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21st October 2019

Why you should always disclose your assets

Those getting divorced have an obligation to give full, frank and clear disclosure when it comes to assets and liabilities such as bank accounts, savings, credit card debts, investments and pension funds. Family lawyer Megan Prideaux looks at the consequences of not doing so.

The duty of disclosure is ongoing during divorce proceedings and includes any material change in financial circumstances. This means that while financial negotiations are underway, even things like a bonus or an increase in salary need to be disclosed. But what if they are not? What are the potential consequences of non-disclosure?

Set aside

If the separating couple reaches an agreement between themselves and it’s documented in a consent order and sealed by the court, one party could apply to set aside the agreement based on material non-disclosure. This could leave the parties back at square one.

Adverse Inferences

If one party fails to disclose all of their assets (for example shares in a company or a separate bank account), the court is allowed to draw what is called ‘adverse inferences’ against that person. While, in most cases, this will simply mean that the non-disclosed assets are taken into consideration, some individuals have been ordered to pay out a higher award as a result, especially when the court has found the non-disclosure to be deliberate.

Looking at direct evidence like documentation, the scale of business activities and the lifestyle of an individual, the court must make a fair and reasonable decision. In the 2013 case of Young v Young, a husband hid assets amounting to around £40 million. As a direct result of his failure to disclose those assets, the judge decided his wife was entitled to a lump sum of £20 million.

Contempt

If a party refuses to comply with a court order to provide full disclosure of assets, that individual can be found guilty of contempt of court. This is a very serious offence and should not be under-estimated. In the most serious of cases, the penalty is prison.
While rare, in the case of Al-Baker v Al-Baker [2015], the husband was sentenced to nine months in prison for refusing to comply with two disclosure orders which had been sent to both the husband and his solicitors. His wife was awarded £61.5 million of her husband’s £130 million asset base.

Litigation misconduct

The court may decide that the party’s behaviour, in failing to disclose assets, amounts to litigation misconduct, which can result in one party having to pay the other’s costs.

Fraud

The court may decide that the party is committing an offence under Section 3 of the Fraud Act 2006. A person is in breach of this section if they dishonestly fail to disclose information which they are legally obliged to disclose; intend, by failing to disclose information, to make a gain for themselves or another, to cause loss to another or to expose another to a risk of loss.

Biggest undisclosed assets claim?

The case of ex-wife (Ms Potanina) against her husband (Mr Potanin) has been dubbed the biggest ever divorce case in the UK in respect of undisclosed assets. Mr Potanin has been described as the second richest man in Russia and a good friend of Vladimir Putin.
When the couple divorced in 2014 after 30 years of marriage, she moved to London and was awarded a £5.5 million settlement sum in Russia. However, she claims her husband’s estate is in fact worth £15 billion, making her settlement far below what would have been agreed in the UK courts.

Ms Potanina is now appealing the original settlement figure on the basis that her then husband failed to disclose the true value of his assets. Ms Potanina has requested a forensic investigation of Mr Potanin’s assets, which will go back 30 years. If successful, this is likely to be the largest settlement in UK divorce history.

Lessons

While some people find it difficult to open up about assets such as pensions or personal savings, especially when those assets were acquired before the relationship, the consequences of not disclosing all assets are serious. Honesty is the best policy, so it’s always best to provide a full, frank and clear disclosure.

For more information, or to discuss your family law needs, please contact Megan Prideaux in our Bath office or another member of the Family team.

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