Waste or Reckless conduct by one party to a marriage or de facto relationship - Consequences

04/12/2017

Often we receive enquiries in relation to waste in family law matters and how it can be minimised.  At Watson & Watson we have senior experienced Solicitors who can advise you and consider the cost benefit analysis.  Generally if the asset pool is known (as is in most cases) it is relatively easy to provide a range of outcomes that are likely at a hearing.  This can be undertaken saving many years and saving very significant costs for a hearing of a fully contested matter.

When one asks family Lawyers generally concerning “waste in family law matters” those Lawyers will mainly and firstly consider the “waste by the parties” for example, by way of gambling or taking risks in business which are unacceptable.

Another waste is the costs associated with litigation and the gamble that each person who embarks on a long and difficult debate in relation to the outcome of the proceedings might face.  It is too late after each person has spent over $100,000 on litigation to argue about matters most of which are insignificant in the overall scheme of things.

This article deals with the traditional view of Lawyers concerning waste by one party or another by actions or omissions (other than the litigation) to diminish the asset pool available to the parties and the division of those assets between the parties.

We believe that it is also very critical for you as the litigant to properly consider the second matter that is, debating issues without consideration of the costs or possible benefits and allowing the Lawyers to assist you to conduct your case in a wasteful manner litigating every issue which of itself cannot achieve an outcome desired by either party.

In dealing with waste the Family Court looks at contributions made by each of the parties to a marriage as to the acquisition, maintenance and improvement of matrimonial property.  Usually over time property (especially real estate) will increase in value and both parties will want a share of the increase in value of the property.  The Court takes into account the contributions made by the parties when the Court decides how to divide assets including property between the parties.

However situations do arise in property division where the value of property can decrease over time.  This could be for a number of reasons but there are cases where one party to a marriage or a de facto relationship has behaved in a way that resulted in the reduction of value of jointly owned assets or loss of the assets entirely.

An asset can be “wasted”.  Examples of what is referred to as “waste” are gambling by one party or excessive lifestyle expenses and spending by a party or reckless business and commercial decisions.

In the case of Kowaliw & Kowaliw the Family Court of Australia set out the law in this context.  In that case the husband had made a decision in relation to not renting out the matrimonial home and allowed people who had promised to buy the home to live in that home for 12 months on a rent free basis.

The sale ultimately did not proceed and the wife asserted that the husband’s decision and behaviour had caused a reduction or minimisation of the effective value of the matrimonial assets.

The Court took the view that generally financial losses that are incurred during the marriage should be shared between the parties but that where one party had committed an act designed to reduce the value of the assets or where they “acted recklessly, negligently or wantingly with the matrimonial assets, the overall effect which has reduced or minimised their value” this did not have to be the case.  The loss in that case was not shared equally.

The same situation can arise because of “lifestyle expenses” where one party asserts that the other party has lived a very high lifestyle for example having taken overseas holidays and paid for those lifestyle expenses or overseas holidays from joint assets.

In Ledarn v Ledarn the Court made a decision on the basis that they could not ignore the amount of money that one party expended for their “lavish” lifestyle and reduced that party’s entitlement because of their spending prior to the Court making a decision.

The Court may also look at issues of over capitalisation in the context of contributions to real estate and it may be that those contributions are not given full weight if they result in the over capitalisation of the property – for example installing a swimming pool which adds no value to the property.

If you are concerned about the reduction or waste of assets as a result of the reckless or negligent actions by your spouse or partner and its impact on your financial settlement, act now.  Please do not hesitate to contact Richard Watson, Family Law Solicitor or his assistant Shereen Da Gloria to discuss your queries or concerns.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.

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