Two divorced couples to revisit the terms of their divorce settlement
Two women have succeeded in an appeal to enable the court to look at again at the terms of their divorce settlement, after their husbands failed to fully disclose the extent of their financial worth.
The much awaited Supreme Court decision in two separate cases, Sharland and Gohil, may now open the door for other divorced couples to revisit the terms of their divorce settlement. This could have wide reaching consequences as news of these high profile cases hits the press.
When couples divorce, they have financial claims against each other arising out of their marriage. The financial claims are not automatically brought to end when decree absolute is made. The financial claims can be brought to an end either by way of a consent order (i.e. an agreed order) or a final order (i.e. one made by the court after a contested hearing and having heard evidence from the parties).
In the cases of Sharland and Gohil, the allegation made by the wives was that the lack of financial disclosure made by their husbands was such that the financial settlements were not valid. This therefore means that the court will now have a fresh look at their cases in order to decide what a fair settlement is.
Each party has a duty to provide full and frank financial disclosure to one another and to the court - this is an ongoing duty. If the parties reach an agreement, and present an agreed consent order to the court, it is supported by a document setting out what their financial positions are. The court needs to know what each party has in terms of capital (i.e. equity in a house, savings, investments, value of businesses etc), income and pensions. The court then decides whether the terms of the consent order are fair, based on the parties’ financial details, with the court retaining the ultimate say as to whether the consent order is approved. The statement containing the financial information (called statement of information) is supported by a statement of truth which both parties sign. Therefore the disclosure must be accurate so that the parties entering into the consent order know what each other has and can base their decision as to the division of the matrimonial assets on this information. If the case progresses to a final hearing, because the parties have been unable to reach a settlement, then at a final hearing the court hears evidence from the parties and makes a decision as to the division of the matrimonial assets based on that evidence. If the information provided to the court is lacking or even dishonest, this can call into question whether the court had a true picture and therefore whether the order is fair.
What the successful appeal in the Sharland and Gohil cases makes clear is that the information the parties present to each other and to the court must be truthful, otherwise the whole basis of the agreement could be in question. In Sharland, the husband had lied about the value of his company as well as plans to float it on the stock market, which would of course have affected the value. Although the case had progressed all the way to a final hearing, part way through the hearing the parties reached a settlement. This was based on information that the husband had provided and the wife based her decision to accept the settlement on the information that the husband had disclosed. The parties reached a settlement but before the court approved the order, the wife discovered that the husband had significantly undervalued his business and she asked the court to withhold from approving the consent order. The Court of Appeal did not agree with her, but the Supreme Court has today said that the husband’s actions were fraudulent and the wife had been a victim of “fraudulent misrepresentation” which had led her to settle her financial claims. Where the lack of disclosure is intentional it is viewed as being material to the case and therefore likely to affect the outcome of the court’s decision regarding a financial settlement.
Ms Gohil had accepted £270,000 and a car as a settlement but it later transpired that he had failed to disclose his true wealth during divorce proceedings.
The exact mechanism of how these types of cases will be brought back to court is yet to be established and time will tell as to how many cases this does affect in practice. Sharland was a very big money case, with the estimated value of the business being upwards of £750 million in addition to vast amounts of other capital available for distribution between the parties. However misrepresentation of a party’s financial position does not need apply only to high asset value cases.
It is crucial that you seek independent legal advice at an early stage when looking at financial settlements and divided matrimonial assets