Marilyn Stowe Blog

A Very Private Divorce?

The popularity of Twitter, and the apparently compulsive desire by some to give a real-time account of a floundering marriage to millions of strangers, has left me thinking about privacy, the divorce process and what happens when a divorce is played out in the public domain.

The wisdom of publishing details about one’s personal difficulties online, to be raked over by all and sundry, has long been grist to the mill for newspaper columnists. I do not intend to add to that debate here. Instead, I would like to look at the divorce itself, with particular reference to finances.

When a case comes to court, what level of confidentiality can you expect?

Divorce is an emotional rollercoaster. When a marriage breaks down, some spouses do lash out publicly at each other’s behaviour. But what about their finances? Would they want the true extent of their wealth and lifestyle made public? For others, there is a very real fear that third parties such as the taxman will be able to pore over the couple’s financial position at leisure.

I always advise clients, from the outset, how essential it is for both parties going through divorce to give full frank and honest financial disclosure to each other and to the court. If they do not, the process is rendered meaningless. The court must have all available information to make a fair decision if the parties cannot reach agreement between themselves. The information required by the court can even include what is likely to happen in the future, such as a change of job or a share deal.

When the stakes are high, it can be tempting for a spouse to go their own way. “So what?” he or she might say. “I’m still not complying.” But that’s a wasted breath. The requirement to give full, frank and honest disclosure is so important, it is enshrined in law. It isn’t voluntary. It is mandatory, and it is backed up by the court’s full firepower. When somebody’s failure to give full frank and honest disclosure becomes clear, that person can end up with a defeat in court and a swingeing costs order to pay. If their omissions are deemed sufficiently serious, that person could conceivably end up with a prison sentence for perjury. It’s rare, but it does happen.

A spouse has no choice in the matter, but it is not uncommon for lawyers to field questions about privacy. Surely, given the compulsory nature of financial disclosure between spouses with the court acting as referee, the details will be kept confidential? No-one else gets to know…  right? Surely, privacy is the quid pro quo for compulsory disclosure in financial cases?

Privacy and the press

Most financial cases are heard in private. Rule 27 of the Family Procedure Rules prevents access by members of the public to family proceedings. However since April 2009, accredited members of the press have been able to access certain hearings, for example the hearing of financial cases between divorcing parties but not conciliation hearings, such as an FDR. In one of the first cases where the media applied for permission to attend, Lord Justice Munby refused an application by both parties in Spencer v Spencer [2009] EWHC 1529 (Fam), when the Earl and Countess sought to exclude the media from attending the hearing of their case. The parties then requested an adjournment and settled very shortly afterwards.

The court may still exclude the press on certain grounds (see Rule 27.3.a) but these are narrow.

Hearings in the Court of Appeal and the Supreme Court are usually held in public. In fact the media were expected to attend private financial cases far more frequently than has happened. Battles were expected over the right to publish details of financial hearings, but these have never materialised.  That is probably because there remains considerable doubt over what the press can actually report.

The Family Procedure Rules state:

Access to and inspection of documents retained in court

29.12 (1) Except as provided by this rule or by any other rule or Practice Direction, no document filed or lodged in the court office shall be open to inspection by any person without the permission of the court, and no copy of any such document shall be taken by, or issued to, any person without such permission.

There is also the importance placed by the courts upon what is known as the implied undertaking. This requires all parties to keep information confidential precisely as a consequence of having no choice but to give disclosure. As such, in the leading case of Clibbery v Allen [2002] EWCA Civ 45, Lady Justice Butler Sloss stated that all information is subject to the implied undertaking before, during and after the proceedings, and may not be published without express permission of the court.

However this implied undertaking may lapse once the information is in the public domain. In the case of Lykiardopulo v Lykiardopulo [2010] EWCA Civ 1315, Lord Justice Stanley Burnton was unswayed by the argument that the judgment should not be made public because it contained “commercially sensitive” information about the Lykiardopulo family’s shipping business. For more about these two cases and the implied undertaking, see paragraphs 71 to 81 of The Family Courts: Media Access & Reporting, published in July 2011.

The question remains: if members of the media are present at a financial hearing court, has the information become public? This point has not yet been litigated, so remains a possibility.

Privacy and the taxman

Now suppose HMRC has you in its sights. The taxman is very interested to discover what came out at the financial remedy hearing. He would like to take a closer look. May he?

