Dealing with non-disclosure in financial remedy proceedings

Our client was a high earner who, together with his wife, owned a portfolio of properties both in the UK and abroad. Disentangling their respective interests in the properties was at the crux of achieving a fair and decisive outcome to allow both individuals to move on with their lives.

The challenge

The couple’s capital was predominantly tied up in a number of properties located across the world, some of which were owned in the parties’ joint names and others that were held in their sole names.

Where court proceedings have been initiated with a view to resolving a couple’s finances as part of a divorce or dissolution of a civil partnership, both parties to the proceedings have an ongoing duty to provide full, frank and clear disclosure to the other regarding their finances. During the course of the proceedings, it came to light that our client’s spouse had unilaterally sold two of the properties without our client’s knowledge and without accounting to our client for any of the sale proceeds. Our client’s spouse subsequently applied a substantial portion of the sale proceeds from one of the properties towards an alleged property development venture. The transaction had not been disclosed as part of the spouse’s financial disclosure, despite it having pre-dated the disclosure process and no documentary evidence was provided in support of the transaction.

The challenge was to consider and advise our client on a pragmatic and cost-effective way forward through a quagmire of non-disclosure to reach a settlement that was fair, in circumstances where the spouse’s non-disclosure had contributed to a breakdown of trust between our client and their spouse.

Our approach

Recognising the importance of acting promptly after our client’s spouse disclosed the transaction, we prepared a further questionnaire.

A questionnaire is a useful tool available within financial remedy proceedings to obtain further disclosure from a party, which sets out questions that aim to clarify or request further information and/or supporting documentation regarding their disclosure. In the questionnaire, we requested copies of documentation to evidence the transaction, including bank statements, contractual documentation, receipts, quotes for the development plans for the property and copies of planning permissions.

In relation to the other property that was sold without our spouse’s knowledge, we weighed up and advised our client on the merits and proportionality of the full range of options that were available to enable our client to make an informed decision on how he wished to proceed. The options included making an application to the court to retrospectively set aside the transaction or the possibility to ask the court at a final hearing to factor in the proceeds that were spent by our client’s spouse when determining the appropriate division of the capital assets.

The outcome

We sought a direction from the court for our client’s spouse to provide responses to the questionnaire and we were successful. Our client’s spouse provided her responses to the questionnaire and later conceded that the amount that was unilaterally applied against the property development venture without our client’s knowledge should be notionally deducted from our client’s spouse’s share of the assets available for sharing.

How we made a difference

We were able to provide our client with our technical and strategic expertise, whilst helping our client to navigate an acrimonious breakdown of the relationship with their spouse. We carefully listened to our client’s aims and concerns to ensure that he achieved a favourable outcome. We were able to apply our technical knowledge and experience to identify that sometimes it is not what the other party is saying, but rather what they are not saying, that is important.