Can I stop my spouse hiding assets in a divorce?

Practical considerations

There are some practical steps that a spouse with concerns of this nature can take to protect family assets. These practical steps are particularly relevant where the behaviour arises in the context of an addiction that might cause the dissipation of assets; as detailed below there are steps the court can take to intervene if a spouse can be shown to be intending to put assets beyond the reach of the family. The question of intention in the context of an addiction is difficult to ascertain and each case would depend on its own circumstances.

If funds are held in a joint account, the spouse with concerns could speak to the financial institution concerned and implement their internal procedures to prevent transfers, withdrawals or payments from the account. This may only provide a short-term solution. Also, this is a step that should be taken with some caution, as a bank might often take such steps of its own volition upon hearing simply of a marital breakdown, to protect its own position in the event of a dispute between its account holders.

In the case of an acknowledged difficulty with addiction, it may be that an agreement can be reached preventing one spouse’s access to the funds, either by removing their access to a joint account or by funds being placed in an account in the sole name of the other spouse, on the specific agreement that the funds shall not be accessed.

Another alternative could be to register a restriction or notice against a property with the Land Registry. If a property is owned the sole name of one spouse and the other has concerns that they may attempt to transfer the property to another person, the non-owning spouse can ask the Land Registry to apply a Family Home Rights Notice against the title to prevent transfers of the property without notice to/agreement of the non-owning spouse.

Legal options

If circumstances require it, s37 Matrimonial Causes Act 1973 gives wide ranging discretion to the Family Court to make freezing orders against specified assets. This prevents the disposal or transfer of the asset in question. The court also has powers to set aside a transaction that has taken place in the three years prior to the application, requiring the return of the assets that have been transferred.

When considering any application for a freezing injunction, the Family Court need to be satisfied that either:

• a) the respondent spouse is about to make a transfer or otherwise dispose of property with the intention of defeating the financial claims of the applicant spouse;
• b) that any transfer or disposal that has already been made by the respondent spouse is a ‘reviewable disposition’ and that, if the transfer or disposal were set aside, the Family Court would make different provision for the applicant spouse; or
• c) where there is already an approved financial order, that the respondent spouse has made transfer or disposal with the aim of frustrating or impeding the terms of the financial order.

In order to consider an application under s37, financial remedy proceedings must have been issued or the application must be imminent (in such circumstances the court usually requiring an undertaking to issue proceedings within a short stipulated timeframe).

The spouse applying for a freezing injunction must demonstrate that the actions of their spouse are intended to defeat the claims that can be made for financial provision upon divorce. The law will presume this is the intention and it is the responsibility of the spouse making the transfer or disposal to prove that this is not their intention.

If the assets that are the subject of any application are held in a legal jurisdiction outside of England and Wales, it is crucial to establish whether that jurisdiction will recognise and enforce any order that is made.

Most often, applications for a freezing order are made urgently and without notice to the other spouse. If the application is successful, the court will make a temporary freezing order and list a hearing which both parties are required to attend, and which gives the spouse subject to the injunction the opportunity to oppose the application and resultant order.

The court will make any order in matrimonial finances within its discretion, considering a number of factors and principles but with the general aim of achieving a result which is fair to both parties. As part of that discretion, the court also has power to impose an ‘add back’, effectively treating a party who dissipates assets as if they have dissipated their own share of those assets only, but ‘adding back’ into the figures, the other party’s share of the lost assets. This is often a finely balanced application to make and will succeed in any event, only if the assets have been disposed of in a ‘wanton and reckless’ manner.

Costs

There is a general presumption in the Family Court is that each party bears their own legal costs in proceedings for a financial order upon divorce, regardless of outcome; costs orders are the exception rather than the rule. Applications for freezing injunctions fall outside of this presumption; the successful party can ordinarily expect to receive an order that the other party meet their legal costs in association with the application. As such, it is vital that expert legal advice is taken prior to issuing an application for a freezing order or upon receipt of any such application.

If you suspect your spouse maybe hiding assets and you need legal advice during a separation, see how our family lawyers can help.