Clients are often surprised that the asset pool is not calculated at the date of separation but at the date of when parties get final court orders, consent orders or enter into a binding financial agreement. That means debts and assets acquired after separation are included in the property pool.
No, if a debt is considered to be unreasonable, illegitimately incurred or not a debt at all, the court will add the value of the debt back into the property pool. When a party takes on the unreasonable debt it is known as dissipating the asset pool.
Facts of the case
The facts of the case are as follows:
The Issues
The primary issue in this matter is the issue of taking 'waste, destruction or the dissipation of assets' into account in a property settlement matter.
Holding
In this case, the court held that the husband had "embarked on a course of conduct designed to reduce or minimise the effective value or worth of the matrimonial assets". The court considered that generally, financial loss incurred during the marriage should be shared between the parties, except where one party has committed an act designed to reduce the assets or where they "acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduce or minimised their value".
Rationale
In this case, Federal Magistrate Judy Ryan best summarised the principles that arise from this case and its line of precedents as follows:
In short, if the loss does not involve waste, the economic consequences of a significant reduction in the asset pool must be considered.
There are several cases where gambling debts or funds spent gambling have been considered as wastage.
In AB & GB (No. 2) [2005] FMCAfam 402 the Husband received $400,000 in workers compensation and wasted $80,000 to gambling. The parties were on small incomes and could not afford this waste.
Facts of the case
The parties had an asset pool of over 1.5 million dollars, the wife had a gambling problem.
Gambling issue
The wife on her own admission stated she had lost about 100,000 to her gambling problem. The court found it was probably likely to be 140,000.
The husband argued that the money should be added back to the pool and it was "reckless, negligent and wanton" loss of assets.
The wife argued the husband knew of her issue throughout the marriage, she had made several attempts to get help in the marriage and after separation. The gambling evolved into a full illness where she completely isolated herself. The wife gave psychiatric reports to prove she had a disorder caused by the gambling and the psychiatrist found that the disorder may not improve.
Outcome
The court found it would not be appropriate to adjust the property assets in this case.
It's often one party will sell assets and spend the money.
Facts
The husband sold a taxi for $148,000 and spent the funds.
Issue
The taxi contributed significant income so selling it prematurely was wasteful.
The spending reckless and not reasonable.
Outcome
The court agreed that it was a premature distribution of joint property and it would be unjust to see it as anything but an add back to the pool.
The court is generally reluctant to add back assets where the money is spent reasonable for living expenses. Parties are generally entitled to live separately and independently using joint funds. Gallings & Scott (2007) FLC 93-319
While it could be argued this is a reasonable living expense there have been cases where the court thought it appropriate to add back funds spent from joint accounts. Marriage of Farnell
It might be appropriate to add the property back to the property pool as if it was never spent or it might be more useful to add it as a contribution under S75(2). It depends on numerous factors as to what the judge or lawyer might argue.
However, it is important to note it is generally quite hard to argue waste, and it is also difficult to add back things that don't exist. The cases discussed in this article are not the full facts and each case will be examined on its own as to wastage. Therefore you should seek legal advice early if you suspect your spouse might go to sell assets or misuse, many things can be done like caveats and interim distribution orders to avoid the wastage argument altogether.
Property to which a party is entitled was said in 1835 in an English case Jones v Skinner to be "the most comprehensive of terms (to describe) every possible interest a party can have". The court has the power to alter the parties' interest in all their property, regardless of when or how it was acquired nor whose name it is owned. Therefore either party can have a claim on any property of the other party until final orders are made or an agreement is reached.
Yes property acquired post-separation and before divorce, could still form part of the property pool. Divorce nor the waiting period for divorce impacts the property settlement time limit.
Yes property acquired after divorce but before a property settlement can be included in the property pool, up until 12 months after the divorce order.
There are ways to bring an application for a property settlement outside of this twelve-month limit, however generally, any property you acquire after twelve-months of being divorced or after a property settlement is finalised, then that property will be protected.
While it is not uncommon for one partner to buy a new property to live in after a relationship dissolves, this is generally not recommended until a formal property settlement has been done or you are outside of the property settlement time limits. If you buy a new home your former partner may be able to claim an interest in your new home.
Just like tangible property, superannuation forms part of the property pool of a relationship. If you have earned superannuation after separation and before your property settlement, it can be included in the property pool too.
It's important to remember that not all cases are the same and sometimes post separation assets might even be left completely out of the pool, like in Famer and Bramley.
Facts of the Case
The essential facts of this case are as follows:
Issues
The issue for the Court was to determine whether the former husband was responsible to provide the former wife a property settlement from funds received post-separation via a lottery win.
The Court decided
In the first trial, the Court decided that the wife should receive a property settlement in the amount of $750,000, which represented 15% of the overall net property pool of the parties.
The Husband appealed to the Full Court of the Family Court, which ultimately decided in favour of the wife and the decision at original trial was not disturbed.
The Court reasoned that the wife had made a contribution to the property pool and assessed the contribution as being valued at 12.5% of the net property pool because of her contributions to the welfare of the family during the marriage. Additionally, the Court assessed her future needs factors as being valued at 2.5% of the net property pool the result of her higher ongoing caring for the couple's child.
Rationale
The adjustment of the husband's property in the wife's favour was because of her having made higher contributions throughout the marriage to the welfare of the family, including caring for the child and at the same time:-
But for the lottery win, the property pool of the parties was nominal at the end of the relationship, largely the result of the above factors including lesser contributions of the husband.
The case highlights that direct financial contribution to an asset (the lottery win) is not required for an adjustment of overall property interests in circumstances where other contributions have been made, such as contributions to the welfare of the family. The future needs including ongoing care of the child was also given weight when determining that an adjustment of the parties' assets was just and equitable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
