Dishonest and Fraudulent Financial Disclosure in Divorce Proceedings

Home / Family and Childcare Law  / Dishonest and Fraudulent Financial Disclosure in Divorce Proceedings

When a marriage breaks down, one of the first casualties is trust.

Resolving the financial issues is often a contentious area. it’s all too common for one party to be convinced that the other isn’t providing a full picture of their financial circumstances and that, in consequence, they will be prevented from getting a fair settlement. Sometimes these suspicions are groundless; sometimes they’re not. Sometimes people will spend significant sums of money trying to prove that assets and income have been concealed by their partner. Sometimes their efforts will show that their suspicions were justified; all too often however they won’t.

In most cases, people settle financial issues arising out of their marriage breakdown by agreement. With the help of a specialist family lawyer a full picture of the assets available for distribution can usually be constructed and negotiations can then focus on reaching a fair and sensible agreement. There is a duty on both parties to provide full and frank disclosure of their finances. The hope is that this can be achieved voluntarily; if it can’t then a court has the power to compel the parties to comply and to impose sanctions on anyone who refuses. If an agreement can be reached then the court can be asked to approve that agreement and translate it into an enforceable, binding court order

But what is the position if, having reached an agreement that is enshrined in a court order, it subsequently turns out that one party hasn’t been frank in what they said about their financial circumstances? Can the innocent party get the order unravelled or are they stuck with it, even though the order made may, in the light of the true financial position, no longer be fair or appropriate?

It is a general legal principle that if a contract is procured by fraud it can be set aside. However, in family law cases there has long been confusion as to whether fraudulent misrepresentation or fraudulent non-disclosure will enable an order made by agreement to be set aside and further, in such a situation, what the procedure is for challenging an agreed order made as a result of fraud.

The Supreme Court has now determined two cases on this issue which have brought much needed clarity on both the effect of fraud and the procedure for setting aside.

In Mrs Sharland’s case, an order was agreed on the basis that the husband’s company shares had a particular value. It subsequently emerged that they were worth exponentially more than he had claimed and that he had plans to float the firm on the Stock Exchange. She sought to have the agreed order undone, but when she went to the Court of Appeal, even though her husband’s evidence was described as “seriously misleading” she was told that it was unlikely she would have received a better settlement even if Mr Sharland had been honest about his financial position. This decision surprised lawyers and legal commentators up and down the land.

In Mrs Gohil’s case, she found out that her husband hadn’t been honest about his finances 2 years after they divorced. He was subsequently convicted of fraud and money laundering on a multimillion pound scale. She too tried to set aside the order that she had originally agreed to, but was told she couldn’t make use of evidence of her ex-husband’s fraudulent behaviour from the criminal proceedings to overturn her settlement.

Neither Mrs Gohil nor Mrs Sharland was willing to leave things at that and their cases went together to the Supreme Court. In both cases the court agreed that the original orders must be set aside as they were based on fraudulent information.

So where does that leave us? The court has certainly confirmed beyond all doubt that the duty to give full and frank disclosure is an absolute one and that the duty is not only owed by each spouse to the other, but by each spouse to the court. If an agreement is made and one party subsequently concludes that it was on the basis of fraudulent misrepresentation or non-disclosure it is up to them to prove this. If they can do so then the agreement, or agreed order, can be set aside unless the fraudulent party is able to prove both that the innocent party would have signed up to the same agreement even if they’d known the true position and that if a court had been called on to adjudicate the case the order would not have been significantly different. All the signs are that unless the non-disclosure was trivial it’s going to be very hard for the fraudulent party to overcome these hurdles.

At Slee Blackwell, our specialist Family Law team will help you get full disclosure before you decide whether to agree an order. We will provide you with realistic, pragmatic advice so that you don’t run up unnecessary and unjustified legal fees. If there is evidence of hidden assets or income however we won’t stop until we get to the bottom of it to make sure that your financial settlement is fair to you and based on the true financial picture.

Call Taunton 01823 354545 or Barnstaple 01271 832128 for a FREE initial assessment of your case.