In general, the answer is no. The threshold for obtaining permission, under Rule 29 of the Family Procedure Rules, is very high. The case of HMRC v Charman & Another [2012] EWHC 1448 (Fam) is a recent example. HMRC wanted access to papers used in the £48m split of Mr and Mrs Charman, as part of a separate tax assessment relating to Mr Charman. Mr Justice Coleridge, who had heard the entire case a few years earlier, gave a straightforward and easy-to-understand judgment. He quoted Lord Wilson, then Mr Justice Wilson, in the case of S v S:

It is greatly in the public interest that all tax due should be paid and that in serious cases, pour encourager les autres, evaders of tax should be convicted and sentenced. It feels unseemly that a judge to whose notice tax evasion is brought should turn a blind eye to it by not causing it to be reported to the Revenue. In one sense that would almost cheapen the law.

On the other hand it is greatly in the public interest that in proceedings for ancillary relief the parties should make full and frank disclosure of their resources and thus often of aspects of their financial history. Were it to be understood that candour would be likely to lead – in all but the very rare case – to exposure of under-declarations to the Revenue, the pressure wrongfully to dissemble within the proceedings might be irresistible to a far bigger congregation of litigants than is typified by the husband in these proceedings, who of course resolved not to be candid in any event. False presentations by respondents in ancillary proceedings have two repercussions, both seriously contrary to the public interest: (a) either the judge remains deceived, in which the case the award is likely to be inaptly low, or he perceives the deception, whereupon he may draw necessarily broad inferences of hidden wealth which, depending on their scale, could make the award inaptly high or indeed leave it still inaptly low; and (b) applicants are seldom minded to compromise their claims on the basis of presentations which they believe to be materially false and their stance, if justified by the court’s findings, will often be upheld in relation to costs. Yet the family justice system depends upon the compromise of all but a few applications for ancillary relief.

Then Mr Justice Coleridge stated, after considering Clibbery v Allen and Lykiardopulo v Lykiardopulo:

As a general rule documents and other evidence produced in ancillary relief proceedings (now called financial remedy proceedings) are not disclosable to third parties outside the proceedings save that exceptionally and rarely and for very good reason they can be disclosed with the leave of the court. The fact that the evidence may be relevant or useful is not by itself a good enough reason to undermine the rule.

However as Mr Justice Coleridge reminded Mr Charman, the onus was on Mr Charman to acquit himself with the HMRC. Mrs Charman didn’t object to the release of the information to HMRC. If Mr Charman wanted to use some of the information, he wouldn’t be permitted to “cherry pick”. Once in, all in.

Privacy and the judge

In the Charman case, all the relevant evidence, documentation and private judgment remained private. There was no evidence of wrongdoing. If there is, the judge may use his discretion to release the information, as happened in the cases of A v A and B v B [2000] 1 FLR 701.

In the High Court, a judge may publish his judgement. He does not have to anonymise the parties. Thus all the private information given throughout the hearing, if contained in his judgment, can become public.

The possibility of financial details becoming public through a judgment does act as a potent weapon and does prompt parties to settle, fairly or otherwise.

And when it doesn’t? Look at what happened when Sir Paul McCartney and Heather Mills went to court. In the case of McCartney v McCartney [2008] EWHC 401 (Fam), Mr Justice Bennett agreed to an order prohibiting the parties from disclosing details of their correspondence, transcripts and evidence, with both parties’ consent. But he published his judgment, which detailed tax returns and other financial information – along with his scathing remarks about Heather Mills being a “less than impressive witness”.

Another case, heard in public in the Court of Appeal, was reported across the media last week. The case had been heard in private by His Honour Judge Booth in Manchester, but it became national news when, at the Court of Appeal, the husband was branded “untrustworthy” after forging his wife’s signature on a loan against the marital home.

True, the husband succeeded in having a lump sum reduced by a relatively small amount, but in the process he was publicly and severely castigated by the court. I wonder: for him, was it really worth it?

Most divorcing couples can relax. They are unlikely to find themselves splashed over the media. It is more likely that their case will remain private and all information will remain strictly confidential. For the court to override the implied undertaking, and send financial information anywhere, it must be for very serious reasons indeed.

But for those whose cases are heard in the High Court, or are appealed upwards, it is worth remembering that privacy cannot be guaranteed. Although spouses can guard their privacy from the taxman and even from the press, the judge is not bound to keep the details of their case out of the public domain. For a warring couple hoping to keep their finances strictly confidential, judicial discretion may turn out to be the final sting in the tail.