1 FARDM1/JP/7/8572256.1

Full and Frank? Or Flawed and Fraudulent?

Disclosure and the Recalcitrant Spouse (or civil partner, etc.)

Principles and Practical Points

Jeremy Posnansky QC, Partner, Farrer & Co.

A. The duty to make disclosure

1. The nature and extent of the duty

1.1 It is trite law that a party to matrimonial (or analogous) financial proceedings is under

an obligation to make full, frank and clear disclosure. The usual focus is on full and

frank. The obligation that the disclosure must also be clear is sometimes overlooked.

But it is often useful, e.g., in relation to requests by Questionnaire for information and

documents or in cross-examination or argument at trial, to remember that third

element of the duty. However, in cases of dishonest disclosure, as opposed to cavalier

or unhelpful disclosure, a lack of clarity is rarely the key issue. Often it is downright

dishonesty and wilful non-disclosure.

1.2 Over 50 years ago, in J v J [1955] P 215, at 228-229, Sachs J stated:

''In the light of this apparent misapprehension it is as well to state

expressly something which underlies the procedure by which husbands

are required in such proceedings to disclose their means to the court.

Whether that disclosure is by affidavit of facts, by affidavit of

documents or by evidence on oath (not least when that evidence is led

by those representing the husband) the obligation of the husband is to be

full, frank and clear in that disclosure. Any shortcomings of the

husband from the requisite standard can and normally should be visited

at least by the court drawing inferences against the husband on matters

the subject of the shortcomings – in so far as such inferences can

properly be drawn."

The final words of that passage from nearly 60 years ago remain as true today

as they did then; see e.g. Prest v Petrodel [2013] UKSC 34, discussed in

paragraph 11.6 below.

1.3 Of course, the same duty of disclosure rests on a wife or other party to such litigation

as on a husband. As Scarman LJ said in the (famous for other reasons) case of

Calderbank v Calderbank [1976] Fam 93, at 103:

"I rejoice that it should be made abundantly plain that husbands and

wives come to the judgment seat in matters of money and property upon

a basis of complete equality."

2 FARDM1/JP/7/8572256.1

1.4 Strangely, and although he emphasised the fundamental importance of the duty of

disclosure, it was a judge as eminent as Lord Brandon who, in Livesey (Jenkins) v

Jenkins [1985] AC 424, truncated the description of it by repeatedly omitting the

word clear; for example:

"It follows necessarily from this that each party concerned in claims for

financial provision and property adjustment (or other forms of ancillary

relief not material in the present case) owes a duty to the court to make

full and frank disclosure of all material facts to the other party and the

court. This principle of full and frank disclosure in proceedings of this

kind has long been recognised and enforced as a matter of practice."

1.5 The duty to make such full, frank and clear disclosure has been re-stated recently by

the Court of Appeal in such cases as Lykiardopulo v Lykiardopulo [2010] EWCA Civ

1315, [2011] 1 FLR 1427, where the issue before the Court of Appeal was how a

Family Division judge should decide whether or not to publish an ancillary relief

judgment at the conclusion of a trial during which one of the parties had conspired to

present a perjured case. Thorpe LJ gave this summary of the problem:

"[35] The conduct of the parties during their relationship is very seldom

an issue in the ancillary relief case. Thus seldom does the judge

investigate and pronounce upon the history of the relationship and the

causes of its failure.

[36] However ancillary relief proceedings are marked by features absent

in other civil proceedings:

i) The proceedings are quasi-inquisitorial. The judge must be satisfied

that he has, or at least that he has sought, all the information he needs to

discharge the duty imposed on him to find the fairest solution.

ii) The parties owe the court a duty, a duty of full, frank and clear

disclosure. The duty is absolute.

iii) Sadly the duty is as much breached as observed. The payer's sense of

the obligation is distorted by the emotions aroused by the payee.

Breaches take many forms.

iv) Breach by omission is commonplace. A bank account or some other

asset is not declared. That tactic gives rise to the counter, filching and

copying the contents of desk, briefcase or computer (now proscribed by

the decision of this court in Tchenguiz v Imerman [2010] EWCA Civ

908, [2010] 3 FCR 371, [2010] 2 FLR 814, the effects of which have yet

to be worked out).

[37] Breaches by commission are more serious. An omission once

detected can be excused as an oversight. A breach by commission is

plain perjury and thus risks serious consequences. The present case is a

good example. The conspiracy within the family to protect the family

business resulted in the presentation to the court of forged and back-

dated documents."

3 FARDM1/JP/7/8572256.1

1.6 More recently, in NG v SG [2011] EWHC 3270 (Fam), Mostyn J began his judgment

with these words:

"The law of financial remedies following divorce has many

commandments but the greatest of these is the absolute bounden duty

imposed on the parties to give, not merely to each other, but, first and

foremost to the court, full frank and clear disclosure of their present and

likely future financial resources. Non-disclosure is a bane which strikes

at the very integrity of the adjudicative process. Without full disclosure

the court cannot render a true certain and just verdict. Indeed, Lord

Brandon has stated that without it the Court cannot lawfully exercise its

powers (see Livesey (formerly Jenkins) v Jenkins [1985] FLR 813, HL).

It is thrown back on inference and guess-work within an exercise

which inevitably costs a fortune and which may well result in an unjust

result to one or other party."

1.7 While it adds little to the definition of the duty and (as far as the writer knows) is

rarely if ever enforced, since 6 April 2011 when the Family Procedure Rules 2010

came into force the Form E includes this warning:

If you are found to have been deliberately untruthful, criminal proceedings may be brought against you for fraud under the Fraud Act 2006.

1.8 Despite the threat or risk of criminal prosecution, a party is not entitled to rely on the

privilege against self-incrimination as a reason for not providing full, frank and clear

disclosure; see R v K, Court of Appeal, Criminal Division, [2009] EWCA Crim 1640,

[2009] 3 FCR 341, [2010] 1 FLR 807. Moore-Bick LJ, giving the judgment of the

court (which included Holman J, of the Family Division) said:

"… it would be impossible for the court to discharge its duty under s 25

of the Act if it were deprived of the information on which it is required

to act. As Lord Brandon pointed out in Livesey's case, the requirement

that the court should have the full and frank disclosure which it must

have in order to discharge its duty is met by rules of court, and those

rules must be construed against that legislative background. In our view

the purpose of the legislation would be frustrated if parties could

withhold from the court relevant information, whether relating to their

financial affairs or other matters, on the grounds that to disclose it would

tend to incriminate them. For these reasons we are satisfied that parties

to such proceedings are not entitled to invoke privilege against self-

incrimination in order to withhold information."

1.9 However, in R v K the court also held that a criminal prosecution could not be based

on admissions made in a Form E or otherwise under compulsion within financial

remedy proceedings (although in some circumstances other evidence might exist to

permit a prosecution). The position was explained thus by Moore-Bick LJ:

"[42] ….. The social purpose for which the Crown seeks to adduce the

evidence in criminal proceedings is the suppression of tax evasion. No

4 FARDM1/JP/7/8572256.1

doubt the protection of the public revenue is an important social

objective, but the question is whether the admission of evidence

obtained from the accused under threat of imprisonment is a reasonable

and proportionate response to that social need. In our view it is not. This

is an unusual case in as much as the Crown accepts that without the

admissions made by K it has insufficient evidence to maintain a case

against him. In many cases information obtained by way of disclosure in

ancillary relief proceedings will provide leads that enable the Crown to

obtain evidence from other sources that is sufficient to support a

prosecution and in such cases there will be no need to rely on evidence

obtained from the accused himself. That has not been possible in this

case, but even so, we do not think that the need to punish and deter tax

evasion is sufficient to justify such an infringement of the right of the

accused not to incriminate himself.

