Family Law Property Dispute: When a Husband Unilaterally Transfers Assets to Adult Children Post-Separation, Can the Funds Be ‘Added Back’ to the Matrimonial Pool?

Based on the authentic Australian judicial case Riggi & Kermode [2025] FedCFamC1F 320, this article disassembles the Court’s judgment process regarding evidence and law. It transforms complex judicial reasoning into clear, understandable key point analyses, helping readers identify the core of the dispute, understand the judgment logic, make more rational litigation choices, and providing case resources for practical research to readers of all backgrounds.

Chapter 1: Case Overview and Core Disputes

Basic Information

• Court of Hearing: Federal Circuit and Family Court of Australia (Division 1)
• Presiding Judge: Hartnett J
• Cause of Action: Property Settlement
• Judgment Date: 14 May 2025

Core Keywords

• Keyword 1: Authentic Judgment Case
• Keyword 2: Family Law Property Settlement
• Keyword 3: Addbacks
• Keyword 4: Dissipation of Assets
• Keyword 5: Section 75(2) Factors
• Keyword 6: Business Valuation in Litigation

Background

This case concerns the division of property following the breakdown of a 26-year marriage. The parties, a husband and wife, had built a substantial asset pool of over AUD $10 million, primarily through a successful family business they operated with the wife’s brother. The relationship soured post-separation, leading not only to family law proceedings but also to the complete collapse and eventual liquidation of their once-profitable company. Amidst escalating personal and commercial acrimony, the husband made a series of significant financial transfers to the parties’ two adult sons, which became the central battleground of the litigation.

Core Disputes and Claims

The core of the dispute was not about the parties’ initial contributions over the long marriage, which were largely agreed to be equal. Instead, the conflict centred on events that occurred after separation.

• The Applicant Wife’s Claims: The wife argued for a significant adjustment in her favour, ultimately seeking a 70/30 split of the asset pool. Her claim was twofold: firstly, an uplift for her greater contributions as a homemaker and parent; and secondly, a substantial adjustment based on the husband’s post-separation conduct. She alleged the husband had recklessly wasted and deliberately diverted matrimonial assets by funnelling money to their sons and orchestrating the demise of the family business, thereby reducing the value of the asset pool. She sought to have these dissipated funds “added back” notionally to the pool before its division.

• The Respondent Husband’s Claims: The husband maintained that the contributions were equal and that only a minor adjustment was warranted for future needs, proposing a near-equal 49.5/50.5 split. He contended that the payments to the sons were not a dissipation of assets but legitimate repayments of loans they had provided to the family years earlier. He argued that the failure of the business was not his fault alone but the result of an irreconcilable deadlock between all three directors, including the wife and her brother.

Chapter 2: Origin of the Case

The parties married in 1994, commencing a 26-year partnership. At the outset, their financial position was modest, with the husband’s initial contribution being a AUD $66,000 deposit on their first property. Both worked diligently, the husband in the automotive parts business that would eventually become the family enterprise, BB Pty Ltd, and the wife in a manual role.

Over the years, they built a significant empire. The business, incorporated in 2000 with the husband as the majority shareholder (70%) and the wife and her brother as minority shareholders (10% and 20% respectively), became highly profitable. Their property portfolio expanded to include multiple commercial and residential properties. The wife transitioned from her external job to working in the family business, balancing her role with being the primary caregiver for their two sons, Mr U and Mr V.

The dynamic began to shift following the husband’s serious medical diagnosis in 2016. While he continued to manage the business from home during his illness, the family fabric was under strain. The final breakdown occurred on 22 April 2020, when the parties separated but continued to live under the same roof. This marked the beginning of a period of intense conflict that permeated both their personal and commercial lives. Trust evaporated entirely. The husband, wife, and her brother, who had once worked as a team, became warring factions within the company. The sons, who also worked in the business, were caught in the crossfire. This acrimony led to a complete operational deadlock, rendering the once-successful company insolvent and ultimately forcing it into liquidation by the Supreme Court of New South Wales. It was during this post-separation turmoil that the husband began making substantial payments to their sons, setting the stage for the central dispute in the Family Court.

