Supreme Court clamps down on divorce cheats’ charter
Bulletin Autumn 2015
The long-awaited judgments in Sharland and Gohil were handed down on 14 October, with both wives successfully appealing. But what does this mean now?
The background Both cases concerned alleged non-disclosure in financial remedy proceedings. At the time of divorcing her ex-husband, Mrs Sharland accepted a settlement that saw her receive £10.3million plus a 30% share of any net proceeds from the sale of the business in which Mr Sharland had a substantial shareholding. After the consent order was drawn up, she discovered that, contrary to what he had said in evidence, Mr Sharland had been holding discussions with various investment bankers as part of active preparations for an initial public offering of the business. The financial press put its value at some £620million. Mrs Sharland made an application to the court not to seal the order, and an application to resume the hearing of her claim for financial provision on the grounds that her agreement to the proposed order had been obtained by fraudulent misrepresentation. Her application was dismissed. Mrs Sharland appealed, but this too was dismissed by the Court of Appeal. In fact, by the time the Court of Appeal case was heard, it had become clear that the flotation would not go ahead.
Contact the authors:
Alan Kaufman Consultant: Family T: +44 (0) 20 3755 5538 E: alan.kaufman@howardkennedy.com
In 2004, Mrs Gohil accepted £270,000 and a car to settle the financial remedy proceedings. Six years later her ex-husband, London solicitor Bhadresh Gohil, was jailed for money laundering and evidence arose in the criminal proceedings that revealed he had not disclosed his true wealth during the divorce. Whilst the High Court rescinded the order, Mr Gohil successfully appealed, resulting in Mrs Gohil’s appeal to the Supreme Court.
What has the Supreme Court said? The Supreme Court has now unanimously allowed both appeals. It was held that Mrs Sharland’s consent was vitiated by her ex-husband’s fraud, meaning that there was not a valid agreement. His fraud deprived Mrs Sharland of the right to a full and fair hearing. The court emphasised that what matters is not the order that the court would make now, but the order that the court would have made at the time, had there been full and frank disclosure.
Lois Langton Partner: Family T: +44 (0) 20 3755 5559 E: lois.langton@howardkennedy.com
In Gohil, the court reaffirmed that the correct test to apply was the need to establish material non-disclosure. Where a party’s non-disclosure is inadvertent, there is no presumption that it is material, and the onus, in such circumstances, lies on the other party to show that, on the balance of probabilities, proper disclosure would have led to a different order. Where a party’s non-disclosure is intentional, it is automatically deemed to be material. There is a presumption that proper disclosure would have resulted in a different order, and the onus to show otherwise, on the balance of probabilities, falls on that party. Interestingly, in Gohil, the husband had sought to rely on a recital to the consent order that stated that notwithstanding that the wife believed that he had not provided full and frank disclosure, she was compromising her claims in order to achieve finality. The husband had argued that this in itself barred Mrs Gohil from relying on any alleged non-disclosure. The court has made clear that this is no defence. The duty of full and frank disclosure is owed to the court, and one spouse cannot exonerate the other from complying with this duty. As a result, the recital had no legal effect whatsoever. This is hardly surprising. The court’s refusal to give this any legal effect is in keeping with the court’s duty to reach a fair settlement, bearing in mind all of the circumstances of the case.
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What does this mean going forward? Both wives have been given the opportunity to have their financial claims re-heard. However, there is no guarantee that this will result in greater awards for either wife, and both will of course have to incur further legal fees. Yes, both husbands are at risk on costs; however whether either wife will be able to enforce any such order will depend on the current financial circumstances of their respective husbands now. The court quite rightly stated that what matters is the order that would have been made at the time, and not the order that would be made if the case was being heard for the first time today. However, caution still needs to be exercised. It is very well to consider the order that would have been made had the true financial circumstances been made at the time, but practically, could that order be enforced today? Bearing in mind the legal costs ahead, one certainly hopes so for the likes of Mrs Sharland and Mrs Gohil. Notwithstanding this, the ruling is a clear warning sign to any would be non-disclosers. The truth will out and the court will deal with such non-disclosure seriously. Full and frank financial disclosure is the bedrock of financial remedy proceedings and the decisions of the Supreme Court today uphold and endorse this fundamental principle.
