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Divorce law blog

Keep Calm and Carry on Disclosing

22/10/2015   By: Nicola Rowlings

You cannot have failed to notice the media storm over Mrs Sharland and Mrs Gohil – the two wives who went all the way to the Supreme Court to overturn financial orders made in their divorce proceedings which had (it later transpired) been based on false and misleading information provided by their husbands.

In Mrs Sharland’s case, there was a significant dispute at the original trial over the value of her husband’s company. His accountants valued his shareholding at £7million; her accountant valued it at £32million. Significantly, both valuations were on the understanding that there were no immediate plans to sell the company or to float it on the stock market. Mrs Sharland wanted 50% of the family’s total assets (including her husband’s shareholding) because all the assets had been built up during their long marriage; Mr Sharland wanted to keep his shareholding to himself. In the end, they negotiated a settlement which gave Mrs Sharland £10million in cash and property and a 30% share of the net sale proceeds of the shareholding as and when the shares were sold. However, she very quickly discovered that Mr Sharland had lied to her and the court; he had been actively planning a public sale of the company, the value of which was now reported to be as high as $1billion.

In Mrs Gohil’s case, she had had serious misgivings about whether her former husband had fully disclosed his assets during their divorce. However, with apparent little in the way of money between them and desiring a finality in the litigation , she made a pragmatic decision to negotiate a settlement giving her £270,000. This was in 2004. Three years later, Mr Gohil was convicted of fraud and money laundering to the tune of £25million and sentenced to 10 years’ imprisonment. Mrs Gohil then began a long battle to unpick her original divorce settlement.

Whilst the facts in both cases are quite different, they do share the same theme – disclosure. Is it right for a husband or wife to lie about their financial and other circumstances when seeking to agree a financial settlement? And what happens if and when a court finds out that one of them has deliberately set out to deceive the other?

The Supreme Court, in Sharland and Gohil, has now answered these questions. It is clear that no one can get away with lying in divorce proceedings and, if they try, it is very likely that the court will re-open the financial settlement and re-distribute the assets more fairly. This is because any settlement which is later shown to be based on misrepresentation of the true facts of the parties’ finances must be scrapped as it is based essentially on fraud.

So what does this mean for you if you are going through a divorce? Here are our three top tips to take away from the Supreme Court’s ruling.

Disclose, disclose, disclose
Divorcing couples owe a duty to each and to the court to provide full and frank disclosure of their circumstances. The Supreme Court is emphatic in underlining the importance of this fundamental principle. Without full disclosure, a fair financial settlement cannot be achieved. It is a safe bet that any lies told during proceedings will be found out in time. Non-disclosure is a ticking time-bomb. There is no time-bar on when a spouse can come back to court. It could be tomorrow; it could be in 30 years' time.

Remember that the duty to disclose continues all the way through the proceedings until a final financial order is made and you cannot wriggle out of it!

Fraud unravels all
Where someone does fraudulently or intentionally fail to disclose assets it will now be presumed that, had they disclosed fully, a different financial settlement would have been reached. This is a significant development. It places the burden on the “fraudster” to show that their non-disclosure made no difference to the make-up of the settlement rather than expecting the “victim” to show that the non-disclosed assets would have made a difference.

Crime and punishment
Up until now, there had been some husbands and wives who felt that non-disclosure was a gamble worth taking. The Family Court, they said, did not have tough enough sanctions in the event their non-disclosure was uncovered. The worst to expect was a costs order punishing their bad behaviour. Now, not only can non-disclosers expect to be at the wrong end of a potentially harsh costs order but they will also see their original financial settlement re-opened and re-examined afresh taking into account the non-disclosed assets.

Imagine having to go back to court because your financial order had to be scrapped due to you or your ex lying about their assets. Your legal costs will increase substantially (especially for the “fraudster”). Any payments that were made after the original order may be changed and, importantly, the delay in achieving finality after divorce (we’re talking potentially years here, not just months) would have a significant impact on you and your family. So if you are thinking about being less than honest in your divorce – think again! The consequences could be devastating.

You can read more about non-disclosure here: Hidden assets

Nicola Rowlings
Professional Support Lawyer

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