Picture the scenario:
You are in a round table meeting with your lawyer, your spouse and his/her lawyer.
Your spouse is questioning you about your financial disclosure. The atmosphere is intimidating. Like the well known New York divorce attorney, your lawyer has a piranha in the fish tank by the coffee pots and cups and saucers. It is stiflingly hot and the air conditioning is not working.
The meeting is being held on a without prejudice basis on the eve of a five day hearing to settle all the matters in issue.
In these sweaty, intimidating conditions, you crumble, and cough up the names of the banks in which you held monies in numbered and secret bank accounts.
You confess that the Revenue knows nothing of them, and that tens of thousands of pounds of unpaid tax would be due if the Revenue got to know about them.
At that precise moment, the firm’s Butler enters the room to replenish the coffee and biscuits. He overhears the confessions and "tut tuts" as he exits the room.
Thinking that he might as well try to get a pay off by whistle-blowing to the Revenue, he discloses the existence of those secret accounts in an anonymous note to the Revenue.
Would the Revenue in reliance on the Butler's disclosure, be able to prosecute you for withholding taxes?
Fanciful as it may seem, this is the same hypothetical situation described by the Court of Appeal in the recent case of R v. Kerman [2009] EWCA Crim 1640.
And the answer?
You are protected because the information came out of the questioning of your assets in the context of matrimonial financial proceedings. And you have an absolute duty of full and frank disclosure in such proceedings. You cannot, in those proceedings, rely on the normal privilege against self-incrimination: you must disclose everything. And thus admissions made during that disclosure cannot be relied on by the prosecuting authorities. To do otherwise would be to contravene your right to a fair trial under Article 6 of the European Convention on Human Rights.
I normally advise clients that so much of family law advice derives from common sense. This legal point also shows how clever lawyers are deploying human rights based arguments.
There were a few more "what ifs" decided by the case.
1. What if the admission had been made in without prejudice conversations, and reported to the Revenue by your vengeful spouse in a misguided attempt to "get back" at you?
The privileged and without prejudice aspects of the negotiations are irrelevant. The admissions cannot be relied upon by the Revenue if they were made to further the duty of full and frank disclosure.
2. What if you made the admissions in open (ie not privileged) discussions with your wife? Would the fact that the admission was made openly, and not without prejudice, enable the Revenue to rely on it? No, the position is exactly the same - the Revenue could not rely on disclosure produced in response to the duty to show your cards face open to the other side.
3. What if, during a hearing, you scribble a note to your barrister, confessing, for the first time, the existence of the hidden Swiss bank accounts?
Could it be said that the document is protected from disclosure by legal professional privilege?
No, the interest of investigating tax fraud overrides legal professional privilege; but, again, everything is trumped by the requirement of providing full and frank disclosure in a divorce. So the Revenue could not rely on the admission unless it is unaffected by the requirement of absolute disclosure.
The Court of Appeal's trumpeting of the sanctity of financial disclosure is loud and emphatic.
On the face of it, the principle offends the general principle that you, or your spouse, should not benefit from an illegal act. However, there is nothing to stop the Revenue from getting independent evidence (if it exists) of a tax fraud, once their attention has been directed to the relevant accounts, and using that in subsequent criminal proceedings…there is no rule in the UK against the use of “the fruits of the poisoned tree.”
The answer may lie in practicality: what hope is there of wresting disclosure from a dishonest husband if he is unwilling to disclose the truth to his wife for fear of subsequent tax repercussions?
Justice in the individual family law case comes at the price of tens if not hundreds of thousands of pounds of public Revenue in unpaid taxes.
Has the balance tilted too far?
Simon Bruce, Farrer & Co and Amanda Pinto QC, 5 Paper Buildings
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