In family law cases, the division of assets is a crucial aspect of separation proceedings. While it is generally accepted that losses incurred during a marriage should be shared between the parties, there are exceptions when one spouse’s actions negatively impact the value or worth of matrimonial assets. In this blog post, we will explore the concept of negative contributions in family law and discuss a relevant case example to shed light on its implications.
What are Negative Contributions?
Negative contributions refer to behaviours or actions by one spouse that intentionally or negligently diminish the value of matrimonial assets during a relationship. These contributions can have significant consequences when it comes to dividing assets in a separation.
The Kowaliw Case
A notable case that provides insights into negative contributions is the Marriage of Kowaliw in 1981. The court ruling stated that losses incurred during a marriage are generally shared between the parties. However, exceptions apply in specific circumstances.
In the Kowaliw case, the husband allowed a prospective purchaser to occupy the marital home without requiring rent or contributions for approximately a year. This action potentially reduced the value of the matrimonial assets as there was, at the very least, a loss of rental income. Consequently, this behaviour was seen as a negative contribution.
The Townsend Case
In Townsend v Townsend, the husband sold his taxi license for $148,000. Instead of including the proceeds of the sale within the matrimonial assets, the husband retained and spent the funds separately.
The court determined that the husband’s decision to sell the taxi license and retain and spend the proceeds outside of the asset pool was unfair and went against the principle of equitable distribution. To rectify this situation, the court ordered that the funds, amounting to $148,000, be brought back into the asset pool for proper distribution.
By including the funds back into the asset pool, the court aimed to ensure that both parties had an equal opportunity to benefit from the sale of the taxi license. This decision aimed to achieve a fair outcome and prevent the husband from unfairly benefiting from the exclusion of significant funds from the asset pool.
The Add Back Concept
The term “add back” refers to a legal principle where a court may “add back” or consider certain financial losses or reductions in asset value caused by one spouse’s negative contributions. In other words, the court may exclude these losses from the overall division of assets, reducing the responsible party’s entitlement.
In the scenario mentioned, if the court determines that the husband’s action of allowing the prospective purchaser to occupy the home free of charge for a significant period resulted in a loss or reduction in the value of the matrimonial assets, it may give rise to an add back. The court would likely consider this negative contribution when determining the fair division of assets between the spouses.
Understanding negative contributions in family law is essential to comprehend the implications on asset division during divorce or separation proceedings. While losses incurred during a marriage are typically shared, exceptions arise when one party deliberately or negligently diminishes the value of matrimonial assets. The case of Kowaliw (1981) sheds light on the significance of negative contributions and the potential application of the add back concept.
It’s important to note that family law can be complex, and the specific circumstances of each case play a crucial role in determining how negative contributions are considered. To navigate such legal matters, it is advisable to consult with a qualified family law attorney who can provide personalized guidance based on the laws and regulations of your jurisdiction.