What happens when money is spent before a family law settlement?

Neville and Bowen [2025] FCWA 226

When a couple separates, the court divides their assets and liabilities. That process starts with identifying what each party currently owns. But what happens when money is spent before any division takes place, such as on legal fees, medical treatment, or day-to-day living costs? Can the court treat that money as though it still exists?

This question was examined in Neville and Bowen [2025] FCWA 226, a decision of the Family Court of Western Australia. The case also addresses how the court assesses each party's contributions when the circumstances of a relationship change significantly over time.

Prior to the parties undergoing family law proceedings, they were both involved in a serious motor vehicle accident. Both parties suffered significant injuries which continue to impact them, the husband sustaining a serious head injury. Both parties pursued claims for damages however, the husband received significantly more than the wife. Their adult children also pursued damages claims. 7 years later, the parties divorced. There were various contentious issues in this case however, the most notable, was the discussion on addbacks in family law.

What is an Addback?

An addback was a mechanism by which courts would notionally include money that had already been spent or disposed of, treating it as though it still existed in the property pool. The purpose was to prevent one party from reducing available assets simply by spending them before the matter reached trial. In family law property proceedings, the court works from what the parties currently own.

Recent amendments to the Family Law Act 1975 (Cth) changed this. The court can only alter rights in property that exists. Money already spent cannot be placed back onto the balance sheet as a notional asset.

What Neville and Bowen makes clear is that removing the addback mechanism does not leave the court without any means to account for how money was spent. Other provisions of the Act remain available, and the court retains discretion to consider expenditure when assessing what is just and equitable between the parties.

Addbacks are an aspect of a balance sheet that looks at the treatment of property the parties no longer own, but owned prior to the trial. These assets have typically been wasted, spent or disposed and parties may typically seek to include these in the property pool to ensure a fair settlement.

The Court's Framework

Judge O’Brien first discussed the recent amendments to the Family Law Act regarding addbacks. The changes he discussed include the following:

1. The Court must first identify the existing legal and equitable rights and interests in any property of the parties.
2. The Court must then consider the contributions listed in s 79(4) of the Family Law Act including contributions made to the acquisition, conservation or improvement of any property, whether or not the parties still own it.
3. The Court then considers the current and future circumstances listed at s 79(5) of the Family Law Act. This includes a consideration of the effect of any material wastage of property or financial resources, caused intentionally or recklessly. It also includes any liabilities incurred by either party including the nature of those liabilities and the circumstances relating to them.
4. Judge O’Brien also mentioned that what was previously s 75(2)(o) of the Family Law Act is now replicated in s 79(5)(v). This section notes that the Court must taken into account any other fact or circumstance which the justice of the case requires to be taken into account.

Judge O’Brien then went on to discuss the relevance of mathematical calculations when holistically assessing contributions. It was determined that mathematical calculations should be avoided. This applies to purported addbacks and considerations of the impact of particular forms of contribution.

Judge O’Brien questioned whether a mathematical approach could inform the required considerations of wastage (s 79(5)(d)) or the required consideration of any other relevant fact or circumstance required to be taken into account in order to do justice (s 79(5)(v)). Two issues which typically arise under this are questions of paid legal fees and interim property adjustments, both of which were raised by the parties.

The Parties’ Arguments

The wife proposed several addbacks however, Judge O’Brien did not add any of these back into the property pool. They included:

1. The entirety of her husband’s legal fees incurred and paid to his firm. She claimed that only an unspecified portion of her legal fees should be added back. Judge O’Brien took into account, the injustice this would cause to the husband in deciding not to add this back.
2. The money spent by the husband that was sought from his damages award. She claimed he placed that amount into his personal account, using it for personal spending. Judge O’Brien found it would also be unfair to add this back. The Judge found 90% of this money was used to pay noncontentious expenses like speech therapy, legal fees and personal injury litigation fees.

The Husband's Speech Difficulties

The husband's counsel submitted that his speech impairment, caused by the head injury sustained in the accident, should reduce the weight given to his evidence, as it affected his ability to construct sentences and communicate clearly. Judge O'Brien rejected this. The impairment arose through no fault of the husband and did not affect the credibility of his evidence.

The husband also proposed various addbacks which Judge O’Brien did not adopt. They included:

1. $100,000 drawn by the wife against a joint redraw facility around the time of separation. This was secured against a family home and paid into her personal account. Judge O’Brien did not add these back. Similar to the husband, most funds were spent on noncontentious expenses including school fees, rent and children’s expenses. As she received far less damages, it would be unjust for the husband to add these funds back.
2. Funds paid by the wife to settle a claim against her late father’s estate. These funds were not added back as the payments were not wasted. Judge O’Brien found it was reasonable for the wife to seek to settle the claim against the estate without having to sell the testamentary trust property.

How Contributions Were Assessed

Judge O'Brien confirmed that all contributions must be considered as a whole. It is not appropriate to take one contribution in isolation and weigh it against the rest separately.

In this case, the court considered the parties' contributions across the full history of the relationship, both before and after the accident. After the accident, the wife's contributions exceeded those of the husband, given his physical and psychological injuries. Despite those contributions, she received a lower damages award than the husband. The court ordered the husband to pay the wife $267,000 to reflect this imbalance.

Other points

There were other, smaller issues raised in this case. The first was that the husband experienced ongoing disabilities after the accident, impacting his ability to construct sentences and speak clearly. His counsel submitted that this would impact his credibility. However, Judge O’Brien disagreed as these speech impairments were of no fault of his own.

Additionally, Judge O’Brien made helpful comments regarding how the Court considers each party’s contributions. Judge O’Brien said that all contributions must be considered holistically. It is inappropriate to compartmentalise contributions and weigh one against the remainder. In this case, it was appropriate to consider the history of the parties’ relationship and the contributions made prior and after the accident. After the accident, the wife’s contributions exceeded the husbands to account for his physical and psychological injuries. However, she was paid less damages.

What this means in practice

The court will not treat spent money as though it still exists simply because one party requests it. To succeed in such an argument, a party must show either that the money was genuinely wasted, spent recklessly or with the intent of reducing the property pool, or that the specific circumstances of how it was spent make it just for the court to factor it in under s 79(5).

Ordinary expenses, including legal fees, medical treatment, school fees, rent and children's costs, will generally not meet that threshold. In Neville and Bowen, neither party succeeded in having any amount added back. The court examined, on the evidence, where the money actually went before deciding no adjustment was warranted.

Key takeaways

This case demonstrates the reluctance of the Court to consider addbacks to the property pool. To be considered, they must not cause any injustices to the parties and evidence is required to show the expenses have been wasted.

Family Court judges also favour a contributions-based outcome when proposing or changing orders. For example, Judge O’Brien required the husband to pay the wife $267,000 based on her contributions after the accident.

How we can help

Property disputes after separation can become more complicated when money has already been spent, assets have been drawn down, or one party's contributions have shifted significantly over the course of a relationship. As Neville and Bowen shows, the court examines the full picture, including the history of contributions, how funds were actually used, and what a just outcome looks like on the specific facts.

Understanding where the law now stands on addbacks, and what arguments are available to you under the amended Family Law Act 1975, matters early in the process. The approach taken at the outset of a property dispute can affect what evidence is gathered, how negotiations are framed, and what orders are ultimately sought. Having a trustable experienced family lawyer by your side can help you navigate in these complex matters of your family law related cases in Sydney.

The Norton Law Group acts for clients in property settlement matters, including cases involving complex asset pools, personal injury proceeds, and disputes about how funds have been spent before or after separation. If you would like to discuss your situation, contact our team to arrange a consultation.