Non-disclosure of finances during divorce: what can you do?

Divorce is one of life’s most difficult challenges. Beyond the emotional strain, practical issues such as sorting out finances can feel daunting, especially where there are concerns about non-disclosure.

When dealing with the financial arrangements arising from separation, both parties owe a duty of full and frank disclosure to each other and to the court, meaning that an honest and complete picture of assets, income, liabilities, pensions and needs must be provided.

Proper disclosure enables informed negotiations and assists the court in determining a fair outcome if proceedings are issued.

In financial remedy cases, the court requires that parties complete a detailed financial statement known as a Form E. This form can also be exchanged on a voluntary basis during Non-Court Dispute Resolution (NCDR), including mediation, solicitor‑led negotiation and round‑table meetings.

A spouse may be reluctant to engage due to general disorganisation or a desire to conceal assets and liabilities. Parties should seek answers to focused questions, request supporting documents and keep a record of evasive responses.

Red flags to look out for include a lifestyle that appears inconsistent with declared income, significant business and director’s loans with unclear purposes and unexplained depletion of bank account funds or investments.

Making an application to the financial remedy court

If voluntary avenues fail and concerns of non-disclosure continues, issuing a financial remedy application enables the court to impose a timetable for disclosure, raising questions and for hearings. This structure often prompts engagement where informal or voluntary requests have achieved little progress.

Some spouses might simply bury their heads in the sand, evading service and correspondence. Others may deliberately manipulate or mask their assets. Where a spouse fails to comply with mandatory directions, the court has a range of powers to address this behaviour and to prevent the gaining of an unfair advantage.

The court may issue a penal notice or costs orders to reflect non‑compliance or unnecessary legal work caused by delay. Penal orders warn a party that if they do not abide by an order, they will be in contempt of court and may face serious consequences for breach, including fines and in extreme cases, imprisonment.

The court can also make costs orders, ordering the party to pay some or all of the other party’s legal fees. The risk of such sanctions often brings about compliance.

The court can also order parties to obtain and provide further targeted disclosure to address gaps, inconsistencies or unexplained transactions.

Alternatively, the court can a make Third Party Disclosure Orders, directing  organisations such as banks, accountants and companies to disclose statements, loan files, or corporate records that a party has failed to provide.

Experts, including business valuers and forensic accountants, may be appointed to value companies, trace assets, review offshore arrangements and assess whether businesses have been restructured or replaced by similar ventures to frustrate claims.

Adverse inferences from poor disclosure

If disclosure is inadequate and explanations are unsatisfactory, the court may draw adverse inferences. In practical terms, this may result in the court assuming that assets or income are more valuable or higher than stated, making an award on that basis.

Morr & Co Case Study of non-disclosure

The Wimbledon Family team at Morr & Co recently acted for a client whose spouse disappeared upon separation, leaving our client caring for their child on an extremely modest income and savings. During the marriage, the spouse had accumulated a significant pension and funds in various banking and investment accounts.

Save for acknowledging service of the divorce application, the spouse failed to engage with any solicitor or client-led efforts to progress financial disclosure on a voluntary basis. He made no contributions towards our client’s expenses, nor any child maintenance payments for the benefit of the child. He ignored all voicemails to his personal and business phone numbers.

He had no known address and correspondence to any of his business or bank account addresses were returned to sender.

The spouse was, however, marketing his business on various social-media platforms, providing an indication of his movements, lifestyle and the resources available to him. This public digital presence appeared to confirm that while he was living a somewhat itinerant lifestyle between the UK and Europe, he was meeting clients and generating income.

Having obtained the court’s permission to serve the financial application by email and following the spouse’s continued non-compliance with directions or deadlines, the Family Team successfully secured the making of several Third-Party Disclosure orders at the first hearing, requiring pension, bank and investment account providers to disclose information on the spouse’s behalf.

The Judge also made a penal order and costs order against him at this hearing.

The third-party disclosure obtained provided a clearer picture of the spouse’s earnings and outgoings, revealing further bank accounts, post-separation transfers and dissipation of large sums of Premium Bonds.

The pension information disclosed enabled the Family Team to obtain an actuarial report identifying the percentage of pension sharing required to achieve equality of income at retirement age for our client.

At the second hearing, we successfully persuaded the Judge to make a final order in the spouse’s absence, an unusual point in proceedings for an outcome to be determined.

Having reviewed the actuarial report, the Judge also made a pension sharing order to achieve equality of income on retirement and a further costs order which following a period of non-payment, was added to the pension sharing order as an additional percentage in our client’s favour.

As the previously made costs order remained unpaid, the Judge referred the matter to the civil court, making an interim Third Party Debt Order to assist with recovering costs directly from the spouse’s bank account to be paid to our client.

A party’s ongoing non-disclosure of financial information or lack of engagement in court proceedings can be stressful, but there are practical and legal steps available to resolve this. The court has robust tools to secure compliance and achieve a fair outcome.

Need advice about non-disclosure during final settlement

If you are facing challenges in dealing with your spouse who is not cooperating with the financial disclosure process during your separation, or if you feel like the other contents of the article are related to you.

Morr & Co’s experienced Family Law team can provide practical, sensitive advice tailored to your circumstances. We advise clients on all aspects of divorce, financial settlements, pensions, property and later-life separation, helping them make informed decisions about the future.

Email info@morrlaw.com or call us on 0333 038 9100 and one of our team will be happy to assist.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.