[43] For these reasons, although we would not agree with Judge Karsten

in so far as he might be taken to suggest that the question is simply one

of judicial discretion, we agree that the use of the admissions made by K

in the ancillary relief proceedings would deprive K of the fair trial to

which he is entitled under art 6 of the Convention and must therefore be

excluded by the judge in the exercise of his powers under s 78 of the

Police and Criminal Evidence Act 1984.

1.10 Thus, the duty to give full, frank and clear disclosure is a high one, fundamental to

proceedings for a financial remedy, and it cannot properly be avoided, even if

compliance involves admitting the commission of a crime.

1.11 The so-called "Millionaire's Defence" (see Thyssen-Bornemisza v Thyssen-

Bornemisza (No 2) [1985] FLR 1069) has probably not survived the introduction of

the "sharing" principle by Miller v Miller, McFarlane v McFarlane [2006] 2 AC 618,

[2006] 1 FLR 1186, [2006, 2 FCR 213; at least, not for cases where the "sharing"

principle is likely to be engaged. However, in a (rare) case which can readily be

identified as one in which full details are plainly inappropriate, such as a "big money",

"short marriage", "needs case", there may be scope for such a "defence", with either

(i) a concession that the party can meet any reasonable order, or (more likely to be

appropriate nowadays) (ii) an open admission of a net worth in excess of £x, probably

with concise disclosure. Subject to what is said in paragraph 1.12 below, the

"defence" probably still applies to a Schedule 1 application, subject to admission of a

suitably high figure and liquidity. It was accepted as permissible in the landmark case

of Re P (a child) (financial provision) [2003] EWCA Civ 837. The basis for such a

limited approach, whether in a matrimonial or Sch. 1 case, would be proportionality;

see FPR 2010, Rule 1.1(2), (b) and (d).

1.12 In PG v TW (No 2) (Child: Financial Provision), (2012), unreported, a Sch. 1 case,

HH Judge Horowitz QC was (to put it no higher) sceptical about whether the

"Millionaire's Defence" could now be employed, whether in a matrimonial or Sch.1

case. He said this:

5 FARDM1/JP/7/8572256.1

"56. In the long run up to the hearing mention has been made of what

has come to be called the Millionaires' Defence, essentially the

proposition that the father is not or should not be obliged to condescend

on particulars of his financial position since he can, it is asserted,

regardless of any specific finding as to his capital, income or financial

future, meet any Order the Court can properly make within the Schedule

and the case law guidelines. It appears in the African judgement of

Judge M delivered in April 2012. No particulars of the father's means

are there set out and it is plain that none were provided.

57. The concept has an historical background in ancillary relief; cp

Thyssen-Bornemisza. Its context is the now obsolete doctrine that

however rich the husband, a wife's claim in ancillary relief was confined

to her reasonable needs – or requirements – as defined by the Court.

Post White, I cannot see how that survives the sharing principle in the

modern triad as explained in cases such as Charman.

58. Nor in my judgment can it be properly applied to the Schedule

which (a) requires information to be provided and (b) obliges me to have

some regard to avoiding too gross a disparity between the standard of

life of the father – with whom Z will hopefully have extensive staying

contact now in the UK and on his likely return to Africa.

59. In these proceedings, an early probing feint from mother's solicitors

invited Mr TW to concede that was where he placed himself. Paragraph

5.1 of Mr Francis QC's opening statement [on behalf of the father] says

of his client "He is well paid and currently earns sufficient to meet any

order the Court may reasonably make and need not be in concerned [sic]

with any enquiry into his means."

60. Mr Francis' statement was redundant when it was made. The father

has, and properly in my judgement, given evidence of his means in his

Form E and by answer to questionnaire. A better restatement which has

in fact been observed by the parties is that it would have been

disproportionate to approach in excessive detail an inquisition in respect

of Mr TW's income capital and outgoings by, for example, requiring him

to identify all debits and credits passing through his bank accounts in

excess of, say, £1,000. No such questions have been addressed to him.

He answered the questionnaire fully. The only contentious issue of

which I am aware was the curious reluctance to produce his recent

signing on contract until the last moment.

61. Proportionality does not absolve Mr TW from disclosing an accurate

outline of his financial affairs."

1.13 To return to the word clear: keeping this part of the duty is mind is important for both

parties and their professional advisers. It is not only a potential "stick" to "beat" the

"other side" – (all those words being, of course, verboten in the civilised language of

Family litigation!) – but also something to bear in mind with and for the sake of your

own client. It isn't good enough to disclose and state the bare facts; the exposition

must be clear. Obfuscation, whether deliberate and mischievous or resulting from

6 FARDM1/JP/7/8572256.1

carelessness or laziness, is a breach of the duty which may well have ramifications.

The lack of clarity might found the need for requests for information and documents,

but equally it may lead to criticism (and costs sanctions?) by the court. Judgments in

two cases in which Nicholas Mostyn QC was sitting as a Deputy High Court Judge

illustrate the potential problems:

(1) In GW v RW, [2003] EWHC 611 (Fam), [2003] 2 FLR 108, [2003] 2 FCR

289, the husband came in for criticism of the way he had disclosed the

existence and value (lack of) of share options. This led to Mostyn QC saying

this in relation to Forms E:

"[16] The very point of form E is to give an honest and conscientious

estimation of the true net worth of the party at the time of swearing it.

For these purposes sensible and fair figures have to be attributed to

unrealisable or deferred assets. The maker of the form E is fully entitled

to qualify those figures in the narrative part of the section. But a proper

figure has to be put in. It is unacceptable, in my view, that simply

because an asset is not realisable on the day that the form E is sworn, but

is assuredly realisable, or likely to be realisable, at some future date, for

a zero figure to be inserted.

[17] Moreover, when a person's financial affairs are complicated it is

incumbent on him, as part of the duty of full, frank and clear disclosure

to give a presentation that is immediately understandable by a solicitor

of average financial sophistication. It is no good to present very complex

material in such a way that only an accountant of enormous financial

acumen can understand it."