Chapter 3: Key Evidence and Core Disputes

Applicant’s Main Evidence and Arguments

The wife’s case was built on her own affidavit evidence and that of her brother, Mr Q, alongside extensive financial documents. Crucially, as the parties’ two sons, Mr U and Mr V, declined to provide affidavits, the wife subpoenaed them to give oral evidence. Her key arguments were:

• The husband had unilaterally transferred hundreds of thousands of dollars to the sons post-separation to deliberately diminish the asset pool available to her.
• The husband’s claim that these payments were “loan repayments” was a fabrication, unsupported by any documentation or credible evidence.
• The husband recklessly caused the failure of the profitable family business, BB Pty Ltd, by creating conflict with suppliers and mismanaging funds, actions which constituted a waste of a significant matrimonial asset.
• The sons’ new, competing businesses were established with the husband’s support and funds diverted from the matrimonial pool, creating a future financial resource for the husband that was not available to her.

Respondent’s Main Evidence and Arguments

The husband relied on his own affidavits and financial records. He vehemently denied the wife’s allegations, arguing:

• The payments to the sons were legitimate repayments for loans they had made to the family years earlier to assist with property development.
• The demise of BB Pty Ltd was not his fault but the result of an irreconcilable deadlock caused by the wife and her brother’s attempts to seize control of the business.
• The wife herself had engaged in questionable conduct, including taking large sums of cash from the business takings without his consent.
• He had no ongoing financial relationship with or resource available from his sons’ independent businesses.

Core Dispute Points

1. The Addbacks: Were the funds transferred by the husband to the sons a dissipation of assets to be notionally added back to the pool, or legitimate loan repayments?
2. Responsibility for Business Failure: Did the husband’s actions constitute a reckless or wanton waste of the family business asset, warranting an adjustment under section 75(2)(o)?
3. Contributions: Did the wife’s role as homemaker and parent, alongside her underpaid work in the business, justify a contribution-based adjustment in her favour beyond 50 percent?
4. Financial Disclosure: Did the husband fail to disclose bank accounts and financial arrangements, further warranting a negative inference or adjustment against him?

Chapter 4: Statements in Affidavits

The affidavits of the parties presented two starkly contrasting narratives. The wife’s affidavit detailed a history of the husband’s increasingly secretive and unilateral financial dealings after their separation. She painted a picture of a husband deliberately dismantling the family’s wealth to benefit himself and their sons, to her exclusion. She meticulously chronicled the transfers and the formation of the sons’ new companies as evidence of a coordinated strategy.

Conversely, the husband’s affidavit portrayed him as the victim of a “gang-up” by his wife and her brother. He detailed their alleged attempts to interfere with his management, their removal of cash from the business, and the general chaos he claimed they caused, which necessitated his actions to “protect” the company’s assets. His narrative framed the payments to his sons as a responsible settling of family debts.

The procedural turning point was the sons’ refusal to file affidavits. This forced the wife to subpoena them, transforming them from potential supporting witnesses for their father into reluctant participants under examination. This move underscored the breakdown of family relationships and ensured their financial affairs would be directly scrutinised by the Court.

Chapter 5: Court Orders

Prior to the final hearing, several key interim orders were made that shaped the proceedings:

• A Single Expert Valuer, Mr T, was jointly appointed to determine the value of the family business, BB Pty Ltd.
• Orders were made for the sale of various investment properties, with the proceeds to be held in trust accounts pending the final division.
• Interim distributions of funds were made to both parties from the sale proceeds to cover their legal fees and living expenses, with the final characterisation of these payments reserved for trial.
• An order was made requiring the wife to initially bear the costs of the Single Expert, subject to a final determination on costs at the hearing.

Chapter 6: Hearing Scene: Ultimate Showdown of Evidence and Logic

The hearing centred on the credibility of the husband and his two sons regarding the substantial funds transferred after separation. Under cross-examination, the husband’s narrative of the “loans” from his sons began to crumble. He could produce no loan agreements, no records of the initial advances, and his explanations for the timing and nature of the transactions were inconsistent.

The sons, Mr U and Mr V, compelled to give evidence by subpoena, were also questioned intensely about the source of the large cash deposits into their accounts and the funds used to purchase the liquidated business assets. Their claims of having accumulated vast savings in cash from their wages were met with judicial scepticism, particularly given their ages and living circumstances at the time.

