This is a guest post written by the super Zoe Saunders, who has saved me the trouble of having to digest the judgments of the Supreme Court in Sharland v Sharland  UKSC 60 and Gohil v Gohil  UKSC 61. Zoe sets out the facts and a legal analysis of the cases, and then answers some very useful FAQs for people who are going through or have been through financial proceedings on divorce and who might be wondering if this affects them.
Do please read the FAQs – these cases do not necessarily mean you can have a second bash at getting the outcome you wanted just because you believe your ex lied.
WHAT DO SHARLAND & GOHIL MEAN FOR ME?
There has been a lot of excitement about the effect of these two cases. I have seen newspaper articles suggesting that there will be thousands of other cases reopened as a result – I think the reality is somewhat different.
So What’s It All About?
In brief here is what these two cases say :
Long marriage, 3 children (one with lifelong special needs); parties’ assets comprised significant liquid capital (c. £17 million) and a company the value of which was in dispute, but was expected to be significant. In the months before trial, and in the course of preparing accountant’s reports as to the value of the company, the husband (‘H’) repeatedly lied about whether the company had plans to float. His evidence at trial was that no flotation was planned, but was possible within 3 – 7 years.
Part-way through the trial, the parties settled, with the wife (‘W’) agreeing to take cash of £10 million together with 30% of the proceeds of the company flotation, whenever that occurred. In fact, plans for a flotation were well advanced and were being actively pursued at the time of the trial; something of which the wife became aware through media reports a few weeks after the trial (and before the approved order had been sealed).
Eight months after the original agreement, the trial judge was faced with two applications:-
(i) The wife’s application for directions for a resumption of the trial (and so, in effect, to set aside the agreement); and
(ii) The husband’s application for notice to show cause why the previously approved order should not be sealed.
Sir Hugh Bennett held that the husband had been guilty of “laying a false trail” and of dishonesty. He nevertheless accepted the husband’s unchallenged evidence that no flotation had then taken place and none was in prospect. He held that he could not have made the order he approved in July had he known the truth, but would have been forced to adjourn to await developments. However, since no flotation had actually then occurred, the agreement embodied an outcome which was the likely result of the trial, and so the wife had failed to establish that the husband’s dishonesty had resulted in a substantially different order than that which would have resulted had the truth been known.
By a majority (Briggs LJ dissenting), the Court of Appeal upheld the order of Sir Hugh Bennett and dismissed the wife’s appeal.
The Supreme Court allowed the appeal, and agreed with the reasoning in the dissenting judgment of Briggs LJ in the Court of Appeal.
What does this say about the law?:-
1. As well established an agreement to compromise financial claims on divorce does not give rise to a contract enforceable in law. A consent order in matrimonial proceedings derives its authority from the court and not from the consent of the parties (whereas in ordinary civil proceedings, the consent order derives its authority from the contract made between the parties). The parties cannot, by their agreement, oust the jurisdiction of the court and only the court can effect a clean break between them;
2. The duty to disclose all relevant facts continues after agreement has been reached until the court itself has made its order;
3. The power to set aside an order arises when there has been fraud, mistake or material non-disclosure;
4. For cases of innocent or negligent non-disclosure or misstatement, Livesey v. Jenkins remains good law: the court has the power to set aside an order where it can be shown by the person seeking to set aside that:-
a. The non-disclosure or misstatement vitiates the agreement or order (for instance because it induced the Applicant to enter into the agreement, or it undermined the whole basis on which the order was made); and
b. had the non-disclosure or misstatement not occurred, the court would have made a substantially different order from that which it did make;
5. Cases of fraud are different. It will be assumed that test in (4a) & (4b) above is met and the victim will be entitled to have the order set aside unless the perpetrator of the fraud can establish that, at the time the court made the consent order:
a. the fraud would not have influenced a reasonable person to agree to it; and
b. had it known then what it knows now, the court would not have made a significantly different order, whether or not the parties had agreed to it.
6. On the facts of this case, having established fraud, W was entitled to re-open the case, and to seek to negotiate a new settlement or a rehearing when all the relevant facts were known;
7. On the facts of this case, W did not need to cross-examine H, since the documents he disclosed revealed that he had deceived the court;
8. The Family Procedure Rules Committee should ensure that the Family Procedure Rules 2010 are revised so as to include the principle that an application to set-aside an order should be made to a court of the level which made the order, and not by way of appeal;
9. The fact that the setting-aside of an order can be justified does not necessarily mean that renewed financial proceedings must start from scratch. It may be possible to isolate the issues to which the non-disclosure or misrepresentation relates and deal only with those. The court retains enormous flexibility to enable the procedure to fit the case.
