Parties in financial remedy proceedings have a duty of full and frank disclosure throughout. If a person is found to have been deliberately untruthful about their assets, criminal proceedings can be brought against them for fraud under the Fraud Act 2006. The author of this article spells out what is at stake.

The following commentary on a major divorce case in London – as reported yesterday – comes from Claire Tollefson, managing associate at Cripps Pemberton Greenish, the law firm. The editors are grateful for this succinct and incisive analysis of what is at stake and the lessons from it. As is always the case, the editors of this news service don’t necessarily endorse all views of guest writers; those who wish to enter the debate should do so. Please email the editors at tom.burroughes@wealthbriefing.com or jackie.bennion@clearviewpublishing.com
 

How the court goes about splitting assets
The goal of matrimonial finance law is to achieve fairness. The starting point is that assets that are matrimonial in nature should be divided equally between the parties. A departure from equality can be justified based on the following principles:

--  One party needing more than the other to house themselves or the children of the family;
--  To compensate one party for loss of income as a result of having given up a previously well-established and lucrative career;
--  To ensure that assets and income are fairly shared between spouses upon divorce; and
--  One party asserting a ‘special contribution’ to the assets

Are there penalties for hiding assets?
Parties in financial remedy proceedings have a duty of full and frank disclosure throughout. If a person is found to have been deliberately untruthful about their assets, criminal proceedings can be brought against them for fraud under the Fraud Act 2006. It is also contempt of court to sign a statement of truth, present on a number of key court documents, knowing the contents to be false. Contempt of court is punishable by a fine or imprisonment in severe cases.

Whilst the general rule is that each party bears their own costs, where there is litigation misconduct such as a party failing to comply with the court rules on disclosure, the court can make a costs order against that party on an indemnity basis. In a 2013 case the costs awarded were £1.5 million, demonstrating the court’s commitment to dealing robustly with this issue.

If the failure to disclose assets subsequently comes to light, the final order can be set aside and the matter re-opened, with costs penalties for the offending party.

How can you locate hidden assets?
Forensic accountants are often employed to investigate the parties’ finances, both personal and business, to identify and investigate, perhaps with the assistance of private investigators or tracing agents, any discrepancies. This information can then be made the subject of questions which a party can be ordered to answer by the court, with any associated third parties, such as a company or trustees joined to the proceedings if necessary. 

The court has a wide range of tools at its disposal to locate and preserve hidden assets:

-- It can issue a search order, which requires a party to provide disclosure and admit another party to their premises for the purpose of searching for material and seizing it.

-- It can make an avoidance of disposition order to effectively undo a transaction, such as the sale of a property, which seeks to put assets out of the reach of a party.

-- It can issue a freezing order restraining a party from disposing of or dealing with their assets, to preserve the assets until judgment can be obtained or enforced.