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Form that misses the mark

16 October 17

The prescribed court form for disclosure of assets in divorce proceedings is fundamentally flawed and illustrates a lack of enticement towards full and early disclosure in Scots divorce procedure

by Bilaal Shabbir

Earlier this year, my firm concluded one of our longest running and most notorious divorce cases against SNP councillor, Dr Imtiaz Majid. The matter began in the Outer House of the Court of Session in December 2006 and spanned over a decade, eventually making its way into Airdrie Sheriff Court.

In her judgment, Sheriff Galbraith found that Dr Majid had deliberately concealed his wealth by dissipating major assets to close family and had fabricated a gambling addiction to explain his sudden loss of wealth and to defeat his wife’s financial claim. The matter culminated in an 11-day proof, resulting in the sheriff finding that Dr Majid's and his family’s evidence was “entirely unacceptable”, “ludicrous” and “a complete fabrication”. The sheriff made an order for a capital sum of £150,000 and Dr Majid’s appeal to the Sheriff Appeal Court was subsequently abandoned.

Following the conclusion of this case, I considered the current procedure in the sheriff court, in particular form F13A, and whether the form in its current format could potentially allow for disclosure of matrimonial assets from the outset.

Form F13A: uncertain scope

Almost all actions in the sheriff court which seek regulation of finances on divorce begin life in the same way, with an initial writ and form F13A being lodged in process. Form F13A is a relatively new procedure. Its inception came about as a result of para 4(2)(a) of the Act of Sederunt (Sheriff Court Rules) (Miscellaneous Amendments) 2012 in August 2012, amending rule 33.9 of the Ordinary Cause Rules.

The amendment introduced the form F13A in divorce cases, with corresponding amendments for civil partnership dissolution, in which a financial provision is sought. The form essentially constitutes a declaration by a party of the assets and liabilities at the relevant date. The amendment seemed to be a welcome change to the usual challenges of identifying which assets comprised matrimonial property. It was hoped that the introduction of the form would allow for greater transparency and avoid, inter alia, parties having to go through the specification and commission procedure. However, it is questionable whether the desired result has been achieved.

There are numerous issues with the form itself and the underlying procedure. As a starting point, the form simply instructs a party to detail all assets “owned by you” at the relevant date, despite being headed “Form of statement of matrimonial property”. The form does not specifically state whether the assets are to be restricted to the definition of “matrimonial property”. Practitioners will be well aware that the distinction is a critical one, as “matrimonial property” has a particular definition (Family Law (Scotland) Act 1985, s 10(4)). Certain assets such as gifts from third parties or inheritance are expressly excluded from this definition. The form has no regard to this.

On the other hand, if the form is only filled in with information on what is deemed to be “matrimonial property” in the legal sense, this would potentially undermine the ability of proceedings to be transparent. This is because a substantial asset which would not strictly be considered matrimonial property may be left out. This creates other issues. If, for example, there was a sizeable inheritance, its disclosure would be important to consider a party's resources for the purposes of s 8(2)(b) of the 1985 Act, and would likely have an effect on the fair sharing of the assets. Failure to disclose this would run contrary to the whole intention of the form. Accordingly, it may be more appropriate for the form to request assets and liabilities as at the relevant date and at the time the form is to be lodged in process. This would address the need to ensure that a full picture of both parties’ financial positions is available to the court and opposing parties.

Another problem arises in the form’s reference to the “relevant date”. This phrase also has a special meaning in terms of the 1985 Act. Section 10(3) of the Act defines the “relevant date” as the earlier of the date on which the parties ceased to cohabit or the date of service of summons in an action of divorce. Where the latter date applies, this conflicts with OCR, rule 33.9 which requires the lodging of a form F13A with the initial writ. In those cases, the “relevant date” has not yet come about as at that point the summons will not have been served. This is a narrow point but could potentially have devastating consequences in some cases. It leaves the door open for another Wallis v Wallis “windfall”.

Cases missed

In addition, given that the whole purpose of the form was to ensure that parties made full and frank disclosure from the outset, it is therefore peculiar to note that the obligation to lodge a form F13A in process is only on the pursuer making a financial claim or the defender opposing a claim which has already been initiated. This matter was brought to a head in another recent unreported divorce case at Kirkcaldy Sheriff Court, NM v WS.

In that case, the pursuer only sought divorce, based on the defender’s unreasonable behaviour. I acted for the defender husband who counterclaimed for financial provision. I enrolled a motion to ordain the pursuer to lodge a form F13A in process and the matter called at an opposed motion hearing. Sheriff Gilchrist was satisfied that there was a lacuna or conflict in the Ordinary Cause Rules. The matter was debated at length due to the lack of authority and guidance in this area. The only reported case which seemed to refer to form F13A was S v S 2013 Fam LR 80, in which Sheriff Small at Hamilton Sheriff Court seemed to indicate that the form had been lodged by both parties in process. On the face of it, rule 33.9(c) does not require the pursuer to lodge a form F13A at the time of opposing a claim for financial provision made in a counterclaim by the defender. However, rule 33.34(4) requires the defender to lodge a form F13A at the time of opposing a claim for financial provision or counterclaiming.

The sheriff found that it was inconsistent with Parliament’s intention that the defender might be subject to an obligation to lodge a form F13A when opposing a claim, but that the pursuer was not subject to that same obligation. This was evident from the heading of rule 33.9, which refers generally to an action of divorce where a claim for financial provision may be made.

Furthermore, given the heading of rule 33.9 refers only to divorce actions, it therefore cannot be used in claims made by cohabitants under s 28 of the Family Law (Scotland) Act 2006. Such claims are already notoriously difficult to pursue even with disclosure of the assets in question.

