If you’re involved in a property settlement which results from a breakdown of a relationship, it’s always helpful to understand the concept of ‘Add-Backs’.
Add-backs generally occur when one partner has wasted or spent money on things such as gambling or the purchase of gifts for third parties. If this situation has occurred then for a Court to be satisfied that any proposed property orders are fair and equitable, this money may be added back into the pool of assets.
There does not seem to be an appropriate basis for notionally adding back moneys that existed at separation but which have been spent on meeting reasonable living expenses incurred by a party.
It has been held that parties are entitled to reasonably conduct their affairs post-separation in a matter that is consistent with properly getting on with their lives.
The Full Court has indicated that to justify an add-back, it is necessary for the Court to make an assessment of the reasonableness of the expenditure – there are generally 3 categories which arise:
- Where parties to proceedings have spent money on legal fees – a Court will usually require the parties to the proceedings to pay for their own legal costs;
- Where there is a premature distribution of matrimonial assets – say one partner distributed an asset to themselves in which the other partner had a legitimate interest. If the circumstances would be unjust in the extreme then an add-back can be made to the pool of assets.
- If there are financial losses – the prevailing view is that financial losses incurred by parties or either of them in the course of the marriage/relationship (whether such losses result from a joint or several liability), then the losses should be shared by the parties (though not necessarily equally).
There are exceptions such as where a party has acted recklessly, negligently and wantonly with matrimonial assets but generally each add-back will be judged on a case by case basis.
So, if you find yourself in the middle of a relationship breakdown, always take care to look after yourself first, and make sure that you keep a note of any unusual expenditure by your partner – it just might be that the actions of your partner won’t bear scrutiny and the expenditure will be called to account in the property settlement process.