Yesterday, the Supreme Court in London ruled in favour of two women who had demanded full facts about the assets of their former spouses. The decision is a victory that could open the way for other suits, lawyers say.

The Supreme Court in London yesterday handed down a decision around the combined appeals of Alison Sharland and Varsha Gohil. Both of these ex-wives appealed to the court following non-disclosure by their respective ex-husbands during their divorce and financial proceedings, which they claimed led them to accept far lower financial settlements than they otherwise would have done.

A number of lawyers have given views on the case. Here is a selection:

Sandra Davis, head of family at Mishcon de Reya
Today's judgment is undeniably a victory not only for Ms Sharland and Ms Gohil, but for all those asserting their rights to know the truth about their spouse's finances. Having been denied by the Court of Appeal, it is telling that the Supreme Court have today unanimously allowed the appeals. This decision upholds and reinforces the principle of full and frank disclosure and should be seen as a stark warning to all those that would seek to deprive their spouses and the court of it.  

Barbara Simpson and Harriet Errington, Boodle Hatfield
The principal asset in the case of Sharland was the husband's majority shareholding in a private company, AppSense. During the divorce and financial proceedings Mr Sharland claimed this was worth £31.5 million ($48.8 million); Mrs Sharland said £47.25 million, and the parties subsequently agreed a financial settlement on the basis of those figures.  Shortly afterwards, Mrs Sharland discovered that AppSense was being prepared to float on the New York Stock Exchange at a value of $1 billion. Mrs Sharland applied back to court, claiming that she had agreed to the financial settlement on the basis of Mr Sharland's fraudulent non-disclosure. The Court of Appeal held that the husband had been misleading and dishonest and that the consequences of his behaviour could lead to "criminal prosecution, civil contempt proceedings and/or a costs penalty".  However the finding of fraudulent disclosure was not in itself sufficient automatically to set aside an approved court order; rather the court has to be satisfied that a substantially different order would have been made. The appeal was dismissed.

The facts surrounding Mr and Mrs Gohil's divorce provide some similarities. During the financial proceedings the wife accepted the amount of £270,000 in settlement of her claims. It later transpired that Mr Gohil had been worth considerably more and he was subsequently jailed for fraud and money laundering sums of up to £37 million. During his criminal trial evidence emerged that he had intentionally misled the Court and Mrs Gohil during the financial proceedings. However, the Court of Appeal held that the evidence from the husband's criminal trial could not be used in the family proceedings and they could not therefore prove Mr Gohil had been dishonest in the original proceedings.

The Supreme Court unanimously allowed both wives' appeals. Lady Hale, delivering the lead judgment in Sharland, emphasised the absurdity of the situation in which a victim of a fraudulent misrepresentation in financial remedy proceedings following divorce could be left in a worse position than a victim in civil proceedings. Indeed, "fraud unravels all" and it follows that an order obtained on the basis of fraudulent representations should be set aside in those circumstances. It was held that the judge would not have made the order he did had Mr Sharland provided the required documentation. The original order has therefore been set aside and the case will go back to the Family Division to be heard afresh. 

In the case of Gohil, Lord Wilson, delivering the lead judgment, found that the High Court judge at first instance was correct to have concluded that Mr Gohil had been guilty of material non-disclosure. The High Court order was reinstated and the 2004 financial order set aside. Again, the case will now go back to the Family Division to be heard once more.

The impact of these decisions is likely to be significant and it is anticipated will apply to smaller asset cases as well as the high value cases such as these. The importance of the principle of full and frank disclosure has been clearly reinforced. The judgments also raise issues regarding how courts should deal with cases where the disclosure provided is later found to be either insufficient or inaccurate, and even deliberately misleading. Such false representations can lead to a substantially different result and can leave the financially weaker spouse (often the wife) in a very unfair position. Criticism has been made in the past of a system which is often referred to as a "cheat's charter"; almost encouraging the wealthy spouse to hide assets. Given the inadequacy of the current sanctions available to the court to prevent non-disclosure (such as the drawing of adverse inferences and costs awards), the paying spouse may feel that concealment is worth a try, when weighed against the impact on his/her case of disclosing the full extent of his/her assets. Going forward, however, any awards made or settlement arrived at on the basis of fraudulent or dishonest representations may be capable of being set aside if the aggrieved spouse can show that the outcome would have been substantially different. 

Toby Hales, the lawyer who represented Varsha Gohil at both Court of Appeal hearings, and is a partner in the family team at law firm Seddons
“The Supreme Court has reinforced today, in two joined appeals, that in family proceedings people have a duty to disclose, fully and frankly, all details of their financial circumstances. Procedural and evidential technicalities will not be allowed to enable deliberate dishonesty.
 
“The Court emphasises that this duty is owed by the litigant to their spouse but also to the Court itself, even if the parties have, ostensibly, reached agreement about their matrimonial affairs. Agreement reached on the basis of lies, misrepresentation and deception is no agreement at all, and will not be allowed to stand.
 
“Today’s decision represents some welcome and long-overdue clarity in what is, ultimately, a complex and convoluted process. It reflects the feelings of most practitioners, and is an example of the Supreme Court taking a common sense approach to these complex issues which will be welcomed and understood by most people who have occasion to come into contact with the Family Justice system.
 
“For the individuals involved, however, the sense of relief may be fleeting. As the Court’s judgment makes clear, there are enormous still obstacles ahead of Varsha Gohil before she is able to achieve a fair outcome to her case. Having struggled for over a decade to achieve some measure of justice, whilst bringing up two children alone while their father was in prison, Varsha will now have to begin her claim again from scratch, without the help of legal aid, in proceedings that may stretch to four or five different legal jurisdictions.
 
“Hopefully these decisions will act as a warning to people to think twice before intentionally failing to disclose their assets. Justice has – quite rightly – been upheld.”
 
Joanna Farrands, family partner at Barlow Robbins
As largely expected the Supreme Court has followed the Court of Appeal judgment. It was held that the order would not have been substantially different if the true information was known at the time. This aligns with the generally accepted position that even if there was "material non-disclosure", this non-disclosure must make a significant difference on the divorce settlement. If it does not, as per this case, the agreement should not be re-visited.

Whilst this ruling may seem unfair to many, it highlights a fundamental public policy point – that people do need certainty going forward and to be able to live their lives without the threat of further litigation and agreements that appeared closed being re-visited. It is for this reason that only in truly exceptional cases will a court re-open an agreement.

Despite the appeal being lost today, this case may still have a wider impact however – it will be interesting to see if an increased number of cases are considered and even re-opened in the future as a result.  

Withers Family Law partner Claire Blakemore
The principle of full and frank honesty in court is what was at stake in these cases and the judgments recognise the importance of the legal maxim that "fraud unravels all". The Court of Appeal was wrong to deprive both wives of a full hearing of their claims where their agreements, and the Court's approval, were "vitiated" by fraud.  The judgments may fire the starting gun for other cases involving non-disclosure which have been waiting in the wings for the outcome of these cases.