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Divorce, disclosure and dishonesty: The Panama Papers

by Tony Roe
27 April 2016

Full and frank, cards on the table - face up. That is the duty of disclosure on each spouse when resolving financial matters on divorce. Reported cases are littered with offshore vehicles, sham trusts and even rogue claims to diplomatic immunity, all devices aimed at hiding the real extent of the individual’s asset position.

The precedent of Sharland and Gohil

The recent victories of two wives in the UK Supreme Court made the headlines. Their cases, Sharland and Gohil, considered the impact of fraudulent non-disclosure on a financial settlement agreed between a husband and wife on divorce, and relevant orders. They are a stark reminder that there is no scope whatsoever for a party to be anything other than totally honest when disclosing their financial position in divorce proceedings, failing which the entire settlement can be reopened.

The Panama Papers

Panama was once famous for its canal. Now it is well-known for the headquarters of the law firm, Mossack Fonseca, which found itself subject to a massive data leak. The International Consortium of Investigative Journalists, the global network of more than 190 investigative journalists, has been investigating 11 million leaked files, the so-called ‘Panama Papers’.

ICIJ reports that the late tycoon, Scot Young, used Mossack Fonseca, and other firms, in relation to his offshore finances. Before his death, his wife, Michelle Young, was awarded a lump sum of £20m by the High Court in London. Almost three years on, Mrs Young is still waiting for her money.

Mr Justice Moor stated in his judgment that Mr Young had not complied with court orders and been found to have ‘misled the court as to his finances to a very significant extent’. Indeed, Mr Young had served six months for contempt of court.

In a statement, Mossack Fonseca says that it does not open or manage accounts, or take custody of money or assets. Its files, relating to numerous high-profile individuals, are still being examined and promise many new revelations, not least about individuals who might have been less than candid in their divorces in this jurisdiction.

Revisiting financial settlements

Opening up divorce settlements is not an easy process, however. It demands expert analysis. The Panama Papers brings a fresh angle. There will be a good number of former spouses seeking to rely on them in fresh applications to set aside, vary or appeal their original financial orders. Certain documents, however, may be exempt from disclosure, being covered by confidentiality or privacy, including legal professional privilege. We must remind ourselves that the Panama Papers comprise documentation from a law firm, albeit one from another jurisdiction. That very fact is likely to be argued by those subject to applications to revisit court orders. As a result, we are likely to see some very interesting case law.

Meanwhile, the leak should come as a warning to any divorcing spouse who might be considering being less than forthright about their finances.

No exceptions

A postscript, though. On 12 April the Telegraph reported that some MPs do not want to publish their tax returns because ‘it could cause problems for those going through a divorce or with a complicated family life’. Someone please remind any such politicians about this key common law principle of financial disclosure on divorce.

About the author - Tony Roe

Tony Roe is principal solicitor and family law arbitrator at Tony Roe Divorce & Family Law Solicitors. He is a member of the Small Firms Division Reference Group and the Family Section Advisory Group.

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