Before the court can make a financial remedies order on divorce it will obviously first require full details of the financial assets of both parties, so that it can decide upon a fair settlement. The parties are therefore under a duty to make full and frank disclosure of their means.
But sometimes a party will fail to make full disclosure, perhaps because of a misapprehension as to the extent of the duty, or in an attempt to deceive the court as to the value of their assets and thereby achieve a more favourable settlement.
The implications of a party failing to make full disclosure was demonstrated in a recently-published judgment of a case in the Central Family Court in London.
The extent of the duty
At the start of financial remedy proceedings the court will direct that both parties file a financial statement (Form E), setting out full details of their means. Each party will be able to request further details, if anything is missing from the statement.
It may be thought that when this disclosure process is complete the duty of full disclosure ends.
But that is not the case.
The duty continues until the proceedings are concluded, i.e. at least until the final order is approved by the court. Accordingly, any significant changes that may occur in relation to a party’s financial position after they have filed their statement but before the conclusion of the proceedings must be disclosed to the court and the other party.
This was demonstrated in the case Mostyn-Williams v Mostyn-Williams. The case was decided in 2021, although the judgment has only recently been published.
Order set aside
The judgment concerned a wife’s application for a financial remedies order to be set aside. The order had been approved and sealed by the court in July 2017, following a final hearing in December 2016.
The order provided for the matrimonial assets, which were found to total some £6,475,583, to be divided equally. Thus each party was to receive £3,237,791.
The assets included the husband’s interest in a company, which was valued at £3,887,538. However, the company was subsequently sold in October 2018 and the husband received the gross sum of £9,449,001 for his interest.
In February 2019 the wife issued her application to set aside the final order. The grounds for the application included the fact that the husband had failed to make full disclosure, or had misrepresented his financial position.
The wife claimed that the events behind the husband receiving so much more for his interest in the company were as follows:
- In March and May 2018, the parties’ children’s shareholdings in the company were transferred from them, some of which were then acquired by the husband, in addition to those he already held, thereby increasing the value of his interest in the company. The wife alleged that this took place at the conclusion of a lengthy and deliberate process engineered by the husband, which began prior to judgment being handed down, and was contrary to the husband’s stated intentions at the final hearing; and
- The sale took place in circumstances where (a) the husband had argued at trial that his shareholding was illiquid and that he could not sell it; (b) the trial judge found that the husband had no intention of selling the company for a few years until retirement; and (c) it was alleged that the husband failed to disclose steps taken in respect of a potential sale in the seven month period between the closing of evidence and the sealing of the final order.
The husband denied any non-disclosure or misrepresentation, whether intentional or otherwise.
The judge, however, found in favour of the wife. The husband had failed to make full disclosure, both in respect of his intentions regarding the sale of the company and in relation to his acquisition of the children’s shares.
Accordingly, the order was set aside, and the husband was ordered to pay to the wife the additional sum of £2,081,618, plus her costs of the application.