Family Law Blog

Fraud in Matrimonial Settlements

17 March 2013, by Taylor King Family Law Solicitors

Where marital assets have been acquired as a result of fraud the Crown can bring confiscation proceedings to recover fraudulent gains. The court will carry out an investigation to determine which assets have been acquired by fraud and any wife who is not party to the fraud or confiscation proceedings will not lose her financial entitlement on divorce.

W v W [2012] EWHC 2469 (Fam) involved a 16 year marriage, with two children, between a couple now in their 50s. In May 2010 the husband was convicted of fraud and imprisoned. Shortly before, in April 2010, the wife petitioned for divorce.

Confiscation proceedings were brought against the husband and an order was made against the husband in January 2012 to recover the benefit from his frauds – a total nearing £5million.

Ryder J was satisfied that the wife had no knowledge of the husband’s fraudulent activities and she did not jointly conduct any fraudulent transactions through a joint account.

The wife pursued a financial settlement in the divorce and asserted a 50% interest in the former matrimonial home, a second jointly owned property and a third property in France on the basis it was purchased with the net proceeds of an earlier property unconnected with any fraudulent activities. She sought the transfer of the matrimonial home into her sole name together with a lump sum from the husband to enable her to discharge the mortgage. The husband agreed to these requests.

However, the Crown disputed the wife’s entitlement to this settlement, in particular in relation to the proceeds of sale from the French property. The Crown attempted to support this contention with evidence from a financial investigator concentrating on the source of various payments and comparing the financial contributions of the husband and wife in the marriage. However, Ryder J held that there was nothing in the evidence that suggested the parties intended their shares in any of the properties to be different to those they would ordinarily be entitled to upon divorce. He commented that there was no public policy jurisdiction for depriving the wife of her 50% interest having not been subject to the confiscation proceedings.

The Crown’s alternative position was that payments made by the husband to the wife were gifts and therefore subject to confiscation. However, Ryder J found that, as a mother, the wife was perfectly entitled to ordinary payments for the mortgage and other outgoings and they were not to be considered gifts.

It was conceded that some payments for refurbishment of the French property arose from fraudulent profits and therefore the wife was only entitled to 50% of the net proceeds of sale after deduction of the “tainted” sums.

The wife, at the time, was still residing in the former matrimonial home and, with some assistance from her brother and friends, was living within her means. Ryder J held that the wife needed to remain living there and that there were sufficient assets to enable the property to be transferred into her sole name and for a lump sum payment to be made to her by the husband in order to discharge the majority of the mortgage. Ryder J said that this achieved “a just a equitable result and would be an appropriate balance” between the interests of all parties.