Is divorce a game of hide and seek?

In many divorce cases, there is an imbalance of wealth between the spouses. Whilst many married couples own their family home together, it is rare to come across cases where each spouse has a similar level of capital, income and pension provision. 

In traditional family models, a clear example is where a wife has taken on the role of primary carer for the children of the family and her career aspirations have been side-lined so that her husband can provide financial support for the family. The husband, in these cases, may have been supported in such a way by his wife to enable him to get to the top of his profession or build up a successful business, both of which could have proved lucrative. As well as a disparity in income, the husband may have been in a position to accrue savings, or an investment portfolio, purchase other properties or assets, and accumulate significant pension provision.

The law in this country recognises the contribution of the spouse who keeps the home, raises the children and provides such a level of support, as equal to the contribution made by the breadwinning spouse. As such, in an unhappy marriage in which, say a husband, may be contemplating separation, he may be tempted to conceal assets or income that he has accrued through his hard work. In the most blatant example, this would present as transfers of monies, assets or properties out of his name to trusted friends or family, with fictional explanations. More subtle methods may need to be unearthed where there are complex trust structures or business ventures, particularly where the husband is owns or controls a company. Legal practitioners are also now anticipating concealment online, such as through the purchase of Bitcoin, where transactions can take place easily on an anonymous basis.

In short, any attempt to conceal assets or deliberately deprive a spouse of financial means within divorce proceedings should not occur. The courts can deal with dishonesty robustly. Judges can make freezing orders and seize control of a spouse’s assets to ensure that they are properly preserved pending a final outcome. The Court is also able to make inferences in relation to one party’s assets or income depending on lifestyles. In some cases, relevant friends or family members can be joined into divorce proceedings to provide evidence as to financial transactions or ownership of assets. Timings of any transactions or changes of circumstances can be viewed as suspicious and can be taken into account. The Supreme Court was very clear in the recent case involving Mr and Mrs Prest that there was no hesitation in “piercing the corporate veil”. The outcome of the case has bolstered the Court’s power to heavily scrutinise transactions in business and company structures.

Mr Prest, an oil tycoon, was worth around £48m and owned properties in London, Nigeria and the Caribbean, within complex offshore companies and subsidiaries. He was ordered to transfer to Mrs Prest a multi-million pound property portfolio even though the properties were owned by an offshore company and not legally in his own name. The Court took the view that Mr Prest did, in reality, have the ability to transfer the properties and was entitled to those properties.  In that case, the Court was satisfied that the corporate structures were used by Mr Prest for improper purpose and the properties remained very much in his control. Where such a sham structure exists, the Court can and should take a tough approach.

In a divorce, there is an ongoing obligation for both spouses to provide each other with full and frank financial disclosure. Generally, such disclosure is provided within a comprehensive Form E document, which is mandatory in Court proceedings. The duty to keep the other party and Court informed of changes in financial circumstances remains pending a full financial settlement. If any information has been withheld, either inadvertently or deliberately, then this could mean that a financial settlement is unravelled. Family lawyers should scrutinise the disclosure provided by the spouse carefully to ensure that all proper and relevant queries are raised at the appropriate time, whilst ensuring that their clients are transparent regarding their financial affairs.