Divorce, hidden assets and suspected fraud – what can you do?
The examination of a solicitor’s file may be required if a fraud has come to light.
When financial cases are bitterly contested, there can be allegations of non disclosure and even fraud against spouses who disclose incomes and assets that are less than expected.
If the husband has supervised the family finances, his wife may know little about the couple’s overall financial standing. So if he is creative and anticipates a divorce, he may try and divest himself of assets in order to produce a relatively modest balance sheet. In such a situation, what can a wife do?
Sometimes the wife’s expectations are unrealistic. She can’t accept what is there in black and white, because her emotions have clouded her judgment. More often than not her suspicions are well-placed, but proving them is another matter. What if the evidence rests in another solicitor’s drawer? Is it possible to obtain the crucial file?
Take the following as an example; in my experience, this isn’t an uncommon scenario. A husband wishes to increase an asset portfolio which, on divorce, will be split. He doesn’t want to pass up a terrific deal; equally, he is determined that his soon-to-be-ex-wife should not benefit. He decides to have a nominee acquire the asset for him. This nominated representative may be a relative, a company or even an offshore trust. He gives explicit instructions to his commercial solicitors as to how the transaction is to proceed, revealing that he is ultimately set to benefit. The nominee also instructs solicitors, and the asset is duly acquired. In such a case, all parties concerned are fully aware that the husband is the overall beneficiary. However, his actions will minimise his wife’s claims against him.
This is fraud. If it ever came to light, the couple’s marital settlement could be set aside and the husband could be prosecuted for perjury. There is an ongoing duty of full and frank disclosure in financial cases in family law until a court order is made. Such a transaction must therefore be disclosed, with the court and the man’s wife made aware of the position. In our hypothetical case, it isn’t, the wife guesses what is going on but she can’t be sure. She tells her solicitors that her husband’s commercial solicitors are Firm X, and that the third party is the best friend of her husband, and his solicitors are Firm Y.
Can the court order disclosure of the relevant files held by Firms X and Y on behalf of the husband and his best friend? The answer is that on the wife’s application, the court can “join” third parties such as the best friend, into the proceedings but this is very risky as nothing may come of it and she may end up paying his legal bill. The court having joined the best friend may also order disclosure of parts – but not all – of the relevant files of Firm X and Firm Y.
The problem faced by the suspicious wife 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.
In a leading family law case, heard in 2006, C v C (2008) 1FLR 115, Mr. Justice Munby stated that “privilege is in principle, absolute” It is founded upon “vitally important public policy”. This means that someone giving instructions to a solicitor and taking advice can be assured that a confidence will remain a closely guarded secret. This is as it should be: we solicitors are guardians of many secrets.
There is one exception when privilege does not apply: in a case of fraud such as the example I have outlined above. In that example, the examination of a solicitor’s file would be ordered if the fraud had come to light. According to Mr. Justice Munby, who re-states century-old law, such an examination should be exercised “very sparingly”.
In the case of C v C, the wife’s suspicions were strongly aroused but not proved. She believed that a Liechtenstein trust, of a type known as an Anstalt, was selling a property behind her back. She also believed that the Anstalt was in effect, her husband. She asked the court to order an inspection of the Anstalt’s solicitor’s conveyancing file. The solicitors concerned refused, claiming that legal advice privilege applied.
The court held that the wife’s case, which was founded upon her suspicions and lacked solid grounds, was not strong enough to merit the waiving of privilege. She remained unable to access the parts of the file that were covered by legal advice privilege.
This may seem unfair and circuitous. How could the wife prove a fraud without access to the file? But…how could she gain access to the file without first proving a fraud?
Making an allegation of fraud is a serious matter; an incorrect accusation could have meant that the wife would have had to pay all the legal costs involved, as well as damages for any losses suffered. On balance, the Judge decided the argument in favour of legal advice privilege was too strong. The wife lost her application.
But do bear in mind that solicitors are Officers of the Court, and they cannot mislead the court and present a financial picture of a client, that they know to be false. If the client tries to pull a fraudulent stunt through the commercial department of his family law solicitors, their professional obligations to the court would prevent this happening and they could not continue to act in the family law proceedings if their client refused to tell the truth.
