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In Sherwood and Sherwood [2013] FCCA2334 (12 December 2013)

Judge Bender considered a twenty seven (27) year marriage involving three (3) children, post separation debts and how add backs should be dealt with.

Both parties were seeking a fifty five percent (55%) / forty five percent (45%) division of assets in their favour.  The wife was seeking this on the basis of her responsibility for the care of the parties three (3) children and on the basis that the husband should bear the business debts due to his sole responsibility for the conduct of the business for two (2) years following separation.

The husband was seeking a fifty five percent (55%) / forty five percent (45%) division of assets due to the wife’s greater income earning capacity and on the basis that the debts of the business should be met equally by both parties.

In this matter it was held that the parties assets should be divided equally and that the husband would remain liable for part of the business debts.

During the marriage, both parties worked and raised their children and the Judge took the view that in the circumstances of the parties long marriage, the parties contributions should be considered equal.

Both parties were seeking an adjustment pursuant to Section 75(2) based upon their future needs.  The wife was seeking an adjustment on the basis that she would be financially responsible for the parties three (3) children and whilst they are now adults she would be providing them with a home until they completed their tertiary studies.

The husband was seeking a future adjustment on the basis that the wife’s inheritance was approximately $150,000.00 more than his and it reflected the greater financial resource available to the wife than that which was available to him.  The husband also argued for as Section 75(2) adjustment on the basis that the wife had a greater earning capacity than he did.

The Court found that there should be a five percent (5%) adjustment in the wife’s favour for Section 75(2) factors based upon the fact that she would bear the support of the children over the next three (3) to five (5) years whilst they are completing their tertiary studies.

In making this decision the Court made some interesting comments about add backs. They also referred to the recent full court decision of Bevan and Bevan (1995) FLC92-600 which places into doubt the practice of adding back joint funds expended by the parties.  It was considered that the authorities are very clear that monies that are existing at separation which are used by the parties to fund their reasonable living expenses will not be notionally added back into the property pool (C and C) 1998 FAMCA143.

They also quoted the case AGO v GRO in which the full court  of Holden, Warnich and La Poer Trench JJ held that the three (3) clear categories of cases where the Court has determined it is appropriate to notionally add back to the pool of assets, assets that no longer exist.  They are:

  1. Where the parties have expended monies on legal fees;
  2. When there has been a premature distribution of matrimonial assets;
  3. In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC91092.

In this case it was found that the wife’s savings were not used to pay her legal fees. The Court found that it was clear that wife’s pre separation saving were used to pay the reasonable living expenses of herself and the children and accordingly would not be a factor relevant to the division of the parties asset pool.