Hidden assets and the duty of full and frank disclosure
The parties in financial remedies cases have a duty of full and frank financial disclosure. In other words they have a duty to tell the court and the other side what their assets are and what their income is.
In fact the parties’ duty goes further than reporting the situation as it is. They have a duty to tell the other side things which are about to happen. So for example they should tell the other side if:
- Someone has offered to buy their company;
- They are about to have a pay rise;
- They are going to receive a bonus;
- They are about to inherit some money.
What people often fail to realise is that being honest is actually in their own interest. If a party is honest and lays all their cards on the table it has the following advantages:
- Both sides will save money on legal costs;
- The case is more likely to settle.The other side’s lawyers will be able to advise the former spouse more easily;
- You look better before the court and the court is more likely to give you a fair judgment.There is a risk that if the court thinks you are dishonest it will find against you.
In many cases however, people do not live up to their duty of full and frank disclosure. The reasons for this are obvious. People do not like telling the other side about what money they have because they know the other side will ask the court to award them a part of that money. On top of that there is usually no one in the world that they would less like to give the money than their former spouse.
The court process is designed to make sure full and frank disclosure takes place. Firstly there is the form E financial statement. This is a sworn document.If the other side fail to provide a form E, the court will order them to provide one and often will order that they pay the court costs which resulted from their failing to provide one.
Sometimes someone does provide a form E financial statement but the information is not complete. For example, the Husband may supply a form E which does not mention any pensions and the Wife knows he has some pensions. The answer for the Wife is to set out the questions in a questionnaire (see Family Procedure Rule 9.14(5)). The court at the first directions appointment will order the Husband to respond to the questions which it thinks are relevant.
What does the law do however, where despite the best efforts of e.g. the Wife and the court, the Husband does not properly disclose his assets or his income? This question has been considered in a number of reported cases.
In NG v. SG  EWHC 3270 (Fam), Mr Justice Mostyn, provided a helpful summary of the reported cases. His Lordship concluded that where the court is satisfied that the disclosure by one party is “materially deficient”:
- "The court is duty bound to consider by the process of drawing of adverse inferences whether funds have been hidden;
- But such inferences must be properly drawn and reasonable.It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the Court is satisfied he has not got;
- If the court concludes that funds have been hidden it should attempt a realistic and reasonable quantification of those funds even in the broadest terms;
- In making its judgment as to quantification the Court will first look to direct evidence such as documentation and observations made by the other party;
- The Court will then look to the scale of business activities and at lifestyle;
- Vague evidence of reputation or the opinions of third parties is inadmissible in the exercise;
- The Al-Khatib v. Masry technique of concluding that the non-discloser must have assets of at least twice what the Claimant is seeking should not be used as the sole metric of quantification.
- The court must be astute that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told.If the result is an order that is unfair to the non-discloser it is better that than the Court should be drawn into making an order that is unfair to the Claimant."