Honesty really is the best policy

October 22, 2015

As a consequence of last week’s Supreme Court judgments two wives (Alison Sharland and Varsha Gohil) have on appeal won the right to have their divorce settlements re-opened as a result of their husbands’ dishonesty in failing to disclose the full extent of their assets.    Seven Supreme Court judges were unanimous in their decision that Mrs Sharland and Mrs Gohil should be given a further opportunity to revisit their matrimonial settlements in the divorce courts, a decision with the potential to impact on many other cases that have been through the divorce courts.

The central tenet of family proceedings is that both parties should provide full and frank disclosure so that the court has all the relevant information before it to make a consent order setting out the financial arrangements.  Importantly, and distinct from civil proceedings, the court then retains authority over the consent order, not the parties themselves, and can, within its wide ranging discretion, suspend, rescind or vary any order it has made.

A clear indicator has now been sent out that anything less than full and frank disclosure to the court will not be tolerated and it is no more acceptable to try and deceive the Family Court by failing to tell the truth than it is to lie in any other court.

In respect of Mr and Mrs Sharland, and at the time of the proceedings in July 2012, Mr Sharland had failed to disclose the true value of his shareholding in his company, and that it was being prepared for flotation on the Stock Exchange.  The Supreme Court judges declared this non-disclosure to be fraudulent on the part of Mr Sharland and even though Mrs Sharland had already agreed to accept 30% of the net proceeds of sale of the company shares (whenever a sale took place) the court found Mr Sharland to have been dishonest in not disclosing the true value and future plans for his company.

Whilst a re-opening of the Sharland case may not make too much difference to Mrs Sharland’s financial status, she has already received £10m in cash and properties, the overturning of settlements could provide access to a share in hidden assets in much smaller, and far more common, financial cases.  This is particularly relevant where the assets available are not enough to meet the parties’ housing and income needs, as is often the case.

Mrs Gohil had reached agreement with her husband in 2004 that provided her and their 3 children with a lump sum of £270,000, plus a car.  However, in 2008 Mr Gohil was charged with serious money laundering offences dating from 2005, and in 2011 was found guilty and sentenced to ten years in jail.  Evidence produced at his trial showed that he had not been fully honest in his financial disclosure at the time of the divorce and despite some of this evidence being ruled inadmissible there was still considered to be enough to find him guilty of non-disclosure in 2004, allowing Mrs Gohil a “second bite of the cherry”.  How much more, if anything, she will receive will depend on pending confiscation proceedings and whether in fact Mr Gohil has any remaining assets.  But the point has been made, whatever the circumstances the court will not tolerate non-disclosure.

Many commentators have predicted that these decisions will produce a flood of claims where one spouse believes that the other has failed to disclose all of their assets in the divorce settlement.  But, whilst there is no time limit on claims being reopened, finding admissible and relevant evidence of non-disclosure could prove a difficult hurdle to overcome for many would-be claimants.

The clear message is that if you want to be sure that your divorce is really over, honesty is the best policy.

As a footnote, pre nuptial agreements (now heavily influential in the divorce courts and with the strong possibility that they will become completely binding) and post-nuptial agreements can help to protect a business where the owner wants to ensure that the future of the business is not jeopardised by their fellow shareholder/director having to sell or transfer their shareholding as a result of a divorce.  Partnerships and companies are now regularly implementing business-wide policies that all of the existing and incoming business owners must have a pre-nuptial or post-nuptial agreement in place.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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