Disclosure on divorce – what to do if your partner is hiding assets

In an attempt to denude their spouse of a fair share of the assets, it is sadly not uncommon for parties engaged in financial proceedings to deploy underhand tactics when it comes to disclosing assets and income.

Thankfully, the English courts have demonstrated time and time again a willingness to flex their judicial muscles when one of the parties refuses to meet their disclosure obligations or tries to place assets beyond the reach of their spouse.

In this blog, we explore the various ways in which a spouse considering divorce can strengthen his or her claims following the breakdown of the marriage, especially if they think there is a risk their other half may not play fair when it comes to disclosing assets.

As well as advising clients in bringing a claim for financial provision, we also frequently advise the person with the greater share of the wealth. For those clients, it is crucial that they understand the obligations placed upon them in terms of disclosure and which assets the court is likely to consider available for sharing. Strategic wealth management and putting protections in place such as a pre or post nuptial agreement can be an effective way of protecting assets.

Disclosure Obligations

In divorce or dissolution proceedings, before settlement negotiations can begin, it is vitally important that both spouses have a full appreciation of the other’s financial circumstances. To achieve this, the courts require that both parties provide full and frank disclosure of their financial arrangements, spanning back at least 12 months. This disclosure then paves the way to transparent and fair settlement negotiations.

Although the majority of people enter the divorce process with the intention of being open and honest, there are some who wrongly think they can outplay the system. As a result, we frequently encounter underhand attempts by one spouse to make it appear as though they have less cash or fewer assets in their possession, in the hope that this will mean their spouse gets a smaller award.

Previously, we have encountered attempts such as:

• converting investments into cash or luxury items, e.g. cars or jewellery, for a new partner;
• temporarily transferring assets to third parties such as family members;
• moving assets offshore;
• placing assets in trust or transferring them into complex corporate structures; or
• asking their employer to postpone a bonus or even make them redundant.

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I think My partners is hiding assets - what do I do?

First and foremost… trust your intuition!

Frequently, our clients seek legal advice because of a suspicion they have that their spouse may be taking steps to hide or temporarily dissipate their assets. Often, these suspicions will date back to a time before the marriage had broken down.

It is quite understandable that you may be daunted by the apparent knowledge-advantage or head-start you think your spouse has, especially if they have been the one to manage your family’s finances throughout your marriage. This is why it is crucial to seek specialist legal advice at an early stage. Indeed, it is becoming increasingly common for our clients to seek pre-emptive advice about disclosure and asset protection even before the marriage has ended.

If you or your spouse has a connection to a country other than England and Wales, it is especially important that you do not delay in taking legal advice as the English courts are known to place rigorous disclosure obligations upon parties to a divorce. This is not, however, the case in all countries. As a result, where one party is motivated to avoid disclosure, they may seek to seize the jurisdiction of a foreign court. In doing so, this could have a significant impact on the disclosure required, and ultimately, the financial award made. Having the earliest petition can often have a big impact on where the proceedings will be heard, so acting fast can be of great benefit to the party seeking the disclosure.

As well as taking early advice, other preliminary steps you should consider taking include:

• Keep quiet - until you have sought legal advice, be sure to keep quiet about your suspicions or wish to bring the marriage to an end. This will help reduce the risk that your spouse will be tipped-off to your plans, which could give them a head start in moving or dissipating assets.
• Early disclosure - consider seeking early disclosure (sometimes even before formal court proceedings have been commenced) and requiring that the disclosure go back further than 12 months. This will help ensure that movement of assets can be traced and then actioned. If your partner will not agree to provide what you need, you may require the assistance of the courts, which can make specific disclosure orders.
• Forensic accountants - in order to assist in locating and identifying your spouse’s assets, we work with specialist forensic accountants who can investigate discrepancies and inaccuracies in the disclosure provided. They can also undertake investigations of their own, so as to ensure that you are not dependent on the information your spouse provides.
• Accessing confidential information yourself - whilst it can be tempting to assume the role of investigator, there are strict rules which govern the accessing and handling of another party’s confidential information. To get things wrong can damage rather than further your case. We can provide advice as to which documents and information you can access, and what to do if you already have documents in your possession which you are unsure about.  
• Cryptoassets – these present a new frontier in family proceedings and are notoriously difficult to trace and value. We have experience of representing clients who both own and wish to claim against cryptoassets. See our previous blog about cryptoassets and divorce. 
• Search or freezing orders - if you do have a real concern that you partner may attempt to dissipate assets or move them beyond your reach, you can consider applying for a search or freezing order so that the assets are located and preserved until a judge decides what should happen to them.
• Third parties - another powerful step can be to obtain an order requiring third parties to disclose information about your spouse’s assets. Helpfully, a third party in possession of assets that are subject to a freezing order owes a duty to the court to also comply with a freezing or search order.

I Know MY PARTNERS IS HIDING ASSETS - WHAT DO I DO?

If, through taking the steps outlined above, you are able to show that your partner has failed to comply with their disclosure obligations or s/he has taken steps to hide assets, all is not lost. The family courts have wide reaching powers to:

• Send non-disclosers to prison (in extreme circumstances);
• Draw “inferences” about your spouse’s wealth, even if their assets cannot be located. The courts can then base your financial award on the inferred wealth of your spouse. Being able to produce historic evidence of the existence of their assets, or demonstrating that your partner’s lifestyle suggests their financial resources may not be as limited as they claim them to be, can both be powerful tools in persuading the courts to make such inferences;
• Vary or even reverse the transfer of assets into a trust or other corporate structure, if the steps taken by your spouse were held to be an attempt to defeat your claims;
• Order your spouse to pay you high levels of spousal maintenance until such final capital payments are made to you;
• Award you more of the English-based assets in recognition that these are easier to locate;
• Notionally to “add back” to the matrimonial assets, as if the asset transfer had not taken place. This is a helpful tool if assets have been recklessly dissipated;
• Although there is a high threshold to prove that a party’s conduct (behaviour) during the litigation should alter the division of assets, the most common circumstances in which the court will take conduct into account are cases involving non-disclosure of assets;
• Order that your spouse pay your legal costs, if previously undisclosed assets are uncovered before the case is concluded; or
• Reopen your case to make a different order, if the undisclosed assets are uncovered after the case is concluded, and knowledge of their existence would have had a material impact on the order the judge made.

Despite the wide-ranging powers the court has in these situations, if you do have any suspicion that your partner may be taking steps to hide, move or dissipate assets, you should act fast and take specialist family law advice. As the saying goes, prevention is better than cure.

FURTHER INFORMATION

If you are affected by or concerned with any of the issues in this blog, please contact our family and divorce team or click here to get started online and find out where you stand.

ABOUT THE AUTHOR

Mia Harrison is an Associate in the family and divorce team. She advises clients on all issues arising from the breakdown of marriage and a significant number of her cases involve disputes which have complex financial and international aspects. Mia has expertise in advising unmarried and cohabiting couples, and also preparing pre and post nuptial agreements. She also has extensive experience in private children matters, many of which are successfully settled outside of the court process. These include contact arrangements, issues surrounding international relocation and financial provision for children. Before joining Kingsley Napley, Mia worked at a niche family law firm in the City which specialised in representing high net worth individuals.