Divorce settlements attacked
Practitioners expect a significant number of applications to vary divorce settlements on the grounds of an ex-spouse’s non-disclosure, after Varsha Gohil and Alison Sharland won their cases in the UK Supreme Court yesterday.
In two judgments released in February and March 2014, the England & Wales Court of Appeal ruled that the women should not be permitted to revisit their consent orders, despite the fact that their ex-husbands had fairly evidently concealed important aspects of their assets or potential assets.
The Sharland dispute turned on the value of a company owned by Mr Sharland. His expert valued it at GBP50 million while Mrs Sharland estimated it at GBP75 million, but both valuations assumed that it would not be sold in the near future. In fact, the husband was already preparing to float it on the stock exchange – an exercise that raised close to a billion dollars.
In Gohil, the ex-husband told the court that his assets were worth just over GBP300,000, which led Mrs Gohil to settle for GBP270,000, despite her doubts. Three years later Mr Gohil was convicted of fraud and money laundering of a sum of GBP25 million, and was jailed for ten years.
Both women sought to have the original orders overturned, but the Court of Appeal in both cases decided against them. Mrs Sharland was told that she had not shown that her settlement would have been substantially different if full disclosure had been made, while Mrs Gohil was told that the evidence used to establish non-disclosure was inadmissible because it came from criminal proceedings outside the UK.
The Supreme Court judgments (2015 UKSC 60 and 2015 UKSC 61) overturn both of these Court of Appeal rulings, though there are some notable differences between the cases
Lady Hale in the Sharland case asserted that the victim of fraud in a matrimonial case should not be left in a worse position than the victim of fraud in an ordinary contract case. The general principle of ‘fraud unravels all’ should be upheld in both, so that a consent order procured by fraud must be set aside unless the perpetrator can prove that his misrepresentation had not made any difference to the outcome. It should not be up to the victim to prove otherwise, she said
In Gohil, Lord Wilson said that the court should have been able to infer the husband’s non-disclosure even without reference to the inadmissible evidence.