Impact of dishonesty in divorce cases – landmark ruling by the Supreme Court

The Supreme Court has unanimously allowed the appeals of two ex wives in the landmark cases of Sharland v Sharland and Gohil v Gohil.

In these two cases the Supreme Court has made it clear that there will be zero tolerance for non disclosure in financial proceedings arising from the breakdown of a marriage.

In these cases, the former wives had sought to have their divorce settlements set aside on the grounds of non-disclosure or dishonesty by their former husbands.

The brief facts of Sharland v Sharland is that Alison Sharland and her husband Charles Sharland were divorced in 2012 after 19 years together. Mr Sharland had founded the firm AppSense, a company specialising in software. The couple made a divorce settlement in which Mrs Sharland received more than £10m in cash and properties plus a 30% share in Mr Sharland’s firm. Mrs Sharland accepted this settlement in lieu of half of the company because she claimed she was told it would not be floated on the stock exchange for a period of time. However following the settlement being made Mrs Sharland heard of plans to float the company and also read reports suggesting that the company was worth more than she had been told at the time of her settlement. She started court proceedings. There was a finding that despite there being fraudulent misrepresentation by Mr Sharland, Mrs Sharland would not have received a significantly different settlement and Mr Sharland’s statements had not therefore been material to the settlement.

In her Judgement in Sharland v Sharland Lady Hale, Britain’s most senior female Judge, said that the present case was one of fraud. She stated that it would be extraordinary if the victim of a fraudulent misrepresentation in a matrimonial case was in a worse position than the victim of a fraudulent misrepresentation in an ordinary case of contract. She considered that the general principle that “fraud unravels all” should lead to the setting aside of a Consent Order procured by fraud. The only exception is where the court is satisfied, at the time the Consent Order is made, that the fraud would not have influenced a reasonable person to agree to it nor, had it known then what it knows now, would the court have made a significantly different order, whether or not the parties had agreed to it. The burden of establishing this has to lie with the perpetrator of the fraud; it is wrong to place upon the victim, the burden of showing that it would have made a difference.

Briefly the facts in relation to Gohil v Gohil is that in 2004 the Mrs Gohil’s claim for financial relief from her husband was concluded by way of a Consent Order. Mr Gohil was subsequently convicted of money laundering. Mrs Gohil applied in 2007 to set aside the 2004 order on the basis that at the time it was made Mr Gohil had failed to disclosure the true extent of his financial assets. When the case was initially heard by Moylan J, Mrs Gohil’s application to set aside the 2004 order was granted. However Mr Gohil successfully appealed to the Court of Appeal and Moylan J’s order was replaced with an order dismissing Mrs Gohil’s set aside application. However at the appeal hearing in the Supreme Court the court reinstated Moylan J’s original order that the 2004 Consent Order was obtained by material non-disclosure and should be set aside.

Commentators may say that these are simply cases of grasping ex-wives going back for more. However, what the cases do revolve around is the lack of honesty by the ex-husbands in their disclosure. In a financial matrimonial case there is a duty by both parties to provide full and frank disclosure of all their assets and the Supreme Court, in granting the joint appeal of Mrs Sharland and Mrs Gohil, is sending a clear message that there should be zero tolerance in relation to non disclosure in financial proceedings arising from the breakdown of a marriage.

The solicitor who represented both the appellants has stated that these cases were actually about a matter of principle and justice for both women and the issues raised in the Supreme Court will have implications in many other cases. This is true. The landmark ruling by the Supreme Court could result in a floodgate of cases involving former spouses applying for their divorce settlements to be reopened.

If you want to ensure in a financial settlement that there is final closure then being dishonest about your financial means could seriously backfire on you and the only way you can be sure of closure is by being honest about your financial assets. The message from the Supreme Court is that the courts will not tolerate fraud or dishonesty in divorce settlements.

To talk to a family law solicitor about divorce and financial settlements please call the family team on 0113 320 5000 or email @email.