Third parties in financial remedy proceedings — trainee Charlie Gavriel reflects on a thought-provoking case

It is a common misconception that financial remedy proceedings on divorce only involve the two parties to the marriage. As I have come to learn in my time training in the family and children team, that is not always the case. In certain scenarios, third parties such as parents, siblings, companies or trusts, for example, intervene in financial remedy proceedings. It is, in fact, more common than one would think, especially given the often informal arrangements that exist in relation to family owned assets such as businesses or property.

Why do third parties intervene? 

In financial remedy proceedings, the court seeks to establish what is in the matrimonial ‘pot’ for division, before deciding how to divide the pot fairly amongst the parties to the marriage. If third parties assert an interest in one of the assets that would otherwise be in the pot, or if one of the parties to the marriage seeks to assert that an asset owned by a third party is beneficially owned by the other party and should be in the pot, it may be desirable or necessary for the third party to be joined into the proceedings.  

In considering whether to join a third party, the court has recourse to two main factors, specifically, whether: 

1.  it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings, or
2.  there is an issue involving the third party and an existing party that is connected to the matters in dispute in the proceedings and it is desirable to add the third party so that the court can resolve that issues.

Examples of when it might be desirable to intervene in proceedings is when there is a dispute about whether monies given by a family member is a gift or a loan to be repaid, or where there is a dispute about one of the parties’ interest or obligations in respect of company or trust assets.

While the threshold for intervening is not particularly onerous, intervening can have serious implications in terms of both time and cost. Further hearings, disclosure, witness statements are all almost inevitable by-products of the process.

Guidance on the management of cases involving third parties

In TL v ML (ancillary relief: claim against assets of extended family) [2005] EWHC 2860 (Fam) [36], guidance was provided on the management of cases involving third parties along the following lines:  

1. the third party should be joined to the proceedings at the earliest opportunity
2. directions should be given for the issue to be fully pleaded by points of claim and points of defence
3. separate witness statements should be directed in relation to the dispute; and 
4.  the dispute should be directed to be heard separately as a preliminary issue, before the FDR

Undoubtedly, these requirements will have an impact in terms of expense and a careful cost-benefit analysis should be undertaken before considering whether to engage. In other words, the asset in question really ought to be of sufficient worth to make such proceedings worthwhile. Third parties will require separate legal representation, and unsuccessful parties run the risk of an adverse costs order to the successful party, as well as having to incur their own costs. 

Protecting assets in cases of ownership dispute 

To avoid the limbo created by third party intervention in financial remedy proceedings, there are many actions that can be taken to ensure that assets, which may be subject to an ownership dispute (within the context of divorce or otherwise), are protected. Firstly (and something which forms a big part of family law work) is through a pre-nuptial agreements (PNAs). While PNAs are not binding in this jurisdiction as a matter of course, if drafted with the appropriate safeguards, a court is likely to give significant weight to such an agreement in the event of a divorce. A PNA can outline the extent of a third party’s interest in a particular asset and provide strong evidence that the parameters of who owned an asset were well understood before the marriage was entered into. Added to this, making sure thorough documentary records are maintained of all communication (e.g. emails/text messages) in relation to an asset and formalising any gifts or loans in the form of a written document is an eminently sensible course of action. 

Exposure to third party claims is just but one of the many fascinating areas of law I have encountered in my training contract. I hope this blog will shed some valuable light on a perhaps less well-known aspect of divorce and financial remedy proceedings.  

Applications for the 2026 Russell-Cooke graduate training contract open on 16 November 2023 and close on 16 February 2024.