The end of addbacks in Family Court.

What happens to an add back now they can’t be added back into the property pool?

Up until fairly recently, parties embroiled in property proceedings in the Federal Circuit and Family Court of Australia (“FCFCOA”) were able to have add backs included in the property pool that would be divvied up as part of the proceedings.

What is an add back?

On occasion in Family Law matters, you will have a matter where one party has either used, disposed of or hidden assets, for the purpose of minimising the total property pool and reducing the amount their partner receives. An add back is a legal concept that enabled the court to account for the used, hidden or disposed assets and it would do so by adding back the funds into the property pool.

The most common types of add backs that parties would try to have added to the property pool include the money the parties spent on mortgages which benefitted both parties or additional rent , any money that was wasted during the proceedings (i.e. one party gambling away money), and property that was either hidden or devalued (i.e. allowing water damage to build up so a property’s value is decreased) An add back was essentially money that was spent from the joint pool for the benefit of one party.

Shinohara & Shinohara

Shinohara & Shinohara is a recent decision out of the Federal Circuit and Family Court of Australia, which changed how add backs are dealt with.

In Shinohara, final parenting and property orders were initially made back in March. Under these parenting orders the father had sole parental responsibility for the children, the children lived with their father and only spent time with their mother on alternate weekends. The court made these orders due to the mother’s mental health, the severe impact stress had on her personality and as the children showed behavioural symptoms of stress.

At trial, the parties provided the Court with an agreed balance sheet, that included $589,155 from the sale of a property, $239,992 in add backs the father was claiming and $352,776 of add backs the mother was claiming, with these add backs arising from partial property settlements and the partial distribution of the sale proceeds prior to the trial. However, the court decided not to have any of the add backs added to the property pool and ordered and made orders for the sale proceeds to be split evenly between the parties.

The Appeal

The mother was unhappy with the final orders and appealed both the parenting orders and the property orders.

The mother, when she appealed the parenting orders alleging that the judge had considered all of the evidence and that the judge had made significant factual errors when assessing the evidence that was considered. On considering her evidence, the court determined that the mother had failed to prove the errors she alleged and dismissed that aspect of thappeal.

While the mother was unsuccessful appealing the parenting orders she had more success with the property order appeal In her appeal the mother complained that the primary judge had decided not

to allow any of the agreed add backs as the funds had already been spent, and as a result she had not been afforded procedural fairness and the judge had failed to take the add backs into account when deciding the matter.

The court on considering that mother’s appeal, decided that the inclusion of add backs went against the current legislation and it would be inappropriate for the add backs to be added to the balance sheet. In the court’s opinion, add backs did not exist, as the money they represented had already been used or spent, and because of this add backs could not be included in the balance sheet which only records the parties’ current assets and liabilities.

However, the court also decided that while it was inappropriate for add backs to be included in the balance sheet, they should be taken into account by the court when determining the parties’ contributions to the relationship and what adjustments to the property pool would be required for there to be a just and equitable split of the property pool.

On this basis, the court allowed the mother’s property appeal and made new orders that provided that the father was to pay the mother $115,262.50, which would mean the mother received 67.5% of the sale proceeds, instead of the 50% that had been ordered by the primary judge. That having been said, because the mother’s parenting appeal was completely unsuccessful, she was ordered to pay the father and independent children’s lawyers’ costs, which came to a total of $8,865.

Key takeaway

Shinohara represents a major shift in how the FCFCOA deals with add backs, as add backs can no longer be included in the balance sheet, which would increase the size of the property pool and skew how the property pool is aportioned, and instead are now being taken into consideration, when the court is determining the parties’ contributions to the relationship and what adjustments to the property pool would be required for there to be a just and equitable split of the property pool.

Voice Lawyers: Your Guide in Family Law Matters

This update is general in nature and is not legal advice. If you need help dealing with a parenting or property dispute or require assistance with any family law matter, at Voice Lawyers, we hear you. 

If you are experiencing or contemplating separation, we suggest you seek legal advice as early as you can, even if you do not intend to separate for a few months or even years. We offer a 90 minutes early separation strategy session Voice Lawyers — Divorce, Separation and Family Law to prepare and inform clients of the process. Every family’s situation is different, and advice tailored to your specific circumstances can assist you in achieving your best possible outcome. We can assist if you would like a second opinion.

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By Enda Byrne