Disclosure of Ownership of Unusual Assets in Divorce Financial Proceedings
Emphasis has often been placed on the legal requirement, in proceedings relating to finances at the time of or after divorce, for full disclosure of the existence of all assets which have a monetary value. This requirement applies even to unusual items, including those whose value may vary frequently or be difficult to establish, such as a rare painting or a unique piece of antique furniture or jewellery.
Duty to disclose continues until the hearing or settlement
The significance of failure to make full disclosure is varied. For example:
- .If the existence of an item is not disclosed and the case finishes without it being taken into account, and then it emerges that it should have been part of the case, the party disadvantaged by the failure to disclose could ask the court to set aside the original order and consider the case again.
- If it is very late in the proceedings that disclosure of an item is made or the fact of its ownership by a party is discovered, the court may order the defaulting party to pay at least part of the costs that may be wasted by, for example, having to delay the proceedings to obtain a last minute valuation.
- If the court concludes that the failure to disclose has been a deliberate attempt to conceal the existence of the asset, it is very likely that the court will order the defaulting party to pay the costs of the case or even worse, adjust the outcome of the case to the disadvantage of the defaulting party on the grounds that the failure to disclose amounts to poor conduct in the case.
What about unusual assets?
The duty to disclose the existence of unusual assets is the same as all others.
As an example, much has been written recently about the apparent rise in value of digital currency known as “bitcoins”.
Bitcoins are assets for the purposes of financial proceedings in divorce as much as conventional currency, even though they have no physical presence. The person whose address the bitcoins are registered hopes that it will be possible to sell the currency at a profit, and so it is the estimated value of the bitcoins which is relevant.
How will bitcoin be distributed on divorce?
Bitcoins will be treated by the court in the same way as any other asset. The court will generally deal with finances by sharing equally everything earned (or gained) during the marriage. The “equal sharing” principle is the starting point in the majority of cases although the final result may be different in some situations (e.g. very short marriages).
How are bitcoins valued?
The value of bitcoins, like that of stocks and shares or jewellery or antiques, fluctuates. If there is disagreement between the parties as to what value to attribute to bitcoins, then that is a factual issue that will have to be decided by the court, perhaps with the help of expert evidence. The relevant date for valuation would usually be the date of the court case relating to the finances although that could vary if, for example, there had been a long delay in the case getting to court.
Distribution of bitcoins as part of the settlement of finances on divorce
In theory, the court has the same power to divide the ownership of bitcoins between the parties in any way it regards as fair. However, with bitcoins being a relatively new financial instrument, there is no clear guidance yet from the courts on this issue.
It is possible that the ownership of bitcoins might come with a restriction that the ownership cannot be transferred except with formal approval of a third party. If that sort of restriction is applied, then the court would be likely to give to the party who would otherwise have received part of the bitcoins, a greater share of other assets.