William Massey explains the key part played by financial disclosure in divorce, collaborative or otherwise.
Financial disclosure is the biggest single legal exercise in the divorce process for most of my clients, whether they are resolving disputes in court, through mediation or in the collaborative process. In order to ensure that financial arrangements on divorce are fair, and for lawyers to advise, it is necessary to pull together a comprehensive picture of the assets, liabilities, income, expenditure and expectations of both spouses. Financial disclosure must be full, frank and clear. When it is not, the process inevitably becomes longer, more complex and more expensive.
As a case in point, the justices of the Supreme Court have just heard argument in the case of Sharland. The former wife is seeking to reopen a court order on divorce finance reached by agreement at a time where her former husband failed to tell the whole truth about his business affairs.
The former couple reached an agreement on the understanding that the husband’s business was worth between £31.5m and £47m, and that his shares in it were worth £7million. He had told his wife and the court that he had no immediate plans to float the company. However, shortly after agreement was reached and approved by the court, it emerged that the company was worth significantly more (press reports said up to £600m) and that an initial public offering was indeed being prepared.
Mrs Sharland asked the court to set aside the agreement on the basis that neither she nor the court had been aware of the true scale of the husband’s wealth at the material time. However, both the High Court and later the Court of Appeal declined to overturn the settlement, saying although the husband’s non-disclosure had been deliberate and dishonest, it was not “material” to the outcome: effectively, the wife would have received a similar amount even if the truth had been known. The Supreme Court has now been asked to take a good look at the rules, and what happened in this case, to say whether the lower courts were right to reject the wife’s application to reopen the settlement. We await the judgment with interest.
Financial disclosure is just as important in the collaborative process as it is the court process, and the same standards of disclosure apply. However the collaborative process has the significant advantage of the built-in opportunity to ask questions of each other face-to-face, and to discuss complicated matters such as tax and business valuations directly with the experts. This reduces the potential for delay, confusion and misunderstandings, which can all be frustrating and costly elements of the litigation process. The end result is that decisions about future financial arrangements can be made consensually once everyone is satisfied that the relevant issues have been explored and all questions answered. If this can take place, as tends to be facilitated in the collaborative process, there is a much lower likelihood of problems arising later.