Add backs – how are these treated?
|WHITE & WHITE|| FamCA 13|
Add backs – The Husband’s removal of funds
- The Wife asserts that the Husband, by removing particular sums of money, has taken a premature distribution of the property of the parties that should be notionally added back (add backs) into the pool. This amount, she said, totalled $372,000, less an amount of $44,000 that the Wife accepts constituted both an established and appropriate disposal of the funds. The total amount sought by the Wife to be added back in relation to these funds is therefore $328,000 (add backs).
- As was set out by Murphy and Kent JJ in Grier & Malphas (2016) 55 Fam LR 107 at -:
Each of the parties used funds available to them in the approximately four years between separation and trial. Included in purposes for which the sums were used were the reasonable living expenses of each. So-called “add backs” are the “exception and not the rule”. Further, although always of course a matter of discretion it can be said that, in the usual course of events, amounts spent on reasonable living expenses would not often be added back.
As the Chief Justice points out, with those principles in mind, the trial judge adopted a broad-brush approach to the parties’ respective expenditure. No error is established by reason alone of that approach; authority eschews “overly pernickety analysis” and s 79 demands neither an audit nor an exercise in accounting. However, when significant sums of money are said by one party or the other to have been “wasted” or to amount to a unilateral “premature distribution of property” and the evidence is suggestive of either or both, an analysis of the relevant sums and their use is needed.
- Murphy and Kent JJ noted that “a very significant disparity in the sums expended by the parties” called for the examination of that disparity and of the “purposes for which the money as used.” Such an examination may then reveal the necessity to add-back or “as has been suggested as often preferable by decisions of the Full Court, by reference to s 75(2)(o)”.
- The assessment of the Wife’s claim therefore requires an examination of the use of the funds by the Husband.