The importance of full financial disclosure on divorce

Mrs Byrne had inherited £1m from her father but did not want her husband, whom she intended to divorce, to know about it.

Her friend, a builder named Mr Howie, suggested that she transfer £600,000 to him to effectively hide it from her husband.

However, Mr and Mrs Byrne were able to work through their marriage difficulties and she asked for her money to be returned, Mr Howie refused. He claimed that she had made an investment in his business. Fortunately for Mr and Mrs Byrne, in this case, the court ordered Mr Howie to repay the money.

What would have happened if Mr and Mrs Byrne went ahead with a divorce?

In a divorce or separation, there is a duty to give a full and frank disclosure to each other and to the court. This means that a husband and wife, or civil partners, need be open and honest about each other’s financial positions to include their interests in property, other capital assets, income and pensions.

For an agreement to be legally binding, disclosure must be exchanged. Should it later come to light that assets or income had not been properly disclosed, the agreement or court order can be ‘set aside’.

The court’s overriding objective is to achieve fairness, which requires full and frank disclosure. This can be difficult to accept, particularly in an acrimonious divorce or separation, where emotions often run high.

In an ideal world, Mr and Mrs Byrne would have been able to agree a fair financial settlement directly. Whether an agreement was reached directly or through solicitors, they should have disclosed documents and information to include; bank and building society statements for the preceding year, details relating to other capital assets to include properties, supported with valuations, their most recent P60’s, payslips and up-to-date pension statements.

By examining the bank statements, Mr Byrne or his solicitors would have been able to detect the transfer of £600,000 to Mr Howie and could then have raised queries.

Unless an agreement could be reached, either directly, via mediation or solicitors, it would be necessary for the court to make an order. If Mrs Byrne refused to provide disclosure on a voluntary basis, the court could order her to do so. If she failed, there would be consequences such as a costs order requiring her to pay her husband’s legal costs, with the ultimate sanction being imprisonment.

What is a fair financial settlement?

When considering a fair financial settlement, the following factors must be considered:

• The income, earning capacity, property and other financial resources of each person.
• The financial needs, obligations and responsibilities of each person.
• The standard of living the family is accustomed to.
• Each person’s age and the duration of the marriage.
• Whether either person has any physical or mental disabilities.
• What contributions each person has made, such as expenses incurred by looking after the home or caring for the family.
• Each party’s conduct if it is inequitable to disregard.
• The value of any monies either party would lose following a divorce, such as pensions.

Only once full and frank disclosure has been exchanged should a settlement be reached.

Dishonesty and non-disclosure will not be tolerated by the courts.

How do you achieve a fair financial settlement?

Instructing a specialist solicitor to assist with financial aspects of divorce and separation can help you to achieve a fair settlement.

Should you suspect that your partner has not been completely honest about their finances, our Family & Matrimonial team can assist you.

We are highly experienced in locating assets that have not been voluntarily disclosed; forensically analysing accounts and financial statements.

Assets that we have assisted clients in discovering have included properties, bank accounts, trusts, and on one memorable occasion, a racehorse.