Ever since Kowaliw,1 the Full Court has held
that notional adjustments to property pools for section 79
determinations have been the exception and not the rule. At least
one judicial eyebrow had to be raised in indignation before the
unholy trinity of premature distributions, "wastage"
(perhaps because "waste" doesn't sound lawyerly
enough) and "add backs" for legal fees, raised their ugly
heads. Despite this, claims for notional adjustments in some form
or another play a significant role in property proceedings,
especially in large pool cases.
In two recent cases, Murphy J has taken a step back to
re-examine the manner in which a judge's discretion should be
exercised in determining a notional adjustment. His Honour firstly
noted in Kouper v. Kouper2 that the discretion
in such cases is not fettered, or perhaps only fettered by the true
meaning of what is just and equitable for the purposes of section
79. And in Hackshaw & Hackshaw,3 his Honour
made the interesting aside that giving consideration to property
that no longer exists seems to run contrary to the section whose
specific purpose is to deal with property that does exist.
The Discretionary Questions
Notional Adjustments has a long and detailed jurisprudence.
Kowaliw, Townsend,4Chorn v.
Hopkins5 and Omacini6 all state
and restate careful principles about the manner in which notional
adjustments may form part of section 79 proceedings. However, in
both Kouper and Hackshaw, Murphy J invites us all
to think more carefully about the nature and the quantum of the
notional adjustment, having regard to the circumstances of the
case. In doing so, his Honour has formed a five question
Is it contended that property (including money), that would
otherwise be available for distribution between the parties if a
section 79 order is made, has been dissipated with a consequential
loss to the property otherwise potentially divisible between the
parties at the date of trial?;
If so, is it alleged that the dissipation of property was in
respect of things other than what, in the particular circumstances
of this particular marriage, can be classified as "reasonable
If it is asserted that any loss to the divisible property
results from dissipation of property other than in respect of such
expenses, why is it asserted that the result should be a sharing of
that loss by the parties other than equally?
If it is contended that this be the result, why should there be
an add back (which brings to account, dollar for dollar, such past
expenditure in current dollars) as distinct, for example, from
there being an adjustment being made pursuant to s 75(2)(o)?;
How should either any "add back", or adjustment
pursuant to s 75(2)(o), be quantified?
This is a new approach, because often the consideration ends at
question 2; that is, there has been dissipated property, and it has
not been used on "reasonable living expenses", ergo it
must be added back. What these questions do is require the parties
to examine the nature of any expenditure which may be the subject
of a notional adjustment "by reference to the particular
circumstances of the particular marriage." This is
particularly so when investments are made and are said to be
imprudent, but no more. Or perhaps where one party spends money
which the other party would have encouraged at the start of a
marriage, but calls extravagant at the end of it.
It also asks the parties to consider the quantum of the add back
too – and whether or not a proper adjustment is not to
the pool itself (i.e. dollar-for-dollar or some other figure), but
a factor to be considered under section 75(2)(o). In
Kouper, his Honour adopted a "global" approach
to quantifying the notional adjustment, having considered the level
of imprudence of the husband's investments decisions, and his
level of control over them within the context of the marital
financial arrangements, but also the fact that a dollar-for-dollar
add back would result in the husband receiving nothing of any
value, which his Honour considered unjust and inequitable.
Notional adjustments may be the exception, and not the rule. But
they abound. It is incumbent on parties to think more carefully
about "add backs," particularly considering the context
in which the dissipation occurs, and its ultimate effect, as well
as the justice and equity of the quantum.
1.  FLC 91-092
2. (No 3)  Fam CA 1080
3.  Fam CA 1123
4.  FLC 92-569
5.  FLC 93-204
6. (2005) 33 Fam LR 134
For further information on this topic, please contact Adam
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
There are several requirements that must be completed by an executor before the distribution of assets to beneficiaries.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).