Is your spouse making your divorce difficult by hiding or disposing of assets?

Everyone hopes for an amicable divorce but unfortunately, there are times when one party may try to defeat the claim of the other by hiding or disposing of assets. For their ex-partner this can be a very worrying and it is important they seek expert advice.

What can be done if I believe my spouse has moved or is about to move assets?

The court has the power to prevent an asset being moved or disposed of by a freezing order or if the transaction has already taken place by make an avoidance of disposition order. Alternatively, it can “add back” an equivalent amount to the party’s share of the assets during the divorce proceedings.

Which application to make depends on the asset that you believe is being disposed of. If it is an asset you would want to retain; for example, shares that provide dividend as a source of income, or its disposal will remove a large part of the family assets, meaning that the needs of the parties cannot be met, an application to the court needs to be considered.

The application can be expensive, and it is therefore important to consider the legal cost in proportion to the asset and potential benefit in terms of outcome. Sometimes, whilst the disposal can be frustrating, there may not be the potential benefit to justify the cost of an application.

Moving divorce assets – when will a court make an order?

The court will consider making an order in the following situations:

  1. Transferring an asset from a liquid asset e.g. cash to an illiquid asset or a risky investment;
  2. Transfer of property to another family member;
  3. Transfer of a property into a company; and
  4. Dissolving a company and transferring the assets to a new company to prevent the other party’s access to it. Assets of a company may not be subject to the powers of the court and it can be for this reason a party will look to transfer.

Who will the proceedings be taken against?

Normally the proceedings are taken against the other party. However, if there is a transfer to a company or a third party, they may need to be joined into the application.

How can I show that a disposition was made to frustrate my claim?

The timing of the disposition affects who has the burden of proving that it was made to defeat a claim. If the disposition was made within three years of the application for financial relief being made, there is an assumption that it was made to frustrate the claim. The other party therefore needs to show that that was not their intention.

If it took place in the three years before the proceedings, the onus is on the person making the application to show that the intention was to defeat the claim. If the disposition was made in good faith and for valuable consideration, i.e. the appropriate value was paid, then an application cannot be made. In those circumstances, we would be looking at what happened to the money received.

How do I prove that divorce assets are being disposed of?

The court will need evidence, as it needs to be satisfied that the intention was to defeat the other party’s claim and that it would affect the order the court finally makes. It is necessary to show a party is about to make disposition or real risk that they will do, if not restrained.

What if the divorce assets are company assets?

Assets that are held within or are transferred to a company need careful consideration. For an application to succeed it is necessary to show that the other party has an interest in that asset and is disposing of something that would have been the subject of the divorce proceedings.

For company assets this requires careful consideration of the source of the assets and whether they are owned by the company, or the beneficial interest retained by the party. There are cases that have succeeded in showing that one party was the true owner, for example in Read v Panzone and Read [2019], the husband purchased a property but registered it in the name of a company. The only shareholder of that company was his mother. The husband was found to be the beneficial owner of the property.

Who pays for the proceedings?

As in most applications within financial proceedings, each party is normally responsible for their own costs. However, in some circumstances when the court considers there has been litigation misconduct the court may order one party to pay the costs of the other.

If you are worried that your spouse is taking steps to move assets to frustrate any claim you may have on divorce, it is important to take legal advice as soon as possible.

For more information on the distribution and protection of divorce assets, please see our previous articles: