Stephen Gold: Are you sitting? Stand by for a shock. Sometimes, one or both parties in a divorce withhold the existence of assets or underestimate their value
Stephen Gold is a retired judge and author who has written popular series for This is Money on how to be a successful executor, writing a will, bankruptcy, consumer rights and legal disputes.
In part one of his latest guide, he explained the ground rules courts use to decide how finances are split in a divorce, and in part two pension sharing, belated applications, remarriage and tax.
Today, he looks at how to reach an agreement, and what happens when one ex tries to cheat the other out of their fair share of marital assets.
‘We’ve agreed. We’ve agreed.’ Parties do actually agree on financial remedies. A lot of the time.
The agreement may be reached without a court application being made or it may be reached at any stage of court proceedings.
There are three stages to all but the most straightforward cases:
– A first appointment at which a judge will give procedural directions;
– A financial dispute resolution appointment at which the judge will bang the parties’ heads together (but ever so gently to avoid fractures);
– And a full-blown contested hearing where the parties are still at war which could take 18 months or more to come about, from when the case kicked off so plenty of time for negotiation, offer and counter-offer and changes of mind. The agreement could come as late as when the court usher calls the parties into court for the third stage.
Along the way, the parties will have been encouraged to attempt to agree through some non-court dispute resolution.
Mediation is the most common form and, in fact, the party applying for financial remedies must generally attend a meeting giving them information about mediation and whether it would be appropriate before starting the application.
New legislation came into force on 29 April 2024 which is aimed at inducing a party who stubbornly refuses to try mediation to think again.
This is achieved by the threat of ordering them to pay the other party’s costs of the proceedings on account of their refusal.
As it happens, costs loom large in negotiations. The general rule is that each party pays their own costs in the world of financial remedies.
With lawyers in the case – even taking advantage of the ‘direct access’ scheme under which a barrister advocate can be engaged without the use of a solicitor – the costs for all three stages can be staggeringly high.
It is fair to point out though that where one side cannot afford to instruct a lawyer, but the other party is loaded, the court can be asked to order the other party to stump up the money for their opponent’s legal representation. It is called a ‘legal services order’.
Where, mercifully, the parties are agreed, they could get on and implement the agreement without any involvement of the court.
‘To hell with the court, to hell with the lawyers,’ they proclaim. That would be highly dangerous, for a host of reasons.
The chances are that the agreement fails to cover every detail it would be wise to have covered.
One party may decide they have done a bad deal and want to renege on the agreement and attempt to persuade the court to decide what financial remedies they should be granted.
Or one of the parties may drag their feet in taking necessary steps to implement the agreement reached with the result that, without an order having been made, it becomes difficult, if not impossible, to compel them to do so.
The drafting of an order incorporating what has been agreed requires skill. It is for the parties to organise it. The court will not undertake the task.
I beg of you: don’t do it without professional input.
Template orders can be accessed by searching online for ‘standard financial remedy orders’ which will demonstrate to parties that their proposed agreement had overlooked a dozen or so points for which they should have allowed.
There is also a template in my book (see the box below) for the simplest of cases if the parties flatly refuse to heed my begging.
To keep down the expense for that drafting task, one of the parties could instruct a solicitor – they might share the bill – and the other go lawyerless.
Ideally, each party should have their own independent legal advice. The same solicitor, or firm, cannot usually act for both sides of a dispute but it could be permitted with the drafting of the consent order where things are relatively straightforward, and the finances are modest.
Most solicitors, however, will decline to act for both.
You may have heard of various non-lawyer businesses which offer to help both parties in drafting the consent order and documents to go with it. The High Court has ruled this to be permissible in an uncomplicated case.
Where there is little or nothing to be shared out and each party has complete and utter trust in the other (so why the breakdown then?!) and are fully aware of their legal rights and the implications, these businesses may have a value when a solicitor would be more expensive, and they do not favour the idea of tackling the task themselves.
Some of these businesses are better at it than others.
Once the draft order has been prepared alongside a concise prescribed form setting out the finances of the parties, it will go to the court and it should be unnecessary for either side to have to turn up at court to support it.