The wife’s counsel effectively dismantled the “loan” narrative by highlighting the lack of any contemporaneous evidence. The cross-examination revealed a pattern of the husband moving funds unilaterally and attempting to re-characterise them after the fact to his advantage. The judge’s assessment of this evidence was pivotal. The Court found the explanations provided by the husband and his sons regarding the alleged loans to be not credible. In a key passage, the judgment noted:

The husband was not truthful in his giving of this evidence. The wife knew nothing about any of these financial transactions and was certainly not consulted about them.

This finding was determinative. The Court concluded that the husband had deliberately attempted to diminish the matrimonial asset pool by gifting significant sums to the sons post-separation. While the Court did not find that the husband was solely responsible for the business’s failure—attributing it to the mutual deadlock—his unilateral and secretive financial conduct was viewed as a serious matter warranting adjustment.

Chapter 7: Final Judgment of the Court

The Court made the following final orders:

1. That there be a final property settlement adjustment on a basis of 54 percent to the wife and 46 percent to the husband.
2. The commercial property at 2 B Street, Suburb C, was to be transferred solely to the wife.
3. The former matrimonial home at H Street, Suburb J, was to be sold, and the net proceeds divided to effect the overall percentage split.
4. To achieve the 54/46 division, the wife was required to make a payment to the husband in the sum of AUD $412,466 from the proceeds of sale of the matrimonial home.
5. Each party was to retain their own superannuation entitlements without adjustment.
6. Various other orders were made regarding the division of chattels and the finalisation of company and partnership affairs.

Chapter 8: In-depth Analysis of the Judgment: How Law and Evidence Lay the Foundation for Victory

Special Analysis

The jurisprudential value of this judgment lies in its practical application of the Court’s discretion under section 75(2)(o) of the Family Law Act 1975 (Cth) to address post-separation conduct that diminishes the asset pool. It serves as a powerful reminder that while contributions over a long marriage may be assessed as equal, the “just and equitable” requirement allows the Court to scrutinise and penalise unilateral and reckless financial behaviour that occurs after the relationship has broken down. The case demonstrates that a party’s attempt to pre-emptively distribute assets to family members, under the guise of repaying undocumented “loans,” is a high-risk strategy that is likely to result in a negative adjustment against them.

Judgment Points

The Court made several critical findings. It rejected the husband’s narrative that the substantial payments to his sons were loan repayments, finding them to be gifts designed to remove funds from the matrimonial pool. Importantly, while acknowledging the wife also withdrew funds, the Court differentiated her actions, largely accepting they were for necessary living expenses and legal fees in a context where the husband had cut off her income. The judgment also carefully balanced the blame for the business’s failure, finding it was a result of the mutual deadlock between all three directors, thereby refusing to place the entire financial loss at the husband’s feet.

Legal Basis

The judgment was fundamentally grounded in Section 79 of the Family Law Act 1975 (Cth), which empowers the Court to alter property interests. While contributions under s 79(4) were deemed equal, the Court’s decision to depart from a 50/50 split hinged on Section 75(2), the “future needs” factors. Specifically, the Court relied on the catch-all provision of s 75(2)(o)—”any other fact or circumstance which the justice of the case requires to be taken into account”—to justify the 4 percent adjustment against the husband for his post-separation financial conduct.

Evidence Chain

The wife’s victory on the addback issue was secured through a clear chain of evidence. Bank statements proved the transfers occurred post-separation. The husband’s own affidavit contained inconsistent explanations for these transfers. Cross-examination of the husband and his sons revealed the implausibility of the “loan” story, given the lack of any documentation and the sons’ financial circumstances at the time. This created an overwhelming inference that the husband’s intention was to defeat the wife’s claim to those funds.

Judicial Original Quotation

The Court’s assessment of the husband’s credibility was damning and formed the bedrock of the final adjustment. In relation to a transfer of AUD $47,000 from the husband to his son, Mr U, the Court stated:

The husband subsequently asserted that these funds were a loan to Mr U and gave evidence that Mr U repaid such monies to him in 2024, and that the husband applied them to his living expenses. The Court does not accept the evidence of the husband as to this matter. The Court finds such advance by the husband to Mr U was not a loan but rather a gift which augmented the wealth of Mr U, at the expense of his mother.

