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Home | Blog | Notional Assets and add-backs in Family Law

Upon the breakdown of a relationship and with the potential for litigious property proceedings looming, individuals attempt the impossible – the greatest of all illusions –where there once was an asset there soon will be none!

So what happens if you are a victim of this subversive attempt to avoid a just and equitable distribution of the matrimonial assets?

The introduction of add-backs

Since the 1980s the courts have recognised the injustice of ignoring such dissipation of matrimonial assets. As a general rule, when parties approach the Court for a property distribution (s79 Family Law Act 1975) the Court is required to identify and evaluate the parties’ proprietary interests as at the date of the hearing.

However, as an exception the Court was able to notionally ‘add back’ the value of certain assets that have been dissipated, whether intentionally or recklessly, at this initial stage (Kowaliw (1981) FLC 91-092). The Court would consider whether the spending was reasonable, and whether it would be just and equitable to recognise the add-back.

How has the law changed?

The High Court in Stanford v Stanford [2012] HCA 52 indicated that the concept did not sit well against the current legislative framework for the simple fact that once assets have been disposed of neither party retained any legal or equitable interest in them. However, this did not mean that such dissipation was no longer relevant.

The Court in Watson v Ling [2013] FamCA 57 confirmed Stanford, and further emphasised that whilst determining whether it was just and equitable for the Court to make an order altering the existing legal and equitable interests of the parties, they could consider the dissipation of assets under the following categories, and use this to make an adjustment in favour of the non-dissipating party:

  1. Pursuant to section 75(2)(o) Family Law Act – ‘any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account’.
  2. Within the assessment of contributions –the dissipation may be recognised as a “negative contribution” by the party responsible for the dissipation (Antmann & Antmann (1980) FLC 90-908). Or alternatively, the non-dissipating party could be regarded as having made a disproportionately greater indirect contribution to the existing legal and equitable interests.

However, as the Court wisely warned, “not every dissipation by a party can be seen to involve an affront to justice and equity; …the circumstances of the individual relationship must be assessed”.

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