Financial Proceedings – Providing Full and Frank Disclosure
Posted by: vstanistreet May 02
During divorce proceedings, parties are encouraged to agree the terms of their financial settlement before the divorce is finalised by way of decree absolute. Having their finances agreed and put into a binding Court Order provides clarity for the parties and, in appropriate cases, can stop any future claims being made between them notwithstanding the fact of their divorce. However, there have been significant cases where the Court has re-opened the financial case and a different Order has been made, for example, because a misrepresentation of financial circumstances, which is later discovered, has resulted in the other party being significantly disadvantaged in the financial settlement.
For financial proceedings to be properly concluded, there should be full mutual disclosure of all information. A financial settlement is therefore best based upon full and frank disclosure from both parties of their full financial circumstances, covering comprehensively their income, capital, pensions and liabilities. Supporting documentation forms part of this exercise. In the absence of full disclosure, there are risks involved with entering into a financial settlement as the financial landscape will not be fully visible to the parties and their lawyers thereby precluding them from fully advising on the merits of any such settlement.
Nevertheless, a Court will not make a financial Order, whether agreed by both parties or not, unless some level of disclosure has been provided. As a minimum requirement, both parties are required to give a snapshot of their financial circumstances and sign off a statement of information to confirm the truthfulness and accuracy of their financial circumstances. This process falls short of full and frank disclosure but is a mandatory requirement in cases where parties choose not to carry out full disclosure. The Court still has the power to reject the Order even where its terms are readily accepted, agreed and understood by both parties. The mere agreement as to settlement terms between two parties does not oust the jurisdiction of the Court to consider such proposed settlement as being incapable of being made into a binding Order.
If disclosure is found to be false, this can result in the party being punished by way of a fine, imprisonment or being ordered to pay the other person’s legal costs.
In two recent cases, Sharland v Sharland and Gohil v Gohil, the financial settlements were re-opened because of the husband in both cases were considered to have made material and dishonest non-disclosures. In Sharland v Sharland the husband claimed that the company of which he was a shareholder had no plans for a public sale and therefore the company was valued for settlement purposes at £60,000. It was later found that the husband was actively preparing for a public offering valued in the region of £750m to £1b. In Gohil v Gohil, Mrs Gohil did not believe that the husband had provided full and frank disclosure during financial proceedings but nevertheless came to an agreement in order to reach finality. Mr Gohil was later arrested and convicted of money laundering and fraud. The Supreme Court ruled that this case could be re-opened as it was clear that Mr Gohil was guilty of material non-disclosure. In the above cases, one party’s non-disclosure of certain information led the other side to be significantly disadvantaged meaning that the financial Order was reconsidered on the facts to achieve a different and newly appropriate balance of fairness in the circumstances.
The result of one spouse failing to provide full and frank disclosure can increase both side’s legal costs and ultimately these costs have to come out of the matrimonial pot. It is in both parties’ interests for a financial settlement to be final. The benefits of dealing with matters in an open and honest way from the outset ensures that the eventual outcome is fair but also so that separated couples can properly and confidently move forward with their lives.
Amy Mullan – Trainee Solicitor