What does a court do when faced with a party who fails to disclose all of their assets in a financial remedy dispute following divorce? Well, one thing it can do is draw an ‘adverse inference’ against that party, inferring that they have more assets than they have actually disclosed. The court will then proceed to divide the assets as if they included the ‘inferred assets’, resulting in the other party receiving a larger settlement.
Such was the situation in Rabia v Rabia, decided by Lord Justice McFarlane in the Court of Appeal last month. The case concerned an application by a husband for permission to appeal against an order of Her Honour Judge Plumstead, who had inferred that the husband had £300,000 worth of assets more than he had disclosed.
Briefly, the facts relevant to the appeal were as follows. The parties separated in March 2012 after a 14 year marriage. They have three children aged between 11 and 14, who live predominantly with their mother. They owned various properties and the husband had set up an offshore company, in which he claimed to have no personal interest.
The financial remedy proceedings before Judge Plumstead were heavily contested. The hearing lasted for 7 days, much of which was taken up with investigations into the husband’s wealth, in particular, it seems, whether he did indeed have an interest in the company. It became clear that there had been “a wholesale failure by the husband to provide any meaningful disclosure in the course of the proceedings”. As a result, the wife’s counsel had to piece together a true picture of the husband’s wealth from such information as was known.
Judge Plumstead decided that it would be appropriate to divide the assets equally between the parties. In doing so, she accepted the arguments of the wife’s counsel and introduced into the ‘balancing exercise’ an additional £300,000 of undisclosed assets for the husband. Accordingly, the husband was assumed to have those assets as part of his 50 per cent share, with the result that the wife received the majority of the ‘known’ assets.
The husband sought permission to appeal against this decision, claiming that Judge Plumstead was wrong to assume he had additional assets.
Now, clearly a judge can’t just make adverse inferences willy-nilly, whenever they think a party has failed to make full disclosure of their assets. They can’t just pick a figure out of the air for the value of the undisclosed assets.
In the 2011 case NG v SG Mr Justice Mostyn set out the ‘stepping stones’ that the court must traverse before it can make an inference. Essentially, these mean that the inference must be reasonable and must be based upon what evidence is available, including the lifestyle of the non-discloser.
Considering the application for permission to appeal, Lord Justice McFarlane was satisfied that it was appropriate to infer from the circumstances of the case and the overall litigation stance of the husband that there was something of the order of another £300,000 available to him but not disclosed. Tellingly, he said:
“A husband who chooses to approach the litigation in the way that this husband did has to run the risk of inferences being made against him.”
– a point that should be borne in mind by anyone considering not making full disclosure to the court.
In the circumstances Lord Justice McFarlane considered that the husband’s appeal had no prospect of success, and he therefore refused permission to appeal.
Photo by ~dgies via Flickr