Following the surge in publicity after the leak of information from the law firm Mossack Fonseca (aka the Panama Papers), David Cameron and his government are feeling pressure to be more transparent with their personal tax and financial affairs.
It should come as no surprise, however, that the hiding of assets in off shore tax havens is nothing new in the world of divorce. The Panama Papers puts the spotlight back on the issue of wealthy spouses who seek to hide their assets from their ex-partners in the course of matrimonial proceedings.
But is the tide turning for them?
Playing hide and seek with assets does sometimes happen in matrimonial proceedings. The leak from Mossack Fonseca highlights that the long established practice of wealthy spouses who tie up their assets in complicated trust funds abroad is alive and well.
But what is the purpose of these complicated financial arrangements? Put simply: to hide these assets and to make it impossible for an ex-partner to ascertain their spouse’s true net worth. The effect of this means that any financial settlement or Order that is granted does not take into account all of the assets of a marriage, and those that are held ‘off shore’ are essentially ring fenced for the benefit of the wealthy spouse.
Unless there are compelling grounds for a settlement or Order to be revisited by the Court there can be no avenue for an ex partner to turn back time to try and get their share of these hidden assets. This sort of result must be a very bitter pill to swallow indeed.
Nowhere to hide
Whilst the practice of hiding assets, or being less than candid about their existence, can be a feature in divorce, the Supreme Court recently ruled in favour of two ex-wives Alison Sharland and Varsha Gohil who were successful in setting aside their previous divorce settlements by reason of non-disclosure (see here).
Commenting after the Supreme Court decided unanimously in their favour Lady Hale stated that the women had been “deprived of a full and fair hearing as a result of their husband’s fraud.’’ Having found that their husband’s misled the courts in the original hearings, their financial cases have been sent back to the Family Court to be re-heard again.
Panama and beyond
Not only does this case provide favourable outcomes to the ex-wives involved but it sends a clear message to divorcing parties across the country: lying will not be tolerated. The clear message now coming from the Courts is that fraud of any sort will not only be frowned upon, it will be investigated and any untruthfulness that is uncovered will be brought into line.
More importantly, the precedent set by the Supreme Court indicates that hiding assets of any size will not be tolerated. Divorcing spouses who are contemplating dishonesty in respect of any asset, whether large enough to be hidden off shore or not, should be warned that the Courts will take a very dim view indeed of such actions.
Arguably the increased publicity into off shore assets and the Supreme Court’s favourable decision in the cases of Gohil and Sharland means that it is likely there will be an increase in the number of divorcees who wish to revisit their financial orders or settlements ‘amicably’ reached.