The Duchess and Marriage Break-Up – Protecting Marital Assets During Divorce Proceedings | Family Law
I want to tell you a story. A sad tale from the past involving a wealthy older women losing much of her wealth to a handsome rake. See if you can guess the parties involved.
In 1705, a wealthy Duchess and former mistress of a King married a man, ten years her junior, who was, by all accounts, a notorious cad. Unfortunately, she soon discovered that he was already married to someone else, and although she brought a successful suit against him, he ran through a great deal of her fortune whilst she waited for the marriage to be declared void by the Courts (as well as spending her money he also found time to seduce her granddaughter).
That’s right; the lady in question is the legendary Barbara Villiers, Duchess of Cleveland and mistress of King Charles II. And her husband? The devilish and handsome Robert “Beau” Fielding. If you wish you can read more about the history here .
The above story is an historic, cautionary tale about protecting your assets and money during divorce proceedings, especially if you or your estranged spouse are high net worth individuals (remember; although the fortune belonged to the Duchess, under 18th century law a woman’s property became her husband’s upon marriage).
One of the greatest fears people face during a divorce where a lot of money and assets are at stake, is how to prevent one party from disposing or hiding assets in order to avoid them becoming part of the divorce settlement, and how to set aside a transaction where assets have already been sold with the intent to deprive a spouse of their rightful financial provision.
Thankfully, unlike poor Ms Villiers, today the Courts can apply a Freezing Injunction and an Avoidance of Dispositions order to protect vulnerable parties to a divorce from being denied part or all of their marriage settlement.
Let’s look at each available solution in turn.
A Freezing Injunction is an interim order made by the Court that prohibits a party from disposing or dealing with the assets listed under the order. They are not granted lightly, with one judge describing them as the “nuclear weapon” of the law (Bank Mellat v Nikpour). This is because a freezing injunction is effectively punishing someone in anticipation of them committing an act which may deny the other party their full divorce settlement.
What Type of Assets Can Be Covered By A Freezing Injuction?
Normally, a freezing injunction will require the respondent to give full and frank disclosure of the type, value and location of his or her assets.
All types of assets can be frozen either in the UK or abroad including:
- Bank accounts
- Business assets
- Shares and bonds
Intangible assets such as goodwill cannot be frozen by the injunction.
What is the Procedure Involved when Applying for a Freezing Injunction?
Before you even think about applying for a freezing injunction, you need to be aware that they are:
- Require full and frank disclosure on many issues regarding your marital finances that you may prefer to keep private; and
- If it is later found that the injunction should not have been granted you may be required to pay damages to your former spouse.
Freezing injunctions are usually applied for before proceedings are issued, however, you can seek them at anytime, including after the judgment has been obtained but not yet executed. Section 44 of the Arbitration Act 1996 gives the Court power to grant a freezing injunction in support of arbitration proceedings being held in an overseas jurisdiction.
Applications for a freezing injunction can be made without notice to the defendant. To succeed in obtaining the injunction, an applicant must provide an application form as well as evidence to support the application in the form of an affidavit.
When assessing whether there are grounds to grant a freezing injunction the Court will consider:
- Whether the applicant has a ‘good, arguable case’ for applying for the order
- That there is a real risk that any judgment of financial relief made in favour of the applicant will go unsatisfied. According to Neuberger J in Thane Investments Ltd v Tomlinson, it is vital that there is “solid evidence adduced to the court of the likelihood of dissipation”
- It is just and convenient to grant the injunction. The Court has to take great care in granting a freezing injunction as innocent third parties such as business partners can be adversely affected by them.
Avoidance of Disposition Order
What if your former spouse has already disposed of assets in order to defeat your claim? This is where an Avoidance of Dispositions Order comes into play.
An Avoidance of Dispositions Order is an order by the High Court setting aside or preventing a transaction by one party (either the husband or wife) that was/is being made with the aim of defeating his/her spouse’s application for financial provision.
How to Apply for an Avoidance of Disposition Order
Avoidance of Disposition Orders are governed by Section 37 of the Matrimonial Causes Act 1973. Section 37(5) of the Act provides that the intention to defeat the other party’s claim to financial relief is presumed if the disposition of the property/asset took place less than three years before the application.
If the presumption is not rebutted the transaction will be set aside unless:
a) The asset was exchanged for appropriate monetary value; and
b) The person who acquired the property/asset acted in good faith and was unaware that the respondent’s goal was to deny the applicants full financial settlement that the Court ruled they were entitled to.
This may all sound a little tricky, however in the recent case of AC v DC (No 1), Mostyn J explained beautifully what the applicant in the case had to prove in order to have her request to set aside her husband’s transfer of a shareholding actioned by the Court.
In this case the wife had to show:
a) That the transfer of the shares was done with the intention of defeating the applicant’s claim for financial relief (in this case intention was presumed and not successfully rebutted); and
b) The transferring of the shares resulted in the defeating of the applicant’s claim for financial relief; and
c) Under Section 23(2) of the Matrimonial and Family Proceedings Act 1984, the Court should exercise its discretion and set aside the share transfer.
A Word of Caution
Tracing assets that were transferred some time ago can be very difficult, especially if they have changed hands multiple times. And remember, the Court will not set aside a disposition if the third party involved had no idea your scoundrel of an ex-spouse was trying to cheat you out of your rightful financial settlement when he or she transferred the property or asset to them.
So would the Countess of Cleveland have saved some of her lost fortune if she had been able to impose a freezing injunction or apply for an Avoidance of Disposition Order against the rakish “Beau”? We will never know. What we do know is it probably wouldn’t have stopped him seducing her granddaughter.
If you are facing similar issues, do not hesitate to call or email our specialist family law department who will gladly try and help. Let us help you protecting your Marital Assets