Fraud Unravels All

Fraud Unravels All

Published: 30 October 2015

Full And Frank Disclosure Required Of All Parties In Divorce And Financial Remedy Proceedings

Supreme Court Ruling

Very recently, the Supreme Court unanimously allowed the appeals of the wives in the well publicised cases Sharland .v.Sharland and Gohil .v. Gohil.  This is a positive and welcome decision, as the Supreme Court has made it clear that the court will not accept fraudsters. In a landmark judgment, previous court rulings (which found that the wives had to settle for less even though their husbands had deliberately concealed the full extent of their wealth) were overturned.

There will be serious consequences for any spouses if they deliberately mislead their former spouses and the court regarding their financial disclosure in order to achieve a more favourable financial settlement.

In both cases, the Supreme Court decided to set aside the divorce settlements of Alison Sharland andVarsha Gohil due to the material non-disclosure of assets by their former spouses. Crucially, as victims of fraudulent non-disclosure, both women have been granted permission to challenge their financial settlements as the court will continue to apply the principle that ‘fraud unravels all’ leading towards the setting aside of a consent order procured by fraud.  In both cases, it was clear that the judge would have made a significantly different order than the one he gave, in the absence of fraud.

It is important to note that a consent order in matrimonial proceedings derives its authority from the court, in contrast to ordinary civil proceedings whereby the parties’ agreement of itself creates a binding contract.  In addition, the duty of full and frank disclosure of his or her financial circumstances is essential in the family courts and remains even after an agreement has been reached and continues until the consent order has been sealed by the court.

The Family Court’s jurisdiction cannot be ousted by an agreement between the parties and it retains jurisdiction over a marriage even after it has been dissolved.

Options Available

It is perhaps inevitable that this Supreme Court ruling will encourage other wives,  husbands or civil partners to consider challenging existing financial settlements especially if they were financially weak and emotionally vulnerable during the course of their previous divorce proceedings.   

Further to the ruling, the options available to victims of non-disclosure in cases of this nature currently are either  1) to seek leave to appeal out of time;  or  2) commence a fresh case and issue an application to set aside within the matrimonial proceedings to a first instance judge.  There will be further clarification of the procedure for setting aside orders, which is already very intricate.  At present, s.31(F)(6) of the Matrimonial and Family Proceedings Act 1984 grants the family court power to vary, rescind, suspend or revive any Order made by it.

Incidentally, in Gohil v Gohil the Supreme Court also pointed out that an appeal will not be a good option if there are disputed facts yet to be determined since an appeal court is not intended to resolve factual issues as such.

Proceed with Caution

It is always advisable to very cautiously consider the prospect of litigation to achieve not only the setting aside of the original order but also reaching an agreement on what the correct settlement should be.  The litigation process can be daunting, costly and stressful for many individuals and it is advisable to have a detailed discussion with a legal professional such as a family law solicitor prior to making this major decision.

The Supreme Court has reiterated that it is far more preferable to reach a settlement by agreement and amicable discussion rather than through an adversarial battle in court in the first place.

Clearly, honesty and transparency together with full and frank disclosure of assets and finances in divorce cases is essential if you want finality in your divorce and financial settlement.

For more advice and information on the above, please contact Eugene Fan - Solicitor in our Family Law Team.

For specific advice and information on any divorce mater please contact Eugene Fan or Dee Douglas.

Eugene Fan