Usually, losses and liabilities will be shared by both the husband and the wife, although it may not always be shared equally. Losses and liabilities will be shared if money was lost during pursuing income or gaining assets for the parties of the marriage. However, in some cases, they can be borne by one party solely.
If one of the parties has deliberately acted to reduce the value or worth of matrimonial assets, then that party may bear the loss solely. Further, if one party has “acted recklessly, negligently or wantonly” and the effect has been a reduction of the value of assets the Court may order that the loss is borne solely by that party.
The Family Courts are well aware of attempts by parties to reduce the asset pool and prevent access to a property by claiming they have sold, gifted or simply transferred that property to another party.
The Family Law Act itself has provisions which deal with this situation.
Section 106B ‘Transactions to Defeat Claims’ is the key provision when it comes to attempts by parties to reduce the asset pool and dispose of property that should be included in any proceedings. The section provides for as follows:
Section 106B(1) - in proceedings under this Act, the Court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by a direction in the interest of, a party, which is made or proposed to be made, to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat such an order.
The word ‘disposition’ is defined in section 106B(5) to include a sale and a gift. That section also defines ‘disposition’ to include ‘the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust’.
There are some limitations on the use of the section. To apply to set aside or restrain the making of a disposition, proceedings under the Act must already be in place. However, the filing of an application for an order under section 106B(1) is not limited to the parties. An application may be made by a party to the proceedings, a creditor to a party to the proceedings (if the creditor would not be able to recover his or her debt if the instrument or disposition were made), or any other person whose interests would be affected by the making of the instrument or disposition. This is clear from section 106B(4AA).
There have been many cases that have dealt with section 106B (and its predecessor, the former section 85). Transactions which have fallen foul of section 106B include the following:
The reasonableness of the expenditure must be taken into consideration as well as the justice and equity of each case.