Invariably, one the most difficult issues in any divorce is how the parties’ assets should be split, and agreeing a financial settlement.
Both parties are under a duty to provide ‘full and proper’ financial disclosure of all of their assets. Such disclosure is essential as both parties’ need to be fully aware of the other’s true financial circumstances in order that they can make informed decisions and hopefully reach a fair and realistic settlement.
Unfortunately not everyone plays by the rules and a party may seek to hide assets during a divorce or look to undervalue their assets , whilst on other occasions they make seek to suggest that a third party is in fact the true owner of an asset held in their name. They do this in an attempt to retain a greater share of the assets. Not only is this unfair but it is breach of the duty to provide full and proper disclosure.
Putting it bluntly, failing to fully disclose a financial situation openly and honestly is a mistake, particularly given that the truth will invariably come out as a result of the Court process. Coupled with this is the simple fact that the Courts themselves take the duty of disclosure very seriously and a party found to be not properly disclosing their true financial circumstances is at risk of being found in contempt of court. Ultimately if the Court thinks that a party has not been honest in disclosing their true financial circumstances, they could penalise you by making a less favourable order.
No excuses
Often a party will seek to come up with an excuse for not properly disclosing their financial circumstances, but the reality is that full financial transparency in financial proceedings is essential.
Not providing proper disclosure when requested will simply lead to increased legal costs and the risk of incurring the Court’s wrath. The Court can fine a party for non-disclosure or even imprison them. They can also draw adverse inferences, if they believe that a party is hiding assets or minimising their value which could result in the Court making assumptions and significantly overvaluing an asset. For example, if someone denies having, say £50,000, and the Court is not satisfied with their explanation it can deem that person still has the £50,000 and add it to their side of the asset table.
If non-disclosure is suspected, raise concerns with your solicitor as soon as you can so that they are aware that it may be an issue, and they can ensure that questions are raised at the appropriate time. Keep in mind that any questions must be proportionate and relevant to the matter in hand. The Court will not permit a party to conduct ‘a fishing expedition’ and ask questions they consider irrelevant and unnecessary.
Far reaching consequences
If the other party still fails to provide proper disclosure in formal court proceedings despite the Court ordering them to do so, then the Court can, in practice, impose punitive financial orders on them, taking their non-disclosure into account. They would also be at risk of the Court making costs orders against them due to their litigation conduct.
In addition, the Court has the power to “set aside” a financial settlement if it becomes known that a party has hidden or misrepresented their assets during a divorce and a settlement was based on significantly incorrect information.
It is far better for both to be upfront and honest from the outset about their finances as this will assist in reaching a settlement in a timely and cost-effective manner. In contrast, failure to properly disclose your assets will simply lead to distrust and suspicion and more likely than not result in costly court proceedings.
The Family Court is taking non-disclosure of assets increasingly seriously. In a number of recent cases the Court has shown no hesitation in sending material non-disclosers to prison or to set aside previous settlements.
Honesty is therefore the best policy when it comes to disclosing financial circumstances and failure to provide full and proper disclosure will limit a solicitor’s ability to provide accurate advice and to protect assets properly.
For help or advice on this topic or related issues please contact Liz at liz.orman@salaw.com or call 01727 798 064