(2) In W v W (ancillary relief: non-disclosure) [2003] EWHC 2254 (Fam), [2004]

1 FLR 494, [2003] 3 FCR 385, the husband was a chartered accountant. The

judge concluded that his Form E was "deliberately false and

misrepresentative". At trial, the husband accepted primary responsibility,

describing the Form E as shoddy, unprofessional, something of which he was

not proud, and a 'cock-up'. But he sought to turn the blow by blaming his

previous solicitors ("Z partners"), specifically a part-time assistant solicitor in

that firm ("X") for the manner in which the Form E was finally prepared. He

explicitly said that X did not follow his instructions. He opened up the

privileged solicitor and own client file and a considerable time in court was

spent scrutinising parts of it. In fairness to Z partners, the judge directed that a

statement setting out the gist of the allegations should be served on them; that

X should be permitted to file a statement in response; that she should be

allowed to give oral evidence; and that Z partners could make representations

to the judge in their defence. Such statements were duly filed and the judge,

have heard submissions from leading counsel on behalf of Z partners, accepted

that the solicitor had (only) made mistakes borne of (a) her limited

involvement and understanding of the case, and (b) undertaking the correcting

exercise in too much haste; she was acquitted of more serious failings. As to

7 FARDM1/JP/7/8572256.1

the husband and his approach to one part (one of several parts which came in

for strong criticism) which related to a debt or possible debt, the judge said

this:

"[50] My conclusions in this area are, I regret, severe. I start first with

general principles. Where there exists in a case a contingent liability it

should certainly be mentioned in the Form E, as part of the narrative.

But a figure should only be inserted in the computational box that forms

part of the calculation of overall net worth if the deponent and his legal

advisers are satisfied by credible evidence that on the balance of

probabilities the liability is more likely than not to eventuate. Solicitors

advising the makers of Forms E have, as officers of the court, an

important responsibility to ensure that true and realistic figures are

inserted in a Form E and deponents have a greater responsibility to

ensure that their Forms E are truthful and honest. The rubric at the

beginning of the form, warning of the consequences of falsehood, is not

mere window-dressing."

The (gratuitous?) warning to solicitors in the penultimate sentence of that paragraph

of the judgment should be noted by all trainees. Similarly, the passage in paragraph

60 of the judgment:

"Of course a solicitor has a duty fearlessly to represent her client to the

best of her ability. But there is a clear line between fulfillment of that

duty and advising a presentation that is misleading, especially where the

client is seeking, indeed instructing, a presentation that is closer to the

truth (but still misleading and false)."

2 Timing:

2.1 The duty to give full, frank and clear disclosure is not confined temporally. It extends

beyond Form E and throughout the proceedings. This was reinforced by Mostyn QC

in his judgment in GW v RW, cited at para 1.13(1) above, where he said this:

"It cannot be emphasised often enough in these cases that a party's

obligations of disclosure are not confined to providing the information

and documents prescribed by form E and as ordered by the court in

response to a questionnaire. There is a continuing duty to provide,

without being asked, new information and documents that may affect the

exercise of the statutory discretion."

2.2 An example of a failure to comply with the continuing nature of the duty of

disclosure, leading to expensive litigation, is Bokor-Ingram v Bokor-Ingram, [2009]

EWCA Civ 412, [2009] 2 FLR 922, [2010] 2 FCR 675. The wife's claims for

ancillary relief for herself and the two children of the family were determined by

consent at a Financial Dispute Resolution appointment on 20 July 2006.

Approximately ten days later, the husband resigned from his employment with AA

and signed a contract of employment with BB. Under the terms of his new

employment, he received a significantly higher level of remuneration which was

8 FARDM1/JP/7/8572256.1

guaranteed for the years 2006 and 2007. Although the husband had not been in receipt

of an offer from BB at the time the consent order was made, negotiations had been at

an advanced stage. The wife subsequently applied to have the consent order set aside

but, on 23 June 2008, her application was dismissed. The wife appealed to the Court

of Appeal. On the date of the hearing, the parties informed the court that they had

reached a comprehensive agreement to settle not only the appeal but also pending or

prospective applications for variation of the consent order. They invited the court to

allow the appeal, set aside the consent order and make revised orders on the wife's

applications. The Court of Appeal gave brief reasons why it had reached a preliminary

conclusion that the appeal, had it not been compromised, would in any event have

been allowed. Thorpe LJ, giving the judgment of the court, said this:

[9] … Plainly, the husband had not disclosed and should have disclosed

his prospects of a successful move to higher remuneration in the

immediate future. …

[11] … the judge was satisfied that the information that the husband

consciously suppressed was not information that he thought he had a

duty to disclose. We would only observe that it was not for the husband

to judge the ambit of the duty or the consequence of the disclosure. Any

information that is relevant to the outcome must be disclosed. …

[18] … The fact that the contract had not been signed by 20 July was

irrelevant to the question of whether the negotiations had to be

disclosed. Disclosure was essential to enable the court to assess the

husband's future prospects. The duty to disclose extends beyond what is

certain on the date that the order is made to any fact relevant to the

court's review of the foreseeable future."

B. Chasing for further and better disclosure than given in Form E

3 Requests for information and documents

3.1 At risk of (again) lapsing inappropriately into the aggressive language of warfare, one

of the most powerful weapons in the armoury of a party to financial remedy

proceedings is a request for information and documents. This is usually in the form of

a Questionnaire – and often a Supplementary Questionnaire and/or a Schedule of

Deficiencies! But that or those particular forms are not essential for every such

request after the first; subsequent requests may be made by letter, although the

formality of a document which looks like a "pleading" has obvious attractions.

3.2 The foundation for such requests is Rule 9.14(5)(c) of the Family Procedure Rules

2010, which provides:

Not less than 14 days before the hearing of the first appointment, each party

must file with the court and serve on the other part …. (c) a questionnaire

setting out by reference to the concise statement of issues any further

9 FARDM1/JP/7/8572256.1

information and documents requested from the other party or a statement that

no information and documents are required.

3.3 Pursuant to Rule 9.15(2):

At the first appointment the court must determine –

(a) the extent to which any questions seeking information under rule 9.14(5)(c)

must be answered; and

(b) what documents requested under rule 9.14(5)(c) must be produced,

and give directions for the production of such further documents as may be

necessary.

3.4 In a straightforward or relatively simple case, the Questionnaire will usually be settled

by the solicitor or counsel, after input and instructions from the client (who will often

have valuable background information to provide). In more complex cases,

particularly involving companies, accounts, commercial arrangements, and the like, it

will be sensible to ask a forensic accountant to draft or assist with the preparation of

Questionnaire. Of course, given that the initial Questionnaire for the First

Appointment must be filed and served after receipt of the other party's Form E but not

less than 14 days before the First Appointment, the accountant will have to be

retained and given at least the basic background well before the exchange of Forms E.

3.5 The primary and usual purpose of a Questionnaire or other request for information or

documents is, of course, to obtain a full picture of the other party's current and

foreseeable financial position. But in some cases there are secondary purposes or

provisional plans. Where there are grounds for thinking that the other party is a "non-

discloser" and is devious, the Questionnaire may be a first step towards establishing

such conduct for the purposes of (a) discrediting the party and his/her evidence,

(b) inviting the court to draw appropriate inferences (as to which see Section C

below), (c) seeking an order for costs.

3.6 A rule/restriction often overlooked – and why not?! – is Rule 9.16(1), which provides:

(1) Between the first appointment and the FDR appointment, a party is not

entitled to the production of any further documents except –

(a) in accordance with directions given under rule 9.15(2); or

(b) with the permission of the court.

In practice, requests for information and documents are often made after the

First Appointment and judicial criticism is (rightly) very rare. Of course, such

informal requests are usually confined to cases where there is reasonable

cooperation. In cases of default or non-disclosure, an order for the other party to

provide the material should be sought, not only to provide the element of

judicial requirement, but to found possible subsequent applications for

committal, costs or other sanctions, which would not be possible if the request

was informal.

