Applying the brakes

Following my last post, we saw a fast car and an open road for unscrupulous spouses who may wish to put assets beyond the reach of the family courts on divorce.

There is action that can be taken by the money-makers to make the most of any company structure but equally some things that the spouse chasing settlement might focus on for best effect – I use the example of wife in this post as chasing settlement, although it could just as easily be the husband.

So…how do we apply the brakes?

1. Look at the family home first…

Even where the Family Home is owned in the name of the company it is often possible to argue that, as the company has allowed the family to reside in the property, it has created a “settlement”.

2. Check the husband’s directors’ loan account

It is possible for the family court to order transfer of the loan account to the wife, who will then be able to enforce payment of the account against the company to extract the monies.

3. Look at Transfer of Shares…

Entirely possible for the family courts to make such an order but be careful…some company articles of association mean that the board has the discretion not to recognise any transfer of shares, which will render any such transfer pointless

4. Check the source of funds….

Check where money for the purchase of company assets came from. If it came from the husband then it may be possible to argue that those assets purchased in the company’s name but with the husband’s money are held on trust for him, therefore opening up the possibility of them being transferred to the wife

5. Prevention is better than a cure…

Ensure that any pre-nuptial agreement considers these issues. 

6. If all else fails...

Be very careful about the drafting of any family court order. Consider drafting a lump sum order in instalments, which will allow the possibility of applying to the court to commit the husband to prison for breach of each instalment, as opposed to one payment – which will allow only one committal application

There may be one large brake applied as I understand that permission has been given to Mrs Prest to appeal to the Supreme Court against the order of the Court of Appeal. We shall await with interest the outcome of that.

Hide and Seek

There was recently reported in the press a case of a man who won £50,000 playing Deal or no Deal on TV.

The winner spent the money in the space of 4 months, before the television show aired, as he was in the middle of a Divorce and wanted to make sure that his estranged wife “wouldn’t get a penny”.

The estranged wife apparently only found out about the winnings once the show aired but Mr Brown, the winner, had by then purchased a number of household items, a second hand X-type Jaguar car, a holiday in Mexico, an ipad etc.

Once discovered, the wife applied to court and an injunction was imposed to prevent Mr Brown spending any more of his winnings, if any remained.

Mr Brown will no doubt have to detail exactly what he spent the money on and there will, no doubt, now be argument about his financial conduct – although he did apparently use some of the money to pay off debts and paid for an electrician’s course, having been signed off work for “depression”.

Although Mr Brown’s conduct may be taken into account and the items purchased with the money potentially be divided between the parties, the reality is that a large part of the winnings have gone and the items reportedly purchased are unlikely to hold their value and are almost certainly far less useful to Mrs Brown than the capital that would have been available.

It highlights the importance of maintaining an eye on your spouse’s lifestyle and spending after separation and within the course of a Divorce. I am not talking about making a note of each time they do a food shop or the purchase a new toy for the children but if there is unusual and excessive spending (cars, holidays, expensive items etc.) then questions must be asked about how that is all being funded.

It also goes to show the lengths to which people will go in cases of Divorce to “deprive” the other from any share of what they perceive to be theirs.

This all against a backdrop of each spouse having a duty to provide full and frank disclosure of their financial position – that duty being an on-going one within proceedings and designed to help the parties (and the Court) ascertain what is available for distribution and what would be fair.

I imagine that Mr Brown will have achieved an increase in both his and his wife’s legal costs in determining their matter and an awful lot of ill-feeling between them – a sad state of affairs when you consider that the parties have 2 young children and will have to co-parent for some time to come.