Non Disclosure of Assets in Divorce: The Consequences

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What is non disclosure of assets in divorce?

Non-disclosure of assets in divorce refers to the act of deliberately hiding or failing to disclose one’s financial assets and resources during the divorce proceedings.

This is generally done to skew the settlement in favour of the non-disclosing party in financial remedy proceedings. In divorce cases, both parties are legally obligated to provide full and frank financial disclosure. This full disclosure should detail of all their assets, financial resources and liabilities to ensure a fair and equitable division of marital property.

The requirement for full disclosure is fundamental to the process of reaching a financial settlement in a divorce. Courts rely on the completeness and accuracy of the financial information provided by both spouses to make decisions regarding the division of assets, spousal support, and child support. The principle behind this is to ensure that the settlement is based on a true reflection of the couple’s financial situation.

Non disclosure of assets in Divorce case law

Sharland v Sharland

In the case of Sharland v Sharland, the Supreme Court dealt with an appeal concerning the non-disclosure of significant financial information by a husband during divorce proceedings. The couple had reached a settlement agreement based on the husband’s disclosure. It was later discovered that the husband has provided misleading information when disclosing assets. The husband had misrepresented the value of his business and its IPO prospects.

Key Rulings and Quotes from the Case

The court decision in Sharland emphasised the duty of full and frank disclosure in divorce proceedings and set a precedent that any departure from this obligation is likely to result in the setting aside of a settlement agreement. Lady Hale, delivering the lead judgment, stated:

“The duty of disclosure in matrimonial cases is a duty to the court. The parties are not entitled just to agree that it should not apply. Nor can the court dispense with it, although it can in appropriate cases decide that it is unnecessary to continue with it.”

Lady Hale further noted:

“If the disclosure is incomplete, the question is whether this prevents the court from making a fair order.”

Additionally, the judgment clarified the grounds on which a settlement agreement could be overturned due to non-disclosure:

“It must be material in the sense that it would have an influence on the outcome of the case.”

Goddard-Watts v Goddard-Watts

The case of Goddard-Watts v Goddard-Watts is a notable example in UK family law, particularly in the context of financial disclosure during divorce proceedings. This case involved a high-net-worth individual. The core issues revolved around non-disclosure of assets, similar to the themes in the Sharland v Sharland case. The Goddard-Watts case emphasises the legal obligation to provide full and transparent financial disclosure during divorce settlements and the consequences of failing to do so.

Background and Key Issues

Robert Goddard-Watts, a wealthy businessman linked to the Screwfix hardware company, had divorced his wife Julia in 2010. However, it later emerged that he had not fully disclosed his financial circumstances at the time of their divorce settlement.

Julia Goddard-Watts subsequently challenged the original financial settlement, arguing that her ex-husband had withheld crucial information about his financial assets which, if disclosed, would have likely led to a different settlement outcome.

Legal Proceedings

In the original settlement of 2010, Julia Goddard-Watts received a substantial financial settlement. However, upon discovering the extent of the non-disclosure, she took legal action to have the settlement revisited. The case first went to court in 2016, where it was revealed that Robert Goddard-Watts had failed to disclose significant assets. The court decided in Julia’s favour, leading to a revised financial settlement.

A second instance of non-disclosure was brought to light subsequently, leading to another court case where further undisclosed assets were revealed.

Ultimately, the court determined that the husband’s fraudulent non-disclosure was so extensive that it necessitated a complete re-evaluation of the ‘entire financial landscape’ by the judge.

This ongoing legal battle highlights the complexities and the importance of full disclosure in divorce settlements, especially in high-stake divorces.

 

Consequences of Non-Disclosure

  • Setting Aside Agreements: As seen in Sharland, a significant non-disclosure is grounds for setting aside a final order. This resets the financial proceedings, potentially leading to a different, and usually less favourable, outcome for the party found guilty of non-disclosure.
  • Legal Costs: The party failing to disclose may be ordered to pay significant legal costs, both their own and their spouse’s, due to the need to revisit and resolve the financial matters.
  • Further Legal Action: Non-disclosure can lead to additional legal actions beyond divorce proceedings, including charges of contempt of court or fraud if the non-disclosure is particularly egregious.
  • Damage to Credibility: A party’s credibility with the court can be severely damaged by failure to disclose, affecting not only the current proceedings but any future legal disputes as well.

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