Spending sprees and hidden assets in divorce proceedings
31 July 2018 by Melanie Wilson
All too often, when a relationship breaks down, one party embarks upon a spending spree, thereby reducing the capital available for distribution between both parties. This may occur particularly when one party feels the other party, for a number of reasons, should not receive their fair share of the family assets. The other party invariably feels aggrieved that assets built up during the marriage are being depleted thereby reducing the level of capital they will receive.
What view does the Court take when faced with a situation like this?
In certain circumstances, where the Court has found the spending to be ‘wanton and reckless’, the Court has ‘added back’ the capital spent by one party thereby increasing the level of capital to be divided by the amount spent. However, it is not always as simple as that. These add back cases raise complicated issues which have to be considered in light of the individual facts of each case.
In addition, some parties endeavour to reduce the level of family capital by disposing of assets. Common examples of this are as follows;
- Transfer of cash made from bank accounts to third parties
- Selling assets at an undervalue, e.g. selling a car valued at £50, 000 for £10,000
- Transfer of properties / Shares in a family Company
In these circumstances, if the Court is of the view the transfers/ sales have taken, place with the intention of defeating or reducing the level of capital to be received by the other party, the Court can add back the value of the assets disposed of and make an award on the basis of the increased figure. The Court can also make various orders preventing or setting aside sales or transfers of this nature. In addition, if the Court forms the view that one party has not fully disclosed their financial position, it can make an award on the basis of the level of the assets the Court believes the non-disclosing party has, rather than the level of assets disclosed. This principle equally applies to income.
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