When a marriage breaks down, the separation process is often fraught with emotional and financial challenges. In England & Wales, divorce entails the division of marital assets, which should be conducted transparently and fairly. However, in some instances, one party may attempt to conceal assets to minimise what they must share with their spouse. Such behaviour not only undermines the principles of justice but also flouts the legal foundation underpinning financial settlements.
This issue is particularly pressing in high-net-worth divorces or where one spouse holds more of the financial reins during the relationship. Understanding how asset concealment can occur, the legal mechanisms in place to prevent it, and the proactive steps that can be taken is essential for ensuring a fair outcome in divorce proceedings.
The legal duty of full and frank financial disclosure
Under the family law system of England & Wales, each party to a divorce has a legal obligation to provide what is known as ‘full and frank disclosure’ of their financial circumstances. This includes disclosing all income, property, pensions, investments, debts, and business interests. This principle underpins financial settlements decided either by negotiation, through mediation, or by the Family Court.
Failing to comply with this duty can lead to serious consequences, including the reopening of financial settlements and potential costs orders or even contempt of court proceedings. The duty applies whether parties reach a settlement privately or whether the court is asked to determine the matter.
Methods commonly used to hide assets
There are various tactics some individuals may use in an attempt to shield assets from the legal process. These strategies are often sophisticated, especially when the party in question has financial acumen or access to professional advice. Some of the more common methods include transferring assets to third parties, undervaluing property or businesses, creating fictitious debts, dissipating assets, and failing to disclose offshore accounts or trusts.
Third-party transfers involve moving funds or property to friends, family members or business associates to disguise ownership. In some cases, assets may be placed temporarily into someone else’s name, with the intention of reclaiming them post-settlement.
Business owners may attempt to manipulate the value of their enterprise by delaying contracts, reducing profits, or not disclosing certain operations. Similarly, cash-intensive businesses offer a degree of flexibility in obfuscating income.
Offshore accounts and complex financial structures involving trusts or shell companies are also common tools utilised by those trying to hide wealth. Each of these tactics creates challenges in ensuring fair settlements, but there are legal remedies available.
How to uncover hidden assets
If you suspect your spouse is attempting to conceal assets, it is paramount that you act swiftly and systematically. Starting with a thorough review of financial disclosure is essential. During the early stages of the financial remedy process, each party completes a Form E, which provides a comprehensive account of their financial position. Any inconsistencies, unexplained gaps, or undervaluations should be carefully scrutinised.
Hiring experienced family solicitors and, where appropriate, financial forensic experts is often a prudent investment. Forensic accountants can analyse bank statements, tax returns, business accounts and other records to identify discrepancies or evidence of concealed wealth. They can also trace the movement of funds and evaluate the real value of assets and business holdings.
Where there is credible evidence or concern that one party is hiding assets, your solicitor can request further disclosure, obtain witness statements, or apply to the court for specific disclosure orders. The court can compel a party to provide documentation, answer questions under oath, or produce records from third parties such as accountants or banks.
In more serious cases, orders such as a freezing injunction (formally known as a Mareva injunction) can be sought to prevent a spouse from disposing of or transferring assets during proceedings. These are particularly useful when there is an imminent risk of assets being dissipated or moved offshore.
Signs and red flags to watch out for
While the concealment of assets can involve deliberately complex schemes, there are often warning signs that should raise suspicion. Some common red flags include sudden changes in financial behaviour, such as establishing new bank accounts, transferring funds to relatives, or issuing loans without clear rationale.
A decrease in lifestyle not explained by a reduction in declared income may also be indicative. If your spouse’s spending habits continue unchecked despite claims of reduced earnings, this discrepancy could signal undeclared financial resources.
Another frequent sign is when a spouse becomes unnecessarily secretive about finances, refuses to share information, or delays completing disclosure documents. Unexplained debts, missing financial documents, and evasive responses during disclosure are also cause for concern.
The role of the courts and judicial discretion
The Family Court in England & Wales retains broad discretion in dealing with cases involving concealment or non-disclosure. Judges are experienced in identifying when disclosure appears lacking or disingenuous. Where the court concludes that a spouse has hidden or undervalued assets, it can draw adverse inferences and ‘add back’ the value of such assets into the pot to be divided.
