Divorce: honesty is the best policy

It is quite a shocking fact that many spouses (wives in particular) still have no real concept of the extent of their family’s wealth. The BBC’s recent Dr Foster drama portrayed a highly educated woman, a G.P., who freely admitted she left the financial side of her marriage to her husband because he was “better at that sort thing”.   If that is the situation that has prevailed during a marriage, it can be incredibly difficult to get to the bottom of a couple’s finances when they divorce. Add to that a (sadly not uncommon) proclivity to fib about the extent of the wealth, and things get a lot harder. 

This week’s ruling by the Supreme Court in the cases of Sharland and Gohil, has therefore been welcomed by practitioners as a victory for common sense.  The ruling sets out very clearly that the obligation on each party to give full and frank disclosure is fundamental. No one should be expected to negotiate in a vacuum (or partial vacuum) of information. 

Even if your spouse loses the appetite for the fight and decides to settle, that does not exonerate you from that duty. Your frankness and transparency is required by the court so that it can discharge its statutory duty to decide if the agreement you have reached is fair and reasonable. 

It is not uncommon for some assets to be innocently forgotten.  In such cases, an order can still be set aside if the non-disclosure was material, meaning the court would have made a substantially different order from the one that was actually made. In the cases ruled on by the Supreme Court, there had been deliberate deceptions practised by one spouse on the other:  the “laying [of] a false trail” as one judge put it. In such circumstances, the Supreme Court have said that it would be for the deceiving spouse to show that their deception was not material and had not resulted in a different outcome being achieved to the one that would have been had they been honest and truthful. The assumption is that to go to the trouble of lying, the deception was intended to make a material difference. In other words, the burden of proof is on the untruthful spouse to show that their dishonesty made no difference, rather than on the honest spouse to show that the dishonesty did make a difference.

This clarification comes at a time when the identification of assets is getting harder. The court forms deal with standard assets – property, bank accounts, business assets etc. It is easy to overlook less mainstream assets such as PayPal accounts, online gambling accounts, bitcoins and other cryptocurrencies. In some cases, parties agree an alternative form of disclosure so that assets can be presented in a way that is more suitable to their family’s financial set-up. This happened in the recent case of Cooper-Hohn & Hohn.  

Recent research from Scottish Widows showed that 84% of wives still routinely forget to take into account their spouse’s pension on divorce. With the burden clearly on the individual to disclose their own position, any husband whose wife made that mistake could now find that they have their order re-opened if they knowingly fail to disclose that pension.

The ruling will also have ramifications for pre-nuptial agreements. With these, the same principle of full and frank disclosure of assets applies so that parties can be advised about the reasonableness of the provision to be made if the marriage fails. If the wealthier party is dishonest about that disclosure, it is logical to assume that a court will be reluctant to hold a party to an agreement that was only reached as a result of the dishonesty of their spouse.

This article was written by Nicola Harries, Partner in the family team at Stevens & Bolton LLP and featured via The Lawyer.

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