The Non-Disclosure of Assets
The case of Cummings v Fawn highlights the importance of declaring the entirety of assets for both lawyers and clients in separation proceedings, especially for high wealth value clients. Failure to do so can result in serious consequences for the non-disclosing party.
The test for fraud in matrimonial proceedings was set out by Lady Hale in Sharland v Sharland. In that case, Mr Sharland, who was a major shareholder in a company, reached a settlement with his ex-spouse where she would receive 30% of the net value of his shares. However, Mrs Sharland then became aware that the company was going to be publicly listed on the stock exchange for the first time, despite Mr Sharland attesting that the company had no plans of going public. This would have dramatically increased the value of the shares compared to the valuation provided in the High Court proceedings. Utilising the maxim of Lord Briggs – “fraud unravels all” – Lady Hale ruled in favour of the appellant wife, setting aside the previous consent order on the basis that Mr Sharland’s failure to disclose the true value of his shares amounted to fraud. It is vitally important for parties in separation proceedings to be vigilant relating to the assets of their former spouse, and to make the courts aware of any potential non-disclosure of assets as soon as possible.
In the Republic of Ireland, the opinion of the courts on the non-disclosure of matrimonial assets is well documented – the case of M v S demonstrates that the non-disclosure of assets is equally non-negotiable. In that case, Justice Barrett heavily criticised the respondent for –
“…failing completely to disclose the full truth of his financial position to the applicant and her advisors, failing completely to provide clear and reliable testimony in the witness box, instead giving answers that only confused and obfuscated and never clarified, such a person will find that his evidence is treated as unreliable.”
In addition, Justice Barrett highlighted that the respondent’s failure to disclose his assets could amount to contempt of court – another serious risk that should be made clear to any party who is reluctant to disclose all their assets.
Some high wealth value clients might believe their matrimonial assets outside the jurisdiction are beyond the reach of the divorce courts, and therefore they don’t have to declare them – this is deeply incorrect, as demonstrated in the UK case of B v B. In that case, the appellant failed to disclose the removal of funds to another jurisdiction, namely Italy, in his matrimonial proceedings. Connell J ruled that he would take the conduct of the non-disclosing party into consideration when delivering a ruling on financial settlements and subsequently dismissed the appeal.
For clients in Northern Ireland, with assets and property in the Republic of Ireland (and vice-versa), this can add to the complexity of their cases. At Caldwell & Robinson, our dual-qualified lawyers are well-versed in the division of matrimonial assets in both jurisdictions.
The notion that “fraud unravels all” is an important lesson for lawyers to remember. Not only does the non-disclosure of assets impact upon the outcome of cases for clients, but it can also have repercussions on the reputation of legal professionals. If a client is unwilling to disclose all relevant assets during their separation proceedings, then there are solid grounds for refusing to continue to act on their behalf.