Just because the draft order has been agreed, the judge who considers it is not bound to approve it.
The judge’s job is to ensure that it clearly expresses what both parties intended, they understand what it means and it is fair to them both. If the judge is not satisfied on these points, they will raise queries or suggest revisions.
One of my jobs as a judge was to decide whether or not to approve these draft orders. I looked at several thousand of them in my time.
In around one in every three, I had to query or put forward changes to make them fair or comprehensible.
Secrets and lies: There are ways and means of getting to the truth if an ex-spouse is hiding some of their assets
Getting to the truth
Are you sitting comfortably? Stand by for a shock.
Sometimes, one or both of the parties withhold the existence of assets from the court and the other of them or underestimate their value.
There are ways and means, however, of getting to the truth.
In a contested financial remedies case, each side will have been required to complete the most exhaustive financial statement by way of what is called Form E which doesn’t stand for Edith or Edgar but slots nicely between Forms D and F.
Think of your tax return for agony and treble it.
Various copy documents should accompany the form including statements of bank and building society accounts for the previous 12 months.
A meticulous study of these statements may lead to the establishment of hidden assets. Why was £10,000 transferred out to Dodgy Bank plc one week before the form was completed when that particular financial institution has not been mentioned elsewhere on the form?
What’s the monthly direct debit for £150 all about? Why isn’t there any mention of a pension from their 15 years of employment as a commodities trader?
Each party may prepare a questionnaire setting out the further information and documents about what has been disclosed and what has not been disclosed.
This questionnaire – not the occasion for a fishing exercise but for genuine questions which are relevant to the issues – will be considered at the first appointment (see above) – and the judge will order legitimate and relevant questions to be answered and documents to be supplied within a set period.
Failure to comply could lead to imprisonment or the court drawing an adverse inference when it comes to decide whether the failing party has lied.
Where it can be demonstrated that some of what is claimed in the Form E is highly suspicious, the judge may be persuaded to require the supply of statements going back longer than 12 months and it is not uncommon for an order to be made for credit and store card statements for say 12 months to be handed over.
These could show a style and standard of living inconsistent with someone on universal credit.
Conned!
If the court has made an order for financial remedies, even with the parties’ agreement, and it is subsequently discovered that one of them has been guilty of fraud, secreting assets or income or some misrepresentation, the conned party may be able to get the court to upset the original order.
What is complained of must have made a material difference to the outcome. It is essential that the matter is returned to court expeditiously once the truth has come out.
The court may also rip up the original order if some supervening event has rendered it unfair.
For this to happen, the event must have occurred soon after the order was made – probably only a few months afterwards – and the court challenge should be fast.
In the leading case on the subject, a husband agreed to transfer the family home to the wife in return for him being relieved of the obligation to pay her maintenance.
Tragically, just five weeks later, the wife killed the parties’ two children and then committed suicide.
The wife’s mother resisted the husband’s attempt at getting the order overturned. She failed and the husband succeeded.
A remarriage by one party soon after the order which did make a difference and which the other party had not contemplated, might be sufficient to achieve a setting aside of the order.
And so might a remarriage about which the husband had kept quiet. In the Form E, each party is specifically asked whether they are living with a new partner and whether they intend to do so within the following six months.
You might have thought that the adverse financial impact of Covid 19 on one of the parties would have been a supervening event that justified an order being set aside. Alas, the courts have so far been reluctant to rip up on this basis.
The impact would need to have been substantial and unforeseen and unforeseeable by the other party, given the stage the pandemic had reached when the order was made.
But even if the order was not set aside, its variation by reducing obligations under it might well be allowed.
In one case in which the husband was unsuccessful with his set aside application, the judge commented in relation to a possible variation of the order that the wife was not immune from having to share some of the pain.
Mistake by a party could also justify an order being set aside. Not easy. It would have to be shown that the mistaken party could not have discovered the true state of affairs by exercising due diligence.
IN PART FOUR… Stephen Gold explains pre-nuptial agreements.
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