Gohil – Summary
Throughout the original proceedings Mrs Gohil (‘W’) complained consistently that her husband (‘H’) had not given complete disclosure, but nonetheless, in 2004 compromised her claims at FDR in order to achieve finality. Three years later, she applied to set aside the order contending again that there had been material non-disclosure. The set-aside application was significantly delayed by H’s prosecution and conviction for money-laundering. In 2012, Moylan J found H guilty of material non-disclosure and set aside part of the original order to allow W to pursue further claims. He based his decision in part on evidence from H’s father, and in part on evidence which the CPS had been ordered to disclose and which they had obtained in large part from overseas pursuant to requests made under the Crime (International Co-operation) Act 2003. By the time of the appeal to the Supreme Court it was accepted that the evidence obtained by the CPS under the 2003 was inadmissible before Moylan J.
The Court of Appeal allowed an appeal by H, holding that Moylan J had no admissible evidence of material non-disclosure before him upon which he could rely to support his findings. Aside from that which was inadmissible under the 2003 Act, the other evidence did not satisfy the criteria for fresh evidence on appeal set out in Ladd v. Marshall, and so should not have been admitted.
The Supreme Court held:-
1. The duty to give disclosure which is full and frank is owed to the court, and without it the court cannot discharge its statutory duty under Section 25(2) of the Matrimonial Causes Act 1973. One spouse cannot exonerate the other from complying with his or her duty to the court;
2. An application to set aside an order in matrimonial proceedings for material non-disclosure was not an appeal, but a separate action within the matrimonial proceedings. The criteria in Ladd v. Marshall for the admission of fresh evidence on appeal does not apply. The argument that it does was based on the mistaken concept that the proper course for W was to have proceeded to trial and presented her evidence there. That was wrong, because the onus of proving H’s wealth was never on W; it was always H, pursuant to his duty to give full and frank disclosure;
3. There was sufficient admissible evidence before Moylan J to enable him to find that the husband was guilty of material non-disclosure, and his order would be restored, with the application remitted to him for disposal of W’s extant claims.
So What Does This Mean In Practice?:
The duty to give full and frank disclosure is of critical importance – it continues throughout proceedings until a final order has been made.
If the duty of full and frank disclosure has not been complied with an order can be set aside, but the test for whether the order should be set aside is different for innocent or negligent non-disclosure and deliberate or fraudulent non-disclosure: see points (4) & (5) above.
If an order is set aside the court doesn’t necessarily have to start from scratch – it can deal with the specific issues which were tainted by non-disclosure only.
To set aside an order for non-disclosure an application should be made back to the original court and level of judge who dealt with the matrimonial proceedings – it is important to bear in mind that the rules have not yet caught up with these judgments so there are likely to be rule changes soon.
I Think My Husband / Wife Lied When He / She Gave Evidence, Can I Set The Order Aside?
Not necessarily – one of the critical issues will be proving that they lied. This is not always straightforward and care will have to be given before making allegations of fraud or deliberate dishonesty.
The second critical issue will be a careful consideration of whether their lies made any difference to the outcome of the case. Even in cases of fraud the court will be looking at whether it is proportionate to re-open the case.
My Consent Order Is About To Be Approved But I Have Lied About My Assets, Should I Keep My Fingers Crossed And Hope?
No, obviously – as a barrister would I say anything else?! Even if you couldn’t care less about the duty of full and frank disclosure, the net result of these cases is that you will always be looking over your shoulder. If your ex finds out about the dishonesty you run the risk of the whole case being reopened and facing the obvious consequences of your damaged credibility, as well as potentially punitive costs orders.
My Consent Order Is About To Be Approved But I Have Just Found A Bank Account with £1 In That I Had Honestly Forgotten About, Should I Keep My Fingers Crossed And Hope?
No – in this case better safe than sorry. Even if the accidental non-disclosure is minimal it is clear that your duty of full and frank disclosure is still on-going – you will need to inform your spouse and provide full disclosure.
My Consent Order Is About To Be Approved But I Have Just Won £1,000,000 On The Lottery, Should I Keep My Fingers Crossed And Hope?
Again – no. As above you have a duty to disclose. This is why not to play the lottery during your divorce unless you fancy sharing any proceeds, see also, gambling, premium bonds, etc.