When and How to Make an Application Pursuant to Section 37 of the Matrimonial Cause Act 1973
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Freezing Injunctions or setting aside a disposition of an asset
Difficulties often arise during acrimonious financial remedy proceedings where parties may act improperly in an attempt to defeat their spouse’s claim. Section 37 of the Matrimonial Causes Act 1973 (s37) gives parties and the court the power to prevent former spouses from disposing of assets. Reference to defeating a person’s claim for financial relief under s37 is a reference to the following:- Preventing financial relief from being granted to that person;
- Preventing financial relief from being granted to that person for the benefit of a child of the family;
- Reducing the amount of any financial relief which might be so granted; and
- Frustrating or impeding the enforcement of any order which might be or has been made.
Financial relief, broadly speaking, includes applications for the following provisions:
The powers under s37 can be summarised as follows:
It is important to note that s37 requires the applicant to show that there is an intent to defeat the claim for financial relief. If the disposition took place less than three years before the date of the application, and the disposition has had the consequence of defeating the applicant’s claim for financial relief, s37(5) states that it shall be presumed, unless the contrary is shown, that the person who disposed of or is about to dispose of or deal with the property did so or, as the case may be, is about to do so, with the intention of defeating the applicant’s claim for financial relief. Effectively, this means that if a disposition took place less than three years before the date of the application, it is highly likely that the burden will fall on the party who made the disposition to prove that they did not have the intention of defeating the applicant’s claim.
- Maintenance pending suit pursuant to section 22 of the Matrimonial Causes Act 1973
- Financial provision orders pursuant to section 23 of the Matrimonial Causes Act 1973
- Property adjustment orders pursuant to section 24 of the Matrimonial Causes Act 1973
- Neglect by a party to maintain the other pursuant to section 27 of the Matrimonial Causes Act 1973
- Variation or subsequent discharge of an order pursuant to section 31 of the Matrimonial Causes Act 1973
- Alteration of maintenance orders pursuant to section 35 of the Matrimonial Causes Act 1973
The powers under s37 can be summarised as follows:
- To restrain a party from disposing of an asset that it appears they are about to dispose of (often referred to as a freezing injunction) - If the court is satisfied that one party to proceedings is about to make a disposition, or to transfer out of the jurisdiction, or to otherwise deal with any property with the intention of defeating the other party’s claim for financial relief, the court may make such order as it thinks fit for restraining that party from dealing with the property in that nature or otherwise for protecting the claim; and
- To set aside a disposition of an asset that a party has already made so as to bring it back into the control of the parties - The court may set aside a disposition which has already been made if it is satisfied that the party had the intention to defeat the other party’s claim for financial relief and had that disposition not been made, different financial relief would be granted to the applicant;
It is important to note that s37 requires the applicant to show that there is an intent to defeat the claim for financial relief. If the disposition took place less than three years before the date of the application, and the disposition has had the consequence of defeating the applicant’s claim for financial relief, s37(5) states that it shall be presumed, unless the contrary is shown, that the person who disposed of or is about to dispose of or deal with the property did so or, as the case may be, is about to do so, with the intention of defeating the applicant’s claim for financial relief. Effectively, this means that if a disposition took place less than three years before the date of the application, it is highly likely that the burden will fall on the party who made the disposition to prove that they did not have the intention of defeating the applicant’s claim.
Defence:
The party who has disposed of an asset may have a defence pursuant to s37(4). They will need to show that:
Remedies
If an application pursuant to s37 is successful, the court will need to consider the remedies available. The court’s powers to provide a remedy are wide ranging and include:
The party who has disposed of an asset may have a defence pursuant to s37(4). They will need to show that:
- The disposition was made for valuable consideration (other than marriage); and
- The person to whom the disposition was made acted in relation to the disposition in good faith and without notice of any intention on the part of the disposing party to defeat the applicant’s claim for financial relief.
Remedies
If an application pursuant to s37 is successful, the court will need to consider the remedies available. The court’s powers to provide a remedy are wide ranging and include:
- Making any such order as it thinks fit for restraining the other party from disposing of assets to protect the applicant’s claim. Breaching such an order would be contempt of court which could lead to penalties such as fines, imprisonment or seizure of assets; and
- In respect of reviewable dispositions which have already taken place, the court may give directions as it thinks fit to “undo” the disposition for example ordering that a property is transferred back to the party who disposed of it.
