Addbacks to the Property Pool

06/01/2019

In the discussion of property and related financial matters, the Family Court and/or the Federal Circuit Court of Australia considers the available pool of net assets (and the value of the net value of assets) at the time of the hearing and other relevant matters.

In Family Law property division matters from time to time the Family Court of Australia will be asked to “addback” to the property pool the value of an asset that was once owned by one or both of the parties but has been sold, used up or otherwise disposed (in particular, at a significant under value) of by one of the parties.  By reason of the disposal of property the asset pool has been reduced and the party who did not use or dispose of the asset will be disadvantaged. The value is added back and becomes “notional property” on the Balance Sheet.

Watson & Watson’s experienced Family Law Solicitors consider all aspects when it comes to financial settlement including the very important aspect as to whether there are “assets” disposed of or wasted by the other party which should form part of the asset pool and be considered if an equitable financial/property settlement is to be achieved.

Whether or not the Family Court of Australia will addback the value of an asset that is no longer available for division between the parties is discretionary.  The addback of the value of an asset by the Family Court of Australia cannot be assumed just because it is sought by one of the parties in the proceedings. In general “notional property” will only be added back in exceptional circumstances.

It has been said that the Court “should not seek to place a fetter upon the exercise of discretion of a trial Judge”.  In individual cases it seems that adding moneys reasonably disposed of back into the pool should be the exception and not the rule.  The parties are entitled to reasonably conduct their affairs post separation in a manner that will allow them to get on with their lives.

There are three principal category addbacks:

Addback of moneys applied to pay legal costs

Money that has been spent by a party in payment of legal costs can be added back to the asset pool. This is based on the principle that each party usually must pay their own costs of their legal advice and the costs of the proceedings.   This is likely to happen if the costs were paid by one or both parties from capital or matrimonial property.  It is less likely that there would be an addback if the fees were paid from post separation earnings.

Addback moneys paid to one party when the distribution to that party was premature

Money or assets received by a party by way of a premature division.  This will occur if (at final hearing) it becomes apparent that one party has already received too much and that unless there is an addback the Family Court cannot achieve equity and fairness on final division of property.

Addback moneys taken out of the pool by wastage by a party

An addback can be sought from the Court if:

  • One party has embarked on a course or conduct designed to reduce or minimize the effective value or the worth of the assets or has acted recklessly, negligently or wantonly with matrimonial assets the overall effect being to have reduced or minimized the value.
  • Early sale of an asset by one party without the consent of the other party – Value of prematurely sold asset added back.
  • When an asset has been sold encumbered or disposed of in particular, where the disposition is at a significant undervalue or has the affect of effectively reducing the net asset pool that would be available for distribution between the parties to the marriage or defacto relationship.
  • In circumstances where there has been deliberate non-disclosure, the Court will not be hesitant to addback an asset or value of asset to assist the innocent party.  
  • Reasonably incurred living expenses will not be added back.

The Court will give effect to the adjustment by “adding” back the appropriate undervalue to the asset pool as a “notional asset” and then attribute that “notional asset” to the party that caused the disposal of the asset of the undervalue, even if it is not recoverable.

At Watson & Watson our experienced Family Law Solicitors always consider all issues which may give rise to “adding” back assets “wantonly devalued” by the other party so as to achieve a better outcome for our client.  Should you have any concerns regarding “addbacks” or queries as to how addbacks work, are you at risk of the Family Court making an addback and/or how an addback can impact your financial/property settlement, please contact Richard Watson our Senior Family Law Solicitor or his Personal Assistant Shereen Da Gloria to discuss your 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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