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Hidden assets and false representation in divorce actions

A national newspaper recently carried out an exposé of celebrity businessman Duncan Bannatyne and revealed that he provided false evidence during his divorce proceedings as to the extent of his assets and business interests. This is an area of family law that is being scrutinised more and more closely nowadays, and family solicitors often find themselves confronted with the question of what to do when your client is convinced their spouse has hidden assets but at the same time has no proof that those assets actually exist.  This very question was considered in the recent Supreme Court cases of Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61.  Those cases centred on two women, Alison Sharland and Varsha Gohil, who said that they were misled by their ex-husbands when they entered into divorce settlements with them.  Both Mrs Sharland and Mrs Gohil argued that their ex-husbands had misled them and hidden the extent of their respective wealths when the deals were made, and the Supreme Court has now ruled that both women will be able to have their cases reheard so that a decision on the division of the assets can be made based on the true wealth of their ex-husbands, Charles Sharland and Bhadresh Gohil.
By way of some background information, when Mrs Sharland became divorced from her husband in 2010 she believed that the £10million settlement that she had accepted represented half of his wealth.  Mr Sharland also had a number of shares in a company and had undertaken to pay his wife 30% of the proceeds of those shares once he had sold them.  However, it later transpired that Mr Sharland had been untruthful about the value of his shareholding.  Indeed, the value used as part of the divorce settlement was £47million, but the financial press actually estimated the shares to be worth about £600million.  Mr Sharland also had plans to float the company on the stock market and those plans had not been disclosed to Mrs Sharland.
In the case of Mrs Gohil, she had accepted a settlement of £270,000 as well as a car when she and her husband became divorced in 2002.  Mr Gohil was later charged and prosecuted with money laundering offences, and at his criminal trial evidence was led which revealed that he had failed to disclose his true wealth during his divorce proceedings.
Following the revelation that her ex-husband had misrepresented the position as regards his finances, Mrs Sharland sought to bring the matter back to Court so as to ask that she be given the opportunity to have her case reheard so that a decision on the division of the assets could be made based on the true wealth of Mr Sharland.  Notwithstanding Mr Sharland’s deliberate and dishonest non-disclosure however, the Court of Appeal initially held that the non-disclosure was not material as it had not resulted in an order significantly different from that which the Court would otherwise have made at the conclusion of the proceedings.  However, the Supreme Court has now ruled that the Court of Appeal was wrong in coming to that conclusion, Lady Hale noting that Mrs Sharland had been “deprived of a full and fair hearing” because of “her husband’s fraud”.
In the case of Mrs Gohil, at first instance she had had an order granted in her favour effectively allowing her application for financial provision on divorce to be reopened.  Mr Gohil subsequently appealed to the Court of Appeal but, despite the Court of Appeal having allowed Mr Gohil’s appeal on the basis of ancillary relief provisions contained in the Senior Courts Act 1981, the Supreme Court has again overruled the Court of Appeal’s decision which could pave the way for Mrs Gohil’s divorce settlement to be reconsidered.
The decisions in Sharland and Gohil are very significant rulings in that they mean that, in England and Wales at least, in divorce actions the division of the parties’ financial assets has to be based on a valid agreement.  This will mean that, where one of the parties to a divorce settlement has been dishonest or misled the other about the extent of their assets, then the other party to that agreement may have the opportunity to go back to Court in a bid to have the agreement set aside and the entire financial settlement considered again. The position in Scotland is that it is ordinarily very difficult for a party to a Minute of Agreement to convince a Court that that should be set aside, and it will be interesting to see what bearing (if any) the cases of Sharland and Gohil will have on Scots law going forward.
In the event you have any questions in relation to the foregoing or, indeed, about any family law matter whatsoever, please contact a member of our Family Law Team.