Can property settlements help you recover assets your former partner wasted?
Your former partner may have spent money during your relationship on a regular basis gambling or buying alcohol or making high risk investments that resulted in financial losses. Your former partner may have sold assets, particularly towards the end of your relationship and later failed to account for the proceeds from sale of those assets.
We are often asked in these situations what the other partner may claim in a property settlement to recognise any wastage of assets by the former partner or to compensate that other partner in relation to a disposal of assets by the former partner.
This is an area of law which has been the subject of scrutiny in more recent years. In some previous cases, the Family Courts had taken an approach of adding back into the asset pool in certain instances the value of assets which had been wasted or disposed of by the former partner and treating those notional assets as having been received by that former partner as part of his or her property settlement. This had the effect, in appropriate circumstances, of treating assets which no longer existed as part of the asset pool available for division between parties.
However, a relatively recent decision of the High Court of Australia has again emphasised that property orders may only be made in relation to property which actually exists at the time that the orders are made. Whilst wasted assets or assets which have been disposed of then may not be treated as part of the notional asset pool, the other party may claim an adjustment in his or her favour out of the existing asset pool on the ground that it is just and equitable in view of the conduct of the former partner.
It is not all losses flowing from investment decisions made by a party to a relationship that would justify an adjustment being made in favour of the other party. Losses as much as profits may arise from legitimate investment decisions made in the pursuit of matrimonial objectives. For the losses to be considered as justifying an adjustment in favour of the other party out of the asset pool, the former partner would need to have been acting in a particular manner, for example, acting recklessly or negligently or with wanton disregard in dealing with the assets.