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Fraud and non disclosure unravels all in divorce

View profile for Georgina Stavrou
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Yesterday the Supreme Court handed down unanimous landmark decisions following the appeals of Alison Sharland and Varsha Gohil.

 

Sharland

The Sharlands married in 1993 and separated in 2010. Mr Sharland had a substantial shareholding in a software company called AppSense Holding Ltd. When giving evidence in the financial remedy proceedings he confirmed that an Initial Public Offering of the company on the stock exchange was not “on the cards today”. On this basis Mrs Sharland agreed to accept 30% of the net proceeds of sale of the company shares whenever they were to be sold by her husband. She also accepted some other assets. The agreement was approved by the judge and a consent order was drafted setting out the financial settlement.

 

Before the Court sealed the consent order, Mrs Sharland found out that preparations were already underway to float AppSense Holding Ltd on the stock exchange. In light of this new information, Mrs Sharland asked the Court not to seal the order and for the financial proceedings to resume. Although the High Court acknowledged that Mr Sharland’s evidence has been dishonest and misleading, it did not make a substantial difference to the settlement. This was upheld by the Court of Appeal which led to Mrs Sharland appealing to the Supreme Court.

 

The Supreme Court allowed Mrs Sharland’s appeal. The financial consent order should not be sealed, and the financial proceedings should return back to Court. In her judgement Lady Hale described the case as “one of fraud”, adding that “it would be extraordinary if the victim of a fraudulent misrepresentation in a matrimonial case was in a worse position that the victim of a fraudulent misrepresentation in a matrimonial case...” Having regard to the facts of this case Lady Hale concluded that “it is clear that the judge would not have made the order he did, when he did, in the absence of Mr Sharland’s fraud” (paragraph 32).

 

Gohil

The Gohil’s were married in 1990 and separated in 2002. Their divorce was finalised and a financial settlement reached during financial remedy proceedings in 2004. As part of that settlement Mrs Gohil received £270,000 and a car. The agreement was recorded in a consent order which was sealed by the Court. It should be noted that within the order there was the following recital:

 

the [wife] believes that the [husband] has not provided full and frank disclosure of his financial circumstances (although this is disputed by the [husband]), but is comprising her claims in the terms set out in this consent order despite this in order to achieve finality.”

 

In 2007, Mrs Gohil applied to set aside the 2004 financial settlement on the basis of her former husband’s fraudulent non disclosure of assets. Her application was delayed as in 2008 Mr Gohil had been charged with money-laundering offences dating back to 2005. During his criminal trial it was revealed that he had not provided full financial disclosure at the time of the divorce proceedings. Following this revelation, in 2012 Mrs Gohil succeeded in her application to set aside the financial settlement of 2004. Mr Gohil appealed against the setting aside of the 2004 settlement and the Court of Appeal allowed his appeal.

 

The matter came before the Supreme Court who unanimously held that the 2004 financial settlement should be set aside due to the husband’s material non disclosure. In his judgement Lord Wilson described the recital recorded in the 2004 order as having no legal effect in a financial order in divorce proceedings. “The husband owed a duty to the court to make full and frank disclosure of his resources ... One spouse cannot exonerate the other from complying with this duty” (paragraph 22). 

 

The decisions of the Supreme Court in both the Sharland and Gohil have lead to considerable commentary as to whether it could open up floodgates for unhappy spouses to apply to overturn their financial settlements. Although it will be interesting to see the effect that both decisions will have in divorce proceedings in the future, it is important not to lose sight of the key message being sent by the Supreme Court that full and frank financial disclosure must be provided at all times throughout divorce proceedings.

 

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