Legal Fees and Add Backs
When identifying items to be included in the property pool to distribute between parties, it may become clear, from review of bank transaction statements, that a spouse or both spouses, has withdrawn money to pay for legal costs after separation. Such withdrawals may have the consequence of depleting the value of assets.
There is a long line of authority that a party can spend money held in bank accounts or otherwise sell assets (using the proceeds of sale) to pay their reasonable living expenses without it having any real consequence on their property adjustment claim.
However, when it comes to payment of legal costs or disbursements from joint funds, a court may find it appropriate to “add back” such amounts withdrawn to the value of the property pool.
However, if payment of legal costs and disbursements are shown to be paid from a person’s own endeavours, including post separation income, then payment of legal costs is not generally added back. This is also the approach taken in respect to a person borrowing money to pay legal fees. Such debt is not usually listed as a liability of the parties to be included and having the effect of reducing the value of the property pool.
For advice or representation in any legal matter, please contact Armstrong Legal.