Wastage & Addbacks

Wastage

Wastage occurs where one party deliberately reduces the value or worth of assets, or where they have acted negligently, recklessly or wantonly with the assets.

Examples include gambling, alcoholism, selling assets below market price, spending money excessively and the like.

The issue is then whether the court can “add back” the value of assets that was wasted.

The Law

In the past, the court was prepared to “add back” the value of assets wasted, spent or distributed prematurely. This was achieved by adding back the value of that asset to the net pool as if it was still existing.

However in recent cases, the court has been less likely to add back the value of assets that have been wasted, spent or sold prematurely. This is because the asset is no longer owned by either parties. It is no longer in existence and property settlements should only deal with the parties’ existing legal and equitable interests in property.

Having said that, add backs are still permitted in some circumstances. The court has discretion to allow add backs, however they are considered the exception rather than the rule.

An example is legal fee paid with joint funds, may still be added back to the property pool.

Alternative to Add-back

Recently, the approach taken by the courts has been to take into account the wastage or premature distribution when deciding what adjustments ought to be made. The result is likely to be a greater adjustment of the existing property in favour of the non-wasting party.