It is not unusual that a party to a financial remedy application on divorce may claim that the other party has purposely dissipated assets, with the aim of reducing the amount that the party making the claim will receive.
If such a claim is successful it will be taken into account by the court, for example by ‘adding back’ the assets on the side of the party who dissipated them, even if the assets no longer exist, so that the award to that party is reduced by the amount of the dissipated assets.
But what if valuable assets were disposed of during the marriage for some other reason, which had nothing directly to do with reducing a claim on divorce? How might the court approach such a scenario?
The issue arose in the recent case BL v OR, decided by Sir Jonathan Cohen.
Main asset given away
The case concerned a wife’s financial remedies application.
At the time of the hearing of the application the wife was aged 63 and the husband was aged 67. It had been the second marriage for each of them, and both of them had two grown-up children.
The parties were married in 2012. The husband was a wealthy man, and it was important to him that there should be a pre-nuptial agreement, so that he could preserve his assets.
The pre-nuptial agreement included the usual provision for each party to retain their separate property. It also included a term for a payment by the husband to the wife, upon the permanent breakdown of the marriage. That payment came to £738,341, which the husband duly paid, after the marriage broke down in 2022.
At the time of the agreement the husband’s assets were some £48 million net. The wife’s assets totalled £2.2 million, of which £1.36 million was comprised of a flat in St John’s Wood, in which she lived prior to the marriage.
In 2015 the wife transferred the flat as a gift to her two daughters. The transfer was made without the husband’s consent or knowledge.
The impact of the transfer
Hearing the wife’s application, Sir Jonathan Cohen had to determine the impact upon the award that the wife received of her giving her main asset to her daughters during the marriage.
Considering the matter, he said that the transfer was an important part of the factual scene in measuring what was a fair way of meeting the wife’s needs. To ignore it in the circumstances of the pre-nuptial agreement would plainly lead to unfairness.
He therefore held that it was right to say that the wife’s alienation of her home was a material factor. If she chose to give away what would have been an entirely reasonable home for her, she could not expect it to be without consequences. She had the autonomy to do with her assets as she wished, but that exercise carried repercussions.
Sir Jonathan went on: “[The wife’s] needs still have to be met but the self-directed loss of [the flat] means that she has to accept that (i) her needs might be met at a lower level than if she had retained the property and (ii) consideration has to be given to the purchase of her new home being subject to [the husband] having an interest in it.”
He said that in his view it was clear that the wife’s new purchase should be subject to the husband having a share in the equity in the new property. Having given one home to her children, it could not be right that the wife should be provided with another home to pass on to them absolutely upon her demise.
And that is indeed what he ordered.
Sir Jonathan awarded the wife a housing sum of up to £2.6 million (she had put her housing need at between £3 and £3.5 million). However, the wife’s new property would be subject to a charge in favour of the husband for 40% of its value, such charge to be repayable upon the wife’s death.