10 FARDM1/JP/7/8572256.1

3.7 The FPR 2010 also contain, in Part 4, a variety of powers of case management; see

e.g. Rule 4.1 (2) and (3): [emphasis added]

(2) The list of powers in this rule is in addition to any powers given to the court

by any other rule or practice direction or by any other enactment or any powers

it may otherwise have.

(3) Except where these rules provide otherwise, the court may—

(a) extend or shorten the time for compliance with any rule, practice direction

or court order (even if an application for extension is made after the time for

compliance has expired);

(b) make such order for disclosure and inspection, including specific

disclosure of documents, as it thinks fit;

(c)-(o) [omitted here]

4 OS v DS hearings

4.1 A novel – at least then (October 2004) – approach to opaque aspects of the evidence

in a complex financial case was adopted by Coleridge J in S v S (ancillary relief:

preliminary hearing of oral evidence, [2004] EWHC 2376 (Fam), [2005] 1 FCR 494,

reported as OS v DS (oral disclosure: preliminary hearing) [2005] 1 FLR 675, from

which practitioners coined the term "an OS v DS hearing". The following passage

from Coleridge J's judgment is long, but admirably summarises the background to and

utility of such a hearing (although the rules referred to are the FPR 1991 which were

then in force):

"[5] …. by the time of the February 2004 [directions] hearing there

remained or had arisen, so far as the wife was concerned, dozens of

unanswered questions. So, understandably and conventionally, that

hearing was intended to deal with the further questionnaires and the

applications to join and for leave to serve letters of request. By this stage

a final hearing had been fixed for ten days in May 2005.

[6] It was at that stage that the procedure took a novel turn.

[7] It occurred to me in my pre-reading for the February 2004 directions

hearing that it would be highly desirable, before making any further

decisions about disclosure or production of further documents or joinder

of other parties, to have the opportunity of hearing from the husband on

oath in relation to a number of the crucial, central and highly contested

financial issues, both historical and current. As practitioners in this field

know only too well, there are often innocent explanations for

transactions. And on the other hand decisions to join third parties to

expensive complex litigation in which they are only likely to figure

peripherally are not lightly made. Furthermore, although certain

explanations had been tendered the plausibility of such explanations

normally has to wait until it can be tested at the final hearing with all the

inevitable attendant increase in costs and delay.

11 FARDM1/JP/7/8572256.1

[8] Accordingly I suggested to counsel that a further hearing involving

the oral examination and cross-examination of the husband at this

relatively early stage in the process might considerably shorten the

whole and dispense with the need for many of the further documents

and/or the joinder of intended parties. Although this was, I believe, a

novel proposal, at least in the ancillary relief jurisdiction, both counsel

readily, even enthusiastically, agreed with this suggested procedure.

They considered that it would be likely to save time overall and to

enable them to tender more accurate and realistic advice about eventual

outcome than would ever be the case if the only predictors available to

them were the usual statements, documents and their own client's

untested explanations.

[9] With counsels' agreement I therefore gave the following directions to

enable a three day 'preliminary/oral discovery' hearing to be as effective

as possible.

'There be a hearing, fixed for 4 October 2004 for three days, before Coleridge J, for the

purpose of taking oral evidence from the respondent and resolving the issue of joinder

of (i) Mr A; (ii) B Ltd; (iii) C Ltd and (iv) D Ltd (BVI), for the purposes of which

hearing the following directions shall apply:—a. counsel for the petitioner and

respondent do agree a statement of issues on or before 16 July 2004; b. the parties'

solicitors do agree any further bundles on or before 30 July 2004; c. the parties'

solicitors do agree a re-designation and full pagination of all bundles to be used at the

hearing on or before 30 July 2004 (the existing bundles to be re-designated A-E etc). d.

counsel for the parties do exchange skeleton arguments on or before 1 October 2004,

such skeletons to take the place of an oral opening of the case at the hearing; e. 4

October 2004 shall be a reading day; f. On 5 and 6 October 2004 the following

timetable shall apply:—i. there shall be no oral opening; ii. the respondent's counsel

shall have 1 hour to examine the Respondent in chief; iii. the petitioner's counsel shall

have until 1 pm on 6 October 2004 to cross-examine the respondent; iv. the

respondent's counsel shall have one further hour to re-examine the respondent; v. the

remainder of the hearing shall be used for further legal argument, directions and

provisional findings.'

[10] The directions were fully complied with and the hearing

commenced yesterday. By the short adjournment on the first day the

husband had been carefully and effectively cross-examined by the wife's

counsel on many of the crucial disputed issues and documents.

Negotiations ensued and the entire ancillary relief application had been

settled by the end of that day. The resulting saving of court time (ten

days) and costs is self-evident and very significant.

[11] The advantages of adopting this process in the appropriate case

seem to me to be:

(a) at a far earlier stage than would otherwise be the case explanations

and factual issues can be fully tested;

(b) the need for production of further documents can be more rigorously

considered. Trips down blind alleys can be ruled out or at curtailed;

(c) preliminary indications or even findings can be made;

12 FARDM1/JP/7/8572256.1

(d) the parties (and particularly the party under scrutiny) are able to

appreciate at an early stage what they face in terms of examination both

orally and in terms of the production of further documents and the

involvement of other parties;

(e) advisers are in a far better position to make accurate assessments of

outcome and so negotiations are more likely to be fruitful;

(f) no time overall is wasted as the final hearing, where these issues

would normally be explored, is almost certain to be shortened;

(g) the court is able to immerse itself in the detail at an earlier stage and

give more focused directions and, in the right case, indications.

[12] I would not seek to suggest that this is the ideal procedure in all, or

even the majority of, complex ancillary relief cases. Further any judge

considering this course or conducting such a hearing must be astute to

ensure that both parties' right to a fair hearing is not jeopardised. But

where the financial substratum of the resources is bound to require

considerable elucidation I consider that this procedure has many

advantages including those set out in the previous paragraph.

[13] I have no doubt that the court has the power within the rules to

order a hearing of this type. Whether it is designated as a trial of a

preliminary issue or oral discovery or the first part of a split final

hearing (cf public law children cases) the court has the necessary tools

to case-manage in this way. After all the court is primarily conducting

an inquiry, not an adversarial trial. The procedure is, in my view,

concordant with the overriding objective applicable to ancillary relief

proceedings set out in FPR 2.51B.

[14] In the recent and not dissimilar case of J v V (disclosure: offshore

corporations) [2003] EWHC 3110 (Fam), [2004] 1 FLR 1042

(involving serious non-disclosure) I commented, not for the first time,

on the obvious desirability of putting 'the cards on the table face up at

the earliest stage if huge costs bills are to be avoided' in these cases. The

court should always be vigilant to discover new and better ways of

encouraging and assisting parties to that end so that they can resolve

their litigation in as cost efficient a manner as possible. I commend this

as a procedure worthy of employment in the right case."

5 Khanna hearings

5.1 Deriving from the eponymous case of Khanna v Lovell White Durrant [1995] 1 WLR

121, [1994] 4 All ER 267), a Khanna hearing is a rarely used procedure which allows

evidence and documents to be given and produced at a hearing prior to the final

hearing. In relation to the production of documents (only), it probably adds nothing to

the procedure in Rule 21.2 (as to which, see paragraph 6 below), but it may have merit

if oral evidence is required, because it allows the initiating party to obtain the

evidence, and perhaps make consequential inquires or take further steps, at an

interlocutory stage. An official transcript is obtained, for use at the trial.

