People are expected to be open and honest about their finances during divorce proceedings. What happens if you think someone is being dishonest?
With divorce, the bar is set much higher than for other types of court cases. There is an ongoing duty of full and frank financial disclosure which means you need to be pro-active about making financial disclosure.
In practical terms this means completing a Form E and providing the paperwork to go with it, which is often followed by a questionnaire asking for extra information and documents. In the majority of cases this is enough to extract the information needed to sort out a financial settlement. These day bank statements and investment accounts provide so much detail, it is difficult to hide funds or to divert them out of sight.
What happens if one person is lying, or you expect one person of hiding assets?
The first step is a court hearing (First Directions Appointment) and you can argue in front of a judge about what extra information is needed. In some cases the courts can make orders against third parties to disclose information (e.g. trustees of settlements). If there is a suspicion of non-disclosure the court has wide powers to make orders to extract further information and paperwork, but they have to strike the right balance – they won’t allow a fishing expedition if there is no evidence of wrongdoing or hiding assets.
Some cases slip through the net. In 2015 the Supreme Court decided two cases (Sharland and Gohil) where they allowed wives to overturn divorce settlements because the husbands had failed to disclose assets during the original proceedings. The Supreme Court said the test is that firstly, the wife had to show there had been non-disclosure, and secondly, the non disclosure would have made a difference to the outcome of the case.
What needs to be done is to make sure disclosure is dealt with properly first time around. Robust action needs to be taken to ensure accurate and truthful information is provided.
One potential issue is privacy. Prior to 2010, it was fairly common practice for divorcing couples to be able to ‘snoop’ in each other’s paperwork. The court would allow this to happen (under what was known as the Hildebrand rule). This all changed with the case of Imerman in 2010, where the court held that spouses have a right of privacy. If one spouse finds paperwork belonging to the other spouse they cannot rely on it in court. They must return it to the other person immediately (and trust that the spouse will disclose it properly under the rule of full and frank disclosure as set out above). This is potentially troubling because it makes it harder for people to prove if one person is being dishonest. However, the courts firmed up on this rule in later cases including UL v BK in 2013, where the court was clear that it could be a criminal offence for one spouse to breach the other spouse’s privacy by copying documents, and they could also be sued for breach of confidence or misuse of private material.
This is a minefield. You need to follow the rules to avoid possible criminal or civil sanctions but at the same time you need to ensure you are protected in divorce proceedings. Please contact any of our solicitors if you are worried about disclosure in your divorce proceedings.
Posted by Peter