Financial Remedy cases within England and Wales, regularly involve allegations of non-disclosure or attempts to mitigate earnings or capital assets. Often, this does not appear to be the case or there are legitimate explanations for circumstances evolving post-separation.
Practitioners will always ensure when reviewing financial disclosure, that the evidence annexed aligns with the position submitted in the Form E. If the evidence is not there to make this decision, it is normally requested prior to providing full, appropriate advice on the ‘fairness’ of any settlement.
There are professionally delicate moments that can arise, in particular when your spouse’s disclosure does not align entirely with their submissions. Examples include undeclared income, historic tax irregularities, unusual or ‘unmotivated’ cash movement, or arrangements that ring the ‘alarm bells’ in your head to suggest fraud. Most practitioners will encounter this at some stage, and will be able to advise appropriately on how to protect your interests. However, there is a benefit in knowing how these issues should actually be navigated once they surface.
An easy starting point that clients are generally made aware of before engaging in Form E: the obligation of full and frank disclosure in is absolute and not negotiable. Whether you are represented or Litigant in Person, ‘tech adverse’ or incredibly organised, the Family Court expect to see a full picture of assets. Parties are not granted permission to dilute or omit information no matter the consequences – whether this implies criminality or just general embarrassment (any transaction you may be concerned about, your solicitor has likely seen on dozens of occasions). The Family Court’s ability to uphold fairness – whether this is by meeting needs or considering sharing – rests completely on the disclosure available (although they do reserve the power to make adverse inferences).
When disclosure appears to overlap with potential illegality (most commonly tax evasion), this can cause concerns for both parties. The ‘concerned’ party may not have been aware of the extent until seeing the full picture, did not consider that this would ever surface publicly, or realise that this represents years of misrepresentation to their spouse. It is not an easy realisation. Equally, the ‘non concerned’ party may suddenly find themselves in possession of documents that cause anxiety about whether silence is treated like complicity.
The Family Court is not Criminal Court. There is no automatic or immediate step, where disclosure is sent or reported to HMRC. This does not mean that there is no consequence, but this is dealt with on a proportionate and case by case basis. The Court’s primary concern is likely to be distrust and concerns surrounding dishonesty of other disclosure, where such behaviour is proven to be a factor of the case.
A ‘concerned party’ should be aware that disclosure within Form E and Family Court does not provide automatic immunity from investigation. If this situation arises, the individual should consider whether proactive engagement with HMRC (ideally using a specialist tax advisor) places them in a better long-term position than hoping to scrape through unnoticed. If the case is being dealt with under the hands of Family practitioners or via litigation at the Court, it is unlikely that such behaviour would be missed entirely.
A more subtle difficulty arises for the ‘non concerned’ party if they knew about the issues but did not cause them. As you would expect, married couples frequently sign joint tax documents or benefit from undeclared income either without the full picture, or without making reasonable enquiries. In strict Criminal terms, liability for a ‘non concerned’ party would depend on the extent of their actual knowledge and participation in this crime since.
Considering the Family Court process in greater depth, suspected illegality is usually treated as an evidential question (the Family Court are not there to make moral decisions under Financial Remedy). The Judge’s immediate concern will be full disclosure and ensuring an accurate picture can be drawn. Hidden income can massively hinder the ability for the Court to make fair settlements without true understanding of the ‘net effect’ for both parties.
Does found tax evasion or fraud amount to ‘conduct’ (per Section 25, Matrimonial Causes Act)? Practitioners will readily advise you on the caution that the Family Court takes when approaching conduct arguments. The threshold remains deliberately high to eliminate the need for parties to raise grievances generally or to unnecessarily delay. The threshold remains ‘gross and obvious’, ‘inequitable to disregard’ and financially quantifiable or relevant. Not every form of dishonesty crosses this threshold, and fraud does not alter the threshold either. This is why the Family Court have ways of dealing with settlements that do not cross the conduct pathway, to keep costs lower and to avoid delay. The Family Court adopts computation (a Judge can add back assets already hidden or dissipated, draw adverse inferences assuming that there is more, and consider costs as a compensatory measure where disclosure has failed to be prompt and reasonable). In many cases, what looks morally concerning can be absorbed into a final settlement with a slightly altered outcome, avoiding the conduct spiral of statements, delays and Hearings.
However, sustained and deliberate deception can still raise the ‘conduct’ flag and the Family Court will give this due consideration. Continued dissipation since disclosure was exchanged, ongoing tax evasion, gambling or other problems, or tactical omissions/misleading statements to provide greater financial again can still be regarded. The Family Court do reserve the right to utilise conduct if they consider that the other tools available will not quite afford the ‘non concerned’ party justice.
Material disclosed within Financial Remedy proceedings are confidential. A party to proceedings can’t pass documents to third parties just to force prosecution or investigation. There is still a risk of being held for contempt of Court. Any party considering this step, should consider asking the Family Court for permission to adduce a proportionate amount of these documents to the relevant authorities. This is not a ‘kitchen sink’ opportunity to provide all disclosure on the table, unless the conduct truly does exist in every statement or asset provided.
Financial Remedy litigation can expose conduct that is poor and illegal. This is an inevitable part of the Family Court’s dealing with such masses of disclosure every day. However, it is crucial to consider receiving advice and not to ‘jump the gun’ regardless of which party you are. The Family Court are not guaranteed to run a conduct argument on this basis, and there is not a guarantee that prosecution would follow. The extent of disclosure, its impact on a fair settlement, and the seriousness of the evidence, should be considered on an individual basis when assessing best next steps.
Hannah Newberry
Hannah Newberry is AJFL’s Co-Director and Solicitor, qualifying in 2022 after training with the practice. Known for her calm and supportive approach, Hannah advises on all aspects of Family Law, including children and financial disputes, divorce and injunctions, draft agreements and unmarried couples.
Hannah has been recognised as a Rising Star finalist in the Cardiff and District Law Society awards. Hannah sits as Former Chair and Law Society Officer of Cardiff JLD, Professional Development Officer of Cardiff and District Law Society, and serves as a Board Member of the National Board for Wales (Law Society Wales).
