When couples divorce, disputes will often arise around the current ownership of assets and which of the parties should retain them, but what happens when extended family members stake a claim to an asset or assets the court is considering?
Such issues can include where there are informal or fluid arrangements in respect of family-owned assets such as properties and businesses, as well as where funds are provided to either or both of the spouses by extended family (often for the purchase of a property or investment in a business) and whether these funds were intended to be a gift or a loan. Conversely, parties to a divorce can also face difficulties where assets in which one of them has a beneficial interest is held in the name of a third party.
Despite it being fundamental that the judge in any case clearly understands the extent of parties’ interests in their assets, they can be left having to determine this with little or no documentary evidence.
An additional complication is that, generally, a decision in the family court will only be binding on the parties to the divorce, unless the relevant third parties are joined to the proceedings, meaning one party may be left with a decision that they could find difficult to enforce.
What is intervening?
Where a third party is claiming an interest in property that is the subject of financial remedy proceedings, or where one of the parties has an alleged interest in property owned by the third party, intervening in the financial application will formally add the third party to the proceedings. This gives them the opportunity to be heard in respect of their interest as well as binding them by the court’s decision.
While the court has the power to join or remove parties at it sees fit, often an application for a joinder will be made by one of the existing parties or the third party themselves. Such an application should be made at the earliest possible opportunity, on notice to the other parties.
The test that the court applies when considering whether to join a third party is namely whether:
a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or
b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.
While the threshold for joinder is not particularly onerous, the parties must consider whether it is proportionate to do so, taking into account that intervening is likely to result in additional hearings, further witness evidence and pleadings.
Intervening also comes with a costs risk as the ‘no order as to costs’ approach within financial remedy proceedings, does not apply in intervenor cases. Instead, they are considered a ‘clean sheet’ case in which the court can make whatever costs orders it sees as fair. While costs orders are still discretionary and not automatic, an unsuccessful party (including intervenors) is at risk of being ordered to pay the legal costs of the successful party, as well as paying their own fees.
If intervening may not be worthwhile, a party can apply to for their extended family members to be heard as witnesses giving written and/ or oral evidence in respect of the arrangements in place. Where it is one of the parties asserting that the other has an interest in assets held by a third party, they may look into issuing a witness summons, which is a document requiring a witness either to attend court to give evidence or disclose documents in order to assist the court.
Each case is different, and arrangements in place can vary drastically, so it is vital that specialist family law advice is sought in respect of the strength of your case and the cost and risks that could be involved with intervening before any such application is made.
How to protect your assets for the future
Many families are now looking into how they can best protect their interests should divorce or another dispute as to ownership arise. Judges in the family court have a wide discretion to make findings based on the evidence before them, so iron clad protection is never guaranteed. That said, loan agreements and other contemporaneous documentation and written correspondence (including emails and text messages) can represent strong evidence of each party’s intention in giving or receiving gifts or loans.
A pre-nuptial agreement properly entered into can also be a useful tool in protecting family-owned assets and defining an extended family’s interest in individual assets at the outset of a marriage. While family law judges still retain an overall discretion in cases involving pre-nuptial agreements, such an agreement can provide a judge with evidence that each party to the marriage understood the wider family’s intentions and the arrangements in place.
Edwards Family Law is a niche London-based firm specialising in high-net-worth divorce and international family law. To find out more about pre or post-nuptial agreements, please phone +44 (0)20 3983 1818 or email firstname.lastname@example.org. All enquiries are treated in the strictest confidence.