A year has passed since two women, Alison Sharland and Varsha Gohil won the right in the Supreme Court to have their divorce settlements reopened. Both discovered their husbands had misrepresented their position at the time of the original financial agreements. You can read a summary of the cases here.
We are often involved in divorce cases where the finances are complex. It’s worth highlighting the implications – and dangers – of deliberate or fraudulent non-disclosure during financial discussions.
Form E – You’ve Been Warned
Form E is the document you must complete when asking the court to make decisions about financial matters during your divorce. It contains a stark warning:
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.
It sounds alarming but in reality criminal proceedings under the Fraud Act in connection with divorce proceedings are virtually unheard of. Added to that, there has traditionally been a perception that courts have limited sanctions at their disposal when faced with non-disclosure. For some, it was a risk worth taking.
Are the Courts Getting Tougher?
We may not have moved as far as some US states. In California for example, a fraudulent breach by one spouse of the duty to disclose assets can lead to an award of up to 100% of the asset that wasn’t disclosed. In one divorce, wife Denise Rossi intentionally hid the fact that she had won the lottery during the divorce proceedings. The court ordered her to pay the full amount of her winnings to her husband.
Nevertheless courts here are more prepared now than ever before to hand down damaging costs orders against a non-disclosing husband or wife. In Sharland for example, the husband had to bear the costs of his wife’s appeal.
Reopening Settlements – The Reality
For many the dominant motivation in securing a financial settlement on divorce is to achieve finality as far as possible. Deliberate non-disclosure jeopardises this.
A husband or wife who has been evasive faces an increased prospect of a more thorough examination of his or her finances – at any time in the future. This will include a careful analysis of those assets hidden during the original settlement negotiations.
This added scrutiny will be carried out when the non-discloser may well have lost the goodwill and trust of his or her ex-spouse. Because of the original evasiveness, he or she will also have reduced credibility with the court. All of this damages any bargaining position.
Added to this – as we have seen – there is a possibility of significant cost orders against a non-disclosing party should a settlement have to be reopened.
If you need advice on the financial aspects of your divorce, get in touch. Please call + 44 (0)20 7430 8470 or contact us online.