What is section 37?

1) Section 37 of the Matrimonial Causes Act 1973 provides the court powers to protect assets. It is a strong and effective set of tools. These powers were drafted into the 1973 Act to prevent sharp practice and attempts to undermine the court’s authority by depleting matrimonial assets ahead of the court’s adjudication.

What can the court do?

2) The court is able to firstly set aside certain transfers of property if the purpose was to reduce or defeat the other party’s claim for financial relief. In addition, the court can prevent transfers by granting an injunction over an asset or class of assets. It is also possible for the court to order that dissipated property should be returned to the matrimonial pot.

3) If assets are transferred to a third party, such as a family member – that third party can be joined to the proceedings and have assets effectively confiscated from them.

What are the time limits?

4) The time limit is three years. It is strongly advised that any suspicion of dissipation should be met with an urgent section 37 application – this would stop the clock from ticking. If later it becomes clear within days or weeks that dissipation has not taken place, then it is always possible to withdraw an application – but it is not possible to go back in time and issue an application.

What is the test applied by the court?

5) To obtain relief one must be able to demonstrate the following two points on the balance of probabilities:

a. That a disposition of property has been made OR is about to be made.

b. The disposition is being done with the intention of defeating a spouse’s financial claim.

What if the assets have been sold and liquidated into cash?

7) In circumstances where assets have been sold for full market value and the offending party has cash or spent/hidden the cash, the court will not set aside a transaction, instead it has the following tools at it’s disposal:

a. The court can add the value back notionally. An add-back case will need to be presented to the court.

b. The court may make adverse inferences against the offending party and this may impact the offending party’s credibility in relation to the remaining matrimonial assets.

c. The court may adjust the final settlement to make allowance for the dissipation providing the innocent party more of the marital assets.

d. The court may also penalise the offending party by granting a costs order against them.

What is a disposition?

6) A disposition can be any one of the following acts:

a. Transfers beneath market value,

b. Transfers without consideration,

c. Gifts to family members or friends,

d. Moving marital assets to friends, family, trusts or companies.

What if the assets have been sold and liquidated into cash?

7) In circumstances where assets have been sold for full market value and the offending party has cash or spent/hidden the cash, the court will not set aside a transaction, instead it has the following tools at it’s disposal:

a. The court can add the value back notionally. An add-back case will need to be presented to the court.

b. The court may make adverse inferences against the offending party and this may impact the offending party’s credibility in relation to the remaining matrimonial assets.

c. The court may adjust the final settlement to make allowance for the dissipation providing the innocent party more of the marital assets.

d. The court may also penalise the offending party by granting a costs order against them

8) In the event the assets have not been sold for market value and the transaction is in bad faith the court is very likely to set aside the transaction, especially in circumstances where the buyer has not acted in good faith and is a family member/friend of the offending party.

What practitioners should look for when advising on a section 37 application:

9) When advising on Section 37 MCA 1973 applications, solicitors should look out for evidence of recent or unusual transfers of property, money, or valuable items — especially to friends, family, or offshore accounts. Look out for sales of assets at undervalue, attempts to liquidate investments, or property being put up for sale or transferred without clear reason. Review bank statements for large withdrawals or transfers, and examine communications (such as emails, texts, or social media) that might indicate an intention to hide or dispose of assets. Patterns of financial behaviour that differ from the norm, particularly around the time of separation or proceedings, are also significant.

Examples of evidence include:

• Transfer of the family home or other property into the sole name of a spouse or a third party.
• Sale of valuable items (such as cars, jewellery, or artwork) for less than their market value.
• Large cash withdrawals or unexplained payments from joint or personal accounts.
• Setting up new bank accounts or moving funds offshore.
• Gifting money or assets to relatives or friends without a clear reason.
• Sudden changes to business ownership or shareholdings.
• Removal of a spouse’s name from jointly owned assets.
• Listing property for sale without the other party’s knowledge.
• Evidence of assets being moved out of the jurisdiction
• Communications stating an intention to “protect” assets from the other party or to “make sure they get nothing”

 

Aysha Miah

33 Bedford Row

February 202