Seven judges of the Supreme Court today ruled unanimously in favour of two ex-wives who applied to set aside financial settlements based on dishonest disclosure by their ex-husbands.
It might seem obvious that the lack of frankness as to the extent of a party’s assets should lead to a review of a settlement either agreed between the parties or imposed by the Court.
However, it is not so simple. The test is whether the original Judge would have “made the order he did, when he did, had the truth been known”, to quote Lady Hale in today’s judgment.
The two cases differed. Mrs Sharland had accepted a valuation of her husband’s company on the basis that it would not be floated on the stock market for several years. She discovered shortly after settlement that he had been in discussions with investment bankers with a view to an imminent initial public offering of shares. Although the husband was found to have been economical with the truth, two Courts found in his favour as the flotation had not taken place and therefore it was held that the non-disclosure was irrelevant.
Mrs Gohil had the more difficult task of persuading a Court that her husband’s lifestyle was at odds with the financial position disclosed by him at Court. He was subsequently sentenced to 10 years’ imprisonment for money laundering. Initially successful, she failed on appeal.
Singled out and criticised today was the original judges’ view as to non-disclosure and its triviality and/or materiality at the date of the order and not at some future date.
Before this case, non-disclosure may have attracted an adverse costs order against a guilty party. This case has now defined “fraud” in non-disclosure and the judgment refers to it in these terms.
It is always in the interests of both parties to settle by agreement rather than having a judgment imposed. Settlement by consent will not oust the jurisdiction of the Court, but the Court will endorse agreement unless it feels that there is something amiss and it should enquire further. Hand-in-hand with this goes the parties’ duty of full and frank disclosure. If there are grounds that call into question the basis of the parties’ consent, then the Court will have grounds to set aside.
This is far from the end for these two cases. Both will be returned to the Family Division of the High Court for further directions and effectively a re-hearing of the relevant issues.
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