On 14 October 2015, seven Supreme Court justices unanimously ruled that Mrs Alison Sharland (aged 48) and Mrs Varsha Gohil (aged 50) could seek larger payouts from their former husbands because their husbands failed to provide full financial disclose of their assets at the time of divorce. This is a landmark decision and one that may well stop spouses from trying to hide assets on divorce and cheating their spouse out of a fair divorce settlement.

The facts of each case are as follows.

Sharland v Sharland
The parties were married in 1993, separated in 2010 and had three children together. In financial relief proceeding, the husband and wife were in dispute about the husband's shareholding in a company. The experts did not agree as to its value, but they proceeded upon the assumption that no initial public offering (IPO) was imminent or under consideration. The husband maintained both before, and in evidence during, the final hearing that no IPO was imminent or likely in the near future.

After both the husband and the wife had given evidence at the final hearing, the parties were able to reach agreement and the hearing was brought to an end. A consent order was drawn up and approved by the judge but, before it was sealed, the wife discovered the husband had lied about the IPO and so she applied to the court to resume the hearing of her claim.

It was found that the husband's evidence about the IPO was deliberately dishonest. However, the judge, following the principles laid out in Livesey v Jenkins (1985), found that notwithstanding the husband's non-disclosure, in all the circumstances the non-disclosure was not material as any order that would have been made if proper disclosure had taken place would not have been substantially different from the heads of agreement incorporated into the draft, unsealed order.

The wife appealed this decision but the Court of Appeal dismissed her appeal. The wife then appealed to the Supreme Court and won.

Gohil v Gohil
The wife issued divorce proceedings in May 2002 and the decree absolute was pronounced, following conclusion of complex financial relief proceedings by agreement, on 30 April 2004. She agreed to receive £270,000 and a car as part of her divorce settlement. Six years later, her former husband who was a former solicitor, was jailed for his role in a multi-million money laundering scam with a Nigerian politician.

In 2007 she issued an application to set aside the 2004 consent order on the grounds of alleged serious material non-disclosure, fraud and misrepresentation by the husband. The husband had faced criminal proceedings for fraud and most of the wife's information about the husband's fraudulent activity came from her attendance at his Crown Court trial. She sought full disclosure from the CPS, which was initially allowed in 2012, but the CPS and the Secretary of State successfully appealed the disclosure order.

The Judge indicated that there were grounds to set aside the order on the basis that either (a) there had been non-disclosure, which had led to the court making an order that was substantially different from the order that would have been made if proper disclosure had been made (as per Livesey v Jenkins) and/or (b) there was new evidence that was such as ‘would probably have an important influence on the result of the case’ (as per Ladd v Marshall). The Judge made an order granting the wife's application by effectively allowing her application to be reopened.

The husband appealed to the Court of Appeal. The Court of Appeal allowed the husband’s appeal and concluded that there was no admissible evidence to support the previous Judge’s conclusions on material non-disclosure. The wife appealed to the Supreme Court and won.

The Supreme Court’s ruling
In both cases, lower courts ruled that the husbands had not fully disclosed their assets but, nevertheless, could not reopen the divorce agreements. The Supreme Court’s ruling will allow the wives in both these cases to seek new settlements. Whatever the outcome is for these two women, the Supreme Court’s ruling is a very powerful one that will act as a clear deterrent to those spouses who are tempted to defraud their other half.

Delivering the main judgment, Lady Hale, said that the principle that “fraud unravels all” applies as much to divorce as to commercial contracts and there is no “special magic” in family cases which means that different principles should apply.

In summary, the Supreme Court’s ruling is extremely significant to all those couples divorcing because it means that the division of the parties’ financial assets has to be based on a "valid agreement". No such valid agreement can exist if one of the parties is dishonest and misleads the court and their spouse about the existence and/or value of their assets. If such dishonesty/fraud does take place, the other spouse can go back to court (even many years later after the divorce is finalised) to have the original agreement set aside and basically start all over again.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.