Authors
When married couples are divorcing, in most cases there are two or three legal aspects to deal with separately:
- The divorce itself
- The finances
- Child arrangements, if there are any children
But sometimes, there is a fourth consideration: a third party who has an interest in property or business interests which are connected with one, or both, of the married parties. In these situations, there is often a dispute about the validity of, or the extent of, a third-party interest which will have an impact on the assets available for distribution between the parties.
In certain circumstances, the Family Court will permit third parties to ‘intervene’ or be ‘joined’ to financial proceedings arising from a divorce. Interveners will only be joined to the financial proceedings – they will not be involved in the divorce itself or the child arrangements.
In some cases, this will need to be done first as a ‘preliminary issue’ but in other cases it can be dealt with as part of the overall case, particularly where non-court dispute resolution methods are used. In turn, for the divorcing couple it can be beneficial to deal with claims from third parties upfront to prevent future claims arising.
Examples of third parties
Common examples of third parties who may intervene in a divorce include, but are not restricted to:
Parents
If parents have made a property investment with the belief that they will get a return on that investment (as distinct from a ‘loan’) they may retain an interest in that property even if their child(ren)’s name(s) are on the title documents and they live there or receive other benefits such as rent.
Parents would need to show the Court that they consistently intended to derive some sort of benefit from the investment(s) from the outset, whether in the short or long term, and that they will in turn suffer detriment if the asset is instead split among the divorcing parties. What is key is that where property is not in their name, the parent(s) will need to show the Court that they were intended to have an interest in that property and it was not a gift to their child(ren).
Children
Conversely, adult children may also intervene in proceedings where, for instance, one parent has mismanaged trust or business assets that were intended to benefit the children.
Business Parties
A third party may be in a partnership with one of the divorcing parties and want to protect their business interests by defining the extent of the divorcing spouse’s interest.
Trustees
Where a spouse is the beneficiary of a trust, the trustees may have a duty to the other beneficiaries. They might therefore be joined to proceedings to ensure that all the interest of other beneficiaries are not prejudiced when deciding what may be available to the divorcing beneficiary.
Advantages
Unlike in other Family proceedings, the concept of ‘needs’ is not a relevant factor in intervener claims, and factual legal principles are the basis upon which the Judge will be making decisions. This is because the civil rules are followed, not the typical family rules.
It is useful to distinguish and distil the issues at play where assets are complex, whether packaged as property, trusts or businesses. The question of the beneficial ownership will need to first be determined by reference to property, trust or commercial law. Therefore, if a judge deemed a property to belong to an intervener, the law of property would take precedence over the needs of the party in the matrimonial finance claim.
If asset ownership is determined as a discrete issue and ruled to belong to a third party outside of the marriage, it will not form part of the marital pot available for distribution, regardless of what is left.
Making a claim
A third party who asserts an interest in assets which are the subject of financial remedy proceedings should apply to be joined to the proceedings. Once formally joined by the Court, particular directions to deal with the intervener claim will be made. The party asserting a beneficial interest will usually be expected to set out their legal case in writing, by filing Points of Claim. The other parties will then have the opportunity to file a defence in response. All parties should expect to provide disclosure of all relevant documents, file witness statements with supporting evidence and attend Court hearings (including to give oral evidence at a final hearing). The judge, having heard all the evidence, will then make a determination as to the point(s) in dispute. At that stage the intervener’s role in the proceedings will generally fall away, and they will have no further involvement in the divorce or financial remedy proceedings.
This process is more akin to the directions found in the civil courts rather than the usual family court rules and often takes on a ‘hybrid’ nature. For this reason, it is a complex and specialist area of law, and not one in which all family lawyers will necessarily have much or any direct experience.
Costs rules
Intervener claims are often suitable for a variety of non-court dispute resolution methods which should be considered, as these can be a more efficient and less costly way to resolve the dispute. Furthermore, the costs rules in intervener proceedings can be another reason to consider all alternatives before embarking on litigation. In financial remedy proceedings the general principle is that each party will bear their own costs, with certain exceptions. Intervener claims are one such exception, and the losing party is likely to be penalised by way of costs orders and be forced to contribute to the costs of the successful party.
Given the complex, specialist and involved process, if it becomes necessary for third parties to intervene it can become expensive, particularly given the risk of costs orders being made against an unsuccessful party. For this reason, it is extremely important to consider the strengths of any claims and to get specialist legal advice from a solicitor experienced in this type of case before applying to intervene in financial remedy proceedings.
Our expertise
At Michelmores, our team of specialists have particular experience across a wide range of claims involving third party interests in the financial consequences of a divorce/dissolution. We represent both interveners and other parties in cases where a third party asserts an interest. This includes cases in the UK and internationally (including disputes over assets situated in other countries, such as the US). We have experience of intervener cases involving:
- Beneficial property interests;
- Farms and farming partnerships;
- Landed estates;
- Trust interests; and
- Complex company/business assets.
We are able to call upon the expertise of colleagues specialising in trusts, tax and corporate issues (amongst others) to assist where needed. We also work closely with renowned family lawyers in other countries for those cases with an international element where foreign advice may be required.
Our approach
As members of Resolution, we strive to reach negotiated settlements wherever possible and have an excellent track record in resolving cases via direct negotiation and non-court dispute resolution methods (including mediation, arbitration and private FDRs). However, we appreciate that this is not always possible, particularly where potentially complex and emotive third-party claims are involved.
We also have direct experience of representing clients at all stages of contested litigation involving interveners, which varies from the standard financial remedy procedure in a number of respects and requires specialist navigation, often collaborating with other professional advisers such as accountants and valuers in the process.
If you feel as though you might need some assistance on any of the issues raised in this article, please feel free to contact our Family team.
Authors