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‘Oh what a tangled web we weave, when first we practice to deceive’ wrote Sir Walter Scottin 1808. More than 200 years later, nowhere is this web more complex than in an ultra-high net worth divorce.
In many ultra-high net worth divorces, wealth is spread across jurisdictions in a highly complex network of liquid and illiquid assets, business interests, investment structures and trusts. Where financial stakes are high and emotions run even higher, allegations of hidden assets and non disclosure can escalate. Some may be unfounded yet can still derail negotiations and lead to years of litigation. More strikingly, when concealment is proven, the financial consequences and reputational risks can be extremely serious.
Whatever the motivation for non-disclosure – be it a misjudged attempt at asset protection or driven by anger, fear or a desire for control – the legal position has been clear for decades. Every divorcing spouse, regardless of their wealth, has an identical duty of full and frank disclosure of their assets and resources during financial remedy proceedings.
Against the backdrop of the globalisation of wealth and the sophisticated planning that underpins it, recent court decisions have again highlighted the consequences of failing to comply, and demonstrate the ongoing vigour in scrutinising complex wealth structures.
In MK v SK, Mr Justice Peel considered allegations made by the wife that the husband had failed to disclose assets forming part of a trust structure. The court agreed, concluding that the husband had concealed wealth. It found he enjoyed access to undisclosed assets in a trust, some other structure or held by individuals on his behalf. This case reminds us that the court looks beyond formal title and legal ownership to the reality of a party’s resources and their access to wealth. For the ultra-wealthy and their advisers, as well as family offices and trustees, this draws attention to the risks of informal arrangements and the importance of strong governance, clear documentation and anticipating future disclosure requirements.
Last year, the case of Helliwell v Entwistle caught the headlines for its focus on financial non-disclosure in the context of a prenuptial agreement. The parties enjoyed a short, three-year marriage, prior to which they had entered into a prenuptial agreement. In the prenup, they each stated that they had ‘fully and frankly’ disclosed to each other their financial resources and liabilities. The wife had not. She had failed to disclose assets amounting to 73% of her wealth, including her business assets and a 50% interest in property. The Court of Appeal found that the wife had deliberately failed to disclose this wealth and sent the case back to the High Court to assess the husband’s needs.
The significance extends well beyond this couple’s situation. It demonstrates that non-disclosure is not a gendered issue and that the need for accurate disclosure is not confined to the divorce proceedings – the disclosure requirements apply just as strongly when asserting full disclosure in a prenuptial agreement. Interestingly, prenup disclosure is often much more limited or high-level than that required on a divorce. For a prenup, financial information is typically provided in the form of a schedule or summary document. This can be misleading. If it falls short, especially when combined with an assertion that it is complete, the protection offered by the agreement may be undermined. With the growing popularity of pre and postnuptial agreements, this issue will no doubt arise again. The costs of getting the disclosure wrong before the marriage even starts can be significant on a future divorce.