The mystery of the disappearing assets

Family Law|June 21st 2016

This is going to be not so much a post about a case as a post inspired by a case.

All family lawyers have come across divorce cases where the parties have enjoyed a high, or reasonably high, standard of living but where when the marriage breaks down the assets or wealth of the party that were used to pay for that living standard suddenly disappear. Apparently, it seems that it’s a fairly common phenomenon that assets mysteriously evaporate simultaneously with marriage breakdown.

The case is KC v RC & Another. This was the final hearing of a financial remedies claim following divorce, heard by His Honour Judge Booth in the Family Court at Manchester last year (the judgments were only published on Bailii last week). Judge Booth summarised the main issues in the case as follows:

“The essential questions I have to resolve involve me deciding whether, as the husband alleges, he has invested in a housing development opportunity that has gone horribly wrong so that he now has nothing and whether what might have been left has been all spent on legal fees fighting this case so that the ultimate position is one where there is only debt.”

Now, I’m not even going to attempt to summarise the convoluted complexities of the parties’ financial arrangements in the case (that exercise would run to several posts), but suffice to say that Judge Booth was:

“…satisfied that the husband has lied throughout these proceedings and colluded with his family to put their interests ahead of the needs of his wife and children.”

Ouch. Judge Booth went on to draw various conclusions and inferences regarding the husband’s finances and was:

“…satisfied that the husband has the resources to pay a sum sufficient to meet the housing needs of the wife and children. He can afford to pay £500,000, the sum needed to allow her to purchase a suitable home.”

And that was the sum that he ordered the husband to pay.

Now, as Judge Booth pointed out, the fact that he had found that the husband had lied did not mean it was open to him to make an order to punish the husband – he could only make an order that on the basis of the evidence, or on inferences he could properly draw from the evidence, he was satisfied the husband could pay. That may make it appear that the husband had ‘got away with it’. However, he had not – the lump sum that he was ordered to pay included at least £150,000 in respect of the wife’s costs.

The costs penalty, and the reason for it, was made clear by Judge Booth in a second judgment, in which he said:

“The starting point in financial remedy proceedings is that both parties will pay their own costs. [The husband’s] litigation misconduct and dishonesty are more than sufficient for me to take the view that that starting point is rapidly left behind and that there should be an order which effectively means that he pays a substantial proportion of [the wife’s] costs.”

That was the end of the matter for the husband in this case. In a worse case, there could, of course, be more serious consequences. Although unusual, lying to a court can result in a criminal charge of perjury.

As I indicated at the beginning of this post, many parties to financial remedies proceedings following divorce are tempted to try to defeat a claim against them by falsely pleading poverty. As we have seen, this is a strategy that is unlikely to get past an experienced judge, and is therefore likely to make things considerably worse, rather than better. The moral is: don’t be tempted!

The full report of the main judgment in KC v RC & Another can be read here, and the second judgment is here.

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  1. Elena says:

    Absolutely spot on! In my (foreign divorce) case, my ex-husband suddenly claimed that he has financed the property with inherited monies. As in many countries, there is no request for a strict financial disclosure or by the time, the Court has ordered an injunction, money tend to evaporate.

    I am completely for parties to pay their own legal costs but when one of the parties has been financially abusive or has pretended financial hardship, the latter should pay for all legal costs. My ex-husband was appointed as a partner before he lodged his affidavit but deliberately omitted this fact to the Court and claimed financial hardship. He even exaggerated the amount he was paying towards the children’s education!

    Finally, your sentence “it seems that it’s a fairly common phenomenon that assets mysteriously evaporate simultaneously with marriage breakdown” could not be further from the truth.

  2. spinner says:

    If people felt they would be treated fairly by the court maybe they would have some respect for it.

    • Elena says:

      Lying and hiding about assets have nothing to do whether the Court is fair or unfair. The likelihood that spouses were hiding assets well before the divorce is quite strong but when divorce is imminent, the dissipation of assets increase. I have even seen people choosing voluntary insolvency just not to pay a cent towards child maintenance.

