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Property Settlements in the Family Court - Add backs are back

Property Settlements in the Family Court – Add backs are back

Property Settlements in the Family Court – Add backs are back

Following separation, generally, the first step in approaching a property settlement between parties is to determine the asset pool available for division. This involves looking at what each party owns, whether individually or jointly or with third parties.

There are a variety of circumstances where it is appropriate to notionally include items in the asset pool which no longer exist (such as funds spent or property sold). This usually has the effect of increasing the asset pool available for division between the parties. These items of notional property in the asset pool are often described as “add backs”.

Some examples of cases involving add backs are:

  1. Where there has been a premature distribution of matrimonial assets by one party (see Townsend and Townsend (1995) FLC 92-569;
  2. Where the parties have expended money on legal fees (see DJM & JLM (1998) FLC 92-816;
  3. Where there had been a course of conduct designed to reduce or minimise the value of assets or where there has been waste – through reckless, negligent or wanton conduct (see Kowaliw and Kowaliw (1981) FLC 91-092).
  4. Where there has been a partial or interim property settlements (see Strahan & Strahan (2011) FLC 93-466);
  5. Where there has been a failure to disclose assets (see Weir & Weir (1993) FLC 92-338);
  6. Where there has been use of marital assets, or assets derived after separation by reason of the skills or assets acquired during the marriage (see Chorn v Hopkins (2004) FLC 93-204).

However, following the High Court’s decision in Stanford & Stanford [2012] HCA 52 and the comments in the Full Court’s decision in Bevan & Bevan [2013] FamCAFC 116 there was seemingly a shift away from add backs and more of a focus on identifying the existing legal and equitable interests of the parties. Essentially, after these decisions, it was not clear whether add backs to the asset pool would be possible.

The position of add backs has now been clarified by the Full Court’s decision in Vass & Vass [2015] FamCAFC 51 in which it was found that add backs are still possible. The Full Court stated:

There is no actual error committed per se in adjusting the parties’ actual property interest by calculations involving notional add backs into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision in Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 or, more particularly, the decision of the High Court in Stanford & Stanford [2012] HCA 52; (2012) 247 CLR 108 is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to notional property, as have been referred to in decisions of this court at first instance, may need to be reconsidered.

The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.

Judge Myers in Astley & Astley [2015] FCCA 3554 also confirmed that the decision in Vass stands for the proposition that add backs are back.

Adam Somerville-Brown, Senior Associate  E: adam.somervillebrown@kimwilson.com.au

Jade Robinson, Law Clerk E:  jade.robinson@kimwilson.com.au

 

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