Search

The implications of not disclosing financial information in Family Court

The Supreme Court has allowed two separate appeals where the wives in each case have argued that their divorce settlements should be set aside on the basis that they were unfair. The wives argued that their husbands had not provided full and frank financial disclosure and as a result of this, they received less pay-out than what they should have done had proper disclosure been provided. 

The Supreme Court has agreed with both wives, Alison Sharland and Varsha Gohil, and the two cases will now go back to the Family Division to be reassessed.

The facts

In Sharland [2015] UKSC 60, the husband had a two-third ownership in a successful company that had been valued on the basis that there were no plans to sell to the public. Shortly after the agreement was reached, the wife became aware the husband had been preparing to launch the company on the stock market, which went against the evidence he had given in court of having no plans to sell. After applying to the court to stop the consent order being sealed, due to the husband's fraudulent non-disclosure, the court and the Court of Appeal dismissed Sharland's appeal on the basis that her award would not be substantially different.

In Gohil [2015] UKSC 61 there was agreement about their finances on divorce in 2004 and a consent order was drawn up. The husband (a solicitor) was convicted of money laundering and was sent to prison for 10 years. The wife appealed to set aside the consent order on the basis that the husband failed to fully disclose his assets at the time.

Although the High Court agreed to overturn the original settlement in 2012, the Court of Appeal claimed the settlement should be upheld. This was on the basis that the court could not use evidence from the criminal trial, so could therefore not prove that he was being dishonest in the financial proceedings. In Sharland the Supreme Court considered three questions:

  • What is the impact of fraud on an agreement in financial remedy proceedings and/or a consent order approved by the court and is it different from, or the same as, it would be in other civil proceedings?
  • In financial remedy proceedings, does fraud give rise to separate remedies to those available in other instances of non-disclosure?
  • Where either fraud and/or material non-disclosure is established, does the refusal by the court to rescind the order (and so reinstate the trial process) sit at odds with the aggrieved party’s right to a fair trial?

The question in Gohil was the approach to take when there has been material non-disclosure by one party. All parties have a duty to make full and frank disclosure to each other.

The Outcome

The outcome could have wide-reaching implications. However, increased awards are not guaranteed simply because a case is to be re-heard and therefore care should be taken before deciding to embark on this course of action.  It will also be necessary to establish on disclosure at the time of the settlement and not a change of financial circumstances after.

In Sharland the Supreme Court said that each party had a duty to make full and frank disclosure to one another and the court. In this instance, Sharland was deprived of her right to a full and fair hearing and so the case is to be sent back on the Family Division to re-open and investigate the claims.

The Supreme Court in Gohil ruled that Mr Gohil would have been found guilty of material non-disclosure in the financial remedy proceedings. This meant that the original application by Mrs Gohil should be upheld.

Lord Wilson in Gohil has emphasised that the proceedings will not necessarily start afresh. The court may choose to isolate the issues that the non-disclosure relates to and focus solely on those issues as part of the re-trial.

What next?

A word of caution - these are two very obvious cases where non-disclosure can be more readily identified. The main focus for all parties should be to ensure full and frank disclosure occurs when settlement discussions/proceedings are occurring.

The best advice is to ensure you have legal advice at that time.

If you are concerned that this may affect your own situation, or that of someone you know, please contact a member of the Family Team at Ashfords LLP to discuss the options available.