In any event, it is strange to observe that no equivalent form exists for divorce actions raised in the Court of Session. That is surprising given that the majority of high value and technical claims are brought there in the first place. Another crucial absence from the form is that it only requests a list of all assets held by the applicant and those held in joint names. There is no requirement for a list of assets or liabilities in the sole name of the opposing party. This is a glaring omission. The assets held in the sole name of the other party at the date of separation are necessarily required for a fair evaluation of the matrimonial property and resources of the parties.

In the event of failure

With that in mind, it is strange that nearly five years on, no reported cases appear to exist in relation to fraudulent declarations or wilful non-disclosure on the form. From experience, little weight is given to the form once lodged in process or during the examination of any witnesses. Indeed, in the majority of cases, the nature and background of the assets are more fully detailed in the pleadings.

This may have something to do with the fact that there is absolutely no guidance on how the form should be completed. If documentary evidence is not required to substantiate the assets disclosed on the form, what is the need for it to be lodged anyway if the assets will be mentioned and detailed in pleadings? The main issue remains unresolved. If the party making the claim is unaware of the extent of their spouse’s assets, how can they be sure they are receiving full disclosure on the form? Given that there are no apparent repercussions, there is nothing stopping a party opposing a financial claim from failing to make full disclosure.

Usually, a failure to provide full disclosure of assets is met with a motion under s 20 of the 1985 Act to compel the party to provide details of their resources. However, any such motion could only be made in the first place where there was reason to suppose the other party was not making full disclosure (Lawrence v Lawrence 1992 SCLR 199). Such a motion suffers from the same defects as above: that there is no way to guarantee full disclosure, especially if the party making the application is unaware of the full extent of the assets. Such a case is especially likely to come about where one spouse has been the main earner during the marriage, as had been the case with Dr Majid. In that respect, there would be no reason for the pursuing party to suspect non-disclosure and to make the appropriate motion.

Any such motion would also not compel the party to disclose assets which may be considered “matrimonial property”, as the statutory language of s 20 only refers to “resources”.

Detection post-decree

As demonstrated, given that the opportunities for non-disclosure in Scots divorce procedure are rife, the obvious question arises: what would be the remedy in cases where the non-disclosure is discovered after decree of divorce has been granted? In cases where the sums involved are insignificant, pursuing a course of action would probably be more trouble (and expense) than it is worth. However, in late 2015, the UK Supreme Court considered two such cases where the sums involved were extravagant. In Gohil [2015] UKSC 61 and Sharland [2015] UKSC 60, the court considered applications to reopen divorce proceedings on the basis that the applicants' husbands had fraudulently misrepresented the extent and value of their assets.

In Gohil’s case, she had accepted a settlement of £270,000. Her husband was later convicted for fraud and money laundering and had been found to be involved in an elaborate scheme with a Nigerian politician. He was believed to have concealed assets of almost £35 million. Her application came three years after the initial divorce proceedings had been concluded. In Sharland’s case, she had accepted a settlement offer of £10 million plus 30% of the proceeds of any future flotation of her husband’s software company. Shortly before the divorce was due to be concluded, Ms Sharland became aware that the company’s actual value was approximately £600 million.

Both appeals were allowed unanimously by the Supreme Court. The principles applied by the court are equally applicable to Scots law as they are to English law. Their Lordships concurred that “fraud unravels all”. Of particular interest was the court’s conclusion that it would be extraordinary if the victim of fraud in a divorce case was in a worse position than a victim of fraud in an ordinary contract case.

The position in Scotland is broadly contained within s 16 of the 1985 Act, which allows for an agreement or a term which was “not fair and reasonable at the time it was entered into” to be set aside or varied by the court. What is “fair and reasonable” is a judgment to be made on the facts of every case (Bradley v Bradley [2017] SAC (Civ) 29). However, the usual course is that such an application to the court can only be made at the time the court grants decree of divorce.

An alternative remedy is available under s 18 of the 1985 Act which allows for transactions effected within five years before the making of a claim for financial provision, to be set aside or varied if they are done in an effort to prejudice or defeat that claim. However, s 18(1) only permits this remedy for applications made within one year of the date of disposal of a claim for financial provision. The relatively short time frame creates obvious difficulties.

Law falling short

Such cases can still be resolved by way of seeking reduction of the decree of divorce on the basis of essential error which had been induced by the other party. However, if the previous decree was granted in foro, the pleadings will require to evidence exceptional circumstances and that reduction would be necessary to produce substantial justice (Adair v Colville & Sons 1926 SC (HL) 51). The other difficulty this would bring about is that the divorce would require to be granted afresh and a full-scale investigation would require to be made into the assets at the relevant date, which may be several years earlier. In addition, if the parties’ financial circumstances have varied, that would also mean that resources available to the parties at the time of granting the decree would be considered. This could potentially result in unreasonable and unfair sharing of the marital assets if these factors require to be taken into account all over again. In any event, such a remedy is likely to be exceedingly expensive and many parties may feel that the cost of vindicating their rights is simply too much.

It is clear that in Scottish divorce procedure, there is a distinct lack of enticement towards early disclosure. Any attempts made to seek full disclosure have the potential to be expensive, longwinded and ultimately may be unsuccessful. Despite the 1985 Act having been with us for over 30 years, it is arguable that the Act is too inflexible in its application and underlying intention to allow fairness in cases where one spouse deliberately intends to prejudice or defeat the other’s claim.

Bilaal Shabbir is a senior accredited paralegal and head of the Court of Session department at MBS Solicitors, specialising in family law, immigration, commercial dispute resolution and professional discipline. He is also a final year student on the part-time LLB programme at Edinburgh Napier University.

 


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