The OMB Law Board: S6 Ep 7 | The Property Pool Loophole That Just Changed

When a relationship ends, the property pool is meant to be shared fairly, but what happens if one person has already spent, gifted, or wasted joint money before settlement? In this episode, Simon Bennett sits down with Family Law Partner Aleena Mills to unpack "add-backs," the legal term for money that's been improperly taken out of the shared pool, and how they're treated under family law.

Aleena breaks down recent amendments to the Family Law Act and a landmark case, Shinohara, which has changed how courts deal with disposed of assets. It's essential listening for anyone going through separation, particularly if joint funds have already been spent on legal fees, early payouts, or reckless spending.

Key takeaways: what counts as an add-back, how the law has shifted from strict calculation to a more holistic assessment, and what it means for your entitlement.

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Welcome to The OMB Law Board, the podcast where legal insights meet practical advice. Hosted by Simon Bennett, Managing Partner at OMB Solicitors, this show delves into what you can expect when engaging with OMB Solicitors. Specialising in property law and commercial law, OMB also boasts dedicated teams for estate planning, contested estates, body corporate matters, litigation, and family law.

Each episode features in-depth discussions led by experienced team leaders, some with over 20 years of expertise. You'll gain valuable knowledge on initial consultations, cost assessments, timelines, and the importance of clear communication and confidentiality in legal matters.

Join us to break down barriers and navigate your legal journey with confidence. Tune in for expert advice, client stories, and tips on how to prepare for your legal needs. The OMB Law Board is your trusted source for all things legal.

00:00:06:12 - 00:00:16:17
Unknown
Welcome back to the OMB Law Board. I'm Simon Bennett, and today I've got OMB family law partner Aleena mills with me. Aleena welcome back. Thanks, Simon.

00:00:16:17 - 00:00:17:10
Unknown
So

00:00:17:12 - 00:00:29:13
Unknown
in a property perspective, we have the family law pool. And the family law pool reflects all of the assets from time to time. Some of those assets may get removed from the pool.

00:00:29:13 - 00:00:41:07
Unknown
And we have this process through amendments in the Family Law Act in recent case legislation, which seeks to add back assets which have been improperly removed.

00:00:41:07 - 00:00:59:07
Unknown
That's right. So add backs are a big, big, relevant topic that most property settlements will involve. So it's really important that we go through those amendments. Okay. Well let's get into this. Because if you're in a situation where the family pool is relevant and assets have been removed,

00:00:59:07 - 00:00:59:13
Unknown
we

00:00:59:13 - 00:01:02:16
Unknown
definitely need to know about how to get them back in the property pool.

00:01:02:16 - 00:01:26:03
Unknown
So, Aleena, I'm going to throw to you, why don't you tell us what is an ad back? How did it come about and what are the legislation and the case law doing in this regard? Sure. So we use the term ad back to describe joint money. So money that's been in your property pool that has been disposed of by one of the parties.

00:01:26:05 - 00:01:44:13
Unknown
And there's a few categories of that disposal. One is that they might have paid some legal fees using joint money, which is a big no no. The law sends you to pay your own legal fees. So the other party probably shouldn't where that depletion in the property pool. The second category is where there's been an interim distribution of property.

00:01:44:13 - 00:02:04:23
Unknown
So this is where you might need 50 grand to put a deposit on something. And the other party agrees prior to settlement. And then the third category of an ad back is essentially where you might have wasted some of the property pool. And that's in conduct that is like, you know, you've you've got a drug addiction or an alcohol addiction and you've spent a lot of joint money.

00:02:05:00 - 00:02:05:22
Unknown
So the pool

00:02:06:03 - 00:02:24:10
Unknown
separation to today, when we settle your matter is down and it's down. And it's not fair to the other party that it's down. So we use advocates to describe that situation. Okay. So as we said at the start, we've got this property pool and that is the joint matrimonial pool if you like, of assets could be property.

