Financial settlement on divorce – the consequences of non-disclosure
Hannah Sims, a solicitor in our family team, considers the implications of the recent decisions of the Supreme Court in the cases of Sharland v Sharland and Gohil v Gohil.
Last month the Supreme Court issued judgments on two landmark financial remedy cases involving fraudulent non-disclosure of assets on the part of the husband, unanimously allowing the wife’s appeal in both instances.
In Sharland v Sharland the husband fraudulently withheld information regarding his company’s possible flotation and the associated valuation from the court. Following settlement it became obvious that the husband had fraudulently misrepresented the value of his interests in the company.
The Supreme Court judgment endorsed the broad approach that “fraud unravels all” setting aside the consent order. There is no reason why the approach to fraudulent misrepresentation should be any different in financial remedy proceedings to that in other civil claims. The court must be in possession of all relevant information to enable them to make an informed decision as to a fair financial settlement.
In Gohil v Gohil, the parties reached an agreement despite the wife acknowledging in a recital to the consent order that she understood the husband may not have given full and frank disclosure. It was held that one spouse cannot exonerate the other from their duty to give full disclosure and such a recital has no effect.
It was made clear that where a party’s non-disclosure is fraudulent it is deemed to be material. The onus is on the non-disclosing party to show on the balance of probabilities that a significantly different order would not have been made given knowledge of the full financial picture. The financial consent order in Gohil was again set aside by the Supreme Court.
It is clear that the provision of full and frank disclosure remains imperative in financial remedy proceedings. This applies both in contested court proceedings and when making an application for a consent order to the court. Failure to disclose can have huge implications; the courts will not uphold a decision that is based on a lie. Fraudulent non-disclosure could lead to the case being re-opened and financial provision for each party being re-considered.
The court’s powers to overturn or set aside an order, however, will still be limited to circumstances where a materially different order would have been made in knowledge of the true facts. It is expected that there will now be a rule change to clarify the procedure for challenging financial remedy orders.