When does the duty to give financial disclosure in financial remedy proceedings end?

Failure to adhere to this duty can lead to severe repercussions. The other party can apply to set aside the court order by alleging non-disclosure which is either innocent or fraudulent.

What happens when the non-disclosure is fraudulent?

The court will set aside the order unless both of the following conditions are met:

• The fraud would not have influenced a reasonable person to agree to the consent order
• The court would not have made a significantly different order if it was aware of the truth at the time the order was made

The burden of proof rests on the party accused of the fraud to demonstrate the above conditions apply.

What happens if the non-disclosure is innocent?

The order will only be set aside if the court would have made a substantially different order if it had been aware of the non-disclosure. The burden of proof falls on the party making the allegation.

In the recent case of Mostyn Williams v Mostyn Williams [2021] EWFC 123 2021 WL 11457398 the husband's fraudulent non-disclosure resulted in the order being set aside and the husband being ordered to pay in excess of an additional £2million to the wife in addition to her costs.

The couple had been married for 34 years, and their total assets exceeded £6.4 million, of which the husband's shareholding in 'ABC Ltd' was the most significant asset at £3.5 million.

During the trial, the husband claimed his shares in ABC Ltd were 'essentially illiquid' and that he had no intention of selling the company until retirement.

Closing submissions were heard in May 2017, judgment followed on 15 June 2017 with the order finally being approved and sealed on 13 July 2017. The parties duty of disclosure therefore continued until 13 July 2017. The court's order was for an equal division of capital, reflecting the parties long marriage and equal partnership.

However, the husband went on to sell ABC Ltd for over double the value attributed to it during the trial with the husband receiving £9,449,001 in October 2018. The wife sought to set aside the final order, alleging fraudulent non-disclosure, that the wrong value had been place on the company, and/or that the transfer of the children's shares in the company to the husband and the sale of the company were supervening events.

Her Honour Judge Gibbon found that:

• Even before the judgement was handed down the possibility of a sale was very much on the husband's mind and that he had firmed up his resolve to sell ABC Ltd before the final order was sealed
• The husband's continuing duty of disclosure included the conversations/correspondence and meetings he was having with interested parties, dealings with the broker, his notification to directors about seeking an early sale of the company and the agreement of the board to instruct a broker to prepare the company for sale
• The husband's failure to disclose was deliberate
• The husband had failed to establish that the court would not have made a different order had he made the disclosure

The Wife also established that the acquisition of the children's shares and sale of the company was a supervening event, although this was immaterial as the Judge had already decided to set aside the order due to fraudulent non-disclosure. The Wife did not establish that a wrong value had been attributed to the company at a final hearing.

The decision demonstrates the importance of providing ongoing financial disclosure throughout the course of proceedings, up until the point at which the order is approved by the court and the potential consequences if you fail to do so.

For further advice regarding financial remedy proceedings, please contact our New Enquiries team on 020 7405 1234, or complete the form below.