What happens if one party fails to be open about their finances during a divorce? This case shows how a lack of transparency, or non-disclosure in divorce, can unravel an agreed settlement, lead to further court proceedings, and result in significant financial penalties. It is a clear reminder that honesty at the outset is essential to achieving a fair and final outcome.
For context
Anne* approached Tees for advice following her separation from her husband, Andrew*. They had been married for several years and had one child together. Anne needed guidance on three key areas: divorce, financial settlement and arrangements for their child.
The couple’s finances were relatively straightforward. They owned a family home with around £90,000 in equity, held savings in bank accounts, had modest pensions, and Andrew ran a small business. Both parties earned enough to meet their day-to-day living costs.
Anne instructed a member of Tees’ experienced family law team. During initial discussions, Anne revealed that she had transferred around £100,000 in savings to a family member living abroad. These transfers took place shortly before and after the separation.
What happened next
As negotiations progressed, Anne and Andrew were unable to reach an agreement. Andrew therefore made an application to the court for a financial remedy order.
Anne was advised by Tees that she had a legal duty to provide full and frank financial disclosure. This included revealing the transfers she had made. He explained the risks clearly. The court could view the transfers as a deliberate attempt to reduce the financial settlement available to Andrew. If so, the court could treat the £100,000 as still part of the matrimonial assets when deciding how to divide them. This is often referred to as “adding back” the sum.
Should Anne not disclose the sums transferred, she would also likely face heavy criticism from the court for failing to provide full disclosure, and likely lost credibility in evidence.
Despite this advice, Anne chose not to disclose the transferred funds. During the proceedings, she and Andrew reached a financial agreement based on incomplete information.
The outcome
However, several months later, Andrew learned of what Anne had done. He then made an application to the court to set aside the financial agreement and sought an order that took into account the savings that Anne had failed to disclose.
The court granted his application. It found that Anne had failed to provide full disclosure and that this had materially affected the original agreement.
A new order was made. Anne was required to pay Andrew 50% of the undisclosed savings. In addition, the court ordered Anne to contribute to Andrew’s legal costs, which totalled almost £15,000.
Giving you the full picture
This case highlights the importance of full financial disclosure in divorce proceedings. If assets are hidden or transferred without transparency, any agreement reached may later be challenged and overturned.
Furthermore, this case serves as a reminder that, whilst the court does not usually order one party to pay the other party’s legal costs, where the Court deem one party’s litigation conduct such that it would be inequitable to disregard it, they will do so!
Taking early legal advice and being open about your financial position will help you reach a fair and lasting settlement.
Divorce and separation can be complex and difficult to navigate at a time when you’re under stress and need the best help available. The family and divorce law team across Cambridgeshire, Essex and Hertfordshire provide trusted, compassionate advice to individuals and families.
*Names have been changed to protect the privacy of those involved.
