“Add back” items discussed

“Add back” items discussed

Warford & Warford [2016] FamCA 55 (9 February 2016)

“Add back” items discussed:

The following is annotated. For full case: http://www.austlii.edu.au/au/cases/cth/FamCA/2016/55.html

53. To the parties’ credit there was agreement about most of the items in the joint balance sheet. But the wife included as a liability what she said was a loan from her uncle for legal fees paid by him on her behalf of $83 309. The wife sought to have admitted into the evidence a Statutory Declaration by her uncle, Mr R, declaring that he had lent the wife the sum of $75 817.75 “to cover legal bills in the course of settling her divorce”. The declaration went on to declare that the money would be repaid to Mr R in full when the wife received her final settlement before the proceeds of settlement were distributed to her.
54. Application to tender this Statutory Declaration into the evidence was strongly objected to by learned counsel for the husband. In these circumstances I decided to permit the wife to arrange for Mr R to give evidence by telephone in respect of this matter which subsequently occurred.
55. I accept that Mr R has paid this amount of $75 817.75 to the wife’s lawyers for her legal costs.
56. Mr R’s oral evidence included evidence to the effect that while he expected the money to be repaid by the wife, he would not sue her to enforce this debt.
57. I do not propose to include this liability of the wife in the balance sheet. In my view this is consistent with the principles set out by the Full Court in Chorn & Hopkins [2004] FamCA 633;(2004) FLC 93-204.
58. At paragraph [55] thereof the Full Court said as follows:

This decision [Finlayson v Finlayson & Gillam [2002] FamCA 898; (2002) FLC 93-121] … confirms the principle that where funds have been borrowed to pay legal fees, and such liability is still outstanding, neither the payment of the fees nor the liability should be taken into account.

59. The rationale for this appears to be the general rule as set out at s 117(1) of the Act that each party shall bear their own costs. If the Court was to include the wife’s liability to Mr R in the balance sheet, this would in effect make the husband liable in a practical sense for part of the wife’s legal costs.
60. In relation to the husband’s payment of approximately $140 000 in legal costs from his $300 000 inheritance, I expressed the view during submissions that I thought it might be appropriate to add back that $140 000.
61. I have decided not to add back the $140 000. Clearly the $300 000 was a large contribution which came to the husband as an inheritance and from which he paid, amongst other things, $140 000 of his own legal costs. I shall regard his contributions as not including this amount.
62. I have also decided not to add back the $30 000 partial property settlement which was paid to the wife from the inheritance. But I shall take this into account when I come to consider the relevant s 75(2) matters.