Dishonest non-disclosure of assets

The issue of dishonest non-disclosure of assets in matrimonial cases is currently being decided by the Supreme Court in two cases that were heard together.

Sharland v Sharland

In Sharland, a settlement agreement was agreed on the basis of the husband’s disclosure at that time, awarding his wife some £10.3 million in cash and properties. At the time, the husband had a two-thirds share of a successful company and agreed to pay the wife a deferred lump sum out of the proceeds of any disposal of the shares he had in that company.

After the agreement was made – but before the court order was sealed by the court – the wife discovered that the husband was making arrangements to float the company on the New York stock exchange by way of an initial public offering (IPO).

The wife applied to have her claim for financial relief reopened. Mr. Justice Bennett held that the non-disclosure of the husband’s IPO discussions was material and might have affected the outcome of the wife’s financial claim as the IPO could have had a dramatic impact on the value of the company and an impact on the value of the shareholding. The IPO did not take place as planned and therefore, Mr. Justice Bennett had to consider if the order already made would have been substantially different than the previous order in light of this new information. Holding that the order would not have been substantially different, Mr. Justice Bennett dismissed the wife’s application.

The wife appealed to the Court of Appeal who rejected her appeal on the same grounds as Mr. Justice Bennett at first instance. The wife has appealed to the Supreme Court, which was heard on 8-10 June 2015. The judgment is expected later this year.

Gohil v Gohil

In Gohil, the wife claimed for financial relief and a consent order was agreed between the parties on 30 April 2004. In 2005, the husband became involved in criminal activities. In 2010, he was found guilty of money laundering and fraud worth nearly £60 million and was sentenced to 10 years in prison. In July 2007, the wife applied to set aside the consent order on the grounds of non-disclosure, fraud and misrepresentation, as she claimed that during the criminal trial, evidence emerged which demonstrated that he has not fully disclosed his assets.

Mr. Justice Moylan found that the husband had failed to give full and frank disclosure of his true financial position during the proceedings. He therefore granted the wife’s application to rehear her claim for financial relief. The husband appealed the order to the Court of Appeal who allowed the appeal on the basis that Mr. Justice Moylan did not have jurisdiction to set aside the consent order agreed on 30 April 2004 on the basis solely on the existence of new evidence.

The wife appealed to the Supreme Court, and her case was heard on the same days as Sharland. Again, the judgment is expected later this year.

Sharland was criticised for allowing fraudulent and dishonest conduct in financial proceedings for divorce and appears to disregard the principle of ongoing disclosure established in the case of Livesey v Jenkins.  However, there is a distinction to be made in that the subject matter of the fraudulent conduct (the IPO of the company), never actually came to fruition, so the husband was not able to benefit from his deception.

Gohil set down guidance in the correct procedure for suspected non-disclosure when new evidence has come to light after an agreement has been reached. An application to set aside an order in financial remedy proceedings is a two stage process:

  1. The Court must establish whether there has been material non-disclosure
  2. If there has been material non-disclosure, the court must determine whether a substantially different order would have been made if the first court had been aware of the non-disclosure. If so, the original order should be set aside.

If you have any questions about non-disclosure of assets, please contact Chris Corney or Lisa Ginesi at Carter Lemon Camerons LLP.