In the majority of cases that I deal with, financial matters are resolved by agreement. However, in cases where the assets are substantial what started as a relatively amicable divorce can quickly turn sour when it comes to negotiations about how those assets should be divided. Many people believe that if they paid for something it belongs to them outright and they are surprised to hear from a family lawyer that their spouse could well have a claim against that asset. There are two particular phrases that family lawyers will be familiar with. One is “well my ex-partner doesn’t need to know that I have that” and when faced with the reality that it needs to be disclosed, the second is “well I will transfer it into somebody else’s name”. This article examines the requirement for full and frank disclosure of all assets within the course of divorce proceedings and the consequences of hiding or disposing of those assets.
Clients who are a party to divorce proceedings will be advised by their Solicitor that they are going to have to give consideration to putting together full and frank disclosure of their financial positions. The documentation that will need to be produced can include but is not limited to bank statements, mortgage statements, pay slips and P60’s, property and pension valuations, business accounts, trust deeds and evidence of any debts. Whether financial matters are being dealt with by Solicitor led negotiations or as part of a Court timetabled matter, it is likely that both parties will need to complete a document known as a Financial Statement or Form E. This form is currently 28 pages long and requires the person completing it to not only give details of assets that they currently have an interest in but also assets that they have had an interest in within the last 12 months. There is a stern warning on the first page of the document which reads as follows:
“You have a duty to the court to give a full, frank and clear disclosure of all your financial and other relevant circumstances. A failure to give full and accurate disclosure may result in any order the court makes being set aside. If you are found to have been deliberately untruthful, criminal proceedings may be brought against you for fraud under the Fraud Act 2006. The information given in this form must be confirmed by a statement of truth. Proceedings for contempt of court may be brought against a person who makes or causes to be made, a false statement in a document verified by a statement of truth.”
The two Financial Statements and the evidencing documentation are exchanged via Solicitors and each Solicitor will go through the paperwork with the assistance of their client checking for any unusual transactions or anything that might be missing. Sometimes failure to disclose an asset or another source of income can be a genuine oversight and questionnaires can be compiled asking for any missing information or documentation. Once those questionnaires have been answered one party might still feel that their ex-partner has failed to disclose something and the position can then become quite difficult as effective negotiations cannot take place where full and frank disclosure has not been provided by both parties.
Some clients ask whether they can undertake their own detective work and basically snoop around in their ex-partner’s paperwork or access their computer to try to find out more. The 2010 case of Imerman sets out important guidelines on what can be done and it also gives a warning that failure to abide by those guidelines can result in a person committing a criminal offence which can be punishable by a fine or a prison sentence. Any of the following could also be a criminal offence:
- Taking your ex-partner’s papers with the intention of permanently keeping them (this constitutes theft).
- Opening or intercepting another person’s mail.
- Using force to break into anything such as a locked briefcase, office or filing cabinet.
Even where a criminal offence is not committed, claims can be brought under the civil law for damages, compensation and costs if you do something such as take copies of someone else’s financial paperwork without their permission or you take something that is clearly private and has no relevance to the financial proceedings.
Because of the restrictions on clients being able to undertake their own self-help detective work, there is often a sense of frustration at not being able to prove that one party has been deceitful in terms of disclosing their financial position. Where there is good reason to believe that full disclosure has not been given by one party then the other party should really apply to Court (if they have not already done so) to have the financial case dealt with by a Judge. If the matter has not been resolved after the preliminary hearings the Judge can list the case for a full trial where all the evidence will be presented to the Court and the Judge will decide whether it has been proven that assets or income have been hidden or otherwise disposed of and if so, what effect that should have on the overall outcome of the case.
In one 2012 case the couple concerned had a combined wealth of approximately £31million in 2008 when their marriage collapsed. The husband attempted to hide his wealth whilst the divorce proceedings were ongoing and by the time the financial case reached the Courts he told the Judge that he had only £87.00 in his pocket. This was shown to be untrue when the wife’s Solicitors showed the Court that he was renting a flat at a cost of £2,700.00 per month and was spending up to £15,000.00 per month on his credit card. It was then shown that the husband had transferred £16million to Liechtenstein without telling his wife. As a result of the husband’s behaviour he was ordered to pay a £6million legal bill which far outweighed the £3.7million that was in dispute.
The Courts are very keen to ensure that assets are preserved and full disclosure is given. A Judge will take a very dim view of the concealing spouse’s conduct and might possibly award a larger share of the assets to the other party and/or order that the concealing spouse should pay the other’s legal costs which as above, can be considerable. When assets have been transferred in an effort to prevent one party being able to claim against them the Court can also reverse that transfer or order that the person who disposed of the asset should compensate the other from the other available assets.
Often, prevention is better than cure and there are a number of practical steps that can be taken as soon as a marriage breaks down to protect the matrimonial pot of assets. Careful consideration should always be given to joint accounts because if one party runs the joint overdraft up to its limit or beyond then the bank can look to either party separately or both of them together to repay the outstanding amount regardless of who spent the funds. You could contact the bank to say that you want the overdraft facility to be removed or you could even agree with your spouse that the account will be closed. If you are worried about extravagant spending by your spouse then joint accounts can even be frozen by the bank but be sure that this is not going to leave either of you in financial difficulty in terms of meeting your day to day living expenses.
If any property is registered in the name of only one party then there is nothing to prevent them selling or transferring it or remortgaging it without the other’s knowledge. If your name is not on the deeds of either the matrimonial home or any other property owned by your spouse then you should speak to a Solicitor about registering a notice or a restriction against that property at the Land Registry. This means that if your spouse tries to sell, transfer or remortgage that property you will receive notice of their intentions.
If you have good reason to believe that your spouse is about to dispose of assets then you can also make an application to the Court for one of the following:
1. An order under section 37 of the Matrimonial Causes Act either to prevent the transfer of an asset or an order to transfer an asset back that has already been disposed of.
2. A freezing order which is similar to the first order above but can be extended to assets abroad and assets that have not yet come into existence.
3. A search order to obtain information about assets that have been hidden. Applications for search orders are very rare as they are extremely expensive to obtain and implement and they are generally only appropriate in big money cases.
In all cases where there is a concern about non-disclosure legal advice should be sought as time is often of the essence and the processes and Court applications involved can be quite complicated. For more information about this or any other family law topic contact Sultan Lloyd Solicitors on 01212482850.