It is imperative during divorce proceedings, if a fair and reasonable financial settlement is to be found, that each party makes full and frank disclosure of their income and assets. However, cases still reach court fairly regularly where allegations of hiding assets are made. So what amounts to fraudulent non-disclosure and is there a penalty for it? In this article, we aim to find out.
It is imperative during divorce proceedings, if a fair and reasonable financial settlement is to be found, that each party makes full and frank disclosure of their income and assets. However, cases still reach court fairly regularly where allegations of hiding assets are made. So what amounts to fraudulent non-disclosure and is there a penalty for it? In this article, we aim to find out.
If you have a family issue and you require legal advice to understand your options, contact specialist family law solicitor Rebecca Calden-Storr of Stowe Family Law. With over 20 years’ experience, she is regularly instructed on matters arising from relationship breakdown, including divorce, financial disputes, complex assets, and disputes relating to children.
What is fraudulent non-disclosure?
The aim of financial disclosure is to result in the fair division of the parties’ matrimonial assets. However, the courts do not always achieve that end, with chief amongst the causes of unfair settlements being one party acting dishonestly during the proceedings.
It is not uncommon for family solicitors to be asked whether or not it is possible to hide assets during divorce, and whilst it is not unheard of, the reality of being successful is rare. Fraudulent non-disclosure is an issue which can be pursued in court and may ultimately result in a period behind bars at His Majesty’s pleasure.
Fraudulent non-disclosure in divorce happens where:
- One party intentionally conceals or withholds financial information relevant to the divorce proceedings; and
- Does so with the intention to deceive the other party or the court
Concealing assets could happen, for example, where one spouse hides bank accounts, property, investments, or other valuable assets to prevent them being included in the division of matrimonial property. A spouse may misrepresent their income or bonuses, either by failing to disclose certain sources of income or by undervaluing the actual earned income.
Intentionally undervaluing a property or assets in an attempt to minimise the amount to be divided during the divorce could also amount to fraudulent non-disclosure. As could inflating expenses or creating false debts to reduce apparent income available for distribution.
What can be done if my ex has fraudulently misrepresented their assets during divorce?
If fraud or misrepresentation comes to light during divorce proceedings, the court will take appropriate action. Costs are likely to be awarded against the party attempting to withhold information forcing them to pay the additional legal fees incurred to investigate and deal with such non-disclosure. An individual found to have lied or misrepresented the extent of their wealth or assets, will experience the rest of the proceedings tainted with their lies, from which the court can draw adverse inferences.
Fraud or misrepresentation is much harder to uncover once a final order has been made because this brings proceedings to conclusion. There will need to be robust evidence to reopen a settlement or final order, but in cases where a case is reopened and there is found to have been fraud or misrepresentation, the court will set aside the original order.
To illustrate this point, in a recent high-profile case, Alison Sharland accepted a financial settlement from her spouse on the basis of the financial disclosure provided during divorce proceedings. However, she later learned that her ex had lied about his assets. She applied to the court to have the settlement set aside, claiming she was entitled to a greater share of the assets than she had originally accepted.
The Supreme Court ordered that the Consent Order would not be sealed and Mrs Sharland’s application for a financial order was returned to the high court for further directions. This case serves as a reminder that there is no scope for a party in divorce proceedings to be anything other than absolutely honest when disclosing their financial position.
Following this decision, the court can now reopen any case if there has been deliberate and fraudulent non-disclosure. This means that where assets have been hidden, the court can reconsider the case and review how the assets were divided.
What are the penalties of non-disclosure during the divorce?
In cases of persistent refusal to make full and frank disclosure, an application can be made for a penal notice. This is a specific order confirming that if the non-disclosing spouse does not provide the information by a set date, they will be held in contempt of court. If one party is successful in obtaining a penal notice, they are usually able to recover the costs incurred in making the application from the other party.
A party who refuses to provide full disclosure is opening themselves up to punishment, potentially in the form of costs orders or the enforcement of a penal notice. If one party is penalised for not have been transparent, their credibility will inevitably be harmed, which could affect a final settlement.
From a judge’s perspective, it is possible to draw adverse inferences about the non-disclosing party. This means the court’s position will be one of suspicion, together with an assumption that if an individual is being evasive, it is because they have something to hide. The court will also make robust assumptions about the true value of their wealth.
As many have non-disclosing spouses have experienced, failure to make proper disclosure can amount to contempt of court, which, if deliberate, can lead to a hefty fine or a term of imprisonment.
What happens if the case is reopened after fraudulent non-disclosure had been found?
If it can be demonstrated to the court there was fraudulent non-disclosure during proceedings leading to a financial remedy order, then generally that order will be set aside. The only exception to this is if the party accused of the fraud can convince the court that the fraud would not have influenced a reasonable person to agree to the terms of the order and that the court would not have made a significantly different order if it knew at the time what it knows now. Therefore, the presence of fraud does not guarantee the order will be set aside, although the presumption will be that the fraud will usually result in doing so.
Exactly what happens when the case is reopened very much depends on the facts of the case. But if you believe that your settlement was impacted by non-disclosure, you should act quickly to issue your application.
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