Deception in divorce: non-disclosure of assets


Author: Anna Wakeling


Divorcing spouses in England and Wales have a legal duty to the court and to each other to provide full and frank disclosure of all capital assets, liabilities and income, not just in the UK but also on a worldwide basis. The duty is ongoing until the divorce is concluded, either by court order or by an agreement between the parties embodied in a consent order which is approved by the court.

The underlying principle is that couples are not allowed to hide any assets from each other during their divorce. Such transparency is essential to ensure that both parties are fully informed of what constitutes the family pot. Only then can the pot be fairly divided to meet the needs of each spouse and any children.

Usually parties exchange financial information by way of a comprehensive financial statement, known as a Form E, with supporting documents such as bank statements, property valuations, pension accounts and any other financial information. Each party has to sign their Form E verified by a statement of truth. A Form E resembles a tax return – but worse!

Failure to disclose all relevant financial information and documents can constitute material non-disclosure, the consequences of which can be severe. The court has the power to set aside or overturn any financial order which it considers not to have been based upon full and frank disclosure. Authority for this stems from the case of Livesey v Jenkins [1985] 1 AC 424 where the court held that “The power to set aside arises where there has been fraud, mistake or material disclosure as to the facts at the time the order was made”.

The impact of financial non-disclosure can be financially and emotionally damaging. The financial implications of non-disclosure can be heavy; disproportionate sums of money spent on legal costs which ultimately deplete the value of the family pot. Equally, accusations of a deceptive spouse may only embitter both parties and serve to worsen relations.

In the summer of 2015 the Supreme Court considered the very issue of financial non-disclosure in two appeals brought by two wives, ‘The Ex Wives Club’, in the cases of Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61. The Supreme Court determined that where fraudulent non-disclosure is found, the order will be set aside unless both of the following apply:

  • the court is satisfied that where a consent order is made, the fraud would not have influenced a reasonable person to agree to it; and
  • had it known at the time the order was made what it knows now, the court would not have made a significantly different order, whether or not the parties had agreed to it.

The burden of proving to the court that this exception applies lies with the spouse accused of the fraud. In both appeals the Supreme Court determined that neither Mr Sharland nor Mr Gohil was able to prove the exception. Accordingly, the appeals brought by ‘The Ex Wives Club’ were allowed on the basis that their respective husbands had deliberately breached their duty to provide full and frank disclosure in order to secure a greater share of the matrimonial assets than was fair. The orders previously approved in both divorces were set aside, allowing both wives the opportunity to obtain new orders giving them a greater share of their husbands’ assets. The downside was more legal fees, more delay before resolution and more time spent in their lawyers’ offices.

Recent press reports have suggested that Duncan Bannatyne provided false evidence to a court in relation to his business affairs during his divorce with his ex-wife. It remains to be seen whether the dragon has been hiding assets in his den, but what these recent decisions of the highest court in the country further emphasise is the fundamental importance of being upfront and honest when providing financial disclosure in divorce proceedings.

Anna Wakeling, Associate, Fladgate LLP (awakeling@fladgate.com)

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