Moreover, deliberate concealment can result in penalties, including a more generous award to the wronged party, indemnity costs orders, or a revisitation of the financial order—sometimes many years after the initial settlement. Landmark cases such as Prest v Petrodel have reinforced the court’s willingness to pierce the corporate veil or explore complex corporate structures where they are used to conceal personal assets.
It is important to note that dishonesty during disclosure also undermines credibility, which significantly impacts how a judge will perceive the balance of a case. Failure to comply with the duty of disclosure not only risks legal penalties but also encourages a loss of trust that can affect future proceedings, including those involving children.
What you can do to protect yourself early on
Proactivity is key in cases of potential asset concealment. The earlier suspicions are acted upon, the swifter legal professionals can take measures to investigate and intervene. Gathering financial documents, such as joint bank statements, past tax filings, and mortgage documents, before separation can provide a valuable baseline against which current disclosure can be measured.
It also helps to keep a personal record of financial history during the marriage, including property purchases, business developments, and sizable gifts or transfers. This information can be crucial when seeking to evidence inconsistencies in your spouse’s disclosures.
Where personal relationships provide credible sources of information—such as business partners, financial advisers, or mutual friends—this may serve to highlight financial activity your spouse may be attempting to keep hidden.
While it is legal for both parties to use joint documents and records in divorce proceedings, it is unlawful to hack into personal accounts, record conversations surreptitiously, or obtain information through deception. Such conduct may impact your own credibility and could breach data protection laws, so it’s always best to consult a solicitor before acting.
Using legal tools to compel transparency
In addition to the court-ordered disclosure mechanisms mentioned earlier, more formalised preemptive actions can be taken. For example, a legal tool known as a ‘Section 37’ avoidance of disposition order under the Matrimonial Causes Act 1973 may be used to reverse or prevent the transfer of assets if it appears they have been moved to frustrate the financial claims of the other spouse.
Similarly, third-party disclosure orders, sometimes referred to as ‘Norwich Pharmacal Orders’, can be obtained in certain scenarios to compel banks, solicitors, or other institutions to disclose information about a party’s financial dealings. These are typically used in high-value or contentious divorces where standard disclosure procedures are insufficient.
In less adversarial scenarios, mediation or arbitration can be employed, providing both parties are committed to transparency. However, where there is a suspicion of dishonesty, court involvement may be the only effective path to compel a fair outcome.
Updating financial settlements after deception comes to light
If a settlement has already been reached, and hidden assets are discovered thereafter, it may still be possible to have the original agreement overturned. This is a complex area of law, but where there is evidence that one party misled the other, or failed to disclose material information, an application can be made to set aside the financial order.
The Supreme Court judgment in Sharland v Sharland is a leading case on this point. Here, a financial agreement was reopened after the Court found that the husband had failed to disclose details of a potential business flotation, resulting in the wife accepting a settlement far below the company’s true value.
Making such an application requires clear evidence and must usually be made within a reasonable timeframe of discovering the deceit. Courts will consider the materiality of the non-disclosure and whether it would have made a difference to the original agreement.
The importance of legal advice from the start
Divorce is an emotionally intense process, but resisting the urge to go it alone can make a significant difference to the outcome. Seeking specialist family law advice from the outset ensures that you understand your rights, receive support in building your case, and have access to the right experts to uncover hidden financial dealings.
Solicitors can help submit court applications, advise on disclosure strategies, and, when necessary, introduce forensic accountants who specialise in finding concealed wealth. They can also ensure that disclosure is conducted legally and can request court orders where voluntary cooperation is absent.
Even if asset concealment is eventually proven, a poorly presented case or unlawful conduct in gathering evidence can hinder success. Therefore, the guidance of experienced professionals is invaluable.
Final thoughts
Hiding assets during divorce may seem an attractive option to those unwilling to share their wealth, but the legal framework in England & Wales provides robust remedies to ensure financial settlements are based on truth and fairness. The courts take financial transparency seriously, and there is little tolerance for deception.
If you suspect your spouse of concealing wealth, take action early. Gather evidence legally, enlist expert support, and apply to the court where necessary. With the right approach, the risk posed by hidden assets can be managed effectively, allowing for a settlement that reflects the true financial landscape of the marriage.
Ultimately, fairness in financial remedies depends on transparency. By understanding the legal obligations, watching for red flags, and taking proactive steps to uncover dishonesty, you can safeguard your financial future and ensure justice is done.