This passage is a clear example of the Court looking past the labels applied by a party (“loan”) to the substantive reality of the transaction (“gift”), and directly linking this conduct to a detrimental impact on the other party, which justified the adjustment.

Analysis of the Losing Party’s Failure

The husband’s case was significantly weakened by several key factors:
1. Lack of Credibility: His shifting explanations for the payments to his sons—from “support” to “gifts” to “loan repayments”—fatally damaged his credibility.
2. Unilateral Conduct: His actions in transferring large sums of money, increasing his sons’ salaries, and opening a new bank account for company funds without consulting his co-directors were viewed as a deliberate attempt to seize control and exclude the wife.
3. Failure to Disclose: His failure to disclose the new bank account he held with his new partner, into which cash deposits were made, further undermined the Court’s trust in his financial transparency.

Ultimately, the husband’s attempt to strategically disadvantage the wife through financial manoeuvres backfired, as the Court used its discretionary powers under s 75(2)(o) to correct the imbalance he had sought to create.

Implications

1. Post-Separation Conduct Matters: Actions taken after separation are not immune from scrutiny. Unilaterally transferring, spending, or wasting assets can lead to those funds being “added back” to the pool and a significant percentage adjustment against you.
2. Documentation is King: Claims of loans to or from family members without formal agreements, clear records, and a history of repayments are highly unlikely to be accepted by the Court. The family context does not excuse the need for evidence.
3. Transparency is Your Best Defence: A failure to provide full and frank financial disclosure, including revealing all bank accounts, will damage your credibility and may lead the Court to draw adverse inferences against you.
4. Business Deadlock is a Shared Responsibility: When a family business fails due to conflict between director spouses, the Court is unlikely to attribute the blame and the entire financial loss to just one party. All directors share a responsibility for the company’s governance.
5. Seek Interim Orders for Support: If one party is cut off from funds post-separation, the correct path is to seek interim spousal maintenance or an interim property distribution through the Court, not to resort to self-help measures like taking company cash, which can complicate the proceedings.

Q&A Session

• Q1: Why did the Court only adjust by 4% for the husband’s conduct, when he transferred hundreds of thousands of dollars?
  • A: The 4% adjustment under section 75(2) was made after the Court had already “added back” the dissipated funds to the asset pool. This means the funds were notionally returned to the pool before being divided. The 4% was a further adjustment to reflect the nature of the husband’s conduct and to address other future needs factors, not a dollar-for-dollar penalty for the amount transferred.
• Q2: Could the sons have been forced to repay the money to their parents’ asset pool?
  • A: No, the Family Court generally does not have the power to make orders directly against third parties like the adult children in this manner. The “addback” is a notional concept—the funds are added back to the asset pool on paper, and the final division is adjusted as if the money was still there. The party who dissipated the funds effectively receives less from the actual remaining assets to account for the funds they have already disposed of.
• Q3: The wife also took cash from the business. Why wasn’t she penalised in the same way?
  • A: The Court distinguished the wife’s actions from the husband’s. While she took cash, the evidence suggested she did so primarily after the husband had cut off her income and that she used it for legitimate expenses like wages and living costs, which she recorded. The husband’s actions, in contrast, were seen as a deliberate and secretive attempt to permanently remove large capital sums from the matrimonial pool and gift them to the sons, which is a more serious form of financial dissipation.

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[Appendix: Reference for Comparable Case Judgments and Practical Guidelines]

1. Practical Positioning of This Case

• Case Subtype: Family Law – Property Settlement
• Judgment Nature Definition: Final Judgment

2. Self-examination of Core Statutory Elements

① De Facto Relationships & Matrimonial Property & Parenting Matters (Family Law)

