Financial Disclosure in Financial Proceedings

Firstly we should explain what ancillary relief proceedings are: in the context of divorce or judicial separation they are proceedings the parties can initiate to invite the court to make a financial order resolving their financial settlement. If the parties cannot agree the financial settlement themselves one of them will issue proceedings to have this decided by the court – these are ancillary relief proceedings.

Once an application has been issued, the court will send out a timetable leading up to a final hearing at which the Judge can impose a resolution. The first step provides for the parties to share their financial information – this is called financial disclosure.

As the court has a duty imposed by the Matrimonial Causes Act 1973 to make enquiries into the couples’ financial needs and resources before distributing matrimonial assets and income between them, the parties have a duty to provide details about their financial circumstances (this is usually provided in Form E).

In order that the court has all of the relevant information it needs to decide a fair distribution of capital and income between the spouses they each have duties set out in the Family Proceedings Rules 2010 to: ‘give a full, frank and clear disclosure of all… financial and other relevant circumstances’, further ‘you must attach documents to the form [E] where they are specifically sought and you may attach other documents where it is necessary to explain or clarify any of the information that you give’¹. That duty is also ongoing.

However some spouses are given reason to believe that the other will not provide full and frank disclosure as required by the rules, perhaps because they have been told that the other will hide as many assets as possible in order to reduce any financial aware.

In those circumstances a set of rules developed, called the ‘Hildebrand rules’, which would allow the spouse who had genuine concerns about a lack of disclosure from the other to resort to a form of self-help. Those rules essentially provided that so long as the spouse obtained any information or documents without the use of force they would be admissible as evidence in ancillary relief proceedings.

So far so good, spouses who feared a lack of disclosure from the other were able to help themselves.

Sadly that is the case no longer! In the recent case of Imerman² Lord Neuberger reviews the law relating to the unauthorised taking of documents or information in the matrimonial context and concludes:’…the so called Hildebrand rules cannot in law be justified….whether on the basis of lawful excuse, self-help or public interest, or, indeed, we would add, on any other basis’.

So what are the risks being taken by spouses who take, copy, keep, or supply to third parties documents or information without the authorisation of the other spouse?

Lord Neuberger reviews the laws of confidence to conclude that ‘An injunction to restrain passing on, or using, the information, would seem to be self-evidently appropriate’. In other words if you obtain information or documents which you are not authorised to have you cannot use it.

There is a small caveat: ‘However, the fact that two parties live together, especially if they are married, civil partners, or lovers, will often affect the question of whether information contained in certain documents is confidential’, As a result of ‘what they have said to each other or how they have acted to each other’s knowledge…’. As an example at paragraph 88 Lord Neuberger says: ‘..if a husband leaves his bank statement lying around open in the matrimonial home, in the kitchen, living room or marital bedroom, it may well lose its confidential character as against his wife..’²

In addition to the risk of being restrained from using the information by injunction Lord Neuberger warns that ‘the surreptitious removal of papers may…involve offences such as theft or burglary….[and where] information is surreptitiously downloaded from a computer there may also be criminal offences under the Computer Misuse Act 1990 and the Data Protection Act 1998’².

This is now very serious business, and any spouse thinking of taking a look through the other’s files for financial information should think very carefully about the consequences of taking that action.

It now appears that devious spouses looking to frustrate the courts in giving over to the other spouse that income and capital deemed fair will get away with it.

Whilst Lord Neuberger is sensitive to the possibility of injustice and reviews the legal remedies available to the spouse who fears disclosure is incomplete or inaccurate, he reminds us that there is a ‘readiness of the family court in drawing appropriately severe adverse inferences where a husband has failed to give full and frank disclosure’² – which essentially just means that if there is a final hearing in ancillary relief where evidence is heard the court can decide to make a higher award if it finds that the disclosure is lacking. This is obviously no help to those spouses who are not unlucky enough to have to go to a fully contested hearing…

So what else can the fearing spouse do? Lord Neuberger reminds us all that parties can apply for Mareva (freezing) orders or Anton Piller (search) orders. Which amount to having to make an application that assets are frozen, or making an application for an order allowing the search for, and seizure, of assets.

However ‘such orders, particularly search and seize orders, can be expensive to obtain and execute, and we accept that, particularly in cases where the amount at stake is not substantial, the cost-effectiveness, or proportionality, of seeking such an order may be questionable’².

So in effect these are not remedies easilly available to the vast majority of spouses who issue applications for ancillary relief!

Many spouses and family law solicitors alike will no doubt feel a great sense of unease at the conclusions in this judgement (which are of course academically sound), and we will all have to look to parliament to address this issue at some future date.

If you have concerns about the availability of information upon which to base a sound and fair financial settlement contact us for more advice.

1 Rule 2.61B.
2 Imerman v Imerman [2010] EWCA Civ 908