13 FARDM1/JP/7/8572256.1

6 Third Party Disclosure: Inspection appointments

6.1 FPR 2010, Rule 21.2, contains provisions for Orders for disclosure against a person

not a party. These were formerly, i.e., under the FPR 1991, expressly referred to as

Inspection Appointments (and originally as "Production Appointments"!) The new

rules do not use either term, but practitioners continue to refer to them as inspection

appointments, or third party disclosure orders, which terms are within the ambit of

the new rule, which provides:

6.2 FPR 2010, Rule 21.2 deals with orders for disclosure against a person who is not a

party to the proceedings. It applies where an application is made to the court under

any Act for disclosure by a person who is not a party to the proceedings. The principal

provisions are as follows:

(1) This rule applies where an application is made to the court under any Act

for disclosure by a person who is not a party to the proceedings.

(2) The application –

(a) may be made without notice; and

(b) must be supported by evidence.

(3) The court may make an order under this rule only where disclosure is

necessary in order to dispose fairly of the proceedings or to save costs.

(4) An order under this rule must –

(a) specify the documents or the classes of documents which the respondent

must disclose; and

(b) require the respondent, when making disclosure, to specify any of those

documents –

(i) which are no longer in the respondent's control; or

(ii) in respect of which the respondent claims a right or duty to withhold

inspection.

(5) Such an order may –

(a) require the respondent to indicate what has happened to any documents

which are no longer in the respondent's control; and

(b) specify the time and place for disclosure and inspection.

(6) An order under this rule must not compel a person to produce any

document which that person could not be compelled to produce at the final

hearing.

(7) This rule does not limit any other power which the court may have to order

disclosure against a person who is not a party to proceedings.

6.3 As the authors of Jackson's Matrimonial Property say, under the old rules these

applications were dealt with as a two-stage process. The first stage is between the

parties to the proceedings. The second stage, if the court makes the preliminary order,

14 FARDM1/JP/7/8572256.1

occurs when the person against whom the court has made the order attends court and,

subject to any argument which they may then advance, produces the documents. It

appears likely that this procedure will continue to be followed under the new Rules.

6.4 Such applications can be of great value when a party is not producing relevant

documents him/herself or where it is believed that, for example, a third party is

managing or holding assets on their behalf. The writer has obtained such an order, on

a without notice basis, together with an injunction forbidding the third party from

destroying or parting with any relevant documents.

7 Applications under the Bankers Books Evidence Act 1879

7.1 The Bankers' Books Evidence Act 1879 provides that any party to a legal proceeding

may apply to the court or a judge for an order that the applicant be at liberty to inspect

and take copies of any entries in a banker's book for the purposes of such proceeding.

Section 7 of the Act, which says that an order can be obtained "either with or without

summoning the bank", provides:

"On the application of any party to a legal proceeding a court or judge

may order that such party be at liberty to inspect and take copies of any

entries in a banker's book for any of the purposes of such proceedings.

An order under this section may be made either with or without

summoning the bank or any other party, and shall be served on the bank

three clear days before the same is to be obeyed, unless the court or

judge otherwise directs."

7.2 An order permits the inspection of the account; in practice, provision of copies of

bank statements. It is not thought to extend beyond such records; e.g., to copies of

cheques, credit slips, and correspondence. But it is arguable that such records could be

obtained under a (non-statutory) subpoena duces tecum.

8 Land Registry search

8.1 Devious, non-disclosing, people intent on hiding their assets are unlikely to hold

property in their own names; but they might, particularly if acquired years before

problems began. Rule 11(3) of the Land Registration Rules 2003 permits a search of

the English Land Registry against a person's name. It provides as follows:

11(1) Subject to paragraph (2), the registrar must keep an index of

proprietors' names, showing for each individual register the name

of the proprietor of the registered estate and the proprietor of any

registered charge together with the title number.

(2) Until every individual register is held in electronic form, the

index need not contain the name of any corporate or joint

proprietor of an estate or of a charge registered as proprietor

prior to 1st May 1972.

15 FARDM1/JP/7/8572256.1

(3) A person may apply in Form PN1 for a search to be made in the

index in respect of:

(a) his own name,

(b) the name of a corporation aggregate, or

(c) the name of some other person in whose property he can

satisfy the registrar that he is interested generally (for

instance as trustee in bankruptcy or personal

representative).

(4) On receipt of such an application the registrar must make the

search and supply the applicant with details of every entry in the

index relating to the particulars given in the application.

8.2 It is unlikely that a non-disclosing spouse will agree to an application for a search of

the proprietors' index, and a request for cooperation might simply alert them.

Therefore, application for a search in the index of proprietors' names may be made to

the Land Registrar on the basis that the alleged non-disclosing spouse is "some other

person in whose property he … is interested generally", as a party to financial remedy

proceedings. The application is made in Form PN1.

C. Consequences of non-disclosure

9 There is a raft of practical consequences which may flow from non-disclosure, both

for the non-disclosure and the other party. They range from interlocutory steps and

orders, to the impact at the final hearing. Some of the interlocutory steps have been

mentioned above. It is arguable that a committal application is part of the range of

measures gathered together in Section B above ("Chasing for further and better

disclosure than given in Form E"), but it fits at least as well here, not least because it

is a coercive (punitive?) adjunct to other prior steps, rather than a free-standing

application for the provision of information or documents.

10 Committal applications

10.1 Committal applications are a potentially powerful step, not least because of the

coercive element if the charge is made good. The premise of such an application and

of an order for committal (imprisonment) is that the respondent is in contempt of

court.

10.2 The potential power of a committal application is that proof of contempt provides the

court with the power to sentence the contemnor for the breach. A typical sentence is a

suspended term of imprisonment, usually imposed for the coercive element; i.e., the

contemnor will usually provide the missing disclosure rather than go to prison.

Sometimes the imprisonment is immediate, with the contemnor having the

opportunity to seek his release upon providing the withheld information/documents.

16 FARDM1/JP/7/8572256.1

10.3 Recent examples of imprisonment for contempt include (i) Thursfield v Thursfield

[2013] EWCA Civ 840 and (ii) Young v Young [2013] EWHC 34 (Fam). In

Thursfield, the claimant issued proceedings in England seeking to enforce a financial

judgment obtained in Michigan. In the course of those proceedings, a freezing order

was granted against the defendant, and he was ordered to disclose all of his assets as

well as the source of his funding for legal expenses. Put shortly, the defendant failed

to comply with his disclosure obligations and the claimant made a committal

application. The judge held that the defendant had been in breach of the disclosure

order and was, accordingly, in contempt. In sentencing, he referred to the defendant's

inadequate compliance, that he had made no attempts to comply with the disclosure

order and his breach had been continuing, and he had ignored the clear order that he

should attend the hearing. The judge imposed a sentence of 24 months' imprisonment,

which was made up of a 12 month punitive element and a 12 month coercive element.

