FAMILY COURT ORDERS AND THIRD PARTIES

Family Law Courts can join third parties in a family law proceeding to protect the interests of both divorcing parties and third parties. A divorcing husband and wife, or separating de facto partners, are the most keenly interested parties in family law proceedings. There are times, however, when third parties also have an interest in the proceedings.

In financial matters, third parties might be creditors, landlords, business partners, and others whose interests are entwined with those of the divorcing or separating parties. If the rights of third parties might be affected by any order the court makes, it may be necessary to join them as parties to the family law proceedings. It may also be necessary to join a third party in order to protect the rights of one of the divorcing or separating parties.

Sham Transactions and Alter Egos

In some cases, the court will be asked to decide whether a third party is being used to defeat the court’s ability to make a fair property settlement. Suppose, for example, that just before the divorce, one party transfers all of his or her interest in a business to the party’s business partner. The party may be trying to keep the business out of the property pool so that the other spouse will not be awarded any share of it. The party may plan to reacquire the property after the property settlement has been finalized.

By joining the third party business partner in the family law proceedings, the court can decide whether the property transfer was a sham. If so, the court can set aside the transfer to assure that the other spouse is not defrauded.

The court may also decide that a third party is the divorcing party’s alter ego. That means the third party is subject to the divorcing party’s direction and control. The court might conclude that property held by an alter ego should be included in the property pool and subject to division.

Orders Against Third Parties

Examples of orders involving third parties that a court can make include:

Directing a creditor to relieve one party of the obligation to pay a marital debt and to hold the other party entirely responsible for it, or designating the portion for which each party will be responsible.

Directing the third party to transfer ownership of the property to one or both parties of the marriage.

Cancelling or voiding a sham transaction, such as a property transfer or a nonexistent debt.

Directing a company to transfer shares from one spouse or partner to the other party.

In all cases, the third party has the right to procedural fairness, including the right to challenge the proposed action. Third parties should obtain legal advice to protect their rights if they will be joined in a family law proceeding.

Third party Interests in family court proceedings

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