Separation and marital assets: when dishonest behaviour leads to adverse costs orders  

Case Study

Do you suspect that your former partner is being less than truthful in their disclosure of assets in your divorce?  In this article I explore what seemingly should have been a straightforward split of assets became a protracted and complex review and decision-making process.  

Please see the page on Financial Remedy Proceedings where I set out the process involved in such applications. This article focuses on how Courts deal with a party’s dishonest behaviour and concealment of assets.  

What is dishonest behaviour? 

Dishonest behaviour in Financial Remedy Proceedings is called material non-disclosure. This is usually where the party undervalues or does not disclose their assets. This undermines the Court’s ability to review all the relevant information and evidence to determine a legally fair outcome.  

Financial disclosure is an essential aspect to enable parties to achieve settlement. The Court will expect that the parties will make offers and proposals and where the Court needs to intervene or assist in that process, to have all the relevant information for it to do so. The expectation therefore is for both parties to adhere to the principle of full disclosure which remains binding on the parties throughout the proceedings.  

Material non-disclosure – a clear example 

Material Non-Disclosure in Financial Remedy Proceedings is one of the grounds to have a Remedy set aside in full or in part. Additionally, the Court has the power to award adverse costs orders against the defaulting party where it is determining an application.  

In X v Y [2022] EWFC, the Husband and Wife of 37 years had decided to separate. Ordinarily, a full disclosure of the assets will achieve a review of how the marital pot is divided. However, in this case, and which is seen all too often, one party is deceitful and seeks to hide some of the assets to avoid paying more than necessary.  

Here, the litigation became protracted and more than £330,000 was spent on legal fees. The Wife was suspicious about the extent of property and funds disclosed. She has alleged coercive control forced on her by the Husband with a Crown Court Hearing taking place contemporaneously. He is also potentially in contempt of Court with respect to a loan. Accordingly, the issues were less straightforward than in usual proceedings.  

The Wife asserted that she was controlled by the Husband throughout their marriage and supporting witness testimony seemed credible from the grown-up children of the parties. As well as many other elements, the Husband seemingly lied about a parcel of land owned in India and which was then transferred to his brother whilst an injunction was in place. The presiding Judge, Her Honour Judge McCabe referring to R v Lucas [1981] QB 720 that people lie for many reasons and that a lie does not mean that they are lying about other material issues, yet it was clear from her perspective that the Husband had been deceitful throughout.  

In addition, his litigation conduct left much to be desired, and he was late to disclose or failed to disclose material documentation to the Court. The Judge referenced NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270 which laid out the principle of not benefitting from non-disclosure, and it was found that the Husband was “guilty of serial non-disclosure, partial disclosure, late disclosure, and where he has failed to provide the proper evidence that would prove clearly that which he asserts…” 

What is the result of material non-disclosure? 

The Court has the power to make an adverse costs order against the defaulting party. In this case, the division of the £1,845,538 sum was split in the usual way and the Judge added back the non-disclosed assets.  

Under FPR 28.3(5) the Court does not make awards to pay the opposing party’s costs. However, the Judge made it abundantly clear that the Husband’s behaviour was the substantive reason for the increased legal costs for both parties. It was found that the additional costs were 2/3 more than necessary and that the Wife should not have had to pay albeit for the Husband’s conduct. Accordingly, the Husband was ordered to pay a lump sum of £124,000 to settle the Wife’s legal costs.  

Had the Husband acted in good faith and provided full disclosure, he would not have had to pay an additional sum towards the Wife’s legal costs and would be £124,000 better off. This is a good example of how not to conduct litigation and shows that the Court takes a dim view on deceitful and bad behaviour, and material non-disclosure.  

If you need assistance with any of the above issues or require support with your matter, please contact Sima directly by calling 02073531746 or via email: