Revisiting financial settlements where it is discovered a former spouse lied about their finances
In reaching a financial settlement on divorce both parties will rely on full honest disclosure of their income and wealth by the other party. But all too often one party fails to make a complete disclosure, and sometimes it is many years after the settlement before the truth comes out. A recent decision confirms the courts are quite prepared to re-open a settlement that was achieved on the basis of false financial disclosures – twice if necessary!
Both parties have a continuing duty, to each other and to the court, to provide full and frank disclosure in relation to the scope of their financial position. They must submit a ‘Form E’ at the outset, which is a financial statement in which parties give disclosure of their finances to each other. The Form E is submitted to the court and verified by a statement of truth and it is vital that the information given is full and correct. As the duty of disclosure is ongoing, should one of the parties’ financial positions change after the Form E has been submitted, they must disclose this information straight away.
The recent decision in Goddard-Watts v Goddard-Watts  EWHC 3367 (Fam) reiterates the importance of disclosure in financial proceedings. In this case, the parties divorced in 2010 whereupon a lump sum order in the sum of £4m was made to the wife. Some years later in 2015, the wife applied to the court to set aside the financial order on the basis the husband committed fraudulent non-disclosure of two trusts in which he was the principal beneficiary. The wife was successful and the Judge held at a re-hearing in 2016 that the wife should receive a further lump sum of £6.42m.
However, in 2017, the wife discovered that the husband had again failed to make full disclosure and she made a second application to set aside the lump sum order. In 2015, the husband’s company received an offer of £82.6m (net of debt). The husband informed the court at the 2016 hearing that this valuation was not a realistic offer and was not achievable. The offer was withdrawn without explanation in October 2015. What the husband failed to disclose at the 2016 hearing was that he was in fact in discussions with a prospective buyer, which were ongoing before and after the hearing. The husband had made a specific proposal to the buyer about the sale of the company at a higher price.
The wife therefore brought a second application to set aside the lump sum order in 2019. Mr Justice Holman held at this hearing that the husband’s conduct amounted to fraudulent non-disclosure, ‘ if an intelligent adult of full capacity, which the husband is, deliberately fails to disclose, and withholds, information and documents which he knows he should disclose, his decision not to do so is dishonest and, for the purposes of the law in relation to non-disclosure, amounts to fraud.’ It was on this basis that the wife was successful in setting aside the lump sum order made for a second time. The ruling in this case shows that the court will not tolerate inadequate or fraudulent disclosure and it will exercise its powers in setting aside a final order, on more than one occasion if necessary.
Articles are intended as an introduction to the topic and do not constitute legal advice.