One issue that may arise upon separation is an allegation that one party has “wasted” or otherwise reduced the asset pool for division through behaviour such as gambling or risky investments. If you are seeking divorce due to gambling addiction or a failed business venture, for example, will the Court take these allegations into account when dividing the assets between the parties?
The answer is sometimes.
Usually liabilities that are incurred during a relationship are seen as “joint” liabilities even if they exist in only one parties’ name, such as credit card debts or mortgage on property. The exception to this is where it is found that one of the parties has:
- Embarked on a course of conduct designed to reduce or minimise the value of the assets; or
- Acted recklessly, negligently or wantonly with matrimonial assets, the overall effect which has reduced or minimised their values.
There have been cases where one party has been shown to have gambled assets recklessly or entered into commercially inept arrangements where the Court has factored this into the overall property division. For example, in one case the husband allowed a prospective purchaser, who then reneged on the purchase, to occupy the matrimonial home for over one year rent free which the Court found to be so reckless that he should bear the total losses.
With an allegation such as gambling, the Court will allow reasonable entertainment expenses, but if it can be shown that this was at a high level in comparison to overall income and resulted in a significant reduction in assets (for example requiring re-financing of property or wastage of savings) then it is more likely to be taken as a negative contribution.
With respect to failed businesses the Court is unlikely to find that someone was acting recklessly simply because a business venture was not successful during the relationship. The argument will often be that both parties agreed to give the business a try and if it had of made millions then they would both be sharing in the profits, as they should be now sharing in the losses. The Court may take into account the issue of whether one party was acting completely unilaterally without the other party’s knowledge, but again the conduct must be designed to reduce the asset pool or be found to be reckless or negligent.
As with all family law disputes, the Court has a wide discretion to apportion liability and division of assets and so it is important for parties to obtain thorough legal advice about what issues may be relevant in their matter.