Procedure
An application would need to be made on a Form D11 and Part 9 of the Family Procedure Rules 2010 applies. Within the D11, the applicant should state what order they seeking and why, for example, an avoidance of disposition order and also to join the third party to whom the disposition was made. A draft order should be attached to the application, and it may also be beneficial to set out the evidence in support in a witness statement. The application and any accompanying witness statement must be signed with a statement of truth. The applicant should ensure that they file the application at least 7 days before the court is requested to deal with the application and a copy must be served on the respondent and third party who received the dissipated asset/s.
Applications can be made without notice in circumstances where there is an imminent risk of an asset being dissipated to frustrate the applicant’s claim and where placing the respondent on notice may result in the disposition taking place before the court is able to consider the application. Applicants must ensure they meet the relevant criteria to proceed with a without notice application and must have a strong case on the merits.
If disclosure has not yet taken place, the parties will need to provide disclosure in Form E. The applicant should include details of the property which has been dissipated and details of the person in whose favour the disposition is alleged to have been made at part 5.3 of the Form E.
At the hearing at which the application is considered, the court will make directions for further evidence and will also consider joinder of the third party. If the third party is joined, it would be possible to seek disclosure orders against them if necessary.
Some important factors to bear in mind
At A L Law Associates, we specialise in financial remedy proceedings, offering expert advice and guidance. If you would like support in navigating the complexities of these matters, please contact us to book a free 20-minute consultation with one of our family solicitors who would be happy to help.
An application would need to be made on a Form D11 and Part 9 of the Family Procedure Rules 2010 applies. Within the D11, the applicant should state what order they seeking and why, for example, an avoidance of disposition order and also to join the third party to whom the disposition was made. A draft order should be attached to the application, and it may also be beneficial to set out the evidence in support in a witness statement. The application and any accompanying witness statement must be signed with a statement of truth. The applicant should ensure that they file the application at least 7 days before the court is requested to deal with the application and a copy must be served on the respondent and third party who received the dissipated asset/s.
Applications can be made without notice in circumstances where there is an imminent risk of an asset being dissipated to frustrate the applicant’s claim and where placing the respondent on notice may result in the disposition taking place before the court is able to consider the application. Applicants must ensure they meet the relevant criteria to proceed with a without notice application and must have a strong case on the merits.
If disclosure has not yet taken place, the parties will need to provide disclosure in Form E. The applicant should include details of the property which has been dissipated and details of the person in whose favour the disposition is alleged to have been made at part 5.3 of the Form E.
At the hearing at which the application is considered, the court will make directions for further evidence and will also consider joinder of the third party. If the third party is joined, it would be possible to seek disclosure orders against them if necessary.
Some important factors to bear in mind
- An application pursuant to section 37 is costly however these applications do fall outside the general rule for costs. The default position at the conclusion of s37 proceedings would be that costs follow the event meaning whichever party is successful is likely to receive an order that the other party pays their costs. The costs would usually be summarily assessed and this usually results in costs being assessed down meaning the successful party may not be able to recover all of their costs, even if they are successful.
- The powers under s37 are discretionary powers which means the court may refuse to take action on the basis of proportionality.
- The powers under s37 are limited to avoiding transactions and limited to the transfer of personal possessions meaning the powers do not extend as far as the distribution of company assets, however valuable they might be.
- Parties should wherever possible seek to avoid s37 applications as they can be lengthy and costly. Parties should consider seeking written agreements or undertakings to prevent dispositions from ever occurring. If dispositions occur it may be just as effective to pursue an add-back argument where there are other assets available to cover the sums which have been dissipated.
- It is always important to bear in mind litigation risk and the cost consequences of making an application.
At A L Law Associates, we specialise in financial remedy proceedings, offering expert advice and guidance. If you would like support in navigating the complexities of these matters, please contact us to book a free 20-minute consultation with one of our family solicitors who would be happy to help.
