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Court overrules divorce settlement twice

View profile for Karen Johnson
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Court overrules divorce settlement twice

The case of Goddard-Watts v Goddard-Watts was in the news last week. The case is notable because of the highly unusual decision to set aside a financial remedy order, not just once but twice.

The millionaire couple, James Goddard-Watts and Julia Goddard-Watts, originally divorced in 2010. A financial remedies order was made awarding Julia a lump sum of £4m. An order of this type should be final and binding.

However, despite James having been under an obligation to provide full and frank disclosure of his financial circumstances during the proceedings, it was subsequently discovered that he had failed to disclose two very valuable trusts of which he was the main beneficiary.

Those assets should have been taken into account and once they were, it meant that the provision set out in the previous order could no longer be considered fair. The wife applied to have the order set aside and was successful.

Fool me once, fool on you. Fool me twice, fool on whom?

In 2016, a further financial remedy order was made providing the wife with a further £6.42m. Yet again, that should have been a final order. However, yet again, despite being under a continuing duty to provide full and frank financial disclosure, the wife discovered that prior to the final judgement the husband had become aware that the value of his shareholdings had substantially increased, but had not disclosed this.

The increased value of those assets should have been taken into account and once they were, would mean that the order made could no longer be considered fair. The wife made a further application to set aside the order and was successful again.

The couple will now need to negotiate a settlement and, failing that, there will need to be a further hearing so that a judge can determine the case (hopefully for the last time).

Whilst it may be tempting to “conveniently forget” assets which you think your spouse may not be aware of, or hold back information concerning good fortune such as increases in assets value, promotions or windfalls, it will more than likely come back to bite you.

The law is clear that when dealing with financial matters as part of divorce proceedings, both parties are under a continuing obligation to provide full and frank financial disclosure. If this is not done and is discovered during the course of proceedings, it will affect a party’s credibility and give rise to arguments regarding litigation misconduct. This can impact the outcome and also lead to adverse costs orders being made.

Lying to the court is a criminal offence and, as Mr Goddard-Watts has found, means that any order made is vulnerable to being set aside. This has a huge impact in terms of costs. It is reported that the likely combined costs for a further fully contested final hearing would be £2.5m. It is also understood that Julia has offered to settle her claims on the basis of a further payment of £3m with no order as to costs.

What is also interesting is that, in failing to fully disclose his financial position the first time round, the husband appears to have really shot himself in the foot.

The reason I say that is because when dealing with financial applications, the court considers the value of the assets at the time of the hearing. There is nothing in the reports to suggest that at the time of the first order, he had failed to disclose the true value of his shareholdings. Any order made at that time, if made on a clean break basis, would not have been liable to be set aside if or when those shares increased in value.

Shares are, by their nature, high risk assets and the person retaining them post-divorce takes the risk that they could go up or down. However, because that order was set aside, everything had to be revalued at the time of the second hearing, including any increase in the value of those shares (and any other asset that the husband or wife held).

In real terms, if Julia’s offer reflects approximately 50% of the increase in value of those shares, his failure to “do it right” the first time round is likely to cost him an extra £3m, plus any costs he incurs for himself and is ordered to pay for the wife.

If you are considering, or currently in the process of, separation then call our specialist divorce lawyers for a free 15 minute discussion about your case and how we can help you.

I am based in our Colchester office and can be contacted on 01206 217305 or karen.johnson@birkettlong.co.uk.

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