On 14 October 2015 the Supreme Court – the highest court in England and Wales – handed down two judgments. They related to the issue of full and frank disclosure and honesty within financial proceedings on divorce.
Family lawyers have paid great attention to this case as some believe that the ruling has the potential to change the nature of future divorce cases. In this blog I summarise the key issues::
Gohil – the wife and the husband reached agreement and a consent order was approved by the court. Within that consent order the wife said that she did not believe that the husband had provided full and frank financial disclosure but that she wanted to achieve finality. The wife later applied to set aside the order on the basis of the husband’s non disclosure. During this period the husband was found guilty of money laundering offences.
The Supreme Court held that the duty of each party to provide full and frank disclosure is to the court. Therefore any wording within a consent order saying that the wife did not believe that the husband had provided full disclosure does not exonerate the husband from the need to provide full disclosure. On the basis of the husband’s failure to provide full and frank disclosure the wife’s application would be allowed and she would be able to pursue her claims against the husband.
Sharland – the husband had developed a successful business. Within his evidence he said that it was unlikely that he would be able to realise the value of the business between 3 or 7 years. Following this evidence the parties reached an agreement and a draft consent order was sent to the court.
However, reports appeared in the press indicating that his company was being prepared for sale with values vastly in excess of what the wife had been led to believe based upon the husband’s evidence. The wife appealed the consent order (which had not yet been perfected by the court) on the basis of the husband’s non-disclosure.
The Supreme Court agreed with the wife and ordered that the matter be returned to the High Court where the wife be able to pursue her claims.
What do these cases mean?
In short, within financial proceedings on divorce you need to provide full and frank disclosure and be honest about future intentions. The financial statement used, Form E, makes it clear what is expected in any event. But will the case have the impact that commentators and the press are suggesting it will, or is there an element of whipping up interest (and dare I say it work?) from over-stating the importance of the judgment ?
- Let’s face it, in most cases the other party is highly unlikely to become aware that their spouse had failed to provide full and frank disclosure.
So, is the court always there to ensure cheats don’t prosper. In short, no! The case of Imerman (which also went to the Supreme Court) prevents a spouse from using self-help to find out financial information about their spouse. How many cases do you know which involve companies to be big enough that there are newspaper reports written about them? Both these cases were ones where information was in the public domain.
- Unless it is a case involving substantial assets, the cost of legal fees may well be disproportionate to the fraud that has taken place. For example, £10,000 would make a substantial difference to most people, but even assuming you find it out in the first place, would you be able to afford to litigate? Even if you did what if the money is long gone? A judgment or order is one thing; money in your back pocket is quite another.
The headline that a spouse who fails to provide full and frank disclosure or lies about their future intentions should be held to account is a concept that’s hard to argue with. However, is there more behind the scenes?
I was lucky enough to hear from Leading Counsel who acted for the husband in the case of Gohil discussing the judgment the day after the Supreme Court had delivered it. He made an interesting revelation that the facts upon which the wife relied to re-open her case, were not based upon fresh evidence or new issues that had arisen after the agreement was reached, but were instead the same issues that the wife had raised previously. I am not sure that this is entirely clear when reading the judgment. She knew they were issues but chose to settle.
This raises an interesting question. If one party chooses to settle their claim whilst under the belief that the other party has not provided full and frank disclosure, is it fair that they should then be able to re-open their claim based upon issues that were previously known about? The Supreme Court clearly say a person can.
As I have previously said, the concept that a spouse who fails to provide full and frank disclosure is hard to argue with, but the idea that a spouse decides not to pursue issues which they are aware of at the time but later uses these to re-open their case is an entirely different prospect. Nevertheless, the Supreme Court has spoken.
What these cases do achieve, is to reinforce the need to ensure disclosure is rigorously considered. After all, without knowing the assets how can a person make an informed decision over settlement. That leads to the issue that you need to make sure you instruct an experienced family law specialist. At Family Law Partners we will consider all the issues in your case and advise you of all your options.