NG v SG (Appeal: Non-disclosure)

In financial-remedy proceedings, materially deficient disclosure requires the court to consider adverse inferences, but those inferences must be properly drawn and reasonable. If hidden funds are found, the court should make a realistic quantification, however broad, based on admissible evidence. Direct evidence, business activity and lifestyle are relevant. Vague evidence of reputation or third-party belief is inadmissible. A technique of inferring that the non-discloser possesses at least twice the sum claimed should not be the sole basis of quantification. The court must also ensure that non-disclosure does not produce a better outcome than full disclosure would have produced.

NG appealed against District Judge Malik’s judgment and order of 20 July 2011 concerning applications to vary a 1998 consent order for spousal and child maintenance, remit arrears and enforce sums exceeding 12 months old. The district judge found NG to be a serious and serial non-discloser, capitalised the spousal maintenance at £675,000, ordered payment of arrears and made a costs order.

The appeal challenged the factual findings concerning NG’s resources, the finding of non-disclosure concerning the LM Group, the late introduction of capitalisation, the construction of the maintenance order and the costs order. The central questions were whether capitalisation had been procedurally available and whether the findings and quantification of undisclosed resources were sustainable.

1. Appeal allowed. The judgment and order of District Judge Malik were set aside in their entirety. A retrial was directed, with fresh Forms E, an FDR and a five-day final hearing. The 1998 order and enforcement of arrears were stayed pending retrial.
2. Where disclosure is materially deficient, the court is bound to consider adverse inferences. They must nevertheless be properly drawn and reasonable. The court must not infer assets which the evidence shows the party does not possess. Where hidden funds are found, the court should attempt a realistic and reasonable broad quantification.
3. Quantification should begin with direct evidence, including documents and observations, and then consider business activity and lifestyle. Vague evidence of reputation or third-party opinions is inadmissible. The Al-Khatib technique of inferring wealth from the amount claimed cannot be the sole metric.
4. The capitalisation award was flawed in principle. The payer had to receive ample notice of an application for capitalisation, and the directions and evidence had to address the relief sought. The late reference to capitalisation in written submissions did not cure that defect.
5. The district judge had also proceeded irregularly by permitting important disclosure after oral evidence had closed and dealing with it only through written submissions. The findings did not include even a broad estimate of the allegedly hidden residue and were neither properly drawn nor reasonable.

• High Court (Family Division): NG v SG (Appeal: Non-disclosure), [2011] EWHC 3270 (Fam). Appeal allowed; the judgment and order below were set aside and the matter remitted for retrial.
• District Judge Malik: judgment and order dated 20 July 2011, set aside by this court.