What’s the story…….morning glory? Despite their divorce, the singers Nicole Appleton and Liam Gallagher recently joined forces to apply for the press to be excluded from the final hearing of their financial remedy proceedings. Mr Justice Mostyn, who heard the application, commented, in his usual inimitable fashion, that it was a “serious understatement……to say that the law about the ability of the press to report ancillary relief proceedings which they are allowed to observe is a mess”.
So what does the law say? The rules provide for financial remedy proceedings to be held in private and so the public cannot attend (unless a case ends up in the Court of Appeal or higher). The parties themselves are also bound by an implied undertaking not to use any information disclosed in the proceedings for any purpose other than the proceedings. However, since April 2009, the press have been permitted admission to certain hearings, although they are not allowed any access to documents. The question is what can they report, and that is where the law has appeared to find itself in real difficulty. Mr Justice Mostyn maintains that “the press have to justify why the core privacy maintained and endorsed by Parliament should be breached” and that, in financial remedy proceedings, “the privacy side of the scales starts with heavy weights on it”. He suggested that cases where the proceedings might be allowed to be published might be where “the parties have both played out their matrimonial collapse through the press” or where “there had already been hearings in open court giving much financial information”. One such example would be the tragic case of Scot and Michelle Young. In the Appleton and Gallagher case, Mostyn saw no reason why the press shouldn’t name not only the parties but also their partners, past and present, as those names were already “all over the internet”. But as far as their financial information was concerned, he found that neither of them had “manipulatively invoked the press to fight their causes” and that most of the financial information was subject to the implied undertaking which collaterally bound the journalists who were present. It was left to the trial judge, His Honour Judge O’Dwyer, to decide whether a full judgment should be published. If you would like more information on our services, please visit www.howardkennedy.com here you will find all our latest news, publications and events. This material is for general information only and is not intended to provide legal advice. © Howard Kennedy LLP 2015
The “mess” identified by Mr Justice Mostyn is illustrated by the fact that his views as to the role of the press appear to be at odds with the decisions of another High Court Judge, Mr Justice Holman, who has held that the starting position is that every financial remedy case before him should be heard in open court, with the press able to report on anything said. In granting News Group Newspapers Ltd permission to appeal his decision, Mr Justice Mostyn has called on the Court of Appeal to clarify the position and to “resolve the unhappy divergence of judicial approach”. In the meantime, it is important that clients who are divorcing are aware of the potential for the press to be present. It isn’t just the famous who are affected; press interest is frequently stirred by cases with interesting issues and/or factual circumstances. The desire to avoid press involvement is often a factor in parties’ decisions to pursue alternative methods of dispute resolution where they can maintain privacy and confidentiality.
It’s not my fault! On 13 October 2015, a Ten Minute Motion on no fault divorce took place in the House of Commons. The Motion allowed each side ten minutes to present their case for and against legislating upon a no fault divorce. The Motion, brought forward by the Conservative MP, Mr Richard Bacon, proposed “that leave be given to bring in a Bill to make provision for the dissolution of a marriage or civil partnership when each party has separately made a declaration that the marriage or civil partnership has irretrievably broken down without a requirement by either party to satisfy the Court of any other facts." At the moment, this idea of a no fault divorce is not possible. Current legislation provides that the only ground for divorce is that the marriage has irretrievably broken down, which can then be proved by one of the following five facts: 1.
Unreasonable behaviour
2.
Adultery
3.
Desertion
4.
Two years’ separation with consent
5.
Five years’ separation without consent.
Relying on these facts mean that it is not possible for a couple to get divorced without apportioning blame, unless they have been separated for at least two years (with consent) or five years (without). Resolution (amongst many others), a staunch advocate of no fault divorce and a supporter of Mr Richard Bacon’s Motion, has argued that for many couples this presents a problem as waiting two years to sort out their finances is just not an option. Therefore, the default choices available are to cite either adultery or unreasonable behaviour, which often creates an unnecessary increase in animosity, conflict and distress between the couple. As the reasons for divorce almost always make no difference to any financial settlement or children arrangement, it seems a particularly pointless exercise to invoke this blame game culture. There are of course opponents to legislating upon a no fault divorce who argue that in some circumstances, it is vital to retain fault as a fact to be relied upon, especially if one’s behaviour is considered so unreasonable, that it is only right and indeed justified to allocate some sort of blame. Only time will tell whether this Ten Minute Motion will effect a change of years’ old law…. Watch this space! If you would like more information on our services, please visit www.howardkennedy.com here you will find all our latest news, publications and events. This material is for general information only and is not intended to provide legal advice. © Howard Kennedy LLP 2015