The balance sheet in property proceedings, its almost always a source of contention and dispute between parties, and that is not dependent on the size of the property pool. There are often arguments about ‘add backs’ and ‘post separation’ usage/wastage and more. “Add backs’, ‘aide-memoires’ and ‘skill sets’ in proceedings, whats the best approach? Bryant CJ, Kent and Murphy JJ gave some interesting insights in the case of Grier & Malphas [2016] FamCAFC 84 which was on appeal.
Bryant CJ:
The parties commenced a relationship in 1999 and married in 2002, neither party having significant assets at the date of marriage. However, during 2003- 2007 houses were renovated and sold and significant assets were accumulated.
Add Backs
At [31-33] Bryant CJ stated: In relation to the assessment of net assets, including superannuation and disputed add backs the position contended for by the husband was that $4,729,729 was available for distribution between the parties. The wife’s position was that there was $6,396,626 available. Where only agreed upon add backs were considered, the husband’s position was that $3,860,292 was available and the wife’s position was that $3,862,592 was available.
Her Honour was called upon to determine a number of balance sheet issues relating to add backs sought by the parties, but particularly by the wife.
….apart from adding back the husband’s paid legal fees and disbursements of $200,300 and the wife’s paid legal fees and disbursements of $343,291, her Honour did not add back other amounts as sought by the parties
At [paragraph34] Her Honour cited passages [paragraphs 72-74] from the Full Court in Mayne & Mayne [2011] FamCAFC 192; (2011) FLC 93-479 relating to add backs, where it stated:
Parties seek funds be ‘added back’ and the rationale is that one party should not benefit from a premature distribution of the assets. An obvious example is withdrawing and using money from a bank account either joint or owned by one of the parties. It is also the case that the parties may decrease the pool by increasing liabilities. The issue in such cases is whether the liability should be a joint liability or a liability only of the party who created it.
The application of the funds removed (or the debt incurred) may have been for a personal purpose (for example, to pay legal fees) or it may have been applied in the sustenance of a party or the children of the parties.
If the former is the case this has generally found to be a pre-emptive unilateral division of property. If the latter is the case then the principles enunciated in Marker v Marker [[1998] FamCA 42] and Chorn NH & Hopkins RC [(2004) FLC 93-204] apply. If the money was, or part of the money, was used to meet reasonable living expenses then that money, or that part of the money, is not “added-back” or regarded as a pre-emptive distribution
Her Honour stated at [39]
I am of the view that both parties spent money freely and irresponsibly after their separation. It would be a formidable, and probably impossible, task to trace the fate of each dollar which came into their respective hands after the separation. As noted, there would be a substantial risk of double-counting in any event. In my view the nature and pattern of post-separation expenditure by both parties also militates against the inclusion in the list of assets of most of the proposed add-backs.
We know that each case turns on its own facts, however, these comments are worthy of note in property cases, particularly on the issues of where there has been irresponsible spending by both parties after separation and add backs.
Aide-Memoire
Bryant CJ stated at [58]:…. “had an aide memoire similar to the one counsel relied on in the appeal been provided (at trial), rather than the exercise being put as a construction of add backs into the balance sheet….the point the wife now makes might have been clearer.”
Aide-Memoires can make a complicated point much simpler, particularly in property cases, and should be utilised liberally, when appropriate, to assist and persuade the judge to easily understand your clients case and help them see why the finder of fact, should find in your favour. Complicated points need to be distilled for easier digestion and aide-memoires can be a useful tool to accomplish that.
Skill Sets/Special Contributions
At [89] Bryant CJ stated: Counsel at trial used the term “skill set” to differentiate it from special contribution, if it was intended to be anything other than a “special contribution” by another name, then it has to be considered in a separate and distinct way
At [86- 87] Her Honour stated :
The line of authority relating to special contributions referred to by senior counsel for the husband includes Kane & Kane (2013) FLC 93-569, Hoffman & Hoffman (2014) FLC 93-591 and Fields & Smith (2015) FLC 93-638.
In Fields & Smith (2015) FLC 93-638, the Full Court said:
If it is necessary to make the point again, and to highlight it for the purpose of this appeal, we add our endorsement to what has been made clear in the authorities referred and to the Full Court’s comments in [52] of Hoffman, that the words of s 79 do not provide endorsement for any category of contribution related to any class of property (for example, high wealth) being, by virtue of that category or class, more valuable or important that another. In each case the contributions made by the parties must be evaluated in the context of the facts particular to that case.
At [91] Her Honour added …”to develop an argument ex post facto that a particular set of skills available at the outset of the marriage is the only or major cause of the parties’ later prosperity is to hypothesise a causal relationship which in most cases will be difficult to reconcile or prove.”
Murphy and Kent JJ
Skill Sets
In a joint judgment, their Honours stated at [135-136] …
“The “skill set” or “potential” of “talent” a party brings to the role or roles which the parties have determined each will undertake in the relationship is, for s 79’s purposes, relevant only to how those attributes manifest themselves in what s 79 says must be considered.
It is not a party’s “skill set” which must be considered, but their contributions. Contributions are the product of many things: talent, industry, selflessness and, indeed, luck, to name a few. It is the contributions (in all senses in which that expression is used in s 79) that fall for consideration and assessment, not the combination of factors that has created the capacity for the making of those contributions.
Add Backs/Waste
Their Honours state at [143]….the husband received some $700,000 more than the wife following separation and the use of that money is not satisfactorily explained. It was within discretion for her Honour to treat that as “waste” and consequently add it back, just as it would have been within discretion for her Honour to treat that expenditure as a matter relevant to s 75(2)(o). We do not consider, with respect, that it was open to her Honour to do neither – or, at least, not without an analysis of the respective expenditure of the parties and the use to which the money was put and reasons why the differential sounded in neither.”
This 2016 appeal case is helpful as it discusses relevant property authorities and how the Full Court currently views ‘aide-memoires, skill sets and add backs/waste’ which is useful when preparing your case and trying to persuade the court in family law property matters.
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