in divorce
DISHONESTY
The news recently carried the story of the Supreme Court as it
unanimously allowed the appeals of Alison Sharland and Varsha
Gohil over the matter of financial disclosure during their divorces.
Dishonesty in any legal proceedings should
not be accepted, the outcome of these
appeals confirms that the Family Court is
not an exception to the general rule and
that it is no more acceptable to lie in the
Family Court than it is in any other court.
When a couple are getting divorced they
are under a duty to fully disclosure their
financial position. Anyone thinking of trying
to get away with not providing a full picture
of their financial position beware; as the
outcome of these appeals shows the court
is not afraid of showing it’s teeth when it
comes to non disclosure.
It goes without saying that the only way to
work out how the matrimonial assets can
be fairly divided is by knowing exactly what
the matrimonial assets are.
People often go to great lengths to try and
hide assets to limit claims their spouse
may have over them. However, as can
be seen in these appeals, the courts are
clamping down on this sort of behaviour
often resulting in the non discloser coming
out worse than if they had just been open
and honest about their finances in the first
place as the courts take the view that it is
better to make an order that is unfair to the
non discloser than it is to make an order
that is unfair to the other spouse. If non
disclosure is accidental then the onus is on
the other party to prove proper disclosure
would have led to a different outcome. If
non disclosure is deliberate it is presumed
that proper disclosure would have led to a
different outcome unless the non discloser
can prove it would not have done so.
Mrs Sharland’s appeal considered the
impact of fraudulent non-disclosure on a
financial settlement agreed on divorce and
embodied in a court order.
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The parties were married in 1993 and
separated in 2010. They have three
children, one of which has severe autism
and will require care from Mrs Sharland
throughout his life. Mr Sharland is an
entrepreneur who has a substantial
shareholding in a software business which
he developed. In the financial proceedings
between the parties the value and manner
of distribution of this shareholding was
the principal matter in dispute. Both
parties instructed valuers, who produced
valuations on the basis that there were no
plans for an Initial Public Offering of the
company.
In the course of the trial, after Mr Sharland
gave evidence confirming that there was
no Initial Public Offer ing on the cards, the
parties reached a settlement. The Judge
approved the agreement and a draft
consent order was drawn up. However,
before it was sealed by the court Mrs
Sharland became aware that AppSense
was being actively prepared for an Initial
Public Offering which was expected to
value the company at a figure far in excess
of the valuations prepared for the hearing.
Mrs Sharland immediately invited the
Judge not to seal the consent order and
applied for the hearing to be resumed.
At the hearing of her application the
Judge found that Mr Sharland’s earlier
evidence had been dishonest and, had
he disclosed the Initial Public Offering
plans, the court would have adjourned the
financial proceedings to establish whether
it was going ahead. However, by the time
of the hearing, the Initial Public Offering
had not taken place and it was no longer
a 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 Court of Appeal upheld the Judge’s
order and Mrs Sharland appealed to the
Supreme Court.
The Supreme Court has now unanimously
allowed Mrs Sharland’s appeal. The
consent order, embodying the terms of
a financial settlement that was reached,
will not be upheld by the court and Mrs
Sharland’s application for a financial
remedy will return to the Family Court for
determination.
The Judge dealing with the appeal has said
that the case was one of fraud. In light of
this the decision to allow Mrs Sharland’s
appeal comes as no surprise, as 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
contract case.
There is a general principle that ‘fraud
unravels all’. There is an exception to this
though, where the court is satisfied that at
the time when it made the consent order
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. On the facts of Mrs Sharland’s
case though the court have determined
that the Judge would not have made the
order he did, when he did, in the absence
of Mr Sharland’s fraud, and the consent
order should be set aside.
In Mrs Gohil’s case it has been made clear
that the husband owed a duty to the court
to make full and frank disclosure of his
resources, without which the court would
be disabled from discharging its duty under
law to work out a fair settlement.
In response to Mrs Gohil’s financial
claims, Mr Gohil asserted that all of his
wealth represented assets held on behalf
of his clients. On the basis of this Mrs
Gohil’s claims were settled within court
proceedings. The Order included a recital