Joanne Major, Principal and leading female solicitor of Major Family Law, the North East’s divorce and family law specialists, comments in this month’s Northern Insight:
It would be hard to have missed the reporting of the ground-breaking decision by the Supreme Court in the cases of Sharland and Gohil recently. Anything relating to financial divorce settlements involving millions and/or the word “fraud” tend to be headline grabbing, but these cases are in fact of monumental significance to anyone seeking financial provision in the course of divorce proceedings.
The cases of Sharland and Gohil respectively, were different in terms of circumstances, the former being a long marriage with the parties’ assets comprising significant liquid capital and a company eventually floated on the stock market; the latter involved the husband being prosecuted and convicted of money laundering after financial settlement had been reached in divorce proceedings.
Notwithstanding the differing circumstances of each case, the ultimate judicial decisions have finally put beyond doubt the right of one party to reopen a matrimonial financial settlement if it can be shown that the other party failed to disclose financial information.
It has always been expressly required that both parties give full and frank disclosure of their financial circumstances within divorce financial proceedings. These two cases reinforce that principle and confirm that the duty continues throughout legal proceedings right until the final Order is made and sealed by the Court. In particular, this clarifies that an agreement reached by consent is not binding on either party until the terms have been ratified by the Court in a formal Order.
Specifically, in the Supreme Court, Lady Hale emphasised that “the divorce court retains jurisdiction over a marriage even after it has been dissolved” and that this remains true even where a clean break has been effected. She confirmed that where agreement of terms has been reached between the parties, such an agreement does not give rise to a contract enforceable in law, however the court will make an order in terms agreed unless it has reason to think there were circumstances into which it ought to enquire.
Where there is a finding of fraud, the general principle that fraud unravels all follows. The only exception to this is where the court is satisfied that at the time when the consent order was made, the fraud in question would not have influenced a reasonable person to agree its terms; and had it known then what it later knows, the court would have made a significantly different order, whether or not the parties had agreed to it. The burden of establishing the above must lie with the perpetrator of the fraud.
In cases of mistake or negligent non-disclosure, the test for setting aside an order is different to that of fraud, not least because it is for the applicant to show the test has been met, as opposed to the person guilty of non-disclosure.
Significantly, in all cases, it’s important to note that the non-disclosure entitles the Court to set aside any existing agreement or order; it does not carry with it any automatic entitlement for the wronged party, other than to reopen their original application for financial provision.
As always, the moral of the story is that honesty is the best policy. At the very least, if you are found to have hidden or failed to disclose financial assets or income during the course of divorce proceedings, you are likely to face further legal costs if the Court reopen the case. Worst case scenario, it could open a can of worms that could end with tax investigation and/or criminal prosecution.
Joanne Major is the Principal at Major Family Law, the Divorce and Family Law Specialists, 12 West Road, Ponteland, Newcastle upon Tyne. T: 01661 82 45 82 www.majorfamilylaw.co.uk. Twitter: @majorfamilylaw