Add-backs, Wastage and Negative Contribution?

When the Courts are determining what assets make up the property pool of the parties of a former relationship, the Family Court has traditionally considered not only the current assets and liabilities of the separated couple but also what has been termed “add backs” or “notional property” or “notional assets”. Add-backs generally refer to money that one partner has spent on wastage such as gambling, paying for gifts for a new partner or third party or paying for legal costs out of joint monies. The Court will determine whether the money has been spent inappropriately or wasted and may add it back into the asset pool of the parties before finalising property orders. There are no fixed rules about what will be added back but the Courts have determined that parties are entitled to cover the cost of reasonable living expenses. The Courts will however add back monies spent on paying for legal fees or where joint monies or assets are distributed to one party in detriment to the other.

Wastage and Negative Contributions

You may think your ex-partner should pay you back or at least “reimburse” the asset pool for wasting money at the club each week. This is where the Court has to determine what wastage is. Generally the Courts consider wastage where the actions of one of the parties reduces the value of assets of the relationship or where a party acts recklessly or negligently resulting in the loss or reduction in value of those assets. An example of wastage was decided in a Family Court case where the husband’s deliberate sale and wastage of his taxi, which was a valuable matrimonial asset, should be compensated by being notionally added back into the property pool. Cases specifically dealing with wastage from gambling underline the need to prove a significant loss for the court to make any adjustment. There must be a proportionate response in any finding that one party has wasted the assets of the relationship. The courts have suggested that gambling may be characterised as entertainment just as a spouse may spend unproductive time on a yacht or other recreation. Any loss is considered in relation to the size of the asset pool and the court will determine a proportionate response. If it is merely a recreational activity without any extreme loss or diminution in the couple’s financial situation, a party will have difficulty in establishing that there is a case of “wastage”. Similarly, discussions about “negative contribution” in the case law have decided that any behaviour, which may be characterised as negative to the financial relationship of the parties, must have a significant impact on the assets and financial resources of the parties, minimising their value. While the Full Court of the Family Court rejected that negative contribution would be considered under the Act, the Court did say that if the negative behaviour created a greater burden for the other party then this could be considered. The Courts have wide discretionary powers and will determine whether assets should be added back to the property pool to allow for a just and equitable financial settlement of the former couple. Each case will be decided on its merits.

Please contact us at David H Cohen & Co for any legal assistance.

Note: This is not legal advice and is provided for information only.