Family practice after 'Sharland and Gohil

Travelling on the tube ?the morning after the Supreme Court rulings ?in Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61, I was amused by the popular press headline ‘Exes can now sue for more after historic ruling’. How accurate is this?

Mrs Sharland’s appeal centred on the impact of fraudulent non-disclosure. The facts are well established. Mr Sharland was an entrepreneur with a substantial software business shareholding; the value and manner of distribution between the parties of this shareholding were the main issues in dispute. After valuations, and on the basis ?that there were no sale plans, ?an agreement provided for Mrs Sharland to receive 30 per cent ?of net sale proceeds whenever ?it was sold, plus other assets.

After the consent order was drawn up, Mrs Sharland became aware the company was being actively prepared for an initial public offering for a substantially higher figure than it had been valued at. The Court of Appeal upheld the judge’s refusal to set aside the consent order, as he would not have made a different order. The Supreme Court allowed the appeal, returning the financial relief claim to the High Court.

In Gohil, the consent order provided for a lump sum payment to be made to Mrs Gohil in final settlement of her claims, despite her belief that there had not been full disclosure. She applied to set aside the order on the grounds that her husband had fraudulently failed to disclose his assets. The court found that there had been a material non-disclosure by Mr Gohil, that the outcome would have been different, and that the wife’s evidence satisfied the criteria in Ladd v Marshall [1954] 1 WLR 1489 (to allow fresh evidence only when it could not have been obtained earlier with reasonable diligence, would probably have an important influence on the result, and was presumed to be ‘apparently credible’).

One must strongly emphasise to a client who one believes is not making full and frank disclosure the absolute requirement to do so. These obligations fall on all parties, right up to trial and settlement. Where a party believes their spouse is or may be concealing assets, there is a much stricter onus on solicitors to follow all legitimate lines of enquiry and ‘leave no stone unturned’.

Material non-disclosure

The judgments addressed how ?a case should be reopened if material non-disclosure is identified. In L v L [2006] EWHC 956 (Fam), Mr Justice Munby confirmed three possible routes: a fresh action to set aside the order; an appeal against the order; or an application to ?a first instance judge in the matrimonial proceedings. 

Permission is required for ?an appeal but not the other two routes. An appeal is not the most suitable vehicle for hearing evidence and resolving factual issues, which often arise on an application to set aside.

Section 31F of the Matrimonial and Family Proceedings Act 1984 provides: ‘Every judgment or order of the Family Court is, except as provided by this or any other Act or by rules of the court, final and conclusive between the parties.’ Section 31F(6), however, gives the Family Court the power ‘to vary, suspend, rescind or revive any order made by it’. Accordingly, such an application can be made either by appeal or by application to a first instance judge. Difficult issues remain around whether such applications should be made within or without the original proceedings, and whether the rules or a practice direction should specify criteria for choosing between an appeal ?and a first instance application. ?A Family Procedure Rules committee working party is currently considering this.

Proportionality

We must keep proportionality ?in mind, in terms of both the amount which may not have been disclosed and the costs ?of reopening the settlement. ?In Livesey v Jenkins [1985] AC 424, Lord Brandon said it would only be in cases where the absence of full and frank disclosure had led to the court making an order ‘substantially different from the order which it would have made ?if such disclosure had taken place’ that a case for setting aside could be made.

Accordingly, the misrepresentation or non-disclosure must be material to the decision the court makes at the time.

When advising clients, remember the fact that there ?has been misrepresentation or non-disclosure justifying the setting aside of the order does not mean the renewed financial remedy proceedings must necessarily start from scratch. With proportionality of costs high on the agenda, it may be possible to isolate the issues to which ?the misrepresentation or non-disclosure relates and deal only with those.

Time will tell whether there is ?a rush to reopen settlements.

Deborah Levy is a consultant at Thomas Eggar @ThomasEggarLLP www.thomaseggar.com

Copyright & permissions