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Divorce law blog

Honesty is the best policy

09/05/2013   By: Nigel Shepherd

When you are trying to sort out the financial consequences of a divorce one of the key ground rules is that you have to give an honest account of your assets. This applies not only to what you’ve got at the moment, but also to what you know might change in the foreseeable future that could make a difference to the negotiations and order the court is asked to make.

The recent “big money” case of S v S heard in April 2013 dealt with this issue. Although they hadn’t been able to reach agreement up until that point Mr & Mrs S settled their case during their final hearing in July 2012. A key asset was the shares Mr S had in a private company. The deal involved cash and properties going to Mrs S, but also 30% of the value (after costs and tax) of Mr S’s shares whenever he cashed them in. What Mr S did not disclose at the time of the deal being agreed and approved by the court was that there were discussions going on about the company being floated on the stock market. Mrs S found out about this later and there were figures being bandied about that the company was worth a great deal more than the value being given for it originally. She applied to the court to scrap the original order and reassess her claims.

Mr S denied that there had been any dishonesty on his part, but the judge was clear that he had kept the details about the floatation from his wife and the court. He went on to say that the information would clearly have made a difference to Mrs S’s decision to accept the deal that was being offered back in 2012 and to the court’s decision to approve that deal. If the facts had been known, the court would have postponed the decision to see what actually happened with the company.

So surely Mrs S would win her argument to set the deal aside? Unfortunately for her she didn’t. This is because there is a two stage test for re-opening a deal approved by the court. She got over the first hurdle of proving that Mr S had not given the information he should have done about the plans for the company but failed on the second part of the test, which was establishing that the information would have made a difference.

It turned out that the planned floatation of the company did not actually take place. This meant that even though Mr S hadn’t been honest the deal was actually still a fair one overall. As noted, when he did eventually sell up she was going to going to get 30% of the net value.

This doesn’t mean to say that Mr S won’t be penalised for his actions. The court has to decide who should pay the costs involved in the attempt to revisit the order and it would be surprising if Mr S didn’t end up footing most if not all of the bill, particularly when he fought the claims of non-disclosure when his case on that was described by the judge as being “hopeless”.

The moral of the story is that keeping relevant facts back will nearly always be costly. Honesty is definitely the best policy and if you haven’t told the truth and you’re found out, coming clean as soon as possible should at least limit the damage.

Find out more about financial disclosure and hidden assets on divorce on our website.

Nigel Shepherd
Family Law Partner

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