WASTAGE IN PROPERTY SETTLEMENTS

For some people, wastage or financial irresponsibility can be the catalyst for separation. For others, they may only learn of their partner’s wastage of financial resources after separation. Regardless, parties whose partners have wasted the assets of the relationship oftentimes find themselves asking whether they can recover some of the wasted assets during the property settlement process.

What is wastage?

One of the first questions that must be asked is – what classifies as wastage? Wastage occurs when a party has intentionally and recklessly or negligently reduced the asset pool in the relationship. This can include activities such as:

1.     Gambling

2.     Drugs

3.     Prostitution

4.     Drinking

5.     Adultery

There is no set defined list, and it is about the unjustified reduction of the asset pool rather than any immorality attached to the actions themselves. For example, a person who engages in an adulterous affair but does not spend any of the parties’ assets on the affair would not be considered as having wasted the assets of the relationship. The other party would not be able to recoup any compensation for the affair.

Wastage can also sometimes occur post-separation when one party maliciously or otherwise intentionally squanders assets of the relationship with the aim of reducing the payout received by their partner. The court treats such behaviour harshly. Parties should avoid disposing of, alienating or wasting common property until after finalization of the property settlement. Of course, parties are able to engage in their regular day-to-day financial spending.

An important aspect of wastage is that it must have been reckless, negligent or wanting. The court generally holds the view that financial losses incurred during marriage should be shared between the parties unless such behaviour is evidenced. Therefore, if the parties are both earning high incomes, and one party chooses to spend their income on lavish holidays while the other party chooses to save most of their income, this may not be considered wastage so long as the more extravagant party was still contributing to the parties’ bills and liabilities on time. It may mean that the more thrifty party would be considered to have made a greater financial contribution, but the court would not consider there to have been wastage.

Consequences of Wastage

Wastage is assessed when identifying the contributions of each party in a relationship. They will assess if wastage can be attributed solely to one party. For example, the case where a husband gambles regularly without the knowledge or with the disapproval of his wife will be treated differently from a case where the wife knowingly supports the husband’s gambling even if the husband is the only one actively gambling.

It is not sufficient to simply accuse the other party of wastage. You must be able to substantiate such claims with evidence such as receipts, bank statements or third-party testimony.

If proven, the usual course taken by the court is to ‘add-back’ the wastage into the property pool. This increases the size of the asset pool to the amount it would have been but for the wastage by one party.  Alternatively, the court may reduce the entitlement of the wasting party if an add-back is not appropriate, such as when the assets have been completely dispersed and there is no realistic way for it to be realized.