What is disclosure?
The starting point when considering the division of assets upon divorce is for the parties to provide full and frank disclosure. Each party should provide their lawyers with a complete picture of their overall finances by providing all of the relevant information and documents. This should take place even before court proceedings, which is called voluntary disclosure. This starting point is integral to the proceedings as it forms the basis of advising on appropriate financial (out of court) settlement which is encouraged by the courts.
Disclosure is provided using the Form E and supporting documents. The form is prescriptive and easy enough to complete. There are set timeframes to complete and exchange as set by the Family Procedure Rules 2010. Thereafter, the parties can ask each other questions which arise out of the other party’s Form E for example, husband might ask wife, “why haven’t you provided the bank details for your Monzo bank account?” These are appropriately termed, ‘Questionnaires.’ There is an ongoing duty to provide updating disclosure if circumstances change and ahead of each hearing as necessary.
If at this stage the parties are able to agree how the financial matters should be dealt with, then the arrangement is set out in a financial consent order and this is filed with the court along with a D81. The D81 sets out the parties’ assets, income, and liabilities before the agreement and what it will be after the agreement is approved. The Judge who reviews the documents might take the view that the agreement is unfair to either or both parties.
What is required in the Form E?
Simply put, everything is required in the Form E. The following list is non-exhaustive but a pretty good representation:
- Properties, solely owned and jointly owned, owned pre-marriage, during the marriage and post-separation.
- Valuations of properties.
- Mortgages, full details.
- Bank accounts and other investments including cryptocurrency.
- Liabilities, hard loans, soft loans, gifts. This includes loans, credit cards, personal loans. Provide the reasons for the loans. Hard loans are considered more formal and what one will consider is a typical loan whereas a soft loan is not considered as a formal debt, rather financial assistance, it lacks structure and clear terms. Gifts usually feature where Person A says that Person B gave them a loan, however it has all the signs that it was a gift for example the bank of mum and dad gave the deposit for the house or transferred money for inheritance tax purposes.
- Chattels including engagement rings and other wedding gifts even if linked to
- religious reasons.
- Income including benefits, bonuses, commissions. This should include income from
- employment and other sources for example rental income from properties. If selfemployed, provide the relevant tax returns and accounts for the past year or more.
- Pensions, the current valuations (most recent should be within the last 12 months)
- and the Cash Equivalent Transfer Value (CETV or CE).
- Company or business interests and the relevant accounts and tax returns. The valuation of the business and the income being received and expected to be received.
- Inheritances which have been received or pending in the foreseeable future i.e. a person has passed. If a party is named in a will of a person who is alive, this should be disclosed. The court, however, will take the correct approach that this is not a guaranteed asset as wills can be changed. It does assist the court with the parties’ overall future financial positions.
What if one person refuses to complete the Form E
The court cannot force a person to engage in proceedings. The engaging party should
ensure service is complete and the other side has all the relevant documents and
dates/deadlines. The court can attach a penal notice to an order to ensure the nonengaging party attends a hearing to respond to the lack of engagement and often nondisclosure.
If the non-engaging party breaches the court order with the penal notice, they
will be in contempt of court. Although this will trigger contempt of court proceedings,
these proceedings are separate and have their own rules. If contempt of court is found,
a party can face up to 2 years in prison.
A different route where continued non-disclosure becomes apparent, might be for the
court order at the earliest opportunity, to state, on its face, that a final order can be made in the absence of further non-disclosure and/or non-attendance by the non-engaging party.
What about hidden assets?
It is usual for accusations about hidden assets or dodgy arrangements to be raised. The common ones include undisclosed bank accounts, hidden cryptocurrency, money transferred to family and friends as repayment of non-existent loans or gifts from parents now being presented as loans. Most likely the other party will invite the court to assume that the person who has not disclosed certain information or documents is hiding assets.
They can make an application for further disclosure although there must be evidence to support the claim of hidden assets. The court will not entertain a ‘fishing expedition.’ It should be noted that you can rely on documents that support your claim only if it is legally obtained. Therefore, if you opened someone’s letter or accessed their online files, this cannot form part of your evidence that they are hiding assets. However, you can rely on your recollection of the information which you obtained meaning that you can tell the court what you remember during witness examination or in your statements.
There are strict rules about the transfer of assets and S37 of the Matrimonial Causes Act 1973 deals with this. Any asset that is disposed (sold or transferred) within 3 years of the application for financial remedies is presumed to have been done with the intention to reduce the assets available for division.
What will the court do about non-disclosure?
The court has powers to deal with non-disclosure. Drawing adverse inferences is a common approach taken, where one party invites the court to consider that the other party’s non-disclosure is so serious that it means they are hiding assets which will impact the proceedings. An example would be to ask for a greater share of the equity in the family home because the wife clearly has 3 bank accounts that she has not disclosed and it is believed that these contain substantial sums.
Fraud proceedings can arise from non-disclosure in financial remedy proceedings.
What about family trusts and businesses?
The court will want to know the type of business or trust and the benefit the party receives or expects to receive from the asset. Simply put, even if you believe your share is £0.00 but you are a shareholder, the asset should be included on the Form E with a NIL value and a note that no income is being received or expected to be received in the future.
Co-habitation
The Form E requires parties to include information about their ‘new’ co-habiting partners even when co-habitation is still an intention for the near future. You will need to disclose details of their income, assets and liabilities as you understand them to be.