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Who Lost the Money? Who pays for the Loss or Waste of Assets in a Property Division?

04/09/2019

The Family Court of Australia/Federal Circuit Court of Australia will divide property on a just and equitable basis and will look at the contributions of each spouse/partner and will also determine whether there is a need for adjustment in favour of one or other of the partner/spouse.

What happens if one spouse/partner has lost or wasted money?

The case of Kowaliw v Kowaliw (1981) states the general rule that financial losses incurred by the parties throughout the course of the marriage, whether jointly or otherwise should be shared by them, although not necessarily equally.  The Court will sometimes “addback” property that has been lost or wasted in exceptional circumstances.  There must have been a deliberate act or economic recklessness which reduced the value of the assets available for distribution.  The principle set out in Kowaliw was affirmed in the case of Omancini v Omancini in 2005.  The rule was brought into focus in the 2017 decision of Charles v Charles which was an appeal from the Federal Magistrates Court of Australia to the Full Family Court. 

Charles v Charles

In that case the wife asserted that there should be added back to the pool an amount of money that she said the husband had lost in unprofitable share trading and a notional amount to be added back by reason of adjustments that the husband had made in the rate and timing of payments to reduce the mortgage. 

The wife said but for the husband’s unprofitable share transactions and his reduction of the amount of mortgage payments, there would have been more money available for division between them. 

The Judge rejected the wife’s argument that the amounts lost should be added back. 

The decision of the Trial Judge was affirmed by the Full Court.  The Trial Judge found that the husband’s share trading had not been designed to reduce or minimize the parties’ wealth and he had not acted recklessly, negligently or wantonly.

The test is as set out in Kowaliw v Kowaliw:

  • Financial losses incurred by parties or either of them in the course of the marriage whether such losses result from a joint or several liability should be shared by them (although not necessarily equally) except in the following circumstances:
  1. Where one party has embarked on a course of conduct designed to reduce or minimize the effective value of worth or worth of the matrimonial assets; or
  2. Where one of the parties acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which was reduced or minimized value of matrimonial assets.

At Watson & Watson our Senior Family Law Solicitors are experienced in property/financial settlement matters.  If you are in a similar position of “loss of assets through no fault of your own” and are unsure as to your rights and entitlements, please contact Richard Watson Senior Family Law Solicitor or his Personal Assistant Shereen Da Gloria to discuss your concerns and seek the appropriate advice.

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

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