Z & Z

This matter concerned a claim by a husband against his former wife regarding property settlement. The court was required to determine whether a liability allegedly owed by the husband to a third party, Ms [B], should be deducted from the asset pool when calculating the parties' respective entitlements.

The central legal issue was whether the court, in exercising its discretion under section 79 of the *Family Law Act 1975* (Cth), should take into account a liability incurred by one party after separation, particularly where that liability was alleged to have been unreasonably incurred and with disregard for the other party's potential entitlement. The court also considered the extent to which it must account for the rights of third-party creditors when making property division orders.

The court reasoned that it has the discretion not to take into account transactions and liabilities incurred after separation, and that property disbursed post-separation can be notionally added back to the pool if the other party should not bear the liability. This approach, endorsed in cases such as *Af Petersens and Af Petersens* and *Biltoft and Biltoft*, allows for the disregard or discounting of liabilities that are vague, uncertain, unlikely to be enforced, or unreasonably incurred, especially where a spouse has acted in deliberate or reckless disregard of the other party's potential entitlement. The court found that the husband's conduct in consenting to the liability owed to Ms [B] was unreasonable, given his knowledge of the wife's application and his disregard for her entitlement. Furthermore, the court was not satisfied that the husband had discharged his onus to establish the alleged liability, noting significant flaws in the evidence and a failure to resolve conflicts regarding cohabitation.

Consequently, the court ordered that the husband's alleged liability to Ms [B] would not be deducted from the asset pool in these proceedings.