Non-Disclosure: Is it Worth the Risk?
Varsha Gohil’s and Alison Sharland’s applications to the Supreme Court (in the cases of Gohil v Gohil and Sharland v Sharland) have been attracting significant media attention recently. Both appellant wives claim that their ex-husbands misled the court about the true value of their assets during the initial divorce proceedings that took place in 2004 and 2012 respectively. The wives are now seeking to overturn the decisions of the Court of Appeal, in order to achieve a more favourable award.
In financial remedy proceedings, the court’s objective is to divide the matrimonial assets fairly. Various factors which are set out in Section 25 of the Matrimonial Causes Act 1973 are considered in the process, including the parties’ earning capacities, their financial needs, their age, the duration of their marriage, and the financial needs of any dependents (amongst several others). However, the court retains flexibility in reaching its decision on the division of assets.
In many cases, following a detailed consideration of the facts of the case and the relevant Section 25 factors, matrimonial assets are distributed in an unequal manner in order to achieve fairness. However, whether the amount received by any party is ‘fair’ can only be determined by having a full understanding of the assets that are available in the marriage. In order to ensure that both parties and the court are aware of the size of the pot to be distributed, the parties to financial remedy proceedings have an on going duty to provide full and frank financial disclosure. This obligation continues until an order has been made.
If a party believes that they were misled during financial remedy proceedings, resulting in the acceptance or award of a lower amount that would otherwise have been higher had the true value of the matrimonial assets been known at the time, they are entitled to make a non-disclosure application to the court for the original award to be reconsidered. However, only where the court would have made a substantially different order had it been aware of the non-disclosure will it set aside the order Livesey v Jenkins [1985] AC 424.
In the case of D v D [2015] EWHC 1393 (Fam), the court rejected the wife’s non-disclosure claim as she had no direct evidence of her ex-husband’s specific undisclosed assets. In that case, the Judge stated that in order to succeed in a non-disclosure claim there would need to be:
(i) direct evidence on an un-disclosed asset;
(ii) evidence of a party’s failure to answer questions and/or comply with court orders (in which case the court would then be able to draw adverse inferences);
(iii) evidence of a lifestyle that is not consistent with disclosed financial resources.
Returning to the Gohil and Sharland cases, in the case of Varsha Gohil, she originally accepted a lump sum payment of £270,000 along with a Peugeot car in her 2004 divorce. However, her ex-husband was subsequently convicted of money laundering and it became apparent that his assets far exceeded those he claimed to have at the time of the divorce. Varsha argued that new evidence had come to light that showed that her ex-husband had not provided full disclosure when the consent order was made. As a result, Justice Moylan set aside the consent order without a full fact finding hearing, and made a disclosure order allowing the introduction of criminal evidence into the financial remedy proceedings. This decision was subsequently overturned by the Court of Appeal as it was held that Justice Moylan did not have jurisdiction to set aside the 2004 consent order solely on the basis of the existence of fresh evidence.
The facts relating to Alison Sharland’s divorce were slightly different. The parties reached a settlement agreement which provided for the wife to receive approximately £10.35 million comprised of cash and properties and the ex-husband approximately £5.64 million of the same. The main asset in the case was the ex-husband’s shareholding in a company called AppSense. Following the divorce, Mr Sharland admitted non-disclosure as he had failed to disclose arrangements that were being made to float AppSense by way of an IPO. Had that IPO taken place, he could have realised his shares much sooner than he had suggested. Here, the Court of Appeal refused to re-open financial remedy proceedings, stating that the fraudulent non-disclosure had not led to the court making a substantially different order to that which would have been made if full and frank disclosure had been provided.
The above cases illustrate the difficulties that can be faced by applicants who feel as though they may have been deceived during their financial remedy proceedings. They also highlight an age-old problem that the family courts have had to deal with – namely that re-opening a case, especially one that may not strictly meet the required thresholds, could potentially open the floodgates and result in a large number of applications being filed. The family courts are sufficiently overburdened without having to handle such claims.
But is there a way of eliminating these claims at the outset? The current penalties for non-disclosure are considered by some to be too low. It has been suggested by commentators that the courts ought to impose stricter penalties on parties who are not forthcoming with information about their true assets. Such an approach may discourage them from being misleading during proceedings.
The decision of the Supreme Court in the Sharland and Gohil cases will no doubt provide us with some further guidance on the circumstances in which a non-disclosure application will succeed and what the potential consequences might be for the ex-husbands in the event that the appeals are upheld. However, what is clear is that in order to walk away from financial remedy proceedings with some form of finality, and to avoid the prospect of further proceedings and/or penalties, it is always advisable for parties to disclose their true asset positions at the outset.
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