As family lawyers, we often have clients who raise concerns that their spouse is not being transparent about their assets or income, or that their spouse is refusing to provide proper disclosure.
Clients are also concerned that their spouse is taking steps to hide assets or transfer them to a third party to avoid them being taken into account as part of the division of assets. This can particularly be the case where one party may not have a full understanding of the assets or may not have been actively involved in managing the finances during their marriage.
In this briefing, senior associate Kate Macdonald outlines the importance of full and frank financial disclosure in family proceedings and explores the legal remedies available where non-disclosure is suspected.
Financial disclosure obligations
In financial remedy proceedings (and indeed where parties are seeking to resolve matters outside of court), parties are required to provide full and frank financial disclosure. This means disclosure in relation to all assets, liabilities, pensions, and income in which a party has an interest in England and Wales or any other jurisdiction. This may include an interest in the family home, investment properties or properties held with a third party; bank accounts, shareholdings and other investments, companies, trusts and pensions. Any liabilities should also be disclosed. Disclosure in relation to income from all sources is also required, including from employment, dividends, rental income and other investment income.
The first step in proceedings is each party must complete a Form E and provide the required supporting disclosure documents. Where a party requires further disclosure (or disclosure which should already have been provided but was not), they prepare a questionnaire. The other party provides their replies to questionnaire.
So, what happens when one person does not comply with their disclosure obligations? Even where the proper procedural steps have been followed, concerns may remain that a party has failed to provide full and frank financial disclosure or is taking steps to hide or transfer assets to place them beyond the reach of the other party. In such circumstances, the court has a range of powers available to address those concerns.
Where there are concerns that a party is not disclosing in accordance with their disclosure obligations, then the court can make an order to do so. Where there are concerns that a party is attempting to hide assets then the court can also make an order compelling a third party to provide disclosure. For example, where there are family trusts or businesses for which documents can be provided but a party is refusing to do so or asserting they have no interest in such assets.
The court has a wide discretion and takes non-disclosure seriously. It follows that there can be serious consequences for the non-disclosing party where they fail to provide full and frank disclosure. The court may draw adverse inferences against that party, make a finding of litigation misconduct resulting in a costs order, or find a party in contempt of court. The court may also set aside a financial remedy order where there has been a material non-disclosure.
Third-party disclosure orders
Rule 21.2 of the Family Procedure Rules 2010 permits a party to apply to the court to require a third party to disclose certain documents. Such an application can be, and regularly is, made without notice and must be supported with evidence. When considering whether to grant the application, the court needs to be satisfied that such disclosure is necessary in order to dispose fairly of the proceedings or to save costs. The order must set out certain matters, including specifying the documents or classes of documents to be disclosed.
The court needs to consider carefully whether it is reasonable to make such an order upon a third party who is not a party to the proceedings. Where the court does make a third-party disclosure order, the person or entity can apply to the court to set aside, vary or stay the order should they consider it appropriate. It is recommended that any third party considering applying to do so seek independent legal advice promptly.
The party alleging non-disclosure carries the burden of proof in their application to the court. When considering whether to seek a third-party disclosure order, a party should consider whether the costs in respect of such an application are proportionate to the issues in dispute. When the court considers an application for third party disclosure, it must consider whether it is appropriate to make such orders on a case-by-case basis taking into account the specific facts of the case and, as previously mentioned, only if satisfied that such disclosure is necessary in order to dispose fairly of the proceedings in the absence of financial disclosure from the respondent.
About Kate
Kate Macdonald is a senior associate in the family and children team. She is a dual-qualified solicitor with extensive experience as a family lawyer in England and Wales and Australia. Kate advises clients on divorce and financial matters, jurisdictional disputes, pre- and postnuptial agreements, property disputes between cohabitees and financial claims on behalf of children following the breakdown of relationships between unmarried couples.
Get in touch
If you would like to speak with a member of the team you can contact our family and children solicitors by telephone on +44 (0)20 3826 7520 or complete our enquiry form.
