What is Waste in Property Settlement?
The concept of wastage refers to conduct engaged in by one spouse, deliberately, recklessly or negligently, which has the overall effect of diminishing the value of matrimonial assets. In divorce settlements, the law treats waste differently from ordinary spending or usage of marital property. This article discusses the distinction between waste and ordinary spending, examples of waste, and when and how the courts take account of waste in property settlements, such as by adjusting the distribution of assets in favour of the innocent party.
Waste versus ordinary debts and expenditure
The general rule, in divorce settlements, is that financial losses and debts incurred by either or both spouses should be shared between the parties. In other words, the financial consequences of expenditure which has reduced the value of the property of the relationship should be felt by both parties and reflected in their respective entitlements as determined by the court. Waste is an important exception to this rule. The law views waste, being any intentional or reckless dealing that wrongfully eats into the marital property, as a “negative contribution” to the pool of property available for division. Waste is to be distinguished from reasonably incurred living expenses. As a matter of fairness, wastage – spending by one party which reaches a certain threshold of unreasonableness or imprudence – is regarded as a burden that the innocent spouse should not be forced to bear.
Examples of waste
Some common examples of waste include gambling, bad investments or commercial dealings, and certain lifestyle expenses.
Gambling activity by one spouse is the subject of many waste complaints. Where large sums are blown and losses incurred as a result of one partner’s recreational or problem gambling, this can lead to a corresponding reduction in the pool of funds available for division upon divorce. The courts have been willing to recognise such expenditure as waste warranting adjustment of the parties’ entitlements, particularly where the losses are extremely financially damaging when considered next to the parties’ incomes.
Commercial and property dealings
Commercial undertakings and dealings with property that are economically reckless or imprudent may result in wastage. An example would be selling an asset of the relationship at a substantial undervalue. Another example would be entering into an inherently risky business venture or making an objectively bad investment.
The court may make a finding of wastage where one spouse has spent significant amounts of money on luxury items, services or experiences, whether for themselves or for others as gifts. In general, the expenditure will need to be extravagant, exorbitant and/or unjustified, far beyond what might be classed as reasonable living expenses. The court is even more likely to treat excessive spending as wastage where it occurs in defiance of the other spouse’s wishes or without the other spouse’s knowledge.
How does waste affect property settlements?
If the court finds that a party has committed waste, there is likely to be some adjustment made to the parties’ entitlements. The amount wasted may be added back into the pool of property available for division. Alternatively, the court may make any adjustment that, in its opinion, justice requires, having regard to all the circumstances of the case. For instance, the court may award the innocent party a higher percentage of the remaining pool of assets. Either way, the party responsible for the waste will get less out of the property settlement than they would have had they not committed waste. Ultimately, how waste is dealt with in the course of property settlement proceedings and how it will affect the final division of property is a matter for the court’s discretion.
What to do if you suspect your former partner has committed waste
If you believe that your former partner may have deliberately or recklessly used up money that would otherwise have formed part of the matrimonial property available for division, it is important that you are armed with cogent evidence to prove the fact and extent of the wastage. It is for the aggrieved party to raise the issue of waste and to substantiate the allegation in divorce settlement proceedings. A good way to prepare is to gather any documentary evidence of your former spouse’s financial activities, such as receipts and records of bank account transfers or withdrawals which reveal a pattern of excessive spending. It is crucial that you seek professional legal advice if you have any doubts or concerns about whether your former partner (or indeed you yourself) may have committed waste.
- Waste is a legal concept referring to activity that reduces or minimises the value of property.
- In the context of divorce settlements, certain intentional, reckless or wanton financial activities by one party may constitute wastage of marital assets.
- The court has a discretion to adjust the parties’ entitlements in light of such wastage, in order to achieve a just and equitable division of property.
For answers to all your property settlement queries, please contact us to speak with one of our experienced family lawyers.
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