Consequences of Failing To Make Full And Frank Disclosure Of Assets In Divorce Proceedings

You may have read court factsheets, or heard from your solicitors, about a duty to fully and frankly disclose all your assets, debts and financial resources during your divorce proceedings.  But what does this mean? And why is it important?

Full and Frank Disclosure

Full and Frank Disclosure essentially means providing the other party and the Court with a true and accurate statement of your assets and all of your financial interests. In Divorce proceedings disclosure is made by both spouses by way of a statement on oath of all monies and assets s/he has received or earned, usually in the last two years before the court application or hearing.  This would include disclosure of an inheritance or employee share benefits for example, either spouse received during that time frame.

Disclosing new assets does not automatically mean your spouse will share in those assets.  The Court has absolute discretion as to how assets are dealt with and will consider the circumstances surrounding the acquisition of each and every asset.

Full and Frank Disclosure and the Court’s Duty – Why it is important

There are strict rules that require both spouses in divorce proceedings to make full and frank disclosure of their financial affairs at the outset of proceedings and to continue to do so until the final conclusion of the matter (section 38(6) Family Law (Divorce) Act 1996).

The Court has a statutory and Constitutional obligation (Article 41.3.2. and s. 5 Family Law (Divorce Act 1996) to consider what constitutes proper provision for the spouses and their dependants at the time when it is asked to grant a decree of divorce, or to order that a settlement – in the context of divorce proceedings –  constitutes proper provision.  This it can only do when it is fully familiar with the true financial position of each spouse.

Effect of Failure to make Full and Frank Disclosure – The Consequences

If a Court finds that one spouse has deliberately hidden assets from the other the impact of a Court decision could be very significant.

If such a finding is made, the Court could find that the non-disclosing spouse cannot be relied upon and could decide that the reality of that spouse’s financial position will never be known. In such a situation, a Court could make a decision of what the non-disclosing spouse’s assets are on the ‘balance of probabilities’ and award the lion’s share of the property of which the court is aware to the other spouse.

This is even more likely if the non-disclosing spouse is otherwise a financially savvy person and ‘expected to know better’. In those circumstances a Court is less likely to believe that a simple, innocent mistake was made and would not allow a non-disclosing spouse to benefit from his/her concealment.

In cases where a concealment of assets has been proved at the time a divorce Decree was granted, the Court has jurisdiction to re-open the divorce proceedings on the application of the other spouse (who has discovered new information), and to set aside the existing orders and make new orders in their place. A costs order can be made against the non-disclosing spouse which could run to hundreds of thousands of euros.

Recent Supreme Court Case

In a recent Supreme Court case, reported in the press in July 2014 a husband was found to have ‘consciously and deliberately’ concealed assets to the value of approximately €5.6 million from a former wife during divorce proceedings.  The Divorce Decree was handed down in 2001.  The Wife subsequently discovered the existence of the assets and issued High Court proceedings setting the Divorce Decree aside and seeking further relief.  The Supreme Court awarded €2.26 million euro to his former wife.  This was in circumstances where the original Divorce order was made in 2001 and the former husband had remarried.  The Supreme Court decided against setting aside the original divorce decree in 2001.

Summary

Where a party to family law or divorce proceedings has not disclosed all relevant financial circumstances, the best thing to do is to file an amended financial statement, or updating affidavit, drawing the attention to the new circumstances. It is far better to be open and upfront about the new information than find you are telling the court (and your lawyer!) this for the first time, under cross examination, in the witness box, fourteen years after a Decree of Divorce was made.

In today’s digital world, there is almost nothing which cannot be uncovered either by subpoenas issued to banks, examining loan applications, reviewing an HR file from an employer to see where the remuneration goes, looking at superannuation statements to see if any superannuation was rolled out into another fund, and the list goes on.

Do not disclose at your peril!

(c)  2015

 

Deirdre Farrell , solicitor and AITI CTA Tax Consultant, Amorys Solicitors 01 213 59 40