2015 saw a number of high profile divorce cases hitting the headlines. At fist glance, it might look like these cases opened the doors to allow disgruntled ex-spouses to get a second bite of the financial cherry following divorce, but careful consideration of the decisions show this is not necessarily true.
If you are going through a divorce, or dissolution of a civil partnership, or if you are already divorced, no matter how long ago, it is certainly worth considering whether you have done all that you can to protect yourself, both now and in the future. This applies equally to divorces and dissolutions of civil partnerships.
To re-open a financial arrangement following a separation is often not straightforward. There are two key issues to consider in light of these court cases. The first is whether your financial affairs on divorce or dissolution were confirmed by way of a court order. The second is whether there are now claims that you and/or your ex were not honest about your financial affairs at the time the deal was done.
In October 2015, in the cases of Sharland v Sharland and Gohill v Gohill, the Supreme Court in London allowed two women to re-open their divorce settlements because their ex-husbands had been dishonest.
In 2010, Alison Sharland accepted £10 million in a divorce settlement as well as proceeds from the sale of shares in her husband's company. Mr Sharland had said that there was no plan for a public sale of his company, AppSense Ltd. On that basis, his expert valued the company at £50million and Mrs Sharland's expert valued it at £75million. An agreement was reached. It turned out that at the time, Mr Sharland had been actively taking steps to float the company. Press reports suggested the company had a value of $750million-$1billion.
Varsha Gohill agreed to the sum of £270,000 when she divorced and this was confirmed by a court order in 2004. Three years later, Mr Gohill was convicted of fraud and money laundering and sentenced to 10 years in prison. Evidence came to light in his criminal trial that revealed he had lied about his finances in the divorce proceedings.
Following applications to the Supreme Court by the wives, the Court found that both Mr Sharland and Mr Gohill had lied about the extent of their wealth in the divorce proceedings. As a result, the financial claims of Mrs Sharland and Mrs Gohill can now be re-assessed by the High Court.
The legal position is that when sorting out finances upon divorce, parties have a duty to each other and to the court to give full and frank disclosure of their financial circumstances. Without this, any agreement the parties reach may be invalid. This could result in the agreement (and any related court order) being set aside and the sums re-examined. If the non-disclosure was accidental or inadvertent, then the party applying to court needs to show that the non-disclosure would have made a difference to the outcome ie if the court had known, it would have made a different order.
What the Sharland and Gohill cases have shown is that if the non-disclosure is deliberate, and therefore fraudulent, the presumption is that it is material. As Baroness Hale said in Sharland: "Why would the husband lay a false trail if what was sought to be suppressed was immaterial?" This means that the original court order can be set aside, unless the wrong-doer can show that the non-disclosure would not have made any difference to the final order/agreement. The big difference is that the wrong-doer has the burden of proving that his/her lies made no difference to the outcome.
Earlier in 2015, in the case of Wyatt v Vince, the Supreme Court had also considered the finality of financial agreements on divorce. In that case, the parties had reached an agreement at the time of the divorce, around 20 years ago. They did not have the terms of the agreement confirmed by a court order. The husband subsequently became considerably wealthier. The wife then made an application to court for financial provision despite this earlier agreement. The court found that the agreement between the parties was not equivalent to a court order and so the wife was allowed to apply to court for financial provision. This was around 20 years after the divorce and original agreement on this very issue.
Parties cannot agree to exclude the authority of the court, when sorting out their financial affairs following divorce. Of course, parties can agree on their financial affairs without going to court, and are encouraged to do so by the courts. Their agreement, however, is not a binding and enforceable contract unless it has been endorsed by the court. The moral of the story is that it is essential for parties to have the terms of their agreement confirmed by a court order if they want to minimise the chances of their ex appealing to court at some point in the future.
In all three of the above cases it is possible that the wives will not end up any better off, but at the very least, they and their ex/estranged husbands are again having to go through legal proceedings, which will undoubtedly be very costly in terms of time, money and, not least, emotional strain, to both them and their children. This has only been possible because Mrs Sharland and Mrs Gohill came across actual evidence that their husbands had been dishonest, and because the parties in Wyatt v Vince had not had their financial agreement endorsed by the court.
Sharland, Gohill and Wyatt v Vince are judgments of the Supreme Court. This is the highest court of appeal in England. The highest Manx appeal court is the Privy Council. However, judgments of the Supreme Court in family matters are extremely persuasive before the Manx courts, particularly where, as here, they are based on English legislation with is very similar to its Manx counterpart.
If you are going through a divorce, or are already divorced, it is worth considering the financial arrangements that you have made with your ex. Were the terms of your agreement confirmed by a court order? If not, you should give serious consideration to obtaining legal advice. Obtaining a court order to confirm the terms of a financial agreement on divorce is generally a straight forward process, usually with no need for anybody to actually attend court. An advocate specialising in family law will be able to advise you about what you should do, if anything, in your particular circumstances.
If you have actual evidence that your ex husband, wife or civil partner was dishonest in negotiations and/or court proceedings dealing with financial arrangements on divorce, it is possible that you might have grounds to re-open your case. However, caution is required. When couples are divorcing, the intense emotional pressure and concern to protect the family for the future often causes couples to be suspicious of one another. You may be convinced that your former spouse is hiding a bank account, undervaluing a business, has asked a relative to hold money for him or her, or is cohabiting and in reality sharing expenses with a new partner. Suspicion alone will not be enough to re-open a case. It is essential that you have evidence of the non-disclosure or dishonesty. Even if you have such evidence, you would be well-advised to take legal advice on whether this new evidence is likely to have made any difference to the outcome if you or the court knew about it at the time. It is worth remembering that taking the matter to court is likely to be a lengthy, expensive and stressful process. Having said that, if you do have a strong case, these recent Supreme Court decisions have made it more likely you will succeed.
Although the Courts can re-open the financial arrangements made on divorce or dissolution many years down the line, if evidence of non-disclosure is discovered then a prompt application to court is required. It must, however, be stressed that a sense of feeling hard done by or envy at varying personal circumstances between former couples does not mean every previously ordered financial arrangement will be re-opened or varied by the Court. The Sharland and Gohill cases deal with deliberate concealment of potentially substantial assets. Final orders, in the absence evidence of material or fraudulent non-disclosure, are invariably final.
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.