The obligation to give full and frank disclosure

Family Law|July 28th 2015

One of the greatest temptations for parties involved in financial remedy proceedings following divorce is to be, shall we say, less than forthcoming when it comes to disclosing details of their means. After all, if the court isn’t aware of that little offshore account, then the ex won’t get any of it, will they?

Obviously, the more complex a party’s financial arrangements, the more difficult it is likely to be for the other party to be certain that full disclosure has been made. Certainly, that was the case in KG v LG (No 2), a judgment which serves as a reminder of the duty to make full and frank disclosure.

The case concerned a husband and wife who separated in 2009, after a long marriage. Divorce proceedings were commenced and in June 2010 they entered into a consent order, setting out an agreed financial/property settlement. As required by the court, the parties filed statements setting out their assets. The husband’s statement disclosed total capital resources of £14,262,143 together with a net income of £166,650 and a pension with a value of £431,522.  Accordingly, the total award to the wife of £7,250,000 was very close to half of the disclosed assets.

All fine and good, save that in 2014 the wife discovered that the husband was the principal beneficiary of two substantial family trusts. The trusts had been mentioned in the husband’s statement, but only on the basis that the husband was a ‘potential beneficiary’, with the three children of the family being the primary beneficiaries. Further, a letter from the husband’s solicitors had mentioned a family trust but had indicated that the husband could not benefit under it.

The wife appealed against the consent order, seeking to have it set aside on the grounds of material non-disclosure by the husband.

The appeal was heard by Mr Justice Moor. He essentially had to decide three points:

  1. Was the husband’s disclosure full and frank?
  2. Was it material to the outcome of the case?
  3. Had the wife delayed too much before launching the appeal?

As to point one, Mr Justice Moor found that the husband’s disclosure as to the trusts was “woeful”. For example, the letter from his solicitors was completely false and had never been corrected. His statement was also misleading.

As to point two, Mr Justice Moor found that he could deal with this point very easily. As at the time of the consent order, the trusts contained £4.2 million in cash and there were also shares worth around £3 million. Clearly, these assets would have had a bearing upon the settlement.

Lastly, as to the issue of delay, Mr Justice Moor found that the wife had acted promptly when, for the very first time, proper disclosure was given to her. She had not delayed.

Accordingly, the husband had been guilty of material non-disclosure. The appeal was therefore allowed and the consent order was set aside.

As I said above, the case is a timely reminder of the obligation to make full and frank disclosure. Contrary to what some might believe, seeing what you can get away with not disclosing is not part of the process of obtaining a financial settlement on divorce. As the case shows, failure to make full disclosure can invalidate the entire settlement, and is also likely to result in you paying the costs of an expensive appeal.

The full report in KG v LG can be read here.

John Bolch often wonders how he ever became a family lawyer. He no longer practises, but has instead earned a reputation as one of the UK's best-known family law bloggers.

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