Divorce, hidden assets and suspected fraud – what can you do?

When financial cases are bitterly contested, there can be allegations of non- disclosure, divorce hidden assets, and suspected fraud. 

If one party has managed the family finances, the other may know little about their overall financial circumstances. With that additional knowledge about their finances, it’s not uncommon for the person who has managed the household finances to plan for a divorce by adjusting and offloading assets to deliberately produce a more modest balance sheet and make a financial disclosure that is less than expected.

Divorce hidden assets

If you suspect your ex-partner hasn’t been honest about divorce finances, or you believe they may have hidden assets, what can you do?

Expectations about divorce finances can be unrealistic, especially if you haven’t been close to the household finances and emotions can cloud judgement.

Suspicions are often well-placed but proving them is another matter. What if the evidence rests in another solicitor’s files – is it possible to obtain the crucial file?

Consider the following example: A husband or wife wants to expand their asset portfolio, knowing it will be divided in the event of a divorce. They don’t want to miss out on a lucrative opportunity, but they also don’t want their soon-to-be ex-spouse to benefit from it. So, they decide to have a nominee acquire the asset on their behalf. This designated representative could be a friend, a business, or even an offshore trust. They provide specific instructions to commercial solicitors on how to execute the transaction, ensuring that only they will ultimately benefit from it. The nominee, after hiring their own solicitors, properly purchases the asset. Everyone involved in this situation is fully aware of who the sole beneficiary is.

As these actions minimise the other spouse’s claims against them. This is fraud. To ensure that you get a fair settlement, contact us today to arrange a meeting with our divorce financial settlement solicitors.

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Fraud in divorce: an example scenario

If this scheme were ever discovered, the couple’s marital settlement could be overturned, and the guilty spouse could face prosecution for perjury. In divorce financial cases, family law imposes a continuing duty of full and frank disclosure until a court order is finalised. Transactions must be disclosed, informing both the court and the other spouse of the situation. In our hypothetical scenario, the other party suspects what’s happening but lacks certainty. They inform their solicitors that their ex-spouse’s commercial solicitors are Firm X, and the third party involved is a friend, represented by Firm Y.

Can the court order disclosure of the relevant files held by Firms X and Y on behalf of their clients? The answer is that on application, the court can “join” third parties such as the friend, into the proceedings but this is very risky as nothing may come of it and they may end up paying the friend’s legal bill. The court having joined the friend may also order disclosure of parts – but not all – of the relevant files of Firm X and Firm Y.

The problem is the rule of legal professional privilege which is regarded as sacrosanct. One form of this rule, known as legal advice privilege, applies to all communications between client and solicitor for the purposes of obtaining or giving legal advice. It exists for the client’s benefit. The courts preserve the right of a client to take legal advice free from outside scrutiny. Because of this, all instructions and advice remain strictly confidential.

There is one exception when privilege does not apply. In the case of fraud, the examination of a solicitor’s file would be ordered if the fraud came to light. The court could conclude that the case, which is founded on suspicion, lacks solid grounds and is not strong enough to merit the waiving of legal professional privilege.

This may seem unfair. How could a suspicious partner prove fraud has occurred without access to the file? Equally how could they gain access to the file without first proving a fraud?

Making an allegation of fraud is a serious matter; an incorrect accusation could mean that the party claiming that fraudulent activity has happened would have had to pay all the legal costs involved, as well as damages for any losses suffered.