Obviously in many divorces the financial assets are predominantly owned by one party, and the other party will pursue a financial remedies claim seeking a share of those assets. Sadly, it is not uncommon for the asset-owning party to try to dispose of the assets, or some of them, in order to defeat or reduce the value of the claim. What can the other party do to prevent this?
The purpose of the financial remedies system is, of course, to enable each party to the divorce to obtain reasonable financial provision for themselves and any dependent children (although the latter is in most cases dealt with, or also dealt with, by the child support system). Naturally, it would be a pretty feeble system if the asset-owning party could defeat it simply by disposing of those assets. Accordingly, as we will see, the system is provided with two tools: one designed to prevent such disposals, and one designed to set aside any such disposals that have already been made. These tools are contained in section 37 of the Matrimonial Causes Act 1973 (note that freezing injunctions, which I will come to in a moment, can also be made under ‘inherent jurisdiction’, but to keep things simple I will limit this post to a discussion of section 37).
Section 37 begins by defining what “defeating a person’s claim for financial relief” actually means. It covers not just preventing that person from being granted financial relief for themselves or for the benefit of any child, but also reducing the amount of any such financial relief, and even frustrating or impeding the enforcement of any financial order.
So if you think that the other party is about to enter into a transaction intended to defeat your financial claim, or that they have already done so, you may apply to the court for an order under section 37.
If the court is satisfied that the other party to the proceedings is – with the intention (see below) of defeating your claim for financial relief – about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, it may make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim. This order could take the form of a freezing injunction, freezing certain assets of the other party, and thereby preventing them from disposing of them, or it could take another form, for example simply requiring the other party to give notice of any proposed dealing with certain assets.
But what if the transaction has already been made? Here things are slightly more complicated, but I will try to keep things simple. Essentially, if the court is satisfied that the other party has, with the intention of defeating your claim for financial relief, made a “reviewable disposition” and that if the disposition were set aside financial relief or different financial relief would be granted to you, it may make an order setting aside the disposition (a ‘disposition’ is basically any transfer of property).
So, what is a “reviewable disposition”? This is defined in subsection 4 as:
“Any disposition made by the other party to the proceedings for financial relief in question (whether before or after the commencement of those proceedings) … unless it was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant’s claim for financial relief.”
So basically this means any transaction for which the other party did not receive full value, i.e. the full value of the asset. Obviously if they did receive the full value of the asset the claiming party can claim against that, although even here the transaction can be set aside if the party to whom the asset was transferred knew that the transfer was intended to defeat your claim.
There is one further provision in section 37, relating to the question of intention, mentioned above. If the disposition took place less than three years before you make your section 37 application, or if the disposition has not yet taken place, and the court is satisfied that the disposition would have the consequence of defeating your claim it is presumed, “unless the contrary is shown”, that the person who disposed of or is about to dispose of or deal with the property did so, or is about to do so, with the intention of defeating your claim for financial relief. If the disposition is older than three years, then you must prove that the other party entered into it with the intention to defeat your claim, although this intention can be inferred from the circumstances.
Naturally, this can be a complex area of law. Accordingly, if you are concerned that your ex has disposed of, or intends to dispose of, property to defeat your claim then you should seek urgent advice from a specialist family lawyer.