Sometimes lawyers fail to realize that privilege applies to some of the documents in a file. This sounds scarcely credible, but it happens. Sometimes they fail to read the entire file they agree to hand over or are ordered by the Court to be produced. Ignorance can lead to disaster, if solicitors blithely disclose prejudicial file notes – which are covered by legal advice privilege – to the other side. Some Solicitors may think that discovering a wrongdoing on a file which has to be disclosed by court order, means the attendance notes and solicitor/client correspondence must be disclosed in their entirety and waive privilege without the client’s consent. That is not the case. It is always for the client to waive privilege. However, if the damage has been done what then? Where documents are disclosed by mistake, the court may order their return to the client but in the case of a demonstrable fraud, I think it is too late! The client’s only remedy having been badly compromised, may be to sue the ignorant solicitor for whatever losses can be legitimately claimed.
For the client and lawyer on the other side, such a blunder can be a godsend if fraud is suspected. The lawyer has no duty of care to his or her client’s spouse, and is entitled to assume that where compromising documents are produced in the normal way, legal advice privilege has been waived.
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28 Comments
Ann Marie on June 19, 2008 at 9:28 pm
I love what you do here. This information proves invaluable to so many people and I’m sure you are making a big difference for many. I work for http://www.firstwivesworld.com, it is an online community of support and help for women navigating through the various stages of divorce and life thereafter. I think that with sites like yours and ours, we are making very big steps in helping people get through this very difficult and trying time in their lives. Together we are collectively removing the stigma from divorce. You’re fantastic!
Just my two cents
Ann Marie
http://www.firstwivesworld.com
rechtsanwalt schweiz on June 22, 2008 at 10:56 am
Thanks for your information, i found your post very helpful.
sarahward on August 1, 2009 at 4:42 pm
I am aware that a solicitor (who is being divorced by his wife) has failed to make full disclosure to the court in his form E. The wife has found evidence of the husband’s extensive non disclosure (investment shareholdings, directorships, bank accounts, shareholdings in family businesses on public records but belives there is more still hidden). Her solicitor says there is nothing my friend can do until the full trial. This seems really unfair as my firned can not afford to take the matter to full trial. Is there any steps she can take? She is very fed up with her present solicitors
Marilyn Stowe on August 3, 2009 at 11:37 am
Without doubt this requires clarification by your friends’s solicitor, and if necessary by someone more senior in the firm. She could also change solicitors if she is still dissatisfied.
On the assumption this case has passed through the previous stages (where it is possible to include this information into a questionnaire and seek replies) and is now listed for a final hearing, what would I do?
As for the information that she has obtained, I would evaluate and explain the information and consider with her whether it is likely to make a proportionate difference to the outcome. Sometimes information is out of date, sometimes it is relatively minimal, and will not alter the settlement.
If it would and the breach of disclosure is serious, the case needs to be brought back to court straight away in advance of a hearing. There would be disclosure of the material she has obtained, a questionnaire for the court to order the solicitor to answer, and documents for him to provide. There would be a wasted costs order to consider against him and that he has perjured himself by failing to disclose the information.
I would also disclose this information to the other side even if it appears to be of little value and seek explanations and his valuations because something may come of it.
I would not leave it until the final hearing because your friend could be criticised by the court, for failing to make disclosure and seeking explanations, when she had it in advance of the hearing.
Anna on June 28, 2010 at 5:37 pm
If one party claims not to be ‘cohabiting’ but living as a tenant but as soon as an ‘Agreement’ has been reached purchases a property with the cohabitee can the other party then prove that the claim not be cohabiting is a lie and the ‘Agreement’ be set aside? How can we find out when the purchase was initiated i.e. if the mortgage was applied for before the ‘Agreement’ was reached is this grounds for the resulting Consent Order to be set aside?
jt on September 4, 2011 at 1:21 pm
What happens when you discover that the ex, who previously declared they got nothing on the death of their remaining parent, actually received over 50k and failed to declare it at the divorce.
The other party has paid them a monthly amount for years when all along they had this money – surely this is fraud and we have a recourse in the court
Marilyn Stowe on September 4, 2011 at 3:24 pm
You can apply to have the settlement order set aside and the case reconsidered in light of the fresh evidence.
It isn’t easy and you need very good legal advice on the pros and cons involved.
Abbie on February 9, 2012 at 8:42 pm
I was wondering if you could help with a pointer on the following. A good few years ago a husband fraudulently remortgaged a family home by forging the signature of the wife and witness, never attended court and avoided all legal proceedings, leaving the wife to declare bankruptcy and her and the 3 children to lose their home. In court the bank argued that it was ‘her duty as his wife to know what he was doing’ and used an example (circa.1990) of a legal case where this had previously been argued successfully. I am trying to find the name of this case and whether it has been rejected in any subsequent cases? Any help would be very welcome! Thank you.
