Fraud Leads to Divorce Settlement Loss

When a divorcee applied to have the financial settlement from her ex-husband amended, she could have little anticipated the problems that would ensue.

The woman had divorced her husband in 2005 and the original financial settlement was the subject of an order by the court in 2007. In 2008, she applied for the set-aside of the original agreement on the ground that her ex-husband had not made a full disclosure of his assets. That application was allowed in 2009 and, pending determination of the revised settlement, he paid to her the lump-sum payment ordered under the original order plus accrued interest.

However, what the woman did not know was that her ex-husband had perpetrated a substantial fraud against two pension schemes and that the payment he made to her in 2009 was traceable to the sums of money he had taken from the pension fund.

The pension fund trustees then sought to recover the money paid to the woman. Her defence was that she was a ‘bona fide purchaser for value’ as regards the matrimonial settlement, having had no notice of her ex-husband’s fraud at the time of the first hearing.

The Court of Appeal considered that she could not rely on that defence for two reasons: firstly, because if a person attempts to reopen a settlement, there is a risk that circumstances will change and that as a result they may be worse off; and secondly, that because she had become aware of the changes in her husband’s position, she could no longer claim to be unaware of the potentially tainted nature of the source of the money settled on her.

The Court ordered that approximately one third of the woman’s settlement should be paid to her pending final resolution of the amount that will be required to be restored to the pension fund.

Applying for an order to amend a financial settlement always carries some degree of risk. For advice on any matter relating to financial settlements on divorce, contact us.