Navigating Finances Post-Separation: An Overview

Navigating financial challenges after separation can be complex, especially when one party has exhibited irresponsible financial behavior, such as a gambling habit or excessive spending. In this article, we explore the legal considerations surrounding financial mismanagement and how these issues can be addressed in court.

Property division in family law in Australia refers to the legal process of distributing assets, liabilities, and financial resources between parties involved in a marriage or de facto relationship that has come to an end. In the case of property division, a number of factors are involved, and one to be particularly considered is negative contributions, which pertains to actions or behaviors of one party that have had a detrimental impact on the shared property pool between the parties.

Wastage in Property Division: Shared Losses and Add-Backs

According to the case of In the Marriage of Kowaliw (1981) FLC 91-092 (Kowaliw), “wastage” is defined as the intentional, reckless, or negligent reduction of the net property pool available for distribution (division) between parties during or after separation. It was highlighted that wasted or disposed assets are to be considered by the court in the interest of justice1

The case recognised that losses incurred during the marriage, whether jointly or separately, should be shared by the parties as a natural part of their relationship, as instances of wasted assets can result in the value of those assets being added back to the overall pool. Common examples include funds withdrawn and spent, assets or money given away, gambling, poor investments, or selling assets below market value.

Despite this recognition, there is still some judicial reluctance to grant “add-backs” for waste, which was first addressed in Stanford v Stanford (2012) 247 CLR 108, where the High Court emphasised the alteration of parties’ existing legal and equitable interests in property.  Similarly,  the case of Owen & Owen (2015) FCCA 2823 (Owen) emphasised that wasted assets may result in the court awarding the other party a higher percentage of the remaining pool, but the wasted asset itself may not be added back to the pool. Further elaboration was provided in Bevan & Bevan (2013) FLC 93 (Bevan), cautioning against the careless disposal of assets. Instead of an add-back of what is an asset that no longer exists,  s75(2)(o) allows an adjustment in one party’s favour and allows enough scope to ensure a just and equitable outcome.

In a more recent case, Charles & Charles (2017) FamCAFC 3, upheld the principles established in earlier cases, by dismissing the wife’s appeal and confirming that the judge in the trial correctly applied the relevant legal precedents.

Summary

The concept of negative contributions, as exemplified in the Kowaliw case, underscores the court’s consideration of wastage and shared losses within a relationship. While judicial reluctance towards add-backs persists, cases like Owen & Owen and the more recent Charles & Charles highlight the court’s nuanced approach. As exemplified in this article, each property division case is unique, and outcomes depend on the specific facts involved. Therefore, seeking legal advice early on is crucial in such situations, in order to preserve your position and rights.

  1.  S75(2)(o) Family Law
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