Divorce and money: disposal of assets before settlement

When discussing how financial matters on divorce might be resolved, we always advise clients that, if possible, attempts should be made to find a solution by agreement. If successful, this approach can achieve a fair settlement in a shorter time, at less cost and less stress for the parties.

When is the ‘right time’ for negotiations?

For a settlement to be fair, the parties must be confident that there has been an honest and straightforward approach to the process. An agreement can only be recommended if both parties have made a full and complete disclosure of their respective financial positions.

Common reasons why negotiations fail to achieve a settlement

The vast majority of cases result in a settlement achieved by agreement. Sometimes this is not possible, for example when:

• one party (or sometimes both) is suspicious that the other has not given a full account of their financial position
• there is a dispute about how the relevant legal principles should be applied to the case (e.g. should the former family home be sold or retained)
• there is suspicion that one of the parties has disposed of assets in order to avoid them being taken into account in the settlement.

It is this last issue that is dealt with below.

What is the issue concerning disposal?

When a financial dispute is resolved either by agreement or by order of the court, it is essential that the decision is made with all the relevant facts, including full details of the financial position of each party. If, with good reason, it is suspected that one party has failed to give the other a full picture or, worse still, has or is now trying to dispose of assets, then that has several effects:

• the party who is suspicious is unlikely to make an agreement
• the court will refuse to make a final order until matters have been put right
• the party harbouring suspicions will be advised to issue an application to the Court for a court order, either to stop such a planned disposal of assets or to undo a disposal which has already taken place.

How can a disposal be prevented?

The relevant law is set out in the Matrimonial Causes Act 1973 s.37.

Under this Act, where the court is satisfied that one of the parties to the divorce proceedings is about to make any disposal (e.g. a sale or transfer of ownership)

“…with the intention of defeating the claim for financial relief”,

then the court can make whatever order it regards as fair and appropriate in order to prevent that disposal.

If the court is satisfied, the order usually made is one which prevents a disposal taking place. In many circumstances however, if the disposal has already taken place then it can also make an order overturning the transfer.

If the case requires it, a preliminary court order can be made without the person intending to make the disposal being given notice of the court application in advance. That procedure is available to prevent the disposal taking place before the order has been issued. Another court hearing will then be fixed so that both parties can put their case to the judge.

These are complex issues but can be of the greatest importance to the outcome of the case. If faced with this situation, sound legal advice is essential so that action can be taken.

For some information or some preliminary confidential advice please contact Pippa Allsop, Associate in our Family Team, on +44 (0)1392 687747 or email pippa.allsop@michelmores.com