Paula Phelan is a Family Lawyer with Specialist Accreditation in this area from the Queensland Law Society. She has been a lawyer for 21 years and is the director of Phelan Family Law, a Rockhampton legal firm specialising in Family Law only.
One issue that may arise upon separation is an allegation that one party has “wasted” or otherwise reduced the property pool for division through behaviour such as gambling or risky investments.
Will the Court take these allegations into account when dividing the assets between the parties? Will they adjust the division of the assets against the party accused of reckless behaviour? The answer is sometimes.
Usually liabilities or debts that are incurred during a relationship are seen as “joint” liabilities even if they exist in only one parties’ name, such as credit card debts or a mortgage on property.
The exception to this is where it is found that one party has:
1. Embarked on a course of a conduct designed to deliberately reduce or minimise the value of assets; or
2. Acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their values.
There have been cases where one party has been shown to have gambled assets recklessly or entered into commercially inept arrangements where the Court has factored this into the overall property division.
For example, in one case the husband allowed a prospective purchaser, who then reneged on the purchase, to occupy the matrimonial home for over one year rent-free.
At the end of the year the house was left vacant with no money forthcoming from the supposed purchaser.
The Court found this conduct to be so reckless that he should bear the total losses.
With an allegation such as gambling the Court will allow reasonable entertainment expenses being spent by either or both parties.
However, if it can be shown that this spending was at such a high level in comparison to overall income and resulted in a significant reduction in assets, then it is more likely to be treated as a negative contribution by the party.
Often this type of random expenditure will result in the necessity of refinancing property or wastage of savings.
With respect to failed businesses the Court is unlikely to find that someone was acting recklessly simply because a business venture was not successful during the relationship.
The argument will often be that both parties agreed to give the business a try and if it had made millions then they would both be sharing in the profits, as they should be now sharing in the losses.
The Court may take into account the issue of whether one party was acting completely unilaterally without the other party’s knowledge, but again the conduct must be designed to reduce the asset pool or be found to be reckless or negligent.
As with all family law disputes, the Court has a wide discretion to apportion liability and division of assets and so it is important for parties to obtain thorough legal advice about what issues may be relevant in their matter.