The recent case of US v SR: the ramifications of hiding and disposing of assets
The recent case of US v SR has revealed to the world the huge legal costs that will arise where a couple when divorcing decide, one way or the other, to behave in a way which is either dishonest or with the intent of intentionally reducing the value of matrimonial assets which could otherwise have been available for division.
This case came before the court in October and November 2013, and heard before Mrs J Roberts QC sitting as a Deputy High Court Judge. Her extensive judgement of some 50 plus pages is a model of clarity. It sets out in graphic detail some of the most complex issues that judges are called on to determine. The judgement is a model of delivery drawing together as it does the correct approach that the court has to take when dealing with “dishonest behaviour”. As well as the inappropriate dissolution of the value of matrimonial assets.
The case also provides the most wonderful example of how the tenacity of counsel, Mr James Ewins, at a time when all might, to others, have appeared lost, resulted in the discovery of a sum of $845,000. The husband had been hiding this not only from his wife but from the court and from his legal representatives. That deception was:
“…a flagrant breach of the clear obligation… to provide a full, frank and transparent exposition of his financial circumstances.”
The case also offered the court the opportunity to highlight the difference between marital and litigation misconduct. The court had to decide in circumstances where it was accepted that the husband had materially lied, could the judge then, without more evidence, find there were other undisclosed assets? Does the burden fall on the husband to show that such assets didn’t exist?
As determined by her Ladyship, the fact that the husband had lied didn’t mean that the wife didn’t have to prove the case that she was putting forward. There had to be “some admissible evidence of hidden funds”, even if one was not in a position to put a precise figure as to how much those hidden funds might be worth.
Just because it was clear that her husband had lied didn’t mean that the court was entitled to draw the adverse inference that, because of that lie, the judge should accept there were probably hidden assets just because the wife alleged that there were.
It was not only the husband who was the subject of allegations of wrongful behaviour. The couple had had various properties in Russia. During the course of the proceedings, the wife had disposed of/sold at least two of those properties. And she had “wantonly and wrongfully disposed of an asset at an undervalue”. The allegation extended to a disposal of $1.57 million. The court then had to look at how it should treat such monies. In the judgement, the court looked at the difference between “notional reattribution”. They distinguished it from “a finding that a party should be presumed to have access to funds or assets which it has found actually exist.”
The judgement stated:
“Each is a form of add back but in one case the court’s finding is to the effect that the assets (or the value of the assets) is actually available to a party: and in the other, the finding is to the effect that it should be treated as being available but is not.”
This judgement also dealt with the distinction between matrimonial misconduct and litigation misconduct. How should the wife’s selling/disposing of properties at an undervalue be treated within the case? The court also had to look at the spending of the wife and decide what proportion of the sum that she had spent should be allowed as being reasonable in the context of the case. After considering all the evidence that had been before her, her Ladyship decided that £1 million should reattribute to the wife.
This is not the end of the story. This was just a hearing to decide those issues mentioned above as well as various other issues of claim and counterclaim. It being the case that the court could not decide on the distribution of matrimonial assets without ruling on the issues themselves.
The parties are now trying to come to a resolution of the totality of financial issues bearing in mind the judgement of Mrs Roberts. Given the discovery of hidden assets and the reattribution of monies, the parties may well reflect that the combined costs they’ve incurred of over £900,000 was a salutary lesson to all those who go afterwards. A departure from the court’s rule to make full and frank disclosure can have ramifications which go far beyond the benefit that the wrong doer sought to achieve.
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