The defendant appealed the sentence. His appeal was dismissed, the Court of Appeal

saying that it was settled law that, where there was a continuing failure to disclose

relevant information, the court should consider imposing a long sentence, possibly

even the maximum of two years, in order to encourage future co-operation by the

contemnor, and that, in the case of continuing breach, the court might see fit to

indicate what portion of the sentence should be served in any event as punishment for

past breaches, and what portion of the sentence the court might consider imposing as

a coercive element in order to prompt full compliance thereafter.

10.4 In Young, there were long-running ancillary relief proceedings in which many orders

for disclosure had been made against the husband over a considerable period of time.

The wife applied for committal for contempt for breach of an order for disclosure

dated 12 November 2012, and to activate a suspended committal made in June 2009.

Moor J decided to deal solely with the former application. He found the husband to be

in contempt, saying that there had been "a wholesale failure to comply with the court

order". The judge was satisfied to the criminal standard that this he had not complied

with the order. The husband was sentenced to six months imprisonment.

10.5 All such applications are required to be listed for hearing in open court and the details

of any committal order must also be stated in open court; see the President's Guidance

dated 3 May 2013, 4 June 2013 and the clarification email from the President to all

Family judges on 2 August 2013. Part of the latter said [all capitals are original]:

"The principle is very clear and MUST be rigorously followed. NO-

ONE is EVER to be committed for contempt of court by a family court

or the Court of Protection (whether the sentence is suspended or takes

immediate effect) without (a) the name of the contemnor (b) proper

details of the contempt(s) and (c) the reasons for the committal being

made publicly available in a judgment published on the BAILII

website."

17 FARDM1/JP/7/8572256.1

11 Inferences

11.1 Judges in Family cases have a good record of being prepared to draw (adverse)

inferences against "non-disclosers". In Prest v Petrodel [2013] UKSC 34, Lord

Sumption's leading judgment gave some important guidance on the topic, particularly

in relation to drawing inferences about beneficial ownership of property, but much of

the old case law remains relevant.

11.2 As mentioned in paragraph 1.2 above, in J v J [1955] P 215, Sachs J said:

"The obligation of the husband in maintenance proceedings is to be full,

frank and clear in his disclosure of his means to the court, and any

shortcomings in this respect can and normally should be visited at least

by the court drawing inferences against him on matters the subject of

shortcomings."

The courts have continued to employ this approach, often to powerful effect,

ever since, with two main points emerging. First, the dishonest or non-

disclosing party cannot complain if adverse inferences are properly drawn

against him which in fact over-state his wealth. Second, the inferences must be

properly and reasonably drawn.

11.3 In F v F [1994] 1 FLR 359, a classic case of non-disclosure by a husband, Thorpe J

(as he then was), elegantly explained why it was right to draw inferences against a

dishonest husband and why the husband only had himself to blame if the judicial

estimate of his wealth was in fact too high. He said this, at 366H:

"The fact is that the husband has, in my judgment, so obfuscated his

financial position and services that it is quite impossible for this court to

be sure as to what he has now in residue. There may well be reality in

the fact that he has sustained set-backs in trade and business which are

coincidental if contemporaneous with the development of these

proceedings. There may well be a genuine ingredient of recessionary

setback that has had the effect of eroding his declared UK capital base.

But as has been emphasised in the authorities and particularly succinctly

in the case of J v J [1955] P 215, [1955] 2 All ER 617:

"……. [see the quotation in para 1.2, above] ………"

In ordinary language if he has conducted his affairs throughout the

marriage in such a covert fashion as to relieve him of the ordinary

obligations of citizenship to support the state through tax contribution, if

he has conducted these proceedings in a vain endeavour to maintain that

camouflage, if in consequence the obscurity of my final vision results in

an order that is unfair to him it is better that than that I should be drawn

into making an order that is unfair to the wife. If at the end of this case

he feels that the lump sum that I order is unfair in reflection of his

present retrenchment then he should remember that he has brought that

consequence upon himself by the fashion in which he has chosen to

18 FARDM1/JP/7/8572256.1

arrange his affairs over the course of the last decade, coupled with the

fashion in which he has chosen to conduct these proceedings."

11.4 Similarly, in Baker v Baker [1995] EWCA Civ 31, [1995] 2 FLR 829, Otton LJ said

this:

"…. the husband cannot complain if the Judge following authority

explored what was before him and drew inferences which may turn out

to be less fortunate than they might have been had he been more frank

and disclosed his affairs more fully. Such inferences must be properly

drawn and reasonable. On appeal it may be possible for either party to

show that the inferences or the award were unreasonable in the sense

that no Judge faced with the information before him could have drawn

the inferences or awarded the figures that he did."

And Butler-Sloss LJ said this:

"[The wife's counsel] pointed to an utterly false case and asked us to

consider why the husband was lying and what did he have to hide. If the

cupboard was bare, it was in his interests to open it and display its

meagre contents. But on the contrary, the husband, despite his

protestations to the contrary, continued to live the life of an affluent

man. I agree with the submissions from [the wife's counsel] that if a

court finds that the husband has lied about his means; lied about other

material issues; withheld documents; failed to give full and frank

disclosure; it is open to the court to find that beneath the false

presentation, and the reasons for it, are undisclosed assets."

11.5 In NG v SG (appeal: non-disclosure) [2011] EWHC 3270 (Fam), Mostyn J

unsurprisingly upheld the principle of drawing adverse inferences, but gave important

guidance about the need for a disciplined and logical approach. You can't just pluck a

figure out of the darkness. He said:

"There must surely be a sound evidential basis for reaching a conclusion

as to the scale of undisclosed assets. The Court should not be led into a

knee-jerk reaction that says simply because evasiveness and opacity is

demonstrated there is some vast sum salted away. This is not to say that

the Court has to put a precise figure on the scale of the hidden assets, let

alone to identify by reference to evidence where they are or what they

comprise: see Al-Khatib v Masry at para 89 and Ben Hashem v Al Shayif

at para 70."

11.6 In Prest, Lord Sumption said this, at para. 45:

"….. There is a public interest in the proper maintenance of the wife by

her former husband, especially (but not only) where the interests of the

children are engaged. Partly for that reason, the proceedings although in

form adversarial have a substantial inquisitorial element. The family

finances will commonly have been the responsibility of the husband, so

that although technically a claimant, the wife is in reality dependent on

the disclosure and evidence of the husband to ascertain the extent of her

19 FARDM1/JP/7/8572256.1

proper claim. The concept of the burden of proof, which has always

been one of the main factors inhibiting the drawing of adverse

inferences from the absence of evidence or disclosure, cannot be applied

in the same way to proceedings of this kind as it is in ordinary civil

litigation. These considerations are not a licence to engage in pure

speculation. But judges exercising family jurisdiction are entitled to

draw on their experience and to take notice of the inherent probabilities

when deciding what an uncommunicative husband is likely to be

concealing. I refer to the husband because the husband is usually the

economically dominant party, but of course the same applies to the

economically dominant spouse whoever it is."

Lord Sumption then analysed the evidence relating to the ownership of the

seven properties which were in dispute (an eighth had already been dealt with

conclusively at the High Court stage and was not subject to appeal). Where the

evidence of the husband or "his" companies was deficient, (e.g., the source of

funds for the purchase price, the non-production (in breach of an order) of the

conveyancing files, or the failure to call an important witness) the Supreme

Court drew inferences to deal with the gaps, ultimately concluding that the

husband was the beneficial owner of all the properties notwithstanding that they

were all registered in the names of the companies.

