To seek an addback or not to seek an addback is a predominant issue arising in most Family Law matters. It is a matter for the court to exercise its discretion whether to notionally add back property into the asset pool for division. Notional property will only be added back in exceptional circumstances. Adding monies reasonably disposed of back into the asset pool ought to be the exception rather than the rule C v C  FamCA 143 at .
The Full Court in Omacini & Omacini (2005) FLC 93-218, identified three most common categories where court has been willing to notionally add back property:
1. Premature distribution of property
In Townsend & Townsend (1994) FamCA 144, following separation the husband sold his taxi for $148,000 and retained all of the net proceeds of sale. Nicholson CJ held that “In my view, what occurred in this case… was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under s. 75(2)(o)”.
2. Payment of Legal fees
In DJM v JLM  FamCA 97, where the husband paid for his legal costs from the parties’ joint funds. The Full Court held that “the trial judge was in error in failing to account for legal costs paid by the husband from the parties’ joint funds, from being part of the asset pool”.
In Chorn & Hopkins (2004) FLC 93-2004, the Full Court held that “if funds used to pay legal fees have been generated by a party post separation from his or her endeavours or received in his or her own right (for example by gift or inheritance) they would generally not be added back as a notional asset”.
In Kowaliw & Kowaliw (1981) FLC 91-092 Baker J held that “financial loss incurred by the parties in the course of marriage should be shared by them (although not necessarily equally) except in the following circumstances (a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or (b) where one of the parties has acted recklessly, negligently, or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value”. In such circumstances the court may add back the value of the wasted assets into the asset pool or make an adjustment pursuant to section 75(2)(o)”.
In M v M  FamCA 42 the Full Court held that “There seems to be no appropriate basis for notionally adding back monies that existed at separation, but which have subsequently been spent on meeting reasonably incurred living expenses… Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial judge”. Therefore, reasonable living expenses will not be added back.
In Kouper & Kouper (no. 3)  FamCA 1080, Murphy J set out a five-question approach to addbacks:
Is it contended that property (including money), that would otherwise be available for distribution between the parties if a section 79 order is made, has been dissipated with a consequential loss to the property otherwise potentially divisible between the parties at the date of trial?
If so, is it alleged that the dissipation of property was in respect of things other than what, in the particular circumstances of this particular marriage, can be classified as “reasonable living expenses”?
If it is asserted that any loss to the divisible property results from dissipation of property other than in respect of such expenses, why is it asserted that the result should be a sharing of that loss by the parties other than equally?
If it is contended that this be the result, why should there be an add back (which brings to account, dollar for dollar, such past expenditure in current dollars) as distinct, for example, from there being an adjustment being made pursuant to s 75(2)(o)?: and
How should either any “add back” or adjustment pursuant to s 75(2)(o), be quantified?
Following Stanford & Stanford (2012) FLC 93-818, addbacks were likely to be considered pursuant to s75(2)(o) if they were dealt with at all. The notion of adding back notional property was rejected Bevan & Bevan (2013) FLC 93-545.
The Full Court in Vass & Vass  FamCAFC 51 held that “There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan  FamCAFC 116 or, more particularly, the decision of the High Court in Stanford & Stanford  HCA 52; (2012) 247 CLR 108 – is authority for any necessary contrary solution.
In cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by making an adjustment taking section 75(2) factors into consideration (Trevi & Trevi  FamCA FC 173).
In the recent case of Santini & Santini  FedCFamC2F 529, the property was sold in September 2018 for $825,000. The net proceeds of sale of $534,970 was transferred into the husband’s bank account. The husband stated in his trial affidavit that these funds were applied over time towards “the business and on living expenses” and also provided oral evidence relating to the expenditure. Newbrun J held that “the Court finds, on the balance of probabilities, that the husband reasonably spent the sums of money, a total of $252,738, for the business and his living expenses from the net proceeds of sale of the property and held that the sum of $282,232 should be found to constitute a premature distribution by the husband of an asset arising out of the parties relationship and added back into the balance sheet.
If you have concerns about addbacks or are of the view that the other party may dissipate the asset pool, please feel free to contact Longton Legal, who have expertise in dealing with such matters.
*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*
Nakil Navinesh Prasad
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