In family law Wastage is where one spouse deliberately wastes money that results in lowering the value of the couple’s assets.
In a property settlement, the law treats “waste” differently from ordinary spending or usage of marital property.
The general rule, in divorce settlements, is that financial losses and debts incurred by either or both spouses should be shared between the parties.
In other words, the financial consequences of expenditure which has reduced the value of the property of the relationship should be felt by both parties and reflected in their respective entitlements as determined by the court.
Waste is an important exception to this rule.
The law views waste, being any intentional or reckless dealing that wrongfully eats into the marital property, as a “negative contribution” to the pool of property available for division. Waste is to be distinguished from reasonably incurred living expenses.
As a matter of fairness, wastage – spending by one party which reaches a certain threshold of unreasonableness – is considered a burden that the innocent spouse should not be forced to bear.
Some common examples of waste include:
Gambling activity by one spouse is the subject of many waste complaints.
Where large sums are blown and losses incurred as a result of one partner’s recreational or problem gambling, this can lead to a corresponding reduction in the pool of funds available for division upon divorce.
The courts have been willing to recognise excessive gambling as waste that should result in adjusting the parties’ entitlements, particularly where the losses are financially damaging when considered in relation to the parties incomes.
Commercial undertakings and dealings with property that are economically reckless or imprudent may result in wastage. An example would be selling an asset of the relationship at a substantial undervalue. Another example would be entering into an inherently risky business venture or making an objectively bad investment.
The court may make a finding of wastage where one spouse has spent significant amounts of money on luxury items, services or experiences, whether for themselves or for others as gifts.
In general, the expenditure will need to be extravagant, exorbitant and/or unjustified, far beyond what might be classed as reasonable living expenses.
The court is even more likely to treat excessive spending as wastage where it occurs in defiance of the other spouse’s wishes or without the other spouse’s knowledge.
If the court finds that a party has committed waste, there is likely to be some adjustment made to the parties’ entitlements. The amount wasted may be added back into the pool of property available for division.
Alternatively, the court may make any adjustment that, in its opinion, justice requires, having regard to all the circumstances of the case. For instance, the court may award the innocent party a higher percentage of the remaining pool of assets.
Either way, the party responsible for the waste will get less out of the property settlement than they would have had they not committed waste. Ultimately, how waste is dealt with in the course of property settlement proceedings and how it will affect the final division of property is a matter for the court’s discretion.
If you believe that your former partner may have deliberately or recklessly used up money, it is important that you are armed with cogent evidence to prove the fact and extent of the wastage.
It is for the aggrieved party to raise the issue of waste and to substantiate the allegation in divorce settlement proceedings. A good way to prepare is to gather any documentary evidence of your former spouse’s financial activities, such as receipts and records of bank account transfers or withdrawals which reveal a pattern of excessive spending.
This case is a landmark decision on the issue of wastage. The Family Court established principles for determining when conduct amounts to wastage:
In this case, the husband sold a family-owned taxi for $148,000 and used the proceeds primarily for his personal benefit. This taxi was a key source of income for the family, making the sale of this asset wasteful.
The court found the spending to be reckless and unreasonable, concluding that it constituted a premature distribution of joint property. As a result, the court determined that the funds should be added back to the property pool to ensure a fair settlement.
The Family Law Act 1975 (Cth) does not explicitly mention the term "wastage" or provide a specific section that directly addresses wastage. However, the principles related to wastage are derived from the general provisions concerning the alteration of property interests under the Act. The most relevant section that provides the framework within which wastage is considered is:
Section 79 of the Family Law Act 1975 allows the court to make orders altering the interests of parties in property. This section provides the legal basis for property settlements and includes considerations that can encompass wastage:
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