies that the other party has spent on legal costs, particularly where the money spent on legal fees was from joint funds rather than the income of the party post separation. Section 117 of the Family Law Act 1975 requires that each party to the proceedings should bear their own costs unless the Court otherwise orders. In DJM v JLM (1998) the Full Court stated "We are of the view that the normal approach ought to be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out".
  2. Where one of the parties has sold or disposed of a matrimonial asset. An example is if a party sold a boat or shares and subsequently spent the proceeds. The Court noted in Omacini [2005] that it was necessary for the court to "make some assessment of the reasonableness or otherwise of the expenditure".
  3. A financial loss as a result of one party acting deliberately or recklessly to minimise the value of assets. There are circumstances where the court has determined that such losses should not be shared, but rather, should be attributed to one of the parties.
 
Our family lawyers can assist you and your clients to assess the above circumstances and to ensure your client is in the best possible position in finalising a property settlement.