In light of a number of recent Supreme Court rulings, Keystone’s Family expert Claire O’Flinn discusses the topical matter of financial disclosure during divorce.
The recent victory, at the Supreme Court, for Alison Sharland and Varsha Gohil in their landmark divorce ruling unmistakably highlights the English family court’s stringent demands on transparency of financial disclosure, during divorce proceedings.
As these two cases illustrate, in divorce, whether the assets concerned are worth £10,000,000 or £10,000, fraudulent disclosure, or non-disclosure, is equally serious. Ultimately, in both the Sharland and Gohil cases, the court came to the decision that the wives were entitled to a share in the hidden wealth of their ex-husbands. Both women are now expected to receive enhanced awards when their cases return to the courts.
This comes just two years after the Supreme Court handed down a judgment in the divorce case of Michael and Yasmine Prest, which signalled that the courts would no longer tolerate parties who deliberately try to hide assets, in that case deliberately hiding business assets.
Of course, for many people in the midst of divorce proceedings, the idea of having to disclose their financial assets is not an appealing one. It can be a costly and lengthy exercise, and some are not entirely comfortable with the idea of disclosing all of their assets. This is a common phenomenon of family law. Here are some basic guidelines on the do’s and don’ts of financial disclosure:
- The court’s approach is crystal clear: parties are obliged to make full and frank disclosure of their financial assets, not only in the UK but also worldwide. Within proceedings, parties are asked to complete a financial statement known as a Form E. This provides evidence of assets including bank statements, business accounts, tax returns, property details (valuations, mortgage statements, etc.), pension details and financial liabilities. To save time and money in the long run, this needs to be done rigorously and honestly.
- Be totally transparent with your disclosure, giving above and beyond if necessary. The courts want to see disclosure of absolutely everything, not just a handpicked selection. The lawyers, and the court, need to understand the whole picture.
- Do not cut corners. If a party refuses to disclose an asset or a document, then inference may be given. That inference may be totally wrong; exclusions are not worth the risk.
- Do not set up a new company, a new bank account or any other new entity with the intention of hiding assets. Siphoning off money to offshore accounts can usually be traced. Divorce lawyers are trained to be highly curious and will study financial disclosure closely. Sometimes it is appropriate to instruct forensic accountants to look through the disclosure, and it is important to remember that the family courts do have the power to question third parties such as your financial adviser.
- Do not transfer assets to friends or family. Again, actions such as these can normally be traced.
Full disclosure allows an open and amicable settlement to be reached (often within court proceedings but before the hearing itself) and tends to lead to longer-lasting agreements. Conversely, any agreement reached under mistrust is likely to fail or have future repercussions.
In short, full and frank disclosure is the best way. If there is something unsavoury within your finances, then you should discuss this with your lawyer. They may be able to present the circumstances in such a way that the worst can be mitigated.
Honesty is always the best policy.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.