Deliberate dissipation – the hiding of assets to defeat a financial claim in divorce – is something I’ve come across too many times in my career to recall. I’ve built up a reputation as a bit of a sleuth and with the help of the Stowe Family Law forensic accountancy team we’ve often been very successful and obtained some pretty spectacular freezing injunctions and had transfers of assets to others set aside and returned to the other spouse.
But sometimes caution is as important as determination.
There’s almost a mantra with some clients, desperate to hang on to as much of the family wealth as possible as it begins to slip out of their control. They tell me: “You’ve never met anyone like him/ her: they will go to any lengths to stop me getting my fair share. I’m here because I know you will fight for me and I want you to fight”.
They are trying to flatter me, but frankly I’m way past that. I might think to myself ‘well, that’s all very well but we have to prove it.’ And depending on the nature of the case, that may be neither easy nor cheap. Freezing orders, often worldwide and sometimes called Mareva Orders, as well as injunctions designed to protect assets, are never something to blindly jump into and rush off to court for unless the evidence is cast iron and water tight.
There have been cases, it is true, where it has been relatively straightforward to get even a draconian Mareva order, but luck played a part.
Business people are not always as clever as they think. Ego and a feeling of invincibility can prevent them seeing the wood for the trees. Sometimes they do incredibly foolish things, putting into writing or on social media information that proves Machiavellian planning. Something in the press might completely disprove information disclosed earlier, which I might have requested before the process got fully under way, or even contradict the financial disclosure in a sworn Form E. Then there are those cases in which a disgruntled business colleague has split the beans about what’s really going on. In other instances, someone might be just too boastful in a public place or on social media and the truth then all comes tumbling out.
But in many other, much more difficult cases, the spouse is calm, commercial and cunning, and when that happens, it can be very hard to prove the need for an injunction. The risks, frankly, are very high and if you lose an interim application you can be left psychologically battered and bruised. Remember – it’s about winning the war and not the battle.
So, I’ve said it before and will say it again: you need more than supposition to apply for an injunctions, even if you believe they will stop efforts to deliberately harm you. You need cold hard proof that your spouse really is trying to defeat your claims – proof which not only convinces you in your naturally emotionally distressed frame of mind, but also the Judge and all the opposition lawyers that could potentially be ranged against you.
That applies especially if you suspect funny business in relation to companies or trusts. These are, remember, completely separate legal entities to your spouse or partner. They are not your spouse in another disguise. You may have shares in the company, you may be a director, you may have once been a beneficiary but have since been removed from the trust, but even so, that still may not be enough to get your injunction.
Your spouse may be answerable to no one else and run the company as a piggy bank but even that might not be enough.
Your spouse might move a trust from one offshore jurisdiction to another but again that might not be enough.
The trustees of the trust may be playing games, you think. But if they are based offshore, they will have the backing of their own law in a country which welcomes business people with millions to invest via a myriad of companies. They won’t be happy to simply open up the trust and stop all dealings because an English family court says so.
The trustees probably will be polite to the English court bat them back, but nothing else. They won’t submit to the English jurisdiction, won’t agree easily to become parties to the action, why should they? They have duties and obligations to the beneficiaries under the laws of another country. It doesn’t matter if those beneficiaries also happen to be your own children. You are not the trustees’ concern and woe betide you if try to involve them in proceedings. You could be on a hiding to nothing.
So that’s the warning.
You should still gather your evidence but you must have it checked by your lawyers in the cold harshest light of day. You should consider with your lawyers your evidence against the explanations you receive from your spouse and then also, as importantly, you must cross check it against the law which will be applied, as well as all the case decisions on the subject, asking all the while: will this stand up in court? Was a particular asset transfer all simply and explainable as a commercial decision – perhaps for tax reasons or to make a high stakes investment to increase the overall value of the asset pot, even if it was unsuccessful?
High risk strategy carries with it a high risk of failure. But failure does not make it actionable in the family courts. The Judge applies a civil law standard to the evidence, which is the balance of probability. Not beyond all reasonable doubt.
Always remember that your desire for prudence may not be enough. Commercial decisions can be taken that with the benefit of hindsight prove to be the wrong ones, but that may not mean your spouse should be liable to have their assets frozen.
Earlier, I mentioned the principle of winning not the battle but the war. My view has always been to pick your battles with the overall end game in sight.
So if you find yourself in a tricky situation, it might be better to keep your powder dry for the final hearing. Ask for any crazy, high risk failed strategies or transfers elsewhere to simply be added back to the balance sheet on the spouse’s side as unnecessary and deliberately imprudent. The court can take such conduct into account. Make sure trust assets placed beyond your reach are still taken into account. Ask for the non-trust assets to be ordered your way.
Ask for any inexplicable dealings in companies closely associated with your spouse to be compensated.
In short, think what you might be better doing long term instead of spending money on a short term hit that could fail.
I’m not saying don’t do it – there will be times when you should – but always think long term too. The money you may have to spend is better off in your pocket.
Photo by Teresa via Flickr