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HMRC Lose Claim for Disclosure of £40 Million Divorce Papers
John Charman, the husband in the biggest contested divorce settlement in the UK, has defeated an appeal by HM Revenue and Customs (HMRC) against a court order refusing disclosure of his court documents.
In 2006, Mr Charman was ordered to transfer to his ex-wife, Beverly Charman, £40 million in cash and assets from an estimated fortune of £123 million, bringing Mrs Charman’s assets up to £48 million. Mr Charman lost an appeal against the award the following year.
Not surprisingly, the original hearing involved a huge volume of documentation detailing the extent of the two parties’ various assets and income. The courts undertook to keep the details confidential. When HMRC sought disclosure of the documents, Mr Charman objected.
Both parties agreed that the consent of Mr and Mrs Charman was required before these documents and other evidence could be disclosed, unless the court ordered otherwise. It was also agreed that the judge had discretion to order the documents to be disclosed.
HMRC argued that it is always in the public interest for the right amount of tax to be paid by taxpayers and that the Charmans’ documents were directly relevant to tax questions under dispute. In particular, HMRC required the transcripts and documents so that Mr Charman could be cross-examined if he seemed to be presenting a case to the Tax Tribunal that was factually different from the one presented to the Family Court and the Court of Appeal.
In reply, Mr Charman stated that the evidence he gave during his divorce proceedings was given in private and was protected by the ‘cloak of privilege’ and the parties’ duty of confidentiality. He argued that for confidentiality to be lifted without justification and with no wrongdoing having been proven would be unfair. He further stated that HMRC’s application was little more than a ‘fishing expedition’ designed to disrupt and distract from his rebuttal of the tax assessment.
In resolving the matter, the High Court held that documents filed in family matters are confidential and should not normally be disclosed. It was further held that although the Court had discretion to order the disclosure of the documents where there was justification to do so, such an order would be rare. The fact that, in this case, the evidence would have been relevant or useful to HMRC was not by itself a good enough reason to undermine the general rule of non-disclosure.
Solicitors’ and barristers’ communications with their clients are generally privileged, which means they cannot be required to be disclosed to anyone else without the agreement of the client. Other professionals do not have the right of privilege over their communications.
As a footnote, the Court stated that if Mr Charman himself wished to rely on documents or evidence produced during the hearing, he would have leave to do so but must produce all relevant materials to the Tax Tribunal, not just highlights selected to support his case.