Family Law lawyers are frequently asked by clients, “what happens if the other spouse spends the money before we reach an agreement?”
The scenario usually arises where there is some money in a bank account which is spent by one party or there is a sale of an asset and the money goes missing.
Often, the party who has missed out on the premature distribution will want to argue that the missing money (or asset) is added back into the asset pool. Traditionally, this has been an area of significant dispute between parties who end up in the Family Court. However, in reality it is usually very difficult to argue that the asset should be added back.
The High Court in the decision of Stanford had some things to say about a premature distribution of assets and some lawyers now argue that since this decision, the notion of “addbacks” no longer exist. While it could not be certainly said that addbacks are a thing of the past it remains the position, as it was before Stanford was decided, that it is usually difficult to have an asset added back into an asset pool.
The Full court of the Family Court reiterated the position in a decision handed down in July 2015 (Talbot & Talbot). In that case the original trial judge found that the husband had sold a property in his name and had received proceeds totalling $252,251. The judge found that the husband had not explained what he had done with the proceeds and added the sale proceeds back into the asset pool. The husband successfully appealed the decision of the trail judge. The Full Court said:
“…it was necessary for the trial judge to take account of a number of relevant considerations, one of the most important of which was what the evidence revealed about expenditure from the account into which the funds were banked. That is because, among other things ‘…parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives’ (Cerini) and, if money is to be “added back” some three years after it was spent, account must be taken of what the evidence reveals about what was spent on “ordinary living expenses” and of the financial circumstances of the parties generally.”
