Two wives win their appeal in the Supreme Court to challenge their original financial settlement on the ground of their husbands’ material non-disclosure

In another landmark decision in the cases of Sharland –v- Sharland and Gohil –v- Gohil, on 14^th October 2015, the Supreme Court granted two wives the right to challenge their financial settlements in their divorce due to their husbands not providing full disclosure at the time of their original financial settlements.

Sharland –v- Sharland

Background

The parties married in 1993 and separated in 2010.  They had three children, one of whom has severe autism and will require care from the wife throughout his life.  The husband is an entrepreneur who has a substantial shareholding in the software business that he had developed. In the financial proceedings between the parties, the principal matter in dispute had been the treatment of the husband’s majority shareholding in a computer software company (its value, the likely timescale of any future sale and the extent to which it was non-matrimonial).

A settlement had been reached on the basis that the wife would receive 30% of any net gain received by the husband from the sale of his shareholding whenever that took place, together with further assets including £10m in cash and property.

The judge approved the agreement and a draft consent order was prepared.  Before it was sealed, however, the wife discovered that whereas the husband had represented that it was unlikely that the company would sell within the next 3 years and that a timescale of 5 to 7 years was more realistic, he had in fact already been in discussion with investment bankers as to an imminent initial public offering of the shares.

The wife immediately invited the judge not to seal the consent order and applied to continue with the trial on the basis that her agreement to the settlement terms had been obtained by fraudulent non-disclosure.

First instance decision

At the hearing of her application in April 2013, the judge found that the husband’s evidence had been dishonest and that, had he disclosed the Initial Public Offering plans, the court would have adjourned the financial proceedings to establish whether it was going to go ahead.  However, by the time of the hearing, the Initial Public Offering had not taken place and was not now in prospect.  The judge declined to set aside the consent order on the ground that he would not have made a substantially different order in the financial proceedings. The Wife appealed.

Court of Appeal decision

The Court of Appeal upheld the judge’s order and the wife appealed to the Supreme Court.

Supreme Court decision

The Supreme Court unanimously allowed the wife’s appeal and held that the husband’s material non-disclosure should lead to the setting aside of the consent order. Therefore, the consent order would not be sealed and the wife’s application for financial relief is to return to the Family Division of the High Court for further directions.
Gohil –v- Gohil

This is a case where the Supreme Court unanimously allowed the wife’s appeal and reinstated an order setting aside a financial consent order on the grounds of fraudulent non-disclosure.

Background

The wife used to be married to the husband who was a former solicitor.  In 2002, the wife petitioned for a divorce.   In response to her financial claims, the husband asserted that all of his ostensible wealth represented assets that were held by him on behalf of his clients.  Shortly before 30 April 2004, the husband produced a balance sheet of what he alleged his personal assets to be which, when set against his liabilities, yielded a net deficit of £311,512.  In April 2004, the parties settled at the financial dispute resolution hearing.

The order provided that the husband should pay a lump sum of £270,000 to the wife in final settlement of the wife’s claims together with periodical payments. The consent order contained a recital setting out the wife’s suspicion that the husband had not provided full and frank disclosure of his financial circumstances and stating that she was compromising her claims despite this to achieve finality.

In 2007, the wife applied to set aside the 2004 order on the grounds that the husband had fraudulently failed to disclose his assets. The ensuing proceedings were delayed, largely because the husband was charged, in 2008, with serious money laundering offences dating back from mid-2005. The husband was sentenced to 10 years imprisonment in 2011.  The wife alleged new evidence had come to light in criminal proceedings that showed the husband had not given full disclosure at the time the consent order was made.

First instance – High Court decision

In September 2012, after an 8 day hearing, the Court set aside the 2004 order, allowing the introduction of criminal evidence into the financial remedy proceedings.  The decision was made on the basis that there had been serious non-disclosure by the husband when the 2004 order had been made and, had the husband made full disclosure, the outcome would have been different. The wife’s application was allowed. The Husband appealed.

Court of Appeal decision
The Court of Appeal allowed the husband’s appeal. The Wife appealed to the Supreme Court.

Appeal to the Supreme Court

The Supreme Court unanimously allowed the Wife’s appeal and reinstated the court’s first instance decision. The court decided that the wife’s claim for further capital provision should therefore proceed.
Implications from those cases

Both cases raise serious issues about how the courts should handle cases where financial disclosure is used to agree a financial settlement, which is subsequently found to be false or incomplete. The cases therefore highlight the need for honesty in disclosure and that dishonesty in any legal proceedings should not be tolerated.

If you would like further advice in connection with the matters raised in this article then please contact Miss Vincent in our family department on 01926 422 101.