A financial settlement on divorce obviously involves the division of the assets between the parties.
But what if one of the parties has transferred assets away, or is about to transfer assets away, with the intention of reducing the amount that the other party will receive? Is there anything that the other party can do?
The answer is yes, there is. They can apply to the court for an order stopping the other party from transferring the assets or, if they have already been transferred, setting aside the transfer.
It is important note that the party applying for such an order must show that the other party intended to defeat their financial claim, either by reducing the amount that they will receive, or by frustrating the claim entirely.
Where the transfer took place less than three years previously and had the effect of defeating the applicant’s claim then the court will presume that the other party intended to defeat the claim.
But if the transfer took place more than three years previously then the intent to defeat the claim must be proved, although it can be inferred from the circumstances.
If, for example, the transfer was made for no payment then it will be set aside.
And a transfer for less than the full value of the asset is also likely to be set aside.
Even a transfer for full value may be set aside if the person to whom the asset was transferred was aware that the purpose of the transfer was to defeat a financial claim.
An example of an application to set aside a transfer occurred in a recent case that took place in the Family Court at Oxford.
In the case the parties separated in 2017. The wife petitioned for divorce in 2018 and issued a financial remedies application shortly thereafter.
In 2021 the husband discovered that the wife had entered into two transactions selling shareholdings in one of the parties’ businesses to two people. Believing that she had done so with the intention of depleting the matrimonial assets, he applied to the court to set aside the transactions.
Hearing the application the judge found that the transactions took place less than three years before the date of the application, and had the consequence of defeating the husband’s claim for financial relief.
This gave rise to the presumption that the wife disposed of the shares with the intention of defeating the husband’s claim for financial relief, a presumption that the judge found the wife was unable to rebut.
Further to this, the judge found that the amount paid for the shares was considerably below their true value, and that the people buying the shares knew full well that the wife was selling the shares with the intention of defeating the husband’s financial claim.
In the circumstances the court set aside both transactions.
You can read the full report of the case here.
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