On 14th October 2015, the UK Supreme Court handed down judgment in the two cases of Sharland v Sharland and Gohil v Gohil. The cases were similar as they concerned two women who had reached divorce settlements but who later found out that their husbands had misrepresented their finances.
The principal legal consideration for the Supreme Court in both cases was whether an order made in the absence of full and frank disclosure should only be set aside in cases where the Court would have made a substantially different order if proper disclosure had in fact taken place.
All seven Supreme Court Judges overturned the Court of Appeal's decisions in both cases and unanimously held that dishonesty or fraud during divorce proceedings and a failure to disclose an accurate picture of all financial assets provide grounds for reopening cases and renegotiating settlements.
Sharland v Sharland
Upon application by Mrs. Sharland, it was held at first instance that Mr. Sharland had lied to the Court about the value of a software business claiming it was worth £75m on the basis that there was no plan for public sale when in fact, he had been actively preparing an initial public offering reportedly with a value closer to £1bn. On appeal by Mr. Sharland, the Court of Appeal subsequently found that although his non-disclosure was deliberate and dishonest, the order in the financial proceedings would not have been substantially different because Mrs. Sharland had received a far greater share of the liquid assets.
On appeal by Mrs. Sharland, the Supreme Court disagreed with the Court of Appeal's reasoning. In giving the lead judgment, Deputy President Baroness Hale concluded that Mrs. Sharland had been "deprived of her right to a full and fair hearing of her claims" and held that the same order would not have been made in the absence of Mr. Sharland's fraud. Additionally, she differentiated family proceedings from ordinary civil proceedings on the following bases: (i) a consent order derives its authority from the Court and not from the consent of the parties; (ii) the duty of full and frank disclosure always arises; and (iii) the consent of the parties must be valid and if there is a reason which vitiates a party's consent, there may also be good reason for the Court to set aside a consent order.
Gohil v Gohil
In 2004, Mrs. Gohil had agreed to accept £270,000 plus a car from her ex-husband in full and final settlement of her divorce. The financial order recorded as a recital that Mrs. Gohil believed that Mr. Gohil had not provided full and frank disclosure. In fact, Mr. Gohil was subsequently convicted of fraud and money laundering to the tune of £25m and sentenced to 10 years after admitting the charges.
In 2007, Mrs. Gohil applied to set aside the 2004 consent order on the grounds of Mr. Gohil's serious material non-disclosure, fraud and misrepresentation and sought to admit fresh evidence on account of her attendance at his criminal trial. Mrs. Gohil's application was granted at first instance but subsequently overturned by the Court of Appeal who ruled that the evidence from the criminal process was not material upon which the Judge could rely and that it was not properly admissible in the family proceedings because the Court had not conducted a full evaluation of the evidence. On appeal by Mrs. Gohil, the Supreme Court unanimously allowed her appeal and set aside the final settlement order from her divorce proceedings on the basis that Mr. Gohil had fraudulently failed to disclose his assets.
Accordingly, both claims have been remitted back to the High Court for further consideration.
The issues raised are likely to have implications in many other cases and it seems inevitable that the floodgates could open as other parties who feel that their ex-spouses failed to disclose all their assets in an effort to reduce their financial award on divorce seek to reopen their cases and challenge their existing divorce settlements.
Links to the full Judgements can be found below.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.