The death of add backs

Special Counsel, Dianne Caruso, discusses this important topic.

The death of add backs

In the recent decision of Shinohara & Shinohara [2025] FedCFamC1A 126 the Full Court considered an appeal by the mother in respect of both parenting and property settlement orders. In regards to property, the Full Court considered whether or not it is possible to notionally add back property into the asset pool.

The Full Court referred to the decision of Omacini & Omacini [2005] FamCAFC 104 which identified add backs falling into three categories:

1. 1. where a party has expended money on legal fees;
   2. where there has been a premature distribution of property; and
   3. when there has been a waste of property.

It went on to cite the decision of Stanford & Stanford (2012) 247 CLR 108 in which the High Court confirmed the need for the Court in property settlement proceedings to identify existing legal and equitable interests of parties in their property. The Full Court then went on to cite subsequent decisions which indicated a movement away from the inclusion of add backs.

The Full Court decisively held, in light of the recent amendments to the Family Law Act 1975, that it is no longer appropriate to notionally add back property to the asset pool, and that it should be taken into account in the assessment of the parties’ contributions to the asset pool and/or their current and future circumstances.

The Full Court held:

1. 1. “Statutory interpretation focuses on the plain and ordinary meaning of the words in the section. The text of s 79(3)(a)(i) is clear. Only the existing property of the parties is to be identified and only that existing property is to be divided or adjusted.
   2. This single conclusion is reinforced, when read in the context of s 79, not to permit more than one potential meaning (Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 35; (1998) 194 CLR 355 at [69]).
   3. Section 79(4) is headed “[c]onsiderations relating to contributions”. Sections 79(4)(a)-(c) encompasses considerations that form part of the history of contributions, including the fact of the legal and equitable interests in property disposed of, and the use and application of the funds produced from the disposal, up until the date of assessment, being the date of trial.
   4. Section 79(5) is headed “[c]onsiderations relating to current and future circumstances”. Section 79(5)(d) directs consideration as to whether a party has engaged in wastage of property or financial resources and its impact on the financial circumstances of the parties at the time of the assessment, being the date of trial, and prospectively, being one of the categories of notional add back identified in Omacini. Section 79(5)(n) directs consideration to the extent to which each party has contributed to the property or financial resources of the other party at the time of the trial and prospectively. This could encompass interim or partial property adjustments or payments by way of litigation funding. Section 79(5)(v) replicates s 75(2)(o) prior to the amendment of the section. Longstanding authority has not read down the scope of the considerations falling within that sub-section, described in the Explanatory Memorandum as a “catch all’ provision, including but not limited to enabling the current and future considerations of the fact and impact of property that has been the subject of predisposition prior to hearing, being a category of notional add back identified in Townsend and Omacini, or the expenditure of property on legal fees.
   5. So that it is clear, s 79 now directs that the categories identified in Omacini pre-amendment that were notionally added back are to be considered in ensuring a just and equitable outcome, either by way of historical contributions, or by way of their relationship to and impact upon the current and future circumstances at the s 79(5) stage. For the avoidance of doubt, it is open when consideration is given to s 79(2) of the Act, to consider the matters in s 79(3)(a) and s 79(3)(b), together with those in s 79(4) and s 79(5) and conclude it is not just and equitable to make any order (Cosola & Moretto [2023] FedCFamC1A 61; (2023) FLC 94-143).
   6. The holistic approach in assessing and determining contributions and adjustments thereto (Jabour & Jabour [2019] FamCAFC 78; (2019) FLC 93-898 (“Jabour”); Horrigan & Horrigan [2020] FamCAFC 25 (“Horrigan”)) remains applicable. Each of the considerations, by either s 79(4) or s 79(5), requires engagement with the circumstances of the disposal of property, the value it achieved, and its use and application being considered and weighed to achieve the mandate of justice and equity that permeates s 79 of the Act.
   7. As notional property does not exist, it cannot be identified to form part of the balance sheet recording the current items of the parties’ property.”

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