Full and honest financial disclosure is fundamental to reaching a binding divorce settlement. If one spouse conceals assets, understates their value or fails to reveal an important change in their finances, the consequences can be significant.
Non-disclosure can delay a settlement, increase costs and affect the court's eventual decision. If it only comes to light after a financial order has been made, there may be grounds to ask the court to set aside all or part of the order.
Our divorce lawyers advise clients who suspect assets are being hidden, as well as those facing allegations that their own financial disclosure is incomplete.
What is material non-disclosure?
Not every mistake or omission is material.
The important question is whether the missing information was significant enough to affect the financial settlement or the basis on which the court made its order.
Examples can include failing to disclose:
bank or investment accounts;
cryptocurrency or other digital assets;
property or overseas assets;
shares or business interests;
trusts or beneficial interests;
significant bonuses, dividends or other income;
valuable assets transferred to another person;
negotiations to sell a business;
substantial changes in an asset's value; or
other information which materially changes the financial picture.
Financial disclosure is an ongoing obligation. It is not enough for information to have been accurate when Form E was completed if an important change occurs before the final financial order.
How can you tell if assets are being hidden?
Usually there needs to be something more than a general suspicion that your spouse has more money than they have disclosed.
Warning signs can include:
previously known accounts missing from Form E;
unexplained transfers or cash withdrawals;
payments to investment or cryptocurrency platforms;
income which does not appear consistent with expenditure;
money transferred to family members;
unusual transactions shortly before separation;
business accounts which do not fit the explanation given;
substantial funds moving between connected companies;
assets being sold or transferred for apparently low values; or
•nformation provided during the marriage which conflicts with current disclosure.
The aim is to identify specific inconsistencies which can then be investigated.
What can you do about incomplete disclosure?
The appropriate response depends on what is missing and how important it could be.
Your solicitor may:
request missing documents;
raise specific questions following Form E;
seek explanations for unusual transactions;
request updated bank or investment information;
investigate company accounts and business interests;
obtain updated valuations;
ask for evidence about particular assets or transfers;
seek further court directions; or
consider specialist forensic evidence.
A focused approach is usually more effective than making broad allegations of dishonesty.
For example, a bank statement showing £80,000 transferred to an investment platform provides a much clearer basis for further questions than simply asserting that your spouse must have undisclosed investments.
Can information be obtained from banks or third parties?
Potentially, where there is a proper basis for doing so.
A spouse cannot simply demand confidential information directly from another person's bank, accountant or investment provider.
However, the court has powers to require relevant evidence and, in appropriate cases, disclosure involving third parties may be possible.
There normally needs to be a proper evidential reason for seeking the information. The court will consider relevance and proportionality rather than allowing a speculative search for assets.
Can you search your spouse's phone or emails?
You should be very careful about trying to find evidence yourself.
Suspecting non-disclosure does not give you a general right to access your spouse's:
phone;
computer;
emails;
cloud storage;
online banking;
investment accounts; or
cryptocurrency wallets.
This can remain problematic even if you know the password or previously had access to the device or account.
The courts have rejected unlawful "self-help" as a means of obtaining private financial information. If you already have information suggesting that an undisclosed asset exists, show it to your solicitor and explain exactly how you obtained it.
The underlying asset can then potentially be pursued through the proper disclosure process.
Non-disclosure involving a business
Business interests can create particularly difficult disclosure issues.
A company's accounts rarely tell the whole story about the owner's financial position or the value of the business.
Issues can include:
understated business valuations;
cash retained within the company;
director's loan accounts;
connected companies;
unusual payments to shareholders or family members;
suppressed dividends or drawings;
share options;
valuable contracts;
substantial transactions after the accounting year end; and
negotiations to sell or obtain investment in the business.
Timing can be particularly important.
For example, a business owner negotiating a substantial company sale while agreeing a divorce settlement may be required to disclose information that materially affects the value of their shareholding. The Supreme Court considered a serious example of this issue in Sharland v Sharland.
What happens if someone lies on Form E?
A deliberate lie about a material financial matter can have serious consequences.
It may lead to:
further disclosure being ordered;
negotiations breaking down;
additional hearings;
adverse costs consequences;
the court drawing conclusions from the evidence; and
potentially an existing financial order being challenged.
There is also a statement of truth within Form E. Financial disclosure should therefore never be approached as a negotiating exercise in which assets can simply be omitted because one spouse considers them irrelevant.
What if hidden assets are discovered after divorce?
It may still be possible to take action.
The first question is usually whether a final financial order has been made and whether the missing information was sufficiently important to undermine the basis upon which that order was agreed or imposed.
The Family Procedure Rules allow an application to set aside a financial remedy order, including a consent order. Recognised grounds include fraud and material non-disclosure.
This does not mean that finding any previously undisclosed asset automatically reopens the settlement.
There is an obvious difference between discovering an inadvertently omitted account containing £500 and discovering that a spouse deliberately concealed an investment portfolio worth £500,000.
The nature, value and effect of the non-disclosure need to be considered.
Does a clean break stop a later claim?
Not necessarily.
A clean break is intended to bring financial claims between former spouses to an end. It is extremely valuable for providing certainty once finances have been properly resolved.
It does not, however, give somebody protection for material assets they deliberately failed to disclose when the order was obtained.
Where material non-disclosure or fraud undermined the financial order itself, it may be possible to apply to have all or part of that order set aside.
How do you reopen a financial order?
An application can be made to set aside all or part of a financial remedy order where an appropriate legal ground exists.
The court will need to understand:
what information was not disclosed;
what evidence now establishes its existence;
whether the non-disclosure was deliberate or inadvertent;
the value and significance of the asset;
what was known when the original order was made; and
whether the missing information could have affected the outcome.
If the court sets aside the relevant order, the financial issues may then need to be reconsidered using the correct financial information.
The precise procedure and potential outcome will depend upon the original order and the circumstances of the non-disclosure.
How our divorce lawyers can help
Non-disclosure cases require judgement about what to investigate, how to obtain the evidence and when the likely value justifies the cost.
We advise clients on:
incomplete or misleading Form E disclosure;
suspected hidden assets;
business and company interests;
cryptocurrency and digital assets;
overseas assets;
unexplained transfers;
further disclosure and questionnaires;
forensic accounting and valuation evidence;
urgent action where assets may be dissipated;
allegations that you have failed to disclose; and
applications to set aside existing financial orders.
Early advice can also help avoid unnecessary cost. Not every discrepancy justifies extensive investigation, but potentially significant inconsistencies should normally be resolved before a settlement is finalised.
