Disclosures last year in the Panama Papers showed that the practice of sheltering and concealing assets from national tax authorities had become widespread. That practice can also serve to conceal assets from a divorcing spouse.
The requirement on both parties in English divorce proceedings is clear: they have a duty to give a full and frank disclosure of all assets.
That includes any change of circumstances once proceedings are underway. Failure to comply with the obligations can even be a criminal offence. If one party deliberately fails to make a full and frank disclosure, the other will have an automatic right to look back again at the order that was made.
What should a divorcing party do if it is suspected that the spouse has hidden assets? In practice, it can be hard to find them without some clue as to their whereabouts. If there is an intermediary involved — a financial adviser, banker or accountant — lawyers can obtain disclosure orders. And if assets have been disposed of — for example, given away to a family member — to defeat a claim, the court can undo that transaction.
Unlike the rest of Europe, the family courts in England and Wales have wide powers to ensure that there is full disclosure and to prevent assets being transferred elsewhere, or to get them back after a transfer.
They are also robust in trying to establish the full picture, drawing inferences about what is going on, and they do not necessarily have to see a bank statement identifying exactly where the money is to make a ruling.
Another delicate issue crops up when one party wants to gain access to the spouse’s computer, often to get hold of financial records. But doing so is not generally wise.
Divorcing parties should tread carefully when gathering evidence. It may seem tempting to pick up a spouse’s file of bank statements or other financial documents, or even to copy electronic files from a laptop or mobile telephone before rushing off to lawyers.
But they should beware that they may well be breaching several laws by doing so, not least the Data Protection Act and the Computer Misuse Act. Even between husband and wife, there is a duty of confidence.
Those who breach it could find a disaffected spouse taking legal action. In reality most spouses are unlikely to get far in the courts by suing their partner, but it may well harm a case if one of the parties has started proceedings by breaking the law.
Renato Labi, Partner
This article was published in The Times Law Brief and is an excerpt from Hughes Fowler Carruthers’ Expert Guide to Divorce and Money