12 Contempt and the "Hadkinson jurisprudence"

12.1 A party who is in breach of the obligation to make full and frank disclosure may be

prevented from pursuing applications or even from making submissions, particularly

if he/she is also in breach of a specific court order, e.g., to answer a Questionnaire or

produce documents.

12.2 The modern starting-point for this is the Court of Appeal decision in Hadkinson v

Hadkinson [1952] P 285. More recent authoritative decisions include Baker v Baker

(No. 2) [1997] 1 FLR 148, Laing v Laing [2007] 2 FLR 199, and M v M [2011] EWHC 3574

(Fam) [2011] 1 FLR 1773.

12.3 The key consideration to exercising what is colloquially called "the Hadkinson

principle" is not simply that the relevant party is in breach of an order and/or in

contempt of court, but that the breach has impeded the course of justice. The basis of

this is Denning LJ's minority judgment in Hadkinson, which has become the accepted

test, where he said, at 298:

"… I am of opinion that the fact that a party to a cause has disobeyed an

order of the court is not of itself a bar to his being heard, but if his

disobedience is such that, so long as it continues, it impedes the course

of justice in the cause, by making it more difficult for the court to

ascertain the truth or to enforce the orders which it may make, then the

court may in its discretion refuse to hear him until the impediment is

removed or good reason is shown why it should not be removed."

20 FARDM1/JP/7/8572256.1

12.4 A particularly striking and unusual example of the employment of the Hadkinson

principle is M v M (financial provision) [2011] 1 FLR 1772, an application for interim

maintenance in proceedings under Part III of the Matrimonial and Family Proceedings

Act 1984. A freezing order had been made against the husband and he had been

ordered to file an affidavit of means with supporting documents. He did so, but it was

inadequate and gave no indication of his wealth or his income and no supporting

documents. He had also failed to file and serve an affidavit in reply to the wife's in

support of her application for interim maintenance. The wife sought a Hadkinson

order, arguing that the husband's disobedience to court orders was such that the court

should refuse to hear counsel's submissions on his behalf. What was extraordinary

was that the husband was the respondent to the application; it was not the usual

situation of a party seeking to invoke the powers of the court (including to pursue an

appeal) when in contempt. In acceding to the wife's application, Eleanor King J said

this:

"[26] I accept, of course, that the order sought is draconian. I further

accept that the situation needs even more anxious consideration where

the party in respect of which it is submitted should not be heard, is the

respondent to the application. But in the present case, the respondent

husband's contempt has been directed specifically at undermining the

very application before the court. The husband has set out to deprive the

court of the information which it needs and to which it is entitled and the

provision of which is in his gift. In those circumstances, in my

judgment, the fact that the contemnor in the present case is the

respondent, as opposed to the applicant, does not preclude the court

from declining to hear him, nor does it fall foul of Art. 6.

[27] [The wife's counsel] further reminds me, with considerable force,

that this is an interim hearing and so does not lead to the prejudice

against the husband which must inevitably arise in a final hearing. The

solution, he says rightly, is in the husband's hands. He could comply

with the order; he could file an affidavit and thereafter apply to vary any

order I make today.

…

[29] I am satisfied, therefore, that the wife's Hadkinson application

succeeds in principle. I have thereafter to consider what response is

proportionate in the exercise of my discretion. In argument before the

short adjournment, [the husband's counsel] said in terms that he does not

seek an adjournment. He made no offer of future compliance on the

husband's part, or assurances of disclosure forthwith if the matter was

held over.

….

[32] I take note that in his position statement [the husband's counsel] has

raised what he regards as an issue of jurisdiction. I take into account,

however, that whilst there appears to be no reported authorities on the

subject, applications for interim maintenance in Part III cases are

commonplace. I in this, as in all applications have to be satisfied that I

21 FARDM1/JP/7/8572256.1

have the jurisdiction to make the order sought. I take into account, as

[the wife's counsel] has forcefully and correctly submitted, that this is an

interim hearing and that the husband may at any stage choose to re-

engage in the process, to file an affidavit, and to make any application

he may wish to vary any order I make.

[33] In those circumstances in the exercise of my discretion, I accede to

the application of [the wife's counsel]."

13 Appeals

13.1 The non-disclosing party may suffer consequences beyond (i) the drawing of adverse

inferences, (ii) committal for contempt, and (ii) the making of a Hadkinson order:

their conduct might have ramifications for any appeal they may seek to pursue. In

Hutchings-Whelan v Hutchings, [2012] EWCA Civ 38, [2012] 1 FCR 339, a consent

order was made in the county court in February 2004 on the basis that the wife would

receive a lump sum of £176,000 in full settlement of her claims. Subsequent to the

making of that order, the wife became concerned as to the husband's apparent wealth,

suspecting that he had failed to make full disclosure of all his assets prior to the

financial dispute being compromised. She accordingly applied to the court to re-open

the matter and, in March 2009, the consent order was set aside on the basis that the

husband had apparently failed to make full and frank disclosure of his assets. In

particular, the judge identified that a property which had ostensibly been purchased in

the name of the couple's son was in reality likely to be the husband's property with the

son acting as a mere nominee. The existence of that property, which had been

purchased for £250,000 and subsequently sold for around £1.3m, had not been

disclosed at the time of the original divorce proceedings. In those circumstances, the

judge considered that the wife was justified in asking for the matter to be re-opened

and evaluated in detail. After a five-day hearing, the judge found that the husband had

a full beneficial interest in the particular property, together with a number of other

properties. He held that, in light of, inter alia, the husband's readiness to lie to lending

institutions and to the court about his income and the true ownership of his properties,

pure arithmetic was removed from assessment of the overall position, with the result

that certain assumptions had to be made. The judge awarded the wife an additional

lump sum of £384,000 as representing a fair award in the circumstances. The

husband, who was granted permission to appeal on a limited basis, claimed that the

judge, in calculating the profit figure, had failed to take account of interest totalling

£136,000 paid by him on loans with respect to the property. The wife submitted, inter

alia, that it ill behoved the husband to be making detailed claims for payments in

respect of a property which he had throughout claimed was not his. McFarlane LJ,

with whose judgment the other members of the court agreed, said this:

[36] For my part, I have more than a little sympathy for the principle

that underlines [the wife's] submission. A litigant who, as the judge

found, has gone out of his way to disguise, hide or otherwise cover up

his financial affairs cannot later be heard to complain that the judge has

22 FARDM1/JP/7/8572256.1

missed one or other point of detail in his attempt to delineate the

husband's finances through the haze created by the smoke and mirrors

that the litigant has deployed. ….

[53] … it is very difficult for an appellant who has been found to be

dishonest and opaque about so much of his financial circumstances as to

cause the judge to estimate, assume and at times, no doubt, guess at his

finances, to pick upon a small yet specific element and argue for pound

for pound credit in his favour in that regard. If the husband had

conducted this litigation in a co-operative, open and honest manner,

setting out in credible detail the minutiae of his finances then, of course,

it might be possible to identify, understand and correct any specific

arithmetical or evidential error in the calculation. The description that I

have just given, however, is the antithesis of the manner in which this

husband has conducted himself over the course of a decade in relation to

resolving the financial issues that remain between himself and his

former wife.

