On 14th October 2015 the UK’s Supreme Court ruled in favour of two wives, deciding that they could seek larger financial settlements from their ex-husbands.This is because it had been discovered that their ex-husbands had failed to fully disclose the value of their assets during their respective divorce proceedings. While the facts of each case may differ, both Mrs Sharland and Mrs Gohil claimed that their ex-husbands intentionally lied about their net worth, misled them and deceived the court as to the true value of their assets. As a result, both wives accepted settlements which were less than what they were entitled to.
The two cases are precedent-setting decisions which aim to provide clarity on the complex nature of financial disclosure in divorce proceedings. More importantly, the decisions are being interpreted as a warning for divorcees who attempt to hide the true extent of their wealth from their spouses and from the court. Such divorcees are never truly safe from being caught because claims for re-opening divorce settlements aren’t time-barred. This means that spouses who have been cheated into accepting unfair settlements can seek redress through the courts at any time in the future.
Why did the Supreme Court make the decisions that it did?
Let’s examine the principle of fairness, the duty to disclose, and the floodgates argument which have been widely discussed since these two decisions came out.
What we learn from these cases is that English law is intent on upholding the principle of fairness where divorce proceedings are concerned. An interesting comparison that was drawn by the courts was as follows: if a commercial contract can be set aside when one party has intentionally deceived the other by way of fraud, why should the same principle not be extended to divorce settlements? In its discussion, the Court had reasoned that that the concept of fraudulent misrepresentation could be extended to family law cases. In particular, wives or husbands who accept a settlement on fraudulent grounds are in the same position as contracting parties because they have acted to their detriment by not having a complete accounting of the financial assets before they negotiated the terms of their settlement. Mrs. Sharland has said that while she received millions in her divorce settlement, she chose to continue her case in the courts because she wanted to fight for the principle of fairness for those who could not afford to do so.
In taking the position that it did, the Supreme Court reinforced the notion that spouses have an absolute duty to disclose and be fully transparent about their financial positions to each other and that fraudulence will not be tolerated by the courts.
Critics have argued that the two decisions have the potential for opening the floodgates for an influx of divorcees rushing back to court to re-negotiate their settlements because they, too, were duped into unfair settlements. In my view the public policy interests of fairness and the need for transparency in the financial disclosure process outweigh this argument.
However, one possible area of concern that does arise from the decisions are the broader implications of the effects of non-disclosure in divorce. For example, what happens in a case where a husband or wife who genuinely did not know the true value of their assets had reached a fair settlement? Will their exes be permitted to re-open such cases? Furthermore, having the ability to re-negotiate divorce settlements may not necessarily lead to a better result as litigation is expensive and exes may have resorted to creative solutions on how to devalue or move their assets around since reaching divorce settlements.
In closing, the decisions in Sharland and Gohil are definitely ‘wins’ for the wives involved but both women still have a long journey ahead of them before they are able to get what’s owed to them by their ex-husbands.
If you’re unsure about what your financial disclosure requirements are, please speak to a Grayfords specialist who can advise you at any stage of your relationship, whether you’re in need of pre-nuptial advice, are involved in current divorce proceedings or have concluded proceedings.
You can read the full judgments in both cases on the Supreme Court’s website.
Sharland v Sharland  UKSC 60 https://www.supremecourt.uk/cases/uksc-2014-0074.html
Gohil v Gohil  UKSC 61 https://www.supremecourt.uk/cases/uksc-2014-0200.html
by Pooja Sihra
Pooja is a guest blogger for Grayfords. Pooja is an international, post-graduate LLB candidate studying at City University London. She received her BA (Hon.) in Law and Society/Sociology in 2009 as well as a Master’s in Public Policy, Administration and Law in 2013 from York University in Toronto, Canada. Her interest in family law developed after navigating the challenges of acting as an estate trustee without a will in a family matter.