Not all pre-mature distributions of property are added back to the asset pool as notional property

Not all pre-mature distributions of property are added back to the asset pool as notional property

This blog summaries the decision of Talbot & Talbot [2015] FamCAFC 132 as an example of a court refusing to add back assets that were distributed prematurely.

Introduction

Property that has been disposed of, used for the benefit of one party or has not been accounted for may be treated as “notional property.” Notional property is property that no longer exists, but is nonetheless regarded as being “owned” by a party for the purpose of assessing value of the net asset pool. This essentially puts the asset pool in the same state it would have been, but for one of the party’s unilateral disposal of assets.

However, not all instances of assets that a party has unilaterally disposed of treated as notional property. This generally occurs where the unilateral disposal of as an instance paying for ordinary living expenses. The decision Full Court decision of Talbot & Talbot [2015] FamCAFC 132 is an example this.

Background

Talbot & Talbot [2015] FamCAFC 132 was an appeal against a decision of the Family Court of Western Australia, whereby the court had notionally added back a premature distribution of $252,251. The distribution related to the sale proceeds of a property that the husband had sold immediate prior to the parties’ separation.

The Full Court’s Reasoning

The Full Court allowed the husband’s appeal. If money is to be notionally added back to the asset pool, there must be some account of how those monies were spent. And if that accounting shows that monies were spent on ordinarily living expenses, then the court may refuse to notionally add the relevant funds. In this case, the court found that the monies were spent on items that fell within “the rubric of ordinary living expenses.”

Final Thoughts

This case underscores the point that great care must be taken in distinguishing property to be notionally added back to the pool from money spent on day-to-day expenses. After all, as the Full Court had indicated in the unreported decision Cerini and Cerini, the ‘… parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.’