When you are involved in financial remedy proceedings as part of your divorce, full disclosure of your financial assets is required. And this applies whether you reach a settlement during family mediation/other alternative dispute resolution process or whether your settlement results from full-blown court proceedings. It stands to reason: in negotiations, both parties need an accurate, up to date picture of the financial situation in order to agree any final settlement. Where there is no agreement it follows that the court needs a similar picture to reach a decision.

The nature of financial disclosure in divorce proceedings is well established. But cases still reach court on a fairly regular basis where allegations of hiding assets are made. In this article we look at the long-running Goddard-Watts divorce proceedings involving the founder of the Screwfix chain of DIY stores. The case has become notorious in legal circles and in the media, not least because of how long the saga has continued. The couple separated in 2009. Following the latest Appeal Court decision from 2023 discussed here, they are gearing up for yet another hearing to decide financial matters.

Types of fraudulent non-disclosure in divorce cases

Fraudulent non-disclosure is where:

By way of illustration here are some examples of fraudulent non-disclosure:

  • Concealing assets – one spouse may hide bank accounts, property, investments, or other valuable assets to prevent them from being included in the division of matrimonial property
  • Underreporting of income – a spouse might misrepresent their income or bonuses, either by failing to disclose certain sources of income or by undervaluing the actual income earned
  • Undervaluing property – intentionally undervaluing the worth of property or assets in an attempt to minimise the amount to be divided during property division
  • Fake expenses – inflating expenses or creating fictitious debts to reduce the apparent income available for property division

As we’ll see below by the time of the Court of Appeal hearing in Goddard Watts the husband’s fraudulent non-disclosure was generally accepted by the court.

Goddard Watts – The Background

Mr and Mrs Goddard-Watts separated in 2009 and divorced the following year. Financial matters were dealt with by a consent order. The wife was to receive £7.6m and the husband around £9m. Subsequently it transpired that the husband had failed to disclose the extent to which he was the beneficiary of two trusts. In 2015 the courts found that this was a material non-disclosure and ordered the consent order to be set aside and a new hearing to be held on financial matters.

At this new hearing the wife was awarded an increased amount to compensate her for the effect of the husband’s non-disclosure. But again it emerged that the husband hadn’t been forthright about his finances, in particular about how he was likely to benefit from the sale of his business.

As a result of this non-disclosure this second award was also set aside. A further hearing took place in January 2022. The wife sought a full reassessment of financial matters, arguing that the husband’s continued non-disclosure meant she was unable to get a fair hearing.

The judge disagreed and decided to take a narrower approach. Instead of looking at the entire financial award he limited his decision to the husband’s non-disclosure of the potential value of his shareholding in the business when it sold.

Appeal Court

Unhappy with this narrow assessment Mrs Goddard-Watts appealed and in February 2023 a judgment was handed down largely agreeing with her.

Essentially the Appeal Court judges said that while the narrower approach of the lower court judge might be appropriate in some circumstances, the court had an inherent discretion to adopt a wider approach if it meets the needs of the case.

Here the adequacy or otherwise of the financial award could not be measured against the single issue of the husband’s non-disclosure of his potential benefit from the sale of the business. It was necessary for example, to consider other factors such as the wife’s continued valuable efforts to support the children of the marriage (all of whom were estranged from the father).

So, what was the effect of these findings?

The wife, tired of the ongoing litigation, asked the court to decide the financial issues there and then but the Appeal Court judges refused to do so. Reaching a final decision on financial matters required detailed scrutiny which the court couldn’t do within the time constraints of the current appeal. Nor would it be fair to the husband to deal with these matters summarily. The upshot was that another full hearing on financial matters would have to be arranged.

Comment

The Goddard Watts case may be extreme, but it nevertheless demonstrates the uncertainty, expense and risk associated with not fully disclosing assets in financial proceedings, not to mention in this case at least the barrage of negative press coverage linking the husband to ‘fraudulent non-disclosure’. All in all, a heavy penalty for failing to follow the clear rules about disclosure of assets.

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