The Supreme Court has unanimously allowed two wives to have financial settlements set aside on the basis that their former husbands failed to provide full and frank disclosure.
We asked Nicola Brocklehurst, Solicitor in the Family Team at Gardner Leader, some questions about the cases of Gohil and Sharland.
What was the background to the decision in Sharland?
Mrs Sharland asserted that her husband had been dishonest as to the value of his shareholding in a company. In the financial proceedings he gave evidence, and the expert valuation reports were produced, on the basis that there were no plans for an initial public offering of the company. The company was valued between £88.3 million and £60 million.
After reaching an agreement, a press release proved that the husband’s evidence was untrue and that there were active plans to offer an initial public offering which would increase the company value to between US$750million and US$1000million. The wife invited the judge not to seal the order as he had misled her.
The Supreme Court stated the order should not be sealed and the case will return to court for a rehearing.
The Supreme Court emphasised that each party has a duty to give full and frank disclosure, not only to each other, but to the court. Mrs Sharland’s consent to the order was vitiated by her husband’s fraud.
What was the background to the decision in Gohil?
Mrs Gohil stated that her husband, a former solicitor, had assets that he was not declaring and his standard of living was beyond his declared means. During proceedings in 2004, the parties reached a financial agreement. There was a recital in the agreement that the wife did not accept that there had been full disclosure but agreed to the terms for finality.
In 2007, Mrs Gohil applied to have the terms of the order set aside. There was some delay as in 2008 the husband was charged with money laundering offences to the value of £25million. In 2010 the husband was convicted and sentenced to ten years in prison.
In 2012 Justice Moylan, set aside the 2004 order, on the basis that there had been material non-disclosure by the husband when the order was made and, had full disclosure been made, the outcome would have been different.
The Supreme Court refused the husband’s appeal and confirmed that the 2004 order should be set aside. The husband owed a duty of full and frank disclosure to the court. A recital in an order cannot exonerate a party from complying with this duty.
What are the implications of the two decisions?
The court have rightly stated that fraud unravels all and should lead to the setting aside of a consent order obtained. We see many cases where clients feel that the whole truth might not have been provided. These decisions may pave the way for others to seek to renegotiate the terms of their financial settlements.
They send a very clear signal that the other party can go back to court, can have the agreement set aside and can have the whole thing considered again in these circumstances. It is an important warning to clients that they must lay all of their cards on the table when divorcing otherwise it could come back to haunt them in the future.
My divorce was finalised a while ago but my ex-husband/wife has lots of money now – can I go back to court?
However, caution must be borne in mind as it does not open the door in every case. Just because someone appears to be doing well for themselves post separation does not necessarily mean that assets have been hidden during the proceedings. There is a difference between someone who has withheld information and been dishonest and someone who has improved the value of their assets post separation. With a lack of legal aid funding available parties need to weigh up what they are spending in costs in reopening any previous proceedings against what they might stand to gain. It is not possible to reopen previous cases on a mere suspicion and it may fall down to a question of what proof is available.
I’m in the process of giving financial disclosure now and I think my partner will try and hide some assets. Will this decision assist?
Moving forwards these cases will help reinforce a strong message which can be relayed to clients when meeting with them and advising them of what their duty to the court encompasses. Whilst we have always emphasised the importance of full and frank disclosure on an ongoing basis throughout the case, we can now rely on the judgements in these cases to highlight the very real risk that settlement could be overturned if they do not comply with this duty. It can also be relied upon as a reminder when corresponding with the other parties’ solicitors if there is a suspicion that they are not disclosing all information.
Of course if the parties have been honest and provided full disclosure throughout the proceedings then a consent order would be deemed final and would enable both parties to move on with their lives.
These decisions serve as a vital reminder that honesty is always the best policy.
Family practitioners may be interested in our analysis on our family blog here, and DR practitioners may be interested to read our post on the rulings implications of the application of Ladd v Marshall.