Dishonesty in divorce. A warning!

DISHONESTY IN DIVORCE: A WARNING!

Unfortunately, it is not unusual for people to be less than honest about the extent of their assets in the process of getting divorced. They may allow their emotions and feelings of anger or hurt towards their spouse to cloud their judgement. They may allow themselves to forget that divorce is a serious process and that (in rare and serious cases) dishonesty in court can even result in them being sent to prison.

In the process of reaching a financial settlement on divorce, each party is required to give full and frank disclosure of their assets and income. At the very least, both parties must complete a Statement of Information form giving a summary of their capital assets, liabilities and income. It is usual for parties to also complete a more detailed financial statement called a Form E which requires them to disclose documentary evidence such as bank statements for all accounts over the last 12 months, valuations of properties, pensions and shares etc. Both forms must be signed (‘sworn’) by each spouse and there are heavy penalties if the financial disclosure is found to be untrue. The dishonest spouse could be found to be in contempt of court which is punishable by way of fine or a term of imprisonment (though this is very unlikely).
THE CASES OF SHARLAND AND GOHIL

The most talked about cases of last year were undoubtedly the two appeals to the Supreme Court of Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61. In both cases, the husbands had deliberately failed to disclose elements of their finances during the initial divorce proceedings. Their former wives had then sought to set aside the original divorce settlement once the deceit became apparent.

In Sharland, the husband (a multi-millionaire software developer), deliberately concealed the fact that he was making arrangements to float his company at the time of the original trial. The wife agreed to a settlement believing that the husband’s company was worth between £50m and £75m. In fact, the shareholding was probably worth in excess of £600m.

In Gohil, the husband was a solicitor who fraudulently represented that all of his wealth was in fact assets held by his clients. The wife agreed a settlement of £270,000 and a car during her divorce proceedings in 2004. Six years later, Mr Gohil was found guilty of fraud and money laundering in a criminal trial and was found to have assets amounting to approximately £25m.

Both wives applied to have their original Consent Orders set aside. Both were successful.

The Supreme Court adopted the broad approach that ‘fraud unravels all.’ Its decision emphasises the basic principle that parties have a duty to provide full and frank disclosure to one another during the divorce process.

Following the Supreme Court judgments, in cases concerning fraudulent non-disclosure, there is now a presumption that the order should be set aside unless the non-disclosing party can demonstrate that at the time of the order:

a) The fraud would not have influenced a reasonable person to agree to the order; and

b) Had the court known the fraudulently non-disclosed information, it would have made a significantly different order.
THE IMPLICATIONS OF THESE CASES

What are the effects of these rulings on the future of financial settlements? What are the implications for husbands or wives who fail to provide full and frank disclosure of their assets? Have these cases opened the floodgates for deceived divorcees as a lot of the media has predicted?

Not quite. While the new test makes it easier for the Court to set aside orders where there has been fraudulent disclosure, the biggest obstacle in these situations is often proving that the party was lying at the time the order was made.

Furthermore, there is still a defence that the fraudulent disclosure would not have led to a substantially different order being made. In any event, the courts will also have to consider whether it would be proportionate to re-open proceedings in light of the overall value of the parties’ assets.

But although these judgments may not have opened the floodgates quite as drastically as predicted, they should hopefully serve as a warning to any spouse going through divorce proceedings who may be considering to hide the extent of their assets. Even if they are not caught out during the initial Court proceedings, these people run the risk of having their cases re-opened in the future, with all the related legal fees and the possibility of a costs order being made against them by the court.

If you believe that your partner has lied about their assets during court proceedings in separation or divorce then you are recommended to seek legal advice as soon as possible.