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To Disclose or not to Disclose

When two people divorce and subsequently negotiate the division of their assets, they have a duty to court to give full details of their financial resources.  Unless they do so, the court cannot properly exercise its discretion when deciding what to award each party.  So what happens when you know your husband or wife is secretly hiding a bank account or another asset and you can easily obtain a copy of their bank statement to prove their dishonesty? 

Historically under the old “Hildebrand Rules” spouses were allowed to copy and use the others’ financial documents in divorce proceedings, especially when believing the other would purposely hide their assets.  This was on the strict basis that the person who took or copied the other spouse’s documents should identify what was copied and any original documents would be returned to the rightful owner.   Generally the court would not penalise that person in these circumstances.  Allowing the documents to be admitted as evidence would enable cases to be dealt with fairly by providing the court will all of the relevant financial information. 

The Court of Appeal has recently ruled in the case of Imerman that Hildebrand Rules, have “no basis in law” and that the rules are unlawful.  The case concerned a businessman called Mr Imerman who shared an office in London with his wife’s brothers, who were property tycoons.  Whilst they shared an office, the office was owned by one of the brothers and Mr Imerman ran a separate business from the shared premises.  The computer systems were linked to common servers.  In 1999 Mr Imerman sold a major stake in his tinned fruit business, Del Monte and received capital in the region of £380 million.  In December 2008 his wife issued divorce proceedings against him and within weeks, Mr Imerman was evicted from the business premises; he told his wife that no-one would ever know the truth of his wealth.  One of the brothers had hacked into Mr Imermans’ computer believing Mr Imerman would attempt to hide his assets.  He proceeded to download and copy a substantial amount of private and confidential financial information belonging to Mr Imerman.  The brother passed this information to the wife who gave the documents to her divorce lawyer.  Mr Imerman applied to the court and successfully claimed that the brothers and his wife’s solicitor had no right to retain or use material which was downloaded without his knowledge.  The brothers and his wife appealed. 

The issues to be determined at the appeal were whether the documents secretly obtained from Mr Imermans’ computer should be returned to him and whether his wife’s solicitor should be restrained from making use of the information contained in the documents.  It was ruled that the old Hildebrand Rules could not be relied upon to justify a defence to conduct which would otherwise be criminal or actionable in a civil court. 

Lord Neuberger said that the wife could have applied for an order to search her husband’s property, or to seize or freeze his assets and that neither the wife nor her brothers should have taken the law into their own hands. 

So what are confidential documents?  Confidential documents are papers which your spouse reasonably expects to be private to include bank statements, investment/policy documents, or letters addressed solely to your spouse.  However, if your spouse leaves documentation, such as bank statements lying around the house, it may well lose its confidential nature.  The court would then have to consider the nature of the relationship between the parties and the way the parties lived and conducted their personal and business affairs.  Thus if the parties each had their own study, it would be less likely that a wife could copy the statement without infringing the husband’s confidence if the statement had been left in the study rather than in the marital bedroom.

So what does this mean in reality?  It means that in future any attempt by one person in a divorce to obtain documents without permission could result in heavy costs orders or criminal proceedings against them.  It could mean that spouses are disadvantaged because if they know that the other spouse has deliberately hidden assets, they can do nothing about it.  They are prevented from showing documents to their lawyers or the court. 

So what can you do if you believe your spouse is deliberately hiding assets?  The only lawful way to obtain evidence showing your spouses true wealth would be to apply to the court for an order to search their premises or even to seize or freeze their assets.  Your recollection of the documents can be explained to the court to assist with your application.  An alternative is to raise suspicion based upon their recollection.  If the court does decide that your spouse has deliberately hidden assets, assuming the Judge hasn’t actually seen the confidential documents, he/she can draw adverse inferences and by deciding the likely level of the hidden assets, he/she will likely value the assets towards the top end of the amount suggested.

Whilst the Imerman case involved assets of millions of pounds, there will be many unfortunate spouses who simply cannot afford to apply to the court to search, seize or freeze assets.  The reality is, unfortunately they may not get a fair outcome.  Whilst there has been much press lately about the government trying to reduce costs relating to the family justice system, it seems as though the decision in Imerman could unfortunately increase costs significantly if a person is forced to apply for searching or freezing orders against the other.

Therefore, think very carefully before secretly obtaining your spouse’s confidential documents as it could backfire!

Please contact Chris Upfield on 023 9236 6004 for more information or email chrisupfield@coffinmew.co.uk