Over Capitalisation & Wastage in Family Court Matters
There are examples that come before the Family Court each year where financial contributions towards the improvement of real estate are not given full credit if those contributions result in over capitalisation. For example, in some cases significant financial contributions by one party such as the installation of an in-ground swimming pool which have added no value to the real property have been given limited credit by the Court when assessing each of the spouse’s overall contributions.
The Family Court has stated on certain occasions that when you look at the question of financial contributions made by one of the parties to a marriage towards the acquisition, preservation and maintenance of an item of property, it is relevant to determine to what extent that contribution is reflected in the increase in the value of that property.
Losses and debts incurred during the marriage
Another issue arises when monies have been lost or debts incurred by one party during the marriage. The general rule is that any losses or debts incurred during the marriage are to be included and shared by both parties. For example, a decision by one spouse to purchase a business that ultimately fails and causes loss is said to have occurred as part of the ongoing marriage or relationship partnership and therefore is part of the ebb and flow of the marriage (just as any successes or profits are).
However, if one party has acted recklessly, negligently or wantonly in reducing or minimising the value of assets or incurring losses or debts, then such liabilities incurred by one party in the course of the marriage or a defacto relationship may not be shared equally or at all. For example, if one party intentionally fails to insure a property knowing the existence of high risks or if one person has lost large sums of money on gambling.
These principles have stood for over thirty years and have regularly been cited and endorsed by Judges since that time.
These principles need to be remembered when your clients come to you seeking advice on how best to spend their money when their marriage or relationship is in trouble.