In this third article on debunking family law myths I look at three steps an individual might consider taking prior to separation, in a misguided attempt to bolster their position upon divorce.
1. Look at, copy or remove their partner’s confidential documents
When faced with the prospect of divorce, parties can be tempted to read, copy or take confidential documentation belonging to their spouse, especially if they are concerned about financial non-disclosure. If you are reading this and are tempted to engage in this form of “self-help” – don’t.
The documents have to be returned immediately[1] and whilst you can ask questions about what you can remember from the documents (and a confidential document however obtained can be used in evidence in financial remedy proceedings) the law is clear that:
- rights of confidentiality apply between a husband and wife and a spouse is entitled to a separate life, distinct from the shared matrimonial life;
- if you hand such documents to your solicitor they could be barred from continuing to act for you; and
- depending on the circumstances you could have committed: (i) a tortious breach of confidentiality; and/or a breach of the (ii) Computer Misuse Act 1990; (ii) Data Protection Act 2018; or (iii) Postal Services Act 2000.
A court determination of whether a right of confidence arose (e.g. bank statements left open in a common part of a family home or a shared family computer with communal passwords) would be highly fact specific and you should speak to your solicitor before undertaking any sort of rummage to avoid falling foul of the law and getting your case off to the wrong start.
2. Transfer or dispose or assets to third parties
Parties may be tempted to transfer assets to a third party (e.g. to family, friends or into trust) before separation either because they would prefer a third party to benefit over their spouse or in the expectation that the asset will be returned to them later. This could be futile and is likely to tarnish their credibility with a judge later hearing their case.
Pursuant to Section 37 of the Matrimonial Causes Act 1973 the court has the power to set aside a disposition[2] if it was made with the intention of defeating the applicant’s claim for financial relief. Where the disposition was made less than three years before the date of the application the court will presume, unless the contrary is shown, that the person who disposed of the property did so with the intention of defeating the applicant’s claim. This puts the onus on the person who made the transfer to show that their intention was not to deprive their soon-to-be former spouse.
There may be legitimate reasons for the transfer e.g. tax or estate planning but absent evidence of such reasons, and the closer to separation the transfer occurs, the more likely the court is to make an order reversing the transaction. The disposal does not have to be for market value but selling for a significant discount could increase the likelihood of the court setting aside the transfer.
Case law tells us that:
- defeating the claim does not have to be the sole or dominant intention – just a substantial part[3];
- there is an inference that a person intends the consequences of their actions[4]; and
- the court’s power could be used for property located outside of England and Wales[5] (although the court may not make an order that would be practicably unenforceable).
Dispositions made more than three years prior to an application can also be set aside but the presumption is reversed – it is the applicant who has to show that the intention was to defeat their claim.
If you want to make a significant disposition of matrimonial property during the marriage it is advisable to inform your spouse, get their agreement and to document their consent and any advice obtained which evidences the legitimate intention behind the transfer (e.g. tax efficiencies, benefitting children etc.).
3. Significant changes in spending
In contemplation of divorce, a party may consider increasing their monthly / annual spend to improve a subsequent needs claim.
The typical starting point in financial remedies is to share the marital acquest (assets ‘made’ during the marriage) equally between spouses[6] with a cross check to ensure that this division leaves both parties able to meet their income, housing and capital needs and that the overall award is fair to both parties. In matrimonial law ‘needs’ is an elastic concept and is referable to the income and housing needs of the parties, based (in part but not only) on the lifestyle enjoyed during the marriage.
In this context, a party may consider artificially increasing their ‘needs’ by spending more in the run up to separation. To help the court quantify income needs both parties are required as part of their financial disclosure to provide: (i) a schedule of expenditure setting out their typical annual spend; and (ii) 12 months’ of bank statements. It is also common for 12 months’ of credit card statements to be disclosed. Because these documents go back a year, any short term increase in spending is usually obvious and easily discredited. Once again, in practice it doesn’t work and can unhelpfully prejudice a judge’s perception of the person making the inflated claim.
The corollary of this is that if parties live lavishly for an extended period of time, it is difficult to argue that spending should be curtailed within the context of proceedings. Clients sometimes indulge in their spouse’s overspending (often living beyond their means for years), in the hope that giving their partner free reign on spending would keep them happy and help save the marriage. When the marriage breaks down anyway and the taps are turned off, because the spending was not viable long term, it looks tactical. It can also lead to unfounded claims of non-disclosure when the capital disclosed does not support the historic spending levels, despite that being the reality.
To avoid costly disputes on ‘needs’ and endless rounds of questionnaires and schedules of deficiencies on disclosure the best course of action is business as usual within the marriage, even if it is in difficulties.
[1] Hildebrand v Hildebrand [1992] 1 WLUK 495
[2] Unless it was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant’s claim for financial relief.
[3] Kemmis v Kemmis [1988] 1 WLR 1307
[4] Sherry v Sherry [1991] 1 FLR 307
[5] Hamlin v Hamlin [1986] 1 FLR 61
[6] This is of course a generalisation and every case and the court’s approach to it will be fact specific.
