Can you divest property during the divorce process?
The divorcing client needs to be careful of divesting themselves of property and thinking that doing so will remove it from the joint property pool. It won’t.
What is property?
The Family Court is a unique legal environment, particularly when it comes to determining a property division. The Family Law Act has a very broad definition of ‘property’, it can encompass company and trust property, as well as individual property. Its reach can extend to third party interests (such as a prospective inheritance), joining a third party to the court proceedings and to setting aside third party transactions.
Case Example
In a recent court property settlement case, the husband was found to have purposefully transferred cash assets to his new partner in an attempt to hide them from his wife.
Facts
The parties were in a 14 year marriage. They had been separated 5 years when their matter was heard by the court. The husband had re-partnered. The wife sought 55% of the property pool which she valued at approximately $1.42 million. Part of the pool of assets was agreed however there was no agreement on the value of the husband’s businesses or whether the husband’s new partner’s assets were part of the pool and if so their value. An accountant had been appointed to value the business but due to the husband’s constant failure to provide the accountant with information, no value could be attributed to the business.
The husband’s new partner had been joined to the court proceedings. The husband and his new partner argued that her assets should not be included in the pool. The wife disagreed due to various transactions between the husband’s business and his new partner, including significant transfers of funds of $100,000. The husband’s new partner used those funds to purchase a property in her own name.
The Court Found
Various financial documents tendered during the proceedings showed that the evidence given by the husband and his new partner was demonstrably wrong or suspect, leading the judge to the conclusion that the husband and his new partner were untruthful and unreliable witnesses.
The judge also found that the husband actively took steps to prevent a valuation of the businesses being obtained, including understating inventory values and omitting products. The wife had claimed the husband’s business should be valued at more than double the amount eventually conceded by the husband it was worth.
A comparison of the funds deposited into the new partner’s bank accounts with withdrawals from the husband’s businesses led the judge to conclude that the new partner’s story about where the funds came from was “unbelievable beyond reasonable doubt”.
Due to the covert behaviour of the husband it was almost impossible for the court to come up with an identifiable pool of assets.
Court Orders
That the property owned by the husband’s new partner was beneficially owned by the husband by way of a ‘resulting trust’ and should be included in the pool.
That the wife receive all of the available assets, except for the husband’s superannuation of approximately $64,000, furniture and business. So from an identifiable pool of $717,757, it was ordered that the wife retain assets to the value of $562,596, which represented 78% of the pool.
Summary
Beware of non-disclosure. Even the smartest of people can come unstuck especially under the pressure of cross-examination and close examination of their financial affairs. When going through the process of property settlement, full and frank disclosure must be adhered to at all times.
The lesson is – anyone who is separated or contemplating separating needs specialist family law advice sooner rather than later. Try to minimise the time that passes between separation and property division, delay inevitably results in problems.
For specialist family law assistance please call us on (07) 3221 4300 or email [email protected] for a fixed cost ($550.00 including GST) no obligation 1 hour initial appointment.