[54] … Having found that there had been a very substantial element of

non-disclosure with respect to a property which had netted over £1m,

[the first instance judge] then had to move through a sea of evidence

within which there was little or no solid ground and yet fix upon one

finite lump sum figure. ...

[55] … in a difficult case, where all the difficulties faced by the judge

originated from the husband's own conduct, it is impossible for the

husband now to complain that the judge exceeded the generous ambit of

discretion open to him in fixing upon an additional lump sum of

£384,000 in this case."

This approach is consistent with the dicta cited above in which it has been said

that non-disclosing spouses cannot complain if a court draws inferences which

in fact over-estimate his wealth (as long as those inferences are reasonable and

properly drawn).

14 Costs

14.1 There is a modern tendency to say that financial remedy applications are governed by

the general rule that "in financial remedy proceedings … the court will not make an

order requiring one party to pay the costs of another party"; FPR 2010, R.28.3(5).

However, as that provision makes clear, it is subject to paragraph (6) of the same rule,

which provides:

"The court may make an order requiring one party to pay the costs of another

party at any stage of the proceedings where it considers it appropriate to do so

because of the conduct of a party in relation to the proceedings (whether

before or during them)."

And paragraph (7) provides: [emphasis added]

In deciding what order (if any) to make under paragraph (6), the court must

have regard to-

23 FARDM1/JP/7/8572256.1

(a) any failure by a party to comply with these rules, any order of the

court or any practice direction which the court considers relevant;

(b) any open offer to settle made by a party;

(c) whether it was reasonable for a party to raise, pursue or contest a particular

allegation or issue;

(d) the manner in which a party has pursued or responded to the application or

a particular allegation or issue;

(e) any other aspect of a party's conduct in relation to proceedings which the

court considers relevant; and

(f) the financial effect on the parties of any costs order.

14.2 Orders for costs against non-disclosing spouses are, therefore, often made. Of course,

such orders are only valuable to the spouse in whose favour they are made if assets

have been secured or can be located which will satisfy the costs order (and the

substantive order).

14.3 A further rather obvious costs consequence of non-disclosure is that the non-

compliance with orders and the need to seek orders aimed at compliance, to

investigate the recalcitrant spouse's finances, and so forth, will inevitably drive up the

costs of the case – particularly for the spouse who has to do the chasing and

investigation.

15 Setting aside

15.1 The non-disclosing spouse may think that by hiding their assets and giving incomplete

they have beaten the system, deceived the court and the other party, and "won". Such

victories can turn bitter, since non-disclosure is often a potent basis for setting aside

an order and re-opening the financial proceedings.

15.2 In Livesey (Jenkins) v Jenkins [1985] AC 424, where the requirement for full and

frank (and clear) disclosure was made plain by the House of Lords, it was made clear

that a breach of the obligation may found an application to set aside the order whether

it was made by consent or adjudication after trial. Such was the outcome in the case,

where the wife had failed to disclose her engagement to another man and intention to

remarry. Lord Brandon said:

"Such disclosure should have been made by the wife to her own

solicitors, and through them to the husband's solicitors, and the husband

himself, as soon as the engagement to remarry took place. Since it was

not made, the consent order was invalid, and the husband should be

entitled, in order to prevent injustice, to have it set aside."

15.3 However, it was made clear in Livesey v Jenkins that not every breach of the

obligation to give full and frank disclosure will lead to an order being set aside or a

case re-opened. Lord Brandon said, at :

24 FARDM1/JP/7/8572256.1

"I would end with an emphatic word of warning. It is not every failure of

frank and full disclosure which would justify a court in setting aside an

order of the kind concerned in this appeal. On the contrary, it will only

be in cases when the absence of full and frank disclosure has led to the

court making, either in contested proceedings or by consent, an order

which is substantially different from the order which it would have made

if such disclosure had taken place that a case for setting aside can

possibly be made good. Parties who apply to set aside orders on the

ground of failure to disclose some relatively minor matter or matters, the

disclosure of which would not have made any substantial difference to

the order which the court would have made or approved, are likely to

find their applications being summarily dismissed, with costs against

them, or, if they are legally aided, against the legal aid fund."

15.4 There is, however, scope for debate and determination in every case about the extent

to which the order should be reconsidered. In Kingdon v Kingdon, [2010] EWCA Civ

1251, [2011] 1 FCR 179, [2011] 1 FLR 1409, the parties had agreed a consent order

in 2005, but the wife later discovered that the husband had failed to disclose that he

had acquired 200,000 shares in a company which he later sold with a net gain of

£1.268m. In proceedings by the wife based on the non-disclosure, the deputy High

Court judge found that the husband's non-disclosure was material but that it was

neither necessary nor appropriate to set aside the whole of the 2005 order and direct a

rehearing of the application for ancillary relief. Instead, he found that the 2005 order

should be altered so as to include an additional payment of £481,000 to the wife,

which comprised 35% of the net gain in the realisable value of the undisclosed shares

(inclusive of interest). The husband appealed against the decision, submitting, inter

alia, that the judge should have set aside the 2005 order in its entirety and directed the

wife's application for ancillary relief to be reheard with submissions by both parties as

to their current means and all the other matters specified in s.25 of the Matrimonial

Causes Act 1973. The court rejected this, at least as a blanket rule and on the

particular facts of that case. Wilson LJ (as he then was), with whom the other

members of the court agreed, said that the judge's approach in the court below was

proper. The judge had been entitled to proceed to repair the defect by enlargement of

the lump sum payment in the 2005 order because (a) he had a discretion as to how

best to proceed; (b) in exercise of that discretion he was required to seek to deal with

the case justly, and thus in a way which was proportionate to the complexity of the

issues and which would save expense and ensure expedition; (c) the non-disclosure

was of a discrete element of the husband's assets and generated a defect which could

be cured by one simple enlargement, to be devised pursuant to the sharing principle;

(d) the order had been fully implemented and there was no need to reverse any part of

its implementation; and (e) the husband's lies yielded a conclusion that, were there to

be a second, updated, inquiry, no assertion on his part in relation to his financial

circumstances would be likely to be accepted unless clearly established following

protracted and costly examination. However, he made clear that such would not

invariably be the case:

25 FARDM1/JP/7/8572256.1

"[36] …. I can well imagine cases of non-disclosure — for example

where an applicant has secured a needs-based award without disclosure

of a substantial asset or of an engagement to marry — in which the

proper course is indeed to conduct the exercise under s.25 all over again

on updated material. The same might apply to non-disclosure by a

respondent which was so far-reaching as to have led the court to survey

the entire financial landscape on a false basis. What I cannot accept is

that the exercise will always have to be conducted again. The exercise

certainly has to have been conducted. But it has been conducted; and the

nature of the defect generated by the non-disclosure may — or may not

— require the whole order to be set aside and the whole exercise to be

conducted again.''

As the same judge said in another case (S v S (Divorce: Staying Proceedings) [1997]

2 FLR 100, at 103D, "It all depends.".

June 2014 Jeremy Posnansky QC

Partner, Farrer & Co LLP