The importance of full disclosure in financial proceedings
Earlier this year there was much ado concerning the divorce settlement between James Goddard-Watts, the Screwfix millionaire and his wife Julia when it was ordered that there should be a rehearing of the wife’s application for financial provision based on the husband’s failure to disclose fully his interest in trust assets.
The case is another illustration as to why it is so important for divorcing parties to make full and frank disclosure of all their assets before a final order is made in respect of the financial aspect of the marriage. If not, the “final” order may not final as happened in this particular instance.
The background to this was that the parties had begun living together in 1987, married in 1996, and separated in 2009. In 1988 the husband started working for his parent’s small company (selling screws) in 1988 which later became Screwfix Direct Ltd. He received £15m for his interest in the company in 1999 and bought what became Group Silverline Ltd of which has 81.82% share with the rest being held for his children on trust. He also has shares in his brother’s business given to him in return for financial help.
What had been ostensibly the “final” Financial Order made on 1 June 2010 had awarded the wife the former matrimonial home worth £3.25m and a lump sum of £4m (£1m to be paid over 8 years). However it was set aside last June on the application of the wife who had evidence that the husband had misled the court by not disclosing his interest in two trusts which had a combined value of £12.67m.
The total value of the assets in 2016 was over £22.8m, considerably more than in 2010 since the value of the business had increased post separation and divorce.
The wife argued that since her case was to be a rehearing based on the current value of the assets, and sought an equal division of the current value of the assets, together with 40% of any profit on sale of company assets over the 2016 value should the company assets be later sold. She contended that in affect her husband had used/invested what should had been her rightful share of the trust fund in his business and so she was entitled to a share of that success despite it being accrued post separation.
On the other hand, the husband thought a fair resolution would be for the wife to receive a £3.5m of the value of the trust assets in 2010, with 15% uplift to compensate her for the delay in payment.
The Court held however that even though there had been misrepresentation or non- disclosure resulting in the setting aside of the 2010 Order it did not mean that the renewed financial remedy proceedings should start from scratch.
It therefore dealt with the matter by isolating those issues which had been affected by the misrepresentation/non-disclosure. So in relation to the trust funds, it was decided that had the court known of the true position in 2010, it would have treated 65% of the trusts’ assets as being resources available to the parties, and awarded half of that to the wife.
On this basis the wife was awarded a further sum of £6.42m representing a half share of the trust assets together with the outstanding lump sum due to her under the 2010 Order (£280,000) and £200,000 to compensate her for not having received the additional sum when she should have done.
Otherwise after taking into account all the circumstances, the Court held that otherwise the terms of the 2010 Order were fair and remained fair, and that the current value of the business was the product of post-separation endeavour by the husband to which the wife had no entitlement.
Both parties would no doubt have accrued significant costs in resolving these issues. It is a common misnomer however that a spouse’s interest in a trust fund is not a marital asset to be divided between the parties if a marriage or civil partnership ends in divorce. This can be the case even if the trust is a discretionary trust. It was clear to the Court that the husband in the Goddard-Watts case was the true beneficiary of the two trusts that had been as issue, and if the husband had been honest in the first place as to the true extent of his wealth then years of financial wrangling between the parties would have been avoided.
The husband may well have been relieved however that the Court did not take the 2016 value of the marital assets as the starting point for division, as otherwise he may have lived to regret his non-disclosure even more so.
At Ringrose Law we have a specialist team that would be happy to advise on these issues or any other family law issue. Contact the Family Law Team in either; Boston, Lincoln, Spalding, Sleaford, Grantham or Newark.