We’ve all heard the stories. A couple separates and then commences the long process of a financial property settlement. However, before any agreements can be made, one of the ex-partners decides to withdraw a large sum of money from a shared bank account and spend it lavishly or recklessly. Or they decide to take a shared asset and sell it. In both cases, without their ex-partner’s agreement.

If you’ve found yourself in this situation, where does that leave you? After all, the money is already spent. The asset is already gone. Isn’t it? Can you get some of that money back, or is it gone for good?

What are addbacks?

‘Addbacks’ is what we call it when assets from the shared property pool are spent or sold and one party seeks to have those ‘added back’ into the property pool. It’s a pretty simple name for what is actually quite a complicated matter. 

Why is it complicated? Well, the Court obviously can’t give more than what exists now. They can’t simply require that money – that is no longer in the shared account – or an asset – that is no longer owned by either party – be simply dropped back into the pool.

Of course the Court has some methods for achieving fairness up their sleeves. Often this depends on the type of addback that is being requested.

Three main categories of addbacks

There are three main categories or types of addbacks.

  1. Legal fees: In general the Family Law Act (the Act) requires each party to pay their own legal costs. So if one party uses joint funds to pay their individual legal fees the other party might request an addback. Whether or not this is awarded is highly dependent on the facts of the individual case.
  • Wastage: If one party has wastefully spent money from the asset pools by doing things like gambling with large sums of money or buying gifts for a new partner, the other party might request an addback. 
  • Spending monies/disposing of asset: If one party spends money or sells an asset that existed at the time of separation, the other party would be within their rights to request an addback. Examples of this might be selling family cars or the homes, especially if it’s below market value, or giving assets or money to a family member.

How does the Court deal with addbacks?

While the Court can and may decide to add back all or part of the funds to the shared pool on a notional basis (which means adjusting the ‘value’ of the asset based on current market value and other factors). Addbacks are the exception rather than the rule. In fact, it simply doesn’t happen very often anymore. 

Instead, it’s far more likely that if one party has acted recklessly or negligently in terms of the property pool, then the other party will receive a higher percentage when the pool is divided.

This is representative of the Court’s changing viewpoint over time, particularly because today our assets and cash are moved more freely and easily, often with just a few clicks of the keyboard. Decisions and updates in recent years have leaned into an adjustment of the property pool in favour of the other party, rather than a straight addback of funds. 

  1. Cases like Omacini v Omacini in 2005, Stanford v Stanford in 2012 and Bevan v Bevan in 2013, have made it clear that ‘addbacks’ are often too simplistic and don’t adequately constitute property of the marriage. On the other hand, adjusting the property pool in favour of the other party means that they are being given fair compensation in a way that is representative of their situation now.

What are your options?

When considering whether or not to request an addback, it pays to remember that in reality, addbacks are the exception rather than the rule. The Court will rarely accept submissions surrounding addbacks, as too many would slow down the system, making it more difficult for families overall. 

The most efficient option is usually to try to stop this situation from happening in the first place. You can do this through:

  • interim partial property settlements
  • injunctions to stop wastage
  • freezing a mortgage to stop equity withdrawals
  • freezing a joint savings accounts to stop cash withdrawals

It’s an important lesson for couples to be very careful about how they spend money post-separation and pre-settlement. 

Of course, if you can’t stop the wastage or reckless spending of an ex-partner, then seeking an addback might be an option. Our team can certainly advise you on whether or not that’s the right option for you.

Remember, reasonable expenses are OK

It’s important to remember that you can still spend your money to meet your reasonable expenses, even if it’s in a joint account or is part of your shared funds. You don’t have to stop living just because you separate. And you shouldn’t! You just need to be cautious that you aren't wasting or recklessly spending your money prior to a settlement.

How Patrick Dawson Law can help

At Patrick Dawson Law we want to help you protect your shared assets and monies while going through the settlement process. And of course, if you want to request an addback, we can help you to do that.

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