00:02:24:10 - 00:02:59:14
Unknown
It could be shares, could be money. It could be a combination. And that should be preserved as assets of both parties. Correct. But one of the parties improperly often has taken assets from that pool. And you're trying to prevent that affecting the other party. That's right. Okay. That's right. And prior to and I'll talk about this in a bit more detail, but prior to last year when we had our amendments come in to the Family Law Act, the exercise or the approach that the courts would take is that they would actually include and quantify the add back.

00:02:59:15 - 00:03:24:05
Unknown
So quantify the amount of money that's been disposed of, and then add it into the balance sheet and assign it to the party that disposed of that money. So it was this mathematical calculation almost where it was included in the balance sheet post the amendments last year that came into effect. That approach, it looks like, has been put to death in a way.

00:03:24:07 - 00:03:53:06
Unknown
And I say that because we've had a recent case by the name of Shinohara, which which came down shortly after these amendments came into effect. Okay. And how does that change things? Like what? What is that? Well, the amendments to the act actually now, tell the court that the court is to, when identifying the asset pool, have regard to existing property of the parties, which means that property that has already been disposed of is not existing anymore.

00:03:53:08 - 00:04:18:15
Unknown
It's notional property. And in this case of Shinohara was one of the first to apply this new terminology in the legislation. And what they affect the court in that matter, said, is that we no longer add that add back to the balance sheet. Instead, we're going to consider the funds disposed of in a broad, sort of holistic consideration of the parties contributions in the case and all their future needs.

00:04:18:15 - 00:04:45:20
Unknown
And that is, in my view, a bit of a bit of an impressive way of dealing with money spent, because add backs allowed us to quantify that and kind of, in a way, punish the offending party for having had property already, if that makes sense. They've already had and spent that property, and they should be. They should where that whereas this decision creates, in my view, a bit of uncertainty around how add backs are going to be treated.

00:04:45:22 - 00:05:18:04
Unknown
Okay, so I know this is a difficult question, but in light of the Family Law amendment and the Shinohara case that you talk about, how do you feel that they're going to deal with this scenario whereby one party has, say, improperly disposed of some of those assets? How is that going to affect the distribution of this pool? I think there's going to be quite a large impact on the way we deal with those situations, because family law is so discretionary.

00:05:18:08 - 00:05:39:04
Unknown
We're not given by the court a lot of guidance as to specific credit that specific contributions get, if that makes sense. So the court will holistically consider everyone's contributions and come to a broad like a rough split of the pool. But they're not going to tell you how necessarily how they in the breakdown of that percentage, say 5050.

00:05:39:05 - 00:05:56:05
Unknown
For example, they're not going to say, look, because of the add back. I'm crediting the with 5% here. They don't do that. So it actually creates a bit of uncertainty for us in how we treat funds unnecessarily, unnecessarily disposed of. And I think it'll also make parties a little bit more

00:05:56:05 - 00:06:09:16
Unknown
cautious about agreeing to things like partial property settlements where previously they might have, but now they're not guaranteed that those funds are going to be credited to that party who received it prior to finalization of their settlement.

00:06:09:16 - 00:06:38:21
Unknown
So I think there's actually going to be quite a few flow on effects from the decision. Yeah, it sounds like with a lot of areas of family that it's difficult to get a black and white answer. That's so because there's so many factors to be considered. And holistically, as you said, they're trying to weigh up all of the factors, including any Add bags or negative contributions, even to the property pool.

00:06:38:21 - 00:07:07:06
Unknown
So it sounds like this is going to be a hotbed. It will be of activity, I think so, and I think we're going to have to watch this space for at least a couple of years just to see how the court handles these matters. Okay. So I appreciate, you know, the advice, and it's good to know about recent changes to the Family Law Act, the Shinohara case, how add backs are going to change your entitlement to a share in the property pool, and maybe a little bit of lack of certainty at the moment.

00:07:07:06 - 00:07:28:15
Unknown
So Aleena, thanks so much for bringing us up to date on all that. No problem. Thanks for having me, son. And if you stay tuned to the OMB Law Board, we will try and answer any questions. If you comment below, any questions to do with the add backs or the family property pool at all, contact the OMB Family Law Team headed by Aleena mills.