When it comes to a property settlement, one of the first steps is to determine the parties property pool. Determining the property pool involves assessing the assets and liabilities of the parties and then giving those assets and liabilities a value.
Determining the property pool becomes obviously more complicated if your ex has tried to hide or sell assets or plans to sell or hide assets.
Practical ways to stop the ex from selling assets
Practical ways to stop your ex from selling your assets after separation include:
- Make a list of assets, even consider hiring someone to track assets.
- Watch your bank accounts for withdrawals or large deposits that might indicate property has been sold
- Sign up to get notifications if someone accesses your credit report. Useful for cases where exes use your name to get into debt.
- Watch for bankruptcy attempts, you can search the bankruptcy register here. Useful for when ex disposes of assets and then claim bankruptcy.
- Catching any attempts to sell property early means actively checking real estate websites to ensure any matrimonial asset properties aren’t on the market. Set up notifications for property here.
- Ensuring you have joint signatures on the mortgage and mutual bank accounts. It is perhaps worth calling your banks and mortgage provider to inform them and check that anything to do with joint funds needs to be done with your consent.
- Finalise financial and property settlements sooner rather than later – the longer you leave it, the more risk there is for assets to be sold.
- Get legal advice about what you can do in cases where assets have already been sold or in cases where you want to stop your ex from selling assets.
What if my ex has already sold assets?
If your ex has sold an asset, it can be hard to include it in the property pool, as the property is not held in either person’s name. Sometimes, a person does this because they panic. Sometimes, they are deceitful, and sometimes it was non-intentional; for example, they sell an investment without consultation. Either way, this situation is known as disposing of assets and, in some cases, dissipating the asset pool. Note that this also applies to gifts to family members. The good news is, if your ex is selling assets or has sold assets – the court can intervene and figure out a way to make sure the sold asset is considered.
Setting aside a transaction
Under Section 106B of the Family Law Act 1975 (Cth), the court can reverse, i.e. ‘set aside’ a sale or transfer of a matrimonial asset, regardless of intention. The court can do this in circumstances where the sale, gift, or transfer defeats or is ‘likely to defeat’ an existing or anticipated court order.
This form of relief can become problematic when the buyer bought an asset in good faith and did not know that the asset could not be sold. This position would make the purchaser a bonafide innocent third party. As such, the court has to consider their interest when making an order to set aside a purchase. And the court would likely not set aside the transaction in this case.
However, if your ex sells or gifts something to a family member without your consent or knowledge. And, the family member is aware of the interest in the property that you would have. Then the court can add that family member as a party to the proceedings and make an order that the transfer is reversed.
What if the property wasn’t sold or gifted, and there’s no way of getting it back?
The form of relief you may find beneficial would be for that money to be reintroduced into the property pool by way of an ‘add back’.
Notional add-backs
If your ex has sold assets and a court can not set it aside, another option is notional add-back to the property pool.
There are three categories of add-backs that the courts have identified.
In Omacini & Omacini (2005) 191 FLR 317 at [30], the Full Family Court identified the following three categories:
- Legal fees: Where the parties have expended money on legal fees;
- Premature distribution of funds: Where there has been a premature distribution of matrimonial assets; and
- Wastage: Where one party has reduced the value of assets or has ‘acted recklessly, negligently or wantonly with assets.’
Traditionally, the courts’ were more flexible with add-backs, and an amount dissipated or wasted could be added back. However, since the cases of Stanford (2012) and Bevan (2013), the court has made it clear that they are now reluctant to make orders for add-backs and do so rarely. The reasoning for this is because of the court’s position that once the asset is sold or wasted, it is no longer an ‘existing’. The newer approach is to adjust the property division in favour of the party that was unfairly disadvantaged.
Section 75(2)(o) – Making an adjustment to the property pool
When the alleged loss arising from your ex prematurely disposing of an asset is difficult to identify and quantify as a matter of evidence, the conduct can be considered when making adjustments, under a broader discretionary power given to the courts by s75(2)(o) of the Family Law Act. With this power, the court does have the discretion to consider any other fact or circumstance they believe to be relevant in determining a just and equitable outcome.
In reality, however, a minor percentage adjustment doesn’t compensate for the dissipation of a valuable asset – whether that’s cash spent gambling or property sold, the percentage adjustment usually won’t make up for that. Hence why it is often crucial to finalise property settlements as soon as possible after separation to avoid your ex selling assets. And if you are concerned about your ex selling assets, then you should stop them in their tracks.
How to legally stop the ex from selling assets to begin with
It is possible to stop your ex selling assets via court order, caveats and injunctions. You should also consider practical ways to prevent your ex from selling assets, such as joint signatures, freezing accounts and catching attempts to sell assets early.
Freezing orders and injunctions stopping the sale of assets
If you are concerned your ex will sell assets, you may apply for an injunction.
You can apply for an injunction that either restrains:
- your ex-partner from selling, or increasing the mortgage, of a property of the relationship;
- a company from involving itself in risky business activities; or
- your ex-partner from disposing of their finances such as superannuation, shares or bank accounts.
An example of an injunction to stop your ex from disposing of their funds is in the case of Sheehan [2008] FMCAfam 655 when a wife sought orders to freeze the Husband’s bank account. The outcome was that the court made an order for the Husband had to give his solicitors half of his current bank balance to hold on Trust, pending a final property settlement.
How to get an injunction to stop your ex selling assets
There are some requirements that the party applying for the injunction must meet. These requirements are:
- That the applicant must have a basis for a claim under the Family Law Act (e.g., property settlement or spousal maintenance);
- There must be evidence of risk, threat or an intention to dispose of assets; and
- The relief sought by injunction must be no more than is necessary to protect the applicant in the circumstances.
Can you get an urgent injunction?
Generally, these types of applications need to be served on the other party. However, there is an exception to this in cases of urgency. The court can make an injunction without your ex’s knowledge; if there is a high level of risk due to an immediate threat to your assets, (e.g. an auction the next day).
Caveats on property to stop it from being sold
If the asset is not already sold, a caveat is a possible option to prevent your ex from selling assets.
A caveat is a legal notice made to the Registrar of Titles. The lodgement of a caveat against a property’s title notifies the Registrar you wish to protect your interest in that property. Once a caveat is recorded, you must commence court proceedings within three months and inform the Registrar of those proceedings; otherwise, the caveat will lapse.
Further, if you lodge a caveat and your ex responds objecting to that caveat, your time limit to commence proceedings reduces to just two weeks. For that very reason, caveats should not be lodged without thought, and we recommend you obtain legal advice before doing so.
If you do not have an interest in the property, you may have to pay your ex for any loss suffered. It should be noted that simply being in a relationship or marriage with the property owner doesn’t automatically give rise to a caveatable interest. It is not the fact that you were in a relationship together that gives rise to claim. However, perhaps if you made financial contributions towards the mortgage, made renovations or were the primary homemaker in that home, you could be in a position of having a caveatable interest.
While lodging a caveat isn’t always the best or recommended option, lodging a caveat does serve a purpose in some situations.
Conclusion
In conclusion, the best thing you can do to stop your ex from selling assets is it get legal advice sooner rather than later. Your ex can sell assets quickly, and urgent action may need to be taken. A lawyer can begin sending letters to your ex (which is often preventative enough) and commencing critical court proceedings if necessary.
