Husband’s voluntary liquidation of business – add-back argument unsuccessful…

…but conduct considered, pursuant to s75(2)(o) of the Family Law Act 1975 (Cth) – property

In Crittenden [2022] FedCFamC1F 892 (18 November 2022), Baumann J heard an application for property division in respect of a 17-year marriage.

The wife argued that the husband had engaged in unilateral dealings that warranted notional add-backs, including dealings with motor vehicles and placing his business as a tradesman in liquidation but thereafter trading in his personal name.

The court said (from [53]):

“ … [T]he wife seeks to include in the balance sheet a number of additional ‘add backs’. The claims relating to the ‘loss’ of the business upon its liquidation appears to be based on a submission that the husband ‘caused’ the business to be liquidated as a result of his ‘reckless, wanton or negligent behaviour’ … (…)

[55] … [N]otionally ‘adding back’ funds is the exception to the overarching oft stated principle, that the Court assesses and identifies the interests of the parties at the time of trial. The Court is therefore not bound to ‘add back’ any amount, however … in an effort to achieve justice and equity, at times consideration of behaviour that might lead to an ‘add back’ is best achieved by taking the matter into consideration under s75(2)(o). … (…)

[57] … The evidence supports a finding that the husband operated the business as he wished … but that as the qualified tradesperson, the profitability of the business … relied upon his efforts. The liquidators reports revealed that as the business began to falter, the husband withdrew available funds for his own use … (…)

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[61] I am far from satisfied that the husband’s conduct amounted to a ‘wasting’ of a valuable asset. … [T]he husband did withdraw funds from the business when other expenses should have been given priority. However, rather than seeking to attribute a notional value and ‘adding it back’ … [t]hese are appropriate matters to take into consideration under s75(2) … (…)”

Craig Nicol and Keleigh Robinson are co-editors of The Family Law Book. Both are accredited specialists in family law (Queensland and Victoria, respectively). The Family Law Book is a one-volume loose-leaf and online family law service (thefamilylawbook.com.au).