• Core Test (Existence of De Facto Relationship – Section 4AA):
  • Duration of the relationship: (General rule: 2 years, unless exceptions apply).
  • Nature and extent of common residence: (Did they live together? Was it continuous?).
  • Whether a sexual relationship exists: (Or existed).
  • Degree of financial dependence or interdependence: (Any financial support arrangements?).
  • Ownership, use and acquisition of property: (Joint names or separate?).
  • Degree of mutual commitment to a shared life: (Was it casual or committed?).
  • The care and support of children.
  • Reputation and public aspects of the relationship: (Did family/friends view them as a couple?).
• Property Settlement – The Four-Step Process:
  1. Identification and Valuation: Determine the net asset pool (assets minus liabilities). This case involved complex valuations and disputes over what should be included, particularly the “addbacks.”
  2. Assessment of Contributions: Assess the financial contributions (e.g., the husband’s initial property deposit, both parties’ incomes), non-financial contributions (e.g., renovations), and contributions to the welfare of the family (the wife’s primary role as homemaker and parent). The Court in this case found these to be equal over the long relationship.
  3. Adjustment for Future Needs (s 75(2) Factors): Consider factors like age, health, income-earning capacity, care of children, and standard of living. This is where the husband’s conduct (s 75(2)(o)) became critical and led to a 4% adjustment in the wife’s favour.
  4. Just and Equitable: The final check to ensure the overall division is fair and equitable in all the circumstances of the case.
• Parenting Matters (Section 60CC of the Family Law Act 1975):
  • Primary Considerations: The benefit to the child of having a meaningful relationship with both parents VS The need to protect the child from physical or psychological harm (Harm is given greater weight).
  • Additional Considerations: The views of the child (depending on maturity), the capacity of parents to provide for needs, practicalities/expense of spending time.

3. Equitable Remedies and Alternative Claims

• If dealing with [Civil / Commercial / Property / Family / Estate] matters:
  • Promissory / Proprietary Estoppel:
    • Did the other party make a clear and unequivocal promise or representation (e.g., “this property will be yours”)?
    • Did you act in detrimental reliance on that promise (e.g., renovating the property, resigning from a job)?
    • Would it be unconscionable for the other party to resile from that promise?
    • Result Reference: Even without a written contract, Equity may “estop” the other party from going back on their word.
  • Unjust Enrichment / Constructive Trust:
    • Has the other party received a benefit (money or labor) at your expense? Is it against conscience for them to retain that benefit without payment?
    • Result Reference: The Court may order the restitution of the benefit or declare that you hold a beneficial interest in the asset via a Constructive Trust.

4. Access Thresholds and Exceptional Circumstances

• Regular Thresholds:
  • Parties must have been married or in a de facto relationship for at least 2 years to be eligible for a property settlement.
• Exceptional Channels (Crucial):
  • Family Law: Less than 2 years of cohabitation? → An exemption may be available pursuant to Section 90SB if there is a child of the relationship or if the applicant has made substantial contributions and a failure to make the order would result in serious injustice.
• Suggestion: Do not abandon a potential claim simply because you do not meet the standard time or conditions. Carefully compare your circumstances against the exceptions above, as they are often the key to successfully filing a case.

5. Guidelines for Judicial and Legal Citation

• Citation Angle:
  • It is recommended to cite this case in legal submissions or debates involving post-separation dissipation of assets, the application of section 75(2)(o) to adjust for financial misconduct, and the principles governing “addbacks” where funds are transferred to adult children under the guise of loans.
• Citation Method:
  • As Positive Support: When your matter involves one party unilaterally transferring significant funds to a third party after separation without the other’s consent, citing this authority can strengthen the argument for a notional addback and a section 75(2) adjustment.
  • As a Distinguishing Reference: If the opposing party cites this case, you might distinguish it by emphasizing that, in your case, there is clear documentary evidence of a legitimate loan, or that the expenditure was for necessary and reasonable expenses, unlike the husband’s actions in Riggi & Kermode.
• Anonymisation Rule: Do not use the real names of the parties; strictly use professional procedural titles such as the Applicant / the Respondent or the wife / the husband.

Conclusion

Everyone needs to understand the law and see the world through the lens of law. The in-depth analysis of this authentic judgment is intended to help everyone gradually establish a new legal mindset: True self-protection stems from the early understanding and mastery of legal rules.

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Disclaimer

This article is based on the study and analysis of the public judgment of the Federal Circuit and Family Court of Australia (Riggi & Kermode [2025] FedCFamC1F 320), aimed at promoting legal research and public understanding. The citation of relevant judgment content is limited to the scope of fair dealing for the purposes of legal research, comment, and information sharing.

The analysis, structural arrangement, and expression of views contained in this article are the original content of the author, and the copyright belongs to the author and this platform. This article does not constitute legal advice, nor should it be regarded as legal advice for any specific situation.

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