Notional Assets or 'Addbacks' Are Not Dead

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In determining a financial settlement under the Family Law Act, it is necessary to calculate the net pool of assets as at the date of the settlement or the trial. This process is potentially complicated in circumstances where one of the parties, before settlement or trial, divests themselves of monies by, for example, paying legal fees, gambling or making gifts to family members. In this situation, it may be possible for those monies to be notionally “added back” into the pool.

Historically, the Full Court has held a view that you can notionally add back to the pool of assets, assets that no longer exist in limited circumstances. These circumstances were summarised by the Full Court in AJO v GRO as follows:

  1. Where the parties have expended money on legal fees;
  2. Where there has been a premature distribution of matrimonial assets; and
  3. In the circumstances:
  • 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
  • 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.

Recently though, case law has indicated that addbacks may no longer be possible. For example, in Bevan & Bevan, it was observed that ‘“notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”’, and thus is not available for distribution between the spouses. The Judges said, ‘It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part’.

In the more recent Full Court decision of Vaas & Vaas, however, the Court confirmed that “there is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties”. Further, the Judges rejected any suggestion that the decision of Bevan & Bevan was authority for any contrary solution.

At the end of the day, it is really up to the discretion of the Trial Judge as to whether or not monies expended prior to the hearing should be notionally added back into the pool of assets. This article illustrates that there are many complexities in Family Law property settlements, including addback arguments, which necessitate the need for legal advice.

For more information

In the Marriage of Kowaliw [1981] FLC 91-092

AJO v GRO (2005) 191 FLR 317

Stanford v Stanford (2012) 247 CLR 108

Bevan & Bevan (2013) 279 FLR 1

Vaas v Vaas [2015] FamCAFC 51

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