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In these articles we have often referred to the fact that when dealing with financial matters following divorce proceedings, the law requires both parties to be honest and straightforward and to act in good faith. That duty includes not disposing of assets immediately before or during the proceedings in an attempt to reduce the value of what is owned and therefore the court order that might be made in favour of the other party.
Requirement for honest disclosure of finances
The duty to act honestly and in good faith includes an obligation to explain fully all parts of each party’s financial position and not to attempt to mislead the other party or the court. A recent case in the High Court has emphasised yet again the orders the court can make if it decides that one party is attempting to conceal part of their assets.
Facts of the case
The essential facts of the case were as follows:
- The husband and wife were married in 1996 and together ran a business which operated vessels providing services in the construction of offshore wind farms and oil and gas underwater operations.
- The husband’s expertise was in shipping. He was responsible for chartering the vessels owned by a company (MMC) which was jointly controlled by the husband and the wife and for their management and operation of those vessels.
- The wife’s expertise was in the financial side of the business and also with property management.
- The vessels were owned by subsidiaries of MMC controlled by the couple, while a limited partnership (AMA) dealt with the operation and management of the vessels.
- In 2012 the ownership of five vessels was transferred to another company (CSM) which was owned solely by a third party, a Gibraltar businessman.
- In 2019 divorce proceedings began.
Steps taken by the wife concerning the vessels
The wife applied for an emergency court injunction (for which no notice was given to the husband or the third parties – so as to prevent any further disposals) preventing the disposing, mortgaging or any other action by the husband or any third party which would diminish the value of the vessels.
The wife alleged that the 2012 arrangements when the ownership of the vessels was transferred, were a sham, the purpose being tax evasion and to understate the value of the assets available for distribution in the divorce financial proceedings.
Her case was that she and the husband remained entitled to the ownership of the vessels (through the companies) and that the husband had engaged in a fraudulent arrangement with the Gibraltar businessman.
Decision of the court
When the husband had had an opportunity to put his case, the court decided that there was sufficient evidence that the disposals of the assets by the husband were suspicious. Accordingly, the injunction was to remain in force until the whole case had been heard in detail. The court decided that if the injunction had been discharged, the wife could well suffer a very serious injustice and have been prevented from obtaining a part of the jointly owned assets of the husband and the wife to which she was rightly entitled.
Conclusions
When dealing with the financial aspects of divorce proceedings, the parties are expected to act with honesty and in good faith. This applies also to the period leading up to the proceedings, if it can be shown that actions taken then are intended to obscure the result of the financial proceedings.
The law gives to the courts wide powers of regulating actions which might, if allowed to stand, produce an unfair and unjust outcome.
If you or anyone you know, are affected by the issues raised above and would like more information or some preliminary, confidential advice, please contact one of our experienced experts in our family team by e-mail, or telephone one of our offices.
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