Churchill on February 29, 2012 at 1:27 pm
Hi Marilyn,
looking at the other side of the finances issue from hidden assets – what consequences are there for the spouse who, in a two year period between separation and FDR has spent at a rate far in excess of that when the couple were together? Surely the assets are to be looked after as far as reasonably possible before there is an agreement on how assets are to be split. This presumably relates to cash in the bank as much as to bricks and mortar value of a FHM?
What makes the case I’m speaking about so acute is that the account from which the majority of this profligacy occurred was not mentioned in the Form E, only in response to a subsequent questionnaire. So there was an attempt to hide the spending, which was wrong in itself I assume and made worse by the detail of the spending.
What, if anything, can the Judge do to re-balance the starting point before assets are divided? Are there any cases (my uneducated attempts to find any have failed miserably) you could point me towards for some guidance?
Thanks again.
Rachel on February 29, 2012 at 6:19 pm
Churchill
At the final hearing in my case the judge considered the purchase of a £72k Porsche a few weeks after the separation as profligate and put the full value back in the marital’pot’. It had depreciated by about £25k in 18 months. There is case law to support this kind of argument.
Marilyn Stowe on March 1, 2012 at 8:44 am
Churchill and Rachel
Yes I agree. The court will most likely ‘add back’ the sum involved into the pot.
This happened in one of our cases where a wife gifted £350k to the children of her first marriage during the separation period from my client. It was added back into the asset pot as though it still existed on her side of the balance sheet. My client then received credit for it.
Regards
Marilyn
PS I’ve changed the facts of the case to disguise the client’s identity but you will get the picture.
Wanda on March 10, 2012 at 3:50 pm
Dear Marilyn:
I am in mediation with a man who has been deceptive too many times to count. I realize that this should be done in court, but I want to end this soon for children and me.
He had two omissions on the statement of net worth, which was certified bt attny for court That totaled $1,700,000.
Knowing this I have given him an amt for me to settle. Not a huge number. 1/3 of his salary. And 1/5 of equitable dist.
He cannot do it. He has no fear of the court, and frankly I see why i am surprised that it has no punitive measures in court for financial deceptionists in divorce O
Shouldn’t there be an award to the spouse who has to deal?
Lying on networh fines? What’s the point of not trying if no body gets spanked?
Anonymous on April 8, 2012 at 5:03 pm
Hi Marilyn,
I am recently divorced after what has been an absolute horrendous divore battle that cost me £100k! Just to give you an idea…my ex husband transferred £607k of our money to his mother 2 weeks after we separated and after taking him to court I lost. Apparently his mother loaned him the money and he repaid it even though the documentation for it was not signed until after we separated! He then resigned as director from 5 companies…(he is still the director of 3) resigned from 2 family trust companies which is worth several million giving it all to his brother and his family. Had 2 medical reports done to say that he was so stressed from the family business that he can’t work and so I do not get any maintenace for my 2 children. He did not produce to my legal team both our Spanish bank accounts or our 2 children’s bank accounts. It only came to light during the divorce that he was investing in my name without me having an knowledge….I will never find out exactly what? He seems to think that he is above the law and because he has been allowed to act this way…bullyish…he has now reneged on the divorce agreement by paying off our children’s school fees which should have been paid into a joint bank acct and the decision made by us both. I told my legal team and indeed the forensic accountant involved that he had offshore accounts and noone listened to me….they had no interest at all. Since the divorce I have found out the name of the company offshore and have a solicitor involved. After spending a silly amount already I’m naturally scared to go down this road again…I have 2 kids to bring up with no income at all. I have not worked for 15 years. When I began my divorce I had faith in our legal system but not anymore the current system is a total sham…there should be high penalties for non disclosure so greedy and controlling people think twice before they lie. As it is right now you can hide your assets so easy so wives like myself whose husbands are wealthy have no chance finding out the truth.
Sheila on April 16, 2012 at 2:47 pm
I divorced 8 years ago. My husband did not fully disclose his assets – he had a bank account with money in it that he had saved during our marriage. I will have proof shortly that his mother left money in her will which he did not share with me. Is this sufficient evidence to warrant an investigation of his finances.