      • spinner says:

        “Lying and hiding about assets have nothing to do whether the Court is fair or unfair” – Your missing the point. People know very clearly how unfair the family courts are in divorce so consequently they don’t trust them to resolve their issues and so use every mechanism to remove assets from the courts jurisdiction or flat out lie. As an example of this type of behaviour the state collects more tax’s if the top end tax rate is kept below 50% than if it is moved above it because when above it people feel it is unfair and they actively organise their affairs differently whereas if below 50% they feel that is fair and so cooperate with the system. The system only works if people feel it is going to give them a fair hearing and then cooperate with it on some level.

  3. Stitchedup says:

    Very often the family assets disappear into the pockets of family lawyers. Family assets are also often destroyed by the courts through orders of sale of the family home, which is often grossly undervalued to achieve a quick sale. Of course it’s all in the interests of the children to have their inheritance wiped out by the family justice system.

  4. Andy says:

    This age old issue. What mine is mine and yours is yours…
    As Spinner says if people were treated fairly then assets and other finances would be freely given.

    As usual the justice system lets us down by measures to either hammering the bread winner because the non bread winner who aparantly spent majority of time looking after children should be paid for this with term such as “My career was put on hold whilst I looked after the children”bla bla bla…
    That’s why any assets and finances are hidden.

    Now let’s take the GOLDDIGGER partner who did sod all,lived a life of leisure,now via court demands can be awarded half of anything you have and pay lump sums periodically for life.
    So when you go broke and all your finances are spent on legal costs.

    Solicitors fuel the fire with all the tricks for more money and of course the now disbanded legal aide for the not so well off. Perhaps tricks to obtain legal aide by a lie of he was violent etc would be enough to carry on the process. In effect that’s why things are hidden so you can survive..
    People who shout about fairness are the ones who have lost out..and quite right so…

    • spinner says:

      “Now let’s take the GOLDDIGGER partner who did sod all,lived a life of leisure,now via court demands can be awarded half of anything you have and pay lump sums periodically for life.” – Exactly clearly this is unfair but it’s a result that happens everyday and people know this now so they treat the system with the same level of respect that it treats them with, as in zero. To me it’s the spousal maintenance that is the most unfair, there are very few places in the world that treat the breadwinner this badly, in Scotland they get a maximum of three years support anything more is a form of indentured labour that you have to keep checking back with the court if you wish to change career or stop working or retire early, this is not reasonable for the state to operate in this way.

  5. Elena says:

    In my experience people who shout about “unfairness” have lied and have hidden assets…..but they are very quick to play the victim when they are caught!

    • spinner says:

      Most people believe it or not are not bad people who want to lie or hide assets but when you are faced with a situation that is clearly loaded against you then I think you are perfectly justified in defending and protecting yourself.

      • Elena says:

        Hiding assets so that the other one is destituted is never justified

        • spinner says:

          I don’t think many people genuinely want to do that but the level of attack they suffer when they get into a family court will turn them that way. A lot of women use the kids as weapons regarding contact and controlling that, even going against contact court orders so I guess a lot of men feel that controlling the money side is that only control they have.
          The family courts in England and one big mess and need to be root and branch rethought and restructured as they just don’t work for either side as your explaining here.

          • Elena says:

            “A lot of women use the kids as weapons”- Well, many men (and their partners too) use the children to manipulate situations so that the children are critical of the mother or want to portray the mother as “unfit” and fight for full residence so that they do not have to pay a cent on children’s maintenance to the mother.
            At the end of the day, the ones who lose out the most are the children.

      • Elena says:

        Having said that, I have seen quite a few women walking out from their wealthy (abusive) husband and huge mansion, etc because they realized that a peaceful life was priceless and a better choice than living in a toxic marriage.

        • spinner says:

          To be honest in this day and age where women have equal access to education and so on I think a lot of women find it demeaning to live off a man anyway.

          • Elena says:

            Well, in my environment, the women are usually more well off than the men and in fact, the men have no qualms living off the women!

          • spinner says:

            This is the point really isn’t it society has changed and the courts do not reflect that fact. Similarly framed cases involving stay at home men to stay at home women do not have similar outcomes due to I believe institutional sexism within the family courts.

            I hadn’t mean to suggest that somehow you wouldn’t get male “golddiggers” of course you will but I think they should be dealt with equally and told to get off their arses and get a job and live at the level that their job enables them to live at rather than off the work of others whom in your environment are normally women.

            If you look at the anti life alimony movement in Florida which is one of the few remaining states to allow life alimony in the US a surprising to me at least number of the people involved are women.

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