This is the first in a series of blogs about matrimonial law.

Remembering always that the aim in divorce proceedings is to get a fair settlement with the minimum amount of disruption and time it takes to do the job properly and with the least expenditure needed in order to get a just result. This article should be read in conjunction with Catia Tavares’ earlier article on Family Dispute Resolutions, (FDRs).

FDRs are exceptionally helpful in complex high-value cases. They only work once both parties’ assets have been fully ascertained.

What is a HNW divorce? They have common denominators, namely:

  • Significant wealth which has been either made or inherited;
  • One party more dominant in relation to wealth creation or inheritance than the other;
  • Spouses making varying levels of contribution from homemaker to genuine business partner;
  • Assets in different countries nearly always with an offshore element and a degree of structuring. What that means in practice is trusts, companies, foundations and a number of cross-border considerations;
  • In a small percentage of cases small husband and wife businesses take off owing to the equal efforts of both spouses producing significant assets.

In relation to a divorce of that nature it is important to pick the right advisers at the beginning. Things can go wrong when a strictly matrimonial law firm has been picked to act for one of the parties. Divorces of this nature needs a blend of skills which include: (1) an intelligence gathering arm, in-house or external; (2) accountancy support and (3) regrettably sometimes, hard skills, more often found in commercial practice including injunctions, search orders and third party disclosure orders.

Once the rot has set in, particularly in relation to non-disclosing spouses, it is difficult to catch up and rectify the position which has deteriorated because given latitude an unscrupulous spouse who has decided to hide their assets or circumvent the judicial process in some fashion will have made considerable progress.

Each case depends on its own facts but identifying and recovering assets concealed by defaulting spouses can be a topic in itself which we have only partially addressed here.

The other point to make at this juncture is that the points made in this article are not limited to this jurisdiction but are in common with many other jurisdictions.

Some disputes between genuinely equal business partners can have tragic outcomes, sometimes best resolved (if possible) by the use of appropriate ADR (Alternative Dispute Resolution) skills because the fight involving the goose that laid the golden egg ends up killing the goose).

In the event that you suspect that the other spouse is not going to play by the rules then before asking questions through formal or informal means (insofar as possible) build up a picture of assets, key personnel, companies and related. There are a number of ways of doing this, human intelligence is of course very important:

  • Spouses even when little involved in their husband/wife’s business tend to know a lot more than they think. This can often provide investigators and lawyers with very valuable leads.
  • There are a lot of legitimate sources of information that can be mined before getting underway. Disaffected business partners, mistresses and employees can be a very useful source of legitimate intelligence.
  • Publically available information, open source documentation and related, if trawled carefully, can yield great dividends.

It may, at an early stage, be useful to look to the end game if you are going to have a hotly contested divorce with elements of non-compliance and a foreign element. It is worth working out at the start the nature and enforceability of any judgment that you can obtain in the country where the assets are either sited or controlled. Also worth analysing at an early stage is the discovery regime available in foreign countries. Some countries allow pre-action discovery to assist you in working out where you want to bring your claim.

Equally at this stage it is worth flagging up a common mistake, that common mistake is crossing the line between legitimate and illegitimate evidence gathering. It is important to stay on the right side of the law for a number of reasons:

  • using unlawfully obtained documents and information is illegal and exposes the persons in question to penalties;
  • such behaviour compromises the integrity and independence of lawyers and can lead them to be pushed off the case, in which case a new team has to be briefed at considerable expense;
  • courts now realise, increasingly so, that spouses who are successful in business have rights like everybody else. They are not necessarily going to default or behave unlawfully and there are alternatives available under the law;
  • if good evidence exists that the dissipation or destruction of documents or assets is likely then restraining and search orders can be obtained. These are a good alternative to the perils of behaving unlawfully or retaining third parties who behave unlawfully.
  • arguments over admissibility can totally eclipse the main issue and eat the budget. You can spend as much time arguing over admissibility and money as you would otherwise have spent dealing with the divorce and sometimes, given the array of legitimate tools, it can be more than counterproductive.
  • The rules in relation to unlawfully obtained documentation and related have changed considerably (see below).
  • The so-called "Hildebrand rules" had, since 1992, been interpreted as permitting a divorcing spouse to access documents belonging to the other spouse, whether confidential or not, provided force was not used. Once access had been gained, the spouse might retain and use copies, though not the originals, but those copies should be disclosed. Since 2010, however, the “Rules” could not be relied upon in justification of, or as providing a defence to, conduct which would otherwise be criminal or actionable, whether in tort or equity. It is an actionable breach of confidence for a person, without the authority of another to whom a document is confidential, to examine, or to make, retain or supply to a third party a copy of, or to use the information contained in, such a document. A spouse whose confidential information has been purloined is entitled to the same relief as a non-spouse would be.

Two real life case studies in relation to the legitimate use of open source and human intelligence are mentioned below:

  • We discovered that the defaulting spouse had another house and another child. Leaving on one side the devastating impact of this information on the client the fact that there was another wholly unencumbered asset available for distribution which could not have been found without a degree of investigation was very helpful when negotiating a settlement.
  • We were acting for a partially informed client. Early enquiries led us to a chain of assets spanning three continents and a multitude (more than 20) live asset holdings or trading companies and numerous trusts including holdings in land, factories, warehousing and related, as well as a number of properties.

In both cases, being either pre or early informed was very helpful indeed in achieving the clients’ aims.

Before coming back to the methods of dealing with disputes of this nature in a successful and timely fashion, it is always necessary to take care in relation to the clients themselves, the clients on both sides, particularly where there has been a betrayal and a threat to financial stability.

Clients can lose the ability to make rational decisions. This may not be a short term phenomenon but there are four recognised stages: (1) denial; (2) anger; (3) depression and (4) acceptance.

Some disadvantaged spouses are in danger of reloading, they do not, at a deep level, accept that they have been betrayed or that their marriage is over and then they are easily manipulated if they break away from their advisers, they can be manipulated into disadvantageous behaviour and settlements.

Funding

Complex disputes over large quantities of money are expensive to deal with, sometimes the spouses are on an even playing field and in other cases they are not; sometimes quite aggressive steps need to be taken at an early stage in order to prevent dissipation, manipulation and removal of assets and to enable the creation of a fighting fund.

In most countries, it is forbidden to use funders (third parties who finance litigation) in relation to matrimonial disputes, certainly pre-judgment. Under certain circumstances they can be utilised in relation to unpaid final judgments especially where there is a foreign element.

Very few matrimonial firms are large enough to extend credit, most do not want to do so and even the larger firm will not due to the risks involved in non-payment. We have so far only encountered one specialist firm that acted nearly always for disadvantaged wives of what I might term rich husbands and they were in America where lawyers can take a mark-up on the fees depending upon the result.

Even specialist firms have a limit to their exposure and the number of cases of this nature that they can deal with. Sometimes a quick win at an early stage can provide a fighting fund and some lenders will provide credit to disadvantaged spouses where their position can be secured.

In other cases some jurisdictions will allow maintenance to be increased in order to take into account the level of legal fees that are necessary in cases of this nature. You can get maintenance to help with fees but it is not always a perfect solution. Courts, particularly Courts that do not deal with these types of disputes on a regular basis, start to put some pressure on the parties to conclude their business and one of the ways that they can do that is to cut down on the budget. Sometimes the budget needs to be large enough to encompass a number of activities which are simply beyond what the Court in question is used to dealing with, this can lead to tension over the amounts of maintenance and timetabling.

For more information about our expertise in this area please contact Catia Tavares catia.tavares@sinels.com