Marilyn Stowe on April 16, 2012 at 3:43 pm
Sheila
I dont want to give false hope to any readers in such a position. Trying to set aside a court order after such a long period as 8 years is a mammoth, hugely expensive task, if it is not near on impossible, unless it can be conclusively proved that there was a fraudulent concealement of substantial assets that would have made a real difference to the overall settlement.The court will only order full disclosure if they set aside the original order and to do so there has to be very strong evidential grounds and not simply a request for a fishing expedition based on supposition. I would also caution anyone in that position very strongly against taking any steps to prove fraud that could leave them at the wrong end of the law. It is not worth it. Sometimes, however unfair it may seem, it is better to let sleeping dogs lie, move on with life and concentrate on the future. That is my general advice.
However, Sheila I am not your lawyer, I dont know all the facts and figures or whether you have other options apart from set aside, under the original order eg if your claims were not fully closed off, and so for an opinion about the strength of your own legal position on which you can then personally rely, you must take your own legal advice.
Best wishes
Marilyn
janice on January 29, 2013 at 3:25 pm
i have been separated 3 years going for divorce my husband lives in spain but has a bank account in england the past 6 years. he does not pay me maintenance and he is telling me he closed the bank account last year but he goes to england same time every year to put a large amount into the account which his father gives him( for rainy day am i entitled to share of this
Marilyn Stowe on January 29, 2013 at 7:30 pm
Hi Janice
All assets in a divorce are up for sharing.
Regards
Marilyn
Betsy Balboni on February 3, 2013 at 4:28 pm
Can you please tell me how I can investigate my ex-husband’s assets abroad? I know he is hiding stacks of money here and is travelling to Italy on the pretence of business to sort himself out. Please help, after 3 years of seperation, I am in constant difficulty to make ends meet with my 6 year old!
Linda on February 5, 2013 at 6:33 pm
Dear Marilyn
I simply do not know which way to turn! Before attending court for our final divorce hearing I had informed my solicitor that I had uncovered pensions that my husband failed to disclose. To be blunt my solicitor was negligent and failed to support my written evidence. I was NOT awarded a share of my husbands pensions. One year later, I receive an e-mail advising me that my husbands solicitor admits to making errors completing his form E and subsequent questions there-after regarding these pensions! I would very much appreciate some advice as to where I go from here, as I have lost complete faith and I don’t know which way to turn!
David on March 24, 2013 at 9:48 pm
Thank you for this article. very informative.
a big thank you to firstwives world site for revealing all the tricks and fun and games to women and men of children who are caught in fire of divorce.
did not think about what the websites information would do to any divorce case. very insightful !!!
alisha on April 27, 2013 at 5:50 pm
when a financial order in the interest of the wife places an asset in trust of “wife and husband” and this asset is passed across upon the sale and on the basis of a decree absolute. what happens when a spouse dies and a decree absolute has not been granted. does the financial order asset in t rust fall part of the estate or not.
Amanda on May 2, 2013 at 11:37 pm
I think that if you can do all the investigating yourself, and bring a file of relevant information to the table, then for just the cost of the application to court it is always worth it. Just be sure that there is proof of conduct. It really is that simple, and make sure that you dot every (i) and cross every (t). It may be a good idea to approach a solicitor for the hearing, who in turn will help to present you with a suitable barrister.
I would also prepare most of the bundle for the barrister yourself, as the fees charged by solicitors is remarkable.
Ru on May 7, 2013 at 10:24 pm
So what happen when a spouse has been selling off marital assets during a period of separation and when divorce proceedings, in particular an asset which was listed in the particulars of a marital home jointly purchased. Also when the spouse has admitted that allegations in a witness statement used to obtain injunctions was false and never happened, then breaches an injunction. Threatens disposal of personal property with the assistance of a solicitor and the solicitors for the spouse admit breaching the Data Protection Act and there are other concern of misconduct such as misrepresentation and discrimination?
merlyn on May 8, 2013 at 12:02 pm
I applied form A for SM for me to UK court and paid 240 pounds fee. I received Form E to be completed now. As we are not living in UK and I am not UK citizen even don’t have visa to attend court hearing. I called to court and send them request for telephone hearing. But not reply still. Please tell me what is my chance after 3 years childless short marriage? We don’t have joint account as well house together. He is getting 8 times more salary than me. Is there any kind of court hearing for people who is outside of UK and can’t come to court hearing and can’t afford to buy ticket? Or there is no chance at all. Thanks
Marilyn Stowe on May 10, 2013 at 5:15 pm
Dear Merlyn
You can apply for a financial settlement here, and the court can make orders to deal with your inability to travel to the court.
