A common complaint of parties to financial remedy proceedings is they are often dissatisfied with the level of disclosure provided by their former spouse. In practical terms, what can a Court realistically do?
Much depends on the nature of any non-disclosure. Sadly, it is fairly common for spouses to try to hide assets or evade disclosing them. Whilst it happens all too frequently, it does not mean we should turn a blind eye to it and just accept it is happening. This article provides some practical tips to maximise the power of the adverse inference.
The case of Imerman v Tchenguiz [2010] really put an end to parties’ (illegitimate) attempts to try to find these hidden assets. The Court in Imerman effectively advised that the individual party carries the burden of complying with their obligation to provide full and frank disclosure and it is not for the other party to try to find evidence of concealed assets and even if they did, that evidence is likely to be inadmissible if it has been obtained via illegitimate means. There are of course exceptions to the rule and much depends on how the party seeking to disclose information came about that information in the first place. This article however focuses on what the Court can realistically do in cases of non-disclosure rather than the principles derived from Imerman.
In the majority of cases, the best a representative can achieve for their client is to persuade the Court to draw adverse inferences. Inferences are conclusions drawn by the Court against those individuals who have failed to disclose their assets and/or have failed to comply with the spirit of disclosure within the Family Justice system. More often than not, those inferences are profound because it is a commonsensical observation that those who have assets they seek to conceal, must surely be of a sizeable value to justify trying to conceal them in the first place.
Third Party Disclosure Orders are possible in some scenarios such as disclosure of values of pensions or other assets that are known about or there is some evidence to support their existence. Even then, for an Order for a Third Party Disclosure Order to be effective, it has to contain proper information to enable the third party to properly implement it. In the absence of that information, it is unlikely any Third Party Disclosure Order will be sufficient.
Penal notices and contempt of court applications are all well and good in principle but rarely in practice. In matrimonial cases, sending one party to prison for contempt of court is rarely a good move when their finances, including their income, is likely to be largely affected.
What the Court is therefore left with is adverse inferences. It is tempting (and sometimes a legitimate opening position) to argue that the party who has failed to disclose should have nothing and the other party should receive the balance of the available liquid assets. Such a stance however must still be justified.
The Court must be careful between drawing an inference and being overly punitive. The lack of disclosure of an asset is relevant but the Court must not sacrifice proper and thorough analysis of S.25 Matrimonial Cause Act 1973 at any Final Hearing.
Some guidance has been provided from the High Court and then approved, applied and elaborated upon in the Court of Appeal.
In NG v SG (appeal: non-disclosure) [2011] EWHC 3270 (Fam) [16] the court concluded:
- the court is duty bound to consider, by the process of drawing adverse inferences, whether funds have been hidden;
- inferences must be properly drawn and reasonable, it would be wrong to draw inferencesthat a party has assets that, on an assessment of the evidence, the court is satisfied they have not got;
- if the court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those funds, even in the broadest terms;
- in making its judgment as to quantification the court will first look to direct evidence such as documentation and observations made by the other party then the scale of any business activities and at lifestyle—vague evidence of reputation or the opinions or beliefs of third parties is inadmissible in the exercise; and
- the court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. If the result is an order that is unfair to the non-discloser it is better that than that the court should be drawn into making an order that is unfair to the claimant.
Subsequently, in Moher v Moher [2019] EWHC Civ 1482 provided further guidance was provided:
- the court would be entitled to draw such adverse inferences as were justified having regard to the nature and extent of the party’s failure to engage properly with the proceedings, but it is not required to engage in a disproportionate enquiry, nor should it engage in pure speculation; and
- regarding the application of the principles of need and sharing, when faced with the uncertainty caused by one party’s non-disclosure, and when considering the inherent probabilities, it is a legitimate approach for the court, in appropriate cases, to infer that the resources are (or where) sufficient, such that the proposed award represents a fair outcome.
Adverse inferences can be a powerful tool in matrimonial cases. Proper and meticulous analysis of the financial disclosure is required however in order to satisfy the Court that assets have been hidden. It is also incumbent upon the party seeking inferences to provide the Court with the necessary tools to undertake a proper calculation of the hidden assets. Such evidence is likely to consist of valuations of comparable properties, quantification of unexplained entries in bank statements or maybe even just the party’s recollection of matters during their marriage.
As is always the case, the Court retains a wide discretion to not only draw inferences but to decide the extent to which those inferences impact the division of the remaining assets. In the majority of cases, there are some liquid assets available that the court can divide unequally to give regard to any hidden assets. The likely true value of any hidden assets is unlikely ever to be known so parties must be prepared for a broad and conservative approach from the Court doing the best it can on the (often limited) information it has available.
In summary, in cases where disclosure is not forthcoming, those seeking adverse inferences should not just sit back and do nothing expecting inferences to be drawn. In order to maximise the impact of any inference on the proceedings, the party seeking the inference has to provide as much evidence as possible. In the absence of any evidence, the Court is at risk of speculating (which it is unlikely to do) and the power of the adverse inference is at least undermined, if not lost altogether.
