The cost of concealing your assets article banner image

A recent court case, Joy v Joy-Morancho & Others (High Court August 2015), has highlighted how a husband or wife’s misconduct in divorce proceedings, whilst not always affecting the final outcome of a court’s decision, could affect the litigation costs.

In this case, the wife was seeking half of the matrimonial assets which allegedly totalled £54 million. The husband maintained he was imminently due to lose his fortune as a result of a decision to be imposed on him by the trustees of a trust, which he said would legitimately swallow the whole fortune.

The husband’s legal advisers had incurred huge costs in presenting their client’s case to the court and inevitably the wife’s costs had soared in attempting to defeat the husband’s contention that he has no assets to distribute in the divorce settlement.

The judge was unable (given the lengths the husband had gone to, to conceal his assets in the apparently legitimate trust), to reach a decision that the wife had made out her case to achieve a substantive capital award. This did not mean, however, that the husband had ‘won’. The judge went on to make it very clear that he considered that the husband’s conduct, in going to extreme lengths to avoid a disposition of any capital assets to the wife, was misconduct which should be penalised.

The judge stated that the trust which the husband had settled was a “rotten edifice” and “a sham” and had been deliberately designed to conceal money from the wife and the court. He went on to say that despite the complications of its structure and impenetrability, he had no doubt that at a  later date the husband would find a way to extract money from it for his own needs.

The judge adjourned the wife’s claim for a capital award indefinitely and increased what should have been a modest periodical payments award to the wife to £120,000 per annum. The real sting in the tail, however, was that the judge made a cost order against the husband for 80% of her litigation costs of £417,829.

In effect, the judge was sending a warning to the husband that the court would not look favourably on a party who conducted deviant litigation of this kind.

The view of the husband’s solicitor was that their client had managed to refute the wife’s case that he had millions of assets. The award of damages clearly paints a different picture, namely that the court can draw adverse inferences from poor litigation behaviour. In this case, resulting in a substantive penalty in costs against the husband. In addition, the wife retained the right to re-open her case if the husband’s financial circumstances were restored in the future. It may be, in this case, that the husband may have shot himself in the foot with a very expensive bullet.

The general rule in divorce cases is that there should be full and frank disclosure of the assets and transparency about financial dealings. This case has repercussions in that costs may be awarded against a party in any divorce,  to penalise them where the court considers they have been less than honest or have sought to mislead contrive or conceal assets.

A solicitor can advise on the best way to present and to negotiate a financial settlement within divorce. At Stephens Scown we have an experienced that can support and advise you throughout the process.