What happens if a party in financial remedy proceedings attempts to dissipate their assets?
If a party in financial remedy proceedings (often related to divorce or separation) attempts to dissipate their assets, meaning they try to hide, transfer, or spend their assets to prevent them from being included in the financial settlement, several legal actions can be taken. The court takes such actions very seriously, and there are measures in place to prevent and address asset dissipation:
1. Freezing Order (Injunction)
The other party can apply to the court for a freezing order (also known as a Mareva injunction). This order prevents the party suspected of dissipating assets from dealing with their assets, including selling, transferring, or otherwise disposing of them.
A freezing order can apply to both domestic and international assets, depending on the circumstances.
2. Setting Aside Transactions
If the dissipation involves transferring assets to a third party (e.g., selling property at an undervalue or gifting money), the court can order the transaction to be set aside. This means the transfer is voided and the assets are brought back into the financial settlement pool.
3. Adverse Inference
If a party refuses to disclose assets or tries to hide them, the court may draw an adverse inference. This means the court can assume the party has significant undisclosed assets and make a financial settlement that reflects this assumption, even if the exact value of the hidden assets is unknown.
4. Penalties for Non-Disclosure
Parties in financial remedy proceedings are required to make full and frank financial disclosure. If one party is found to have concealed or dissipated assets, they may face penalties, including:
Being ordered to pay the other party’s legal costs.
Receiving a less favorable financial settlement.
In extreme cases, a person can face committal proceedings for contempt of court, leading to possible imprisonment.
5. Delay in Final Order
If the court suspects asset dissipation, it may delay the final financial remedy order to allow investigations into the dissipation or to allow time for assets to be recovered.
6. Restoration of Assets
If the dissipating party has sold or transferred assets, the court may make an order for them to restore or compensate for the value of those assets so that they are accounted for in the settlement.
7. Impact on Settlement
Any attempt to dissipate assets may significantly affect the final financial remedy order. The court will take into account the attempt to reduce the available assets when making the final settlement and may award a larger share of the remaining assets to the innocent party.
8. Criminal Consequences
In extreme cases, attempting to conceal or dissipate assets may amount to fraud or a breach of trust, which could lead to criminal prosecution depending on the circumstances.
It is important for both parties to be transparent during financial remedy proceedings. Attempting to dissipate assets not only risks legal penalties but also undermines the fairness of the settlement, which can harm the party attempting it in the long term.
Zubair Mughal is a specialist family law barrister, qualified to accept instructions under the direct access scheme. For further information on instructing Zubair for your family law matter, contact him today to arrange a free initial consultation.
