What can I do if my spouse has disposed of our assets to defeat my claims? – the court’s power to make an avoidance of disposition order.
Sometimes in divorce proceedings, one party may deliberately dispose of assets to try and defeat the other party’s financial claims, perhaps by hiding or reducing the assets available for distribution between them. If there is evidence that this has happened, the court can set aside the disposal, which is known as making an avoidance of disposition order.
If there is evidence that someone is about to dispose of assets but has not yet done so, it may also be appropriate to apply for a freezing order to prevent the disposition.
Considerations before applying for an avoidance of disposition order
Making a court application for an avoidance of disposition order is expensive. It is worth considering the value of the assets that have been disposed of in the context of the parties’ overall financial position.
If the claim for financial relief can be met from other assets that the parties hold, it is not usually cost-effective to make an application. It is less expensive, for example, to ask the court to reattribute the value of the assets as part of the financial distribution between the parties. This is known as seeking an add-back.
However, if the other party has disposed of a particular asset, the client wants to retain, such as the family home, an application to set aside the disposal may be appropriate.
What assets can an avoidance of disposition order be made against?
In addition to real property, an avoidance of disposition order may be made against a range of assets, including property, cash, investments or valuable personal belongings.
The court can, in theory, make an order against an asset outside the jurisdiction but is unlikely to do so if the order would be unenforceable in practice. One or both parties must have an interest in the asset in question.
What do you need to prove in an avoidance of disposition?
For a successful application, the applicant must prove that the other party has made what is known as a reviewable disposition intended to defeat their claim for financial relief and that if the disposition were set aside, the applicant would be granted greater or different financial relief.
A disposition is reviewable if it was made any time before or after the application for financial relief. The exceptions are if:
1. The disposition was made:
- for valuable consideration (not gifted) or;
- in a will;
2. The recipient acted in good faith.
3. The recipient of the property did not have notice of the intention to defeat the applicant’s claim.
If a disposition has been made within three years of the application for financial relief, there is a statutory presumption that it was done with the intention of defeating the applicant’s claim unless the other party proves otherwise. If the disposition occurred more than three years before the application, the applicant must prove its purpose and effect.
How to apply for an avoidance of disposition order
It is not possible to make a stand-alone application for an avoidance of disposition order. It must be made in the context of an application for financial relief.
An application for financial relief is usually made in the divorce application or in a court form called Form A, which is also used to trigger the court timetable to deal with the application. The timetable means that if the parties cannot reach an agreement about the financial consequence of their divorce, the court will ultimately determine what is a fair outcome at a final hearing.
The documents are filed at court via the HMCTS online system with a draft of the order sought and the court fee. They are also served on the respondent.
Joinder
The applicant usually needs to join the third party, who is alleged to have received the asset disposed, into the financial relief proceedings. Joinder means that the third party is bound by the court’s decisions in the proceedings.
Next steps
Where an application for an avoidance of disposition order is made at the start of proceedings for financial relief, the next step is for the parties to provide financial disclosure in a court document called a Form E. When the applicant completes their Form E, they should include details of the asset that has been disposed of and the third party who is alleged to have received it.
Frequently, an application for an avoidance of disposition order is made during proceedings, as disposals may be revealed by, for example, disclosure in the respondent’s Form E. An application may also be made after proceedings have concluded if the other party is attempting to frustrate the implementation of an order for financial relief.
Court directions on avoidance of disposition orders
Once an application for an avoidance of disposition order has been made, the court sets out the steps that need to be taken to enable it to determine the application. These are called court directions.
The court is likely to make directions for the parties to provide further evidence and disclosure about the disposal that has taken place. It is also likely to make directions for the third party joined in the proceedings to provide disclosure.
When will the court decide the application?
The court usually decides an application for an avoidance of disposition order at a preliminary issue hearing that takes place before the final hearing of the parties’ financial relief claims.
If the application is made after proceedings for financial relief have concluded, there is a separate hearing at that stage.
What orders will the court make?
If the application is successful, the court declares that the relevant disposal should be set aside and makes consequential directions that it considers appropriate.
These could include ordering a third party to pay back cash received into a jointly held solicitors’ account or to sign a property transfer giving title back to the party who has made the disposal.
The effect of an avoidance of disposition order is that the disposal is treated as if it was invalid from the outset and never happened.
Who pays the costs?
The general rule is that each party is responsible for their own costs on an application for an avoidance of disposition order. However, if there is litigation misconduct (such as failing to provide disclosure), the court may order one party to pay the costs of the other.
Watson Morris and avoidance of disposition orders
At Watson Morris, we specialise in all areas of family law. We can help advise on any aspect, including avoidance of disposition orders.
Contact the team today if you are looking for a divorce lawyer.
Written by Peter Morris
July 17, 2023
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