Full and frank disclosure required of all parties

A landmark ruling by the Supreme Court made on 14^th October 2015 sends a “shot across the bows” to parties in divorce cases by reiterating the Court’s sanctioning power if parties are found to be fraudulent and dishonest about their finances and, in doing so, seek to mislead the Court.

The joint appeals of Alison Sharland and Varsha Gohil were unanimously allowed by the Supreme Court.  Both wives claimed their husbands had deliberately misled them and the Court by providing false information as to the extent of their wealth.

Mrs Sharland agreed to accepting what she believed was 50% of the assets after 17 years of marriage.  It became clear that Mr Sharland failed to disclose arrangements he had made to float his company, of which he was the founder and co-owner and in which he held two thirds of the shares.  His intention was to float the company on the New York stock exchange.  Instead of being valued at between £31m and £47m his business was reported in the financial press as being ready to float at a value of $1bn.  The Supreme Court found that Mr Sharland’s misrepresentation and non disclosure were highly material to the agreement reached as it “coloured” the valuer’s approach to the valuation of the company and the value of his shareholding.  This in turn had a bearing on Mrs Sharland’s approach to what she was advised represented proportionality of her share of the assets.

The Court ruled Mr Sharland had been fraudulent and in doing so had deprived Mrs Sharland of a full and fair settlement.  The Court has ordered a re-hearing.  The matter will return to the Family Division of the High Court.

Mrs Gohil agreed to receive £270,000 and a car in her divorce settlement.  She believed this represented her entitlement following her pursuit of full disclosure from Mr Gohil.  Mrs Gohil had always been suspicious of Mr Gohil’s deficient disclosure in the light of his lavish expenditure and lifestyle.  Mr Gohil was subsequently found to have been involved in fraud and money laundering amounting to in excess of $37m.  Evidence emerged during the criminal trial as to the extent of Mr Gohil’s non disclosure in the divorce proceedings.  Mrs Gohil applied to set aside the financial order on the basis of Mr Gohil’s alleged non disclosure, fraud and misrepresentation.  The Supreme Court has ruled that the final order be set aside and a re-hearing ordered.

These two cases represent a spectrum of modest finances and substantial wealth.  The message is nonetheless the same.  Each party within divorce proceedings is entitled to have their claims properly assessed by the Court and, in doing so, the Court requires full and frank disclosure.  A clear message has been sent which is that to mislead the Court by means of fraud or misrepresentation which then affects proportionality of an award will not be tolerated.

This ruling potentially has the effect of many divorce settlements being re-opened on the basis of one party believing there has been material non disclosure of facts.  This could mean financial orders being set aside and finances looked at again.  The Court will need to assess whether the material non disclosure of facts would make a difference to the agreement reached in that the deceived party would have been and is entitled to more of the known assets.

Colemans Solicitors commented “The sanctions applied to a party misleading the Court whether in a fraudulent misrepresentation in an ordinary contract case should be no different to the sanctions applied to a party misleading the Court by misrepresentation or fraud within divorce proceedings.  Full and frank disclosure must be provided in order for fairness and justice to prevail and for the integrity of the process to be maintained.  This ruling sends out a clear and definite message that full and frank disclosure is required by all parties”.

For further advice on this article or to look at whether there has been non disclosure of material facts in your own financial settlement, whether it was agreed or ordered by a Judge, contact Elizabeth on 01628 631051 or email family@colemans.huntersserver.co.uk

Categorised in: Family Law, Latest news

This post was written by Colemans Solicitors LLP