11th Feb 2014

Are husbands who do not disclose their assets getting away with it?

– recent case lets dishonest husband keep original terms of settlement

Meet Mr. Sharland.

In June 2012, while giving evidence in divorce proceedings from his wife, he told the court that his company, AppSense, was unlikely to be selling any shares within three years.  In fact it was more likely to be five to seven years before any shares were released.

On the basis of that evidence, sworn under oath, Mrs. Sharland reached an agreement with her husband, while at court and before the judge had to make a decision for them.

In the weeks that followed, Mrs. Sharland would have been shocked to discover that, far from a sale of shares being unlikely for several years, Mr. Sharland had been holding discussions “In full swing” for a sale of shares to take place early the following year.  What is more, those discussions had been under way for six months already.

Mr. Sharland had clearly, and in the words of the judges in their Court of Appeal judgment (at S v S [2014] EWCA Civ 95) dishonestly and fraudulently misled the court and his wife.

Mrs. Sharland first applied to the Liverpool judge who had started hearing the case before it was settled.  She asked for the agreement, which had not yet been sealed by the court, to be set aside.  She also asked that the trial of the matter should either be resumed or restarted so that she could get a proper settlement based upon the newly revealed and true facts.

The judge finally considered the matter on April 15th2013. 

By that time the sale of the shares in early 2013 had fallen through.  The husband did not deny that he had misled the court and was now asserting once again that there was no imminent sale of shares.

Having considered whether to restart or resume the hearing, bearing in mind the husband’s dishonesty, the judge decided that he would not do so and that the agreement reached on the basis of the husband’s `fraudulent’ evidence would have to remain.

The wife disagreed with this decision and appealed it.  It was then heard by the three judges at the Court of Appeal who upheld the original judges’ decision, although they were not unanimous in doing so.

So the question remains; Do husbands, who do not disclose their financial circumstances, get away with it?

On one hand the husband has not got away with anything.

He will still have to pay his wife a substantial proportion of the assets as previously agreed.  What is more, the agreement recorded that the wife would get a percentage of whatever capital the share sale produced, whenever it was produced.  That would remain to be the case.

His responsibilities to his wife will have to be met and on the terms that they agreed between them.  The husband’s situation now accurately reflected what he said it was 18 months earlier, even if it did not do so at that time.  It followed therefore, that if they reached a settlement on that basis then that it remained good now.

One judge, Lord Justice Briggs disagreed.

He repeatedly labels the conduct of the husband as being nothing less than fraudulent.

He asserts that as soon as fraud is revealed that the trial has to be reheard, restarted or at the very least resumed.  The fraud undermined the very platform of understanding and integrity upon which the case, and indeed the pillars of justice, were built upon.

It was not good enough, he states, to accept the fraud and then for the judge to go on and ask herself or himself if the fraudulent misrepresentation would have made a difference.  The proper way to go about it would be for there to be the full trial, evidence being given, the parties’ credibility and conduct being put to the test in the witness stand under oath and a judge having to make up their mind anew on the basis of what they hear.

It is likely that this would have been more acceptable to the wife, and probably readers of this article.

The husband’s earlier deception and false evidence would have played a key role in the court’s considerations and decision.  Indeed, it would not be unfeasible that if the husband had to face another full trial that he would have been advised to make concessions to his wife, granting her a larger settlement, to avoid the risk of a trial and judgment.

There can be a criticism that in not allowing the husband to take the stand again that the wife was denied a proper hearing.  It is notable however that in this case the judge in Liverpool had invited the wife, via her representatives, to cross examine the husband on his `updated’ evidence before he made his decision.

The wife, for reasons best known to her and her advisers, declined. 

On an emotional level, the wife, and readers, may also feel that the husband has got away with it in terms of not getting his comeuppance.  Our sense of righteousness can be very strong in fuelling a desire to see wrongdoers receive their punishment.

There might be a sense that the husband has got off lightly in this sense as well.

Indeed, some readers might be thinking that the punishment for non-disclosure seems fairly light.  You might be under the misguided impression that it is almost worth taking a gamble.

That would be a dangerous presumption to make.

The husband, in paragraphs 49-50 of the judgment (and fairly liberally throughout) is condemned for his dishonesty.  Consider these comments;

“The husband apparently perjured himself… It is inevitable thereby that the husband is, and will be, rightly subject to the opprobrium of this and the lower court and law abiding members of the public generally…”

Those words may or may not give cause Mr. Sharland to reflect sagely on what he has done.  The words that follow are perhaps more likely to keep him up at night;

“…and may be subjected to criminal prosecution, civil contempt proceedings, and/or a costs penalty.”

Daniel Coombes, divorce solicitor and partner with London divorce lawyers Family Law in Partnership LLP has had involvement with disclosure cases including the reported case of L v L [2007]. He says;

There can be a perceived gap between decisions of the court and ‘natural’ justice. Some feel that penalties for non-disclosure are inadequate.  The courts are, however, insisting on proper conduct from both the discloser and their partner to compel full disclosure and to cut down on spouses who help themselves to their partner’s private documents and computer files.  As we see in this current case, judges are more likely to warn of civil and criminal sanctions for improper conduct and non-compliance with the rules.”

If you or anyone you know is worried about disclosure in divorce proceedings get in touch with us right away.  Family Law in Partnership LLP are award winning divorce lawyers based in Covent Garden, London.  You can email us any questions about this or other divorce questions at hello@FLiP.co.uk or telephone us on 020 7420 5000.