Regards
Marilyn
Kim on May 9, 2013 at 7:34 pm
I am after some advice. My husband left me at seven monhs pregnant after having an affair with a joint friend. I had some savings of about 18k I paid off a loan and then had the house redecorated in my room, my nursery, spare room and kitchen. I bought new things so everything was knew to me bedding, furnishings etc. My ex froze the joint account a few months later and didn’t pay me a penny so I lived off the rest of my savings (I took a whole year mat leave not getting any money for 6 monhs and have incurred about 6k solictors fees which also came out of my savings. My ex is now insisent that I have hidden money and is applying to the courts to get various friends bank accounts looked into. I’m not worried as they won’t find anything however one of my friends is very well off (rents out various houses). I’m just worried how some of them will take their accounts being inspected as it’s very personal. What is the likely hood this will happen? I have even offered that the money, take away what he should have paid me in CSA and half solicitors fees, go back into the pot even though it’s gone. But he’s not having any of it and likes being awkward for the sake of it. It took me nearly a year to get him served with the divorce papers as he wouldn’t sign anything then I had to pay for them to be served which he avoided for weeks and the ripped them up when he was finally served. Under what circumstances would the court agree to various friends bank accounts being looked into? Would this be agreed to just upon speculation from my ex partner? Would I be informed so I could tell them first so it wouldn’t be a shock?
Sue on May 15, 2013 at 2:45 pm
Dear Marilyn,
In two weeks time I have my first hearing. Looking at my ex husbands form E there are various anomalies.
We are both retired and each receives our respective State Pensions supplemented by Pension Credit Guarantee. I have in addition some DLA, and my ex continues to claim carer’s allowance for me although we have not lived together for two years. Inspite of this, my ex still has more monthly income than I do.
He rents a luxioury 2 double bed 2 bath flat, paid for by housing benefit. I remain in the family home trying to keep up with the mortgage as he refuses to contribute.
Firstly, I can see that he is claiming monthly expenses far in excess of what he is actually spending according to his bank statements. He has around £1000 each month of excess income when he is claiming £200 – £300 left over.
He also previously claimed to his solicitor that he had no savings/premium bonds but after I put evidence forward that he had, he has now produced a statement showing some £13,000. He has £12,000 currently in his current account.
He has only put forward 9 months of bank statements instead of 12, and I can see during four of those months that he has taken out £2500 on one occasion and £2000 on three others making a total of £8500 being paid?? Does this look like an undisclosed bank account.
It now appears that he has some decent savings of £33,000. I have none save a small running total in my current account.
He has refused to contribute towards considerable maintenance on the family home. He left the family home after a non molestation order was placed against him whilst I was in hospital after another violent attack, taking with him all of the family furniture other than a bed and an arm chair.
On his form E, he is not claiming that he needs money to re-house himself. I, on the other hand require a small bungalow that will have to be adapted somewhat (wheelchair accessible etc.)
There is only roughly £120000 equity in the property. He is insisting that he takes 50% of the house and keeps his savings.
I have two questions:(1) In light of the anomalies in his form E, how will the court look at this – his claims that he spends more than he does, plus the question of where did the £8500 go?
(2) I think that if you add together his total savings of around £33,000 plus the equity of £120,000, this makes £153,000.
In view of the fact that he gets more income than me, can save around £10,000 per year, has no need of alternative accommodation, how is the court likely to split the assets?
I have asked for a 70/30 split to enable me to purchase the most basic of bungalow’s in the area but he will not negotiate at all and insists upon going into court. He refused mediation even though I was willing but didn’t have to because of the DV.
My solicitor is on sick leave at the moment and unlikely to be back in time for the court hearing. I am going to have to be represented by a junior from the firm who’s only expertise is in Housing, not Family law and am rather worried as to the outcome.
He has a very experience solicitor acting for him and I am afraid that they will run rings around mine.
Grateful for any advice or reasurrance that you can offer.
Marilyn Stowe on May 16, 2013 at 5:01 pm
Dear Sue
I was amazed to read your e mail. You have experienced DV and retained solicitors and are writing to me for advice? If your solicitor is on sick leave, then another solicitor in the firm who is equally competent should be advising you. You should not be relegated to someone who deals with other matters. You must immediately contact the senior partner of the firm and set out your concerns. If they can’t help, then change solicitors and instruct someone who will advise you fully and represent you in court.
Regards
Marilyn