‘Non-disclosure’ by wife considered by the High Court

Divorce|February 17th 2016

A financial settlement reached in 2012 requires further consideration, the High Court has ruled.

AB v CD concerned a husband in his mid-60s and a wife in her mid-40s. They met ten years ago and began living together the following year, eventually marrying in November 2008. The wife had been married once before and the husband twice before. Both had children from their previous relationships.

Unfortunately the marriage came to a rapid end. By the summer after their marriage they were no longer living together, although the wife claimed that they had made unsuccessful attempts to reconcile until as late as July 2010.

In her High Court ruling, Mrs Justice Roberts explained that by the time divorce proceedings began in 2011, the couple had reached “an acrimonious parting of the ways”.

She noted that both parties were “independently wealthy at the time of the marriage”. The husband was a venture capitalist who owned several properties while the wife was a CEO and “entrepreneur”.

The case proceeded towards a financial settlement and in March 2012 at the First Appointment the former couple duly signed a consent order (financial settlement). This stated that he was to pay a substantial lump, transfer his shares in her company to her and transfer ownership of a property to Oxfordshire to her as well. He would still pay the mortgage on the property for a period of one year then it would become her responsibility.

The settlement was intended to be final, leaving the husband with the former matrimonial home. The settlement was based on the Wife’s disclosure of the value of her shareholding (a percentage of which were owned by the Husband) and valued at just over £10 per share. He agreed to transfer the shares back to her.

Later, the husband returned to the courts, seeking to have the consent order set aside. He claimed that the wife had not made full and frank disclosure of her business dealings at the time of the settlement, and as a result he had “compromised” his own financial claims.

The argument centred around a reported multimillion pound investment in the wife’s firm, during the lead up to the agreement, which came to the husband’s attention not long after the consent order was signed. This meant that at the time of the agreement the shares were arguably worth three times the value. His lawyers contacted the wife’s solicitors to ask whether this supposed investment could have and should have been disclosed at the time of the order. The financial settlement was suspended while the investigation continued.

The wife denied that her company was worth more than she had stated and insisted that the value of the shares had not changed. More than £1m in joint legal costs were spent arguing the point. She maintained the newspaper article seen by the husband had not been accurate and the investor referred to had not made any firm plans to invest in the ex-wife’s company. He had simply been asked to provide support in the event the firm secured a major government contract.

Mrs Justice Roberts’ detailed judgment included an in-depth analysis of the precedents established by the similar cases of Sharland v Sharland and Gohil v Gohil, both of which reached the Supreme Court in October last year.

The law is set out at Para 149 of the judgement and applied to the facts of the case through until Para 192. It is well worth a read in full because as the Judge explains, the law is not complicated. Briefly, for an order to be set aside, the application must be made in a timely fashion, there can be fraud deceit or misrepresentation, and it must impact on the order at the time it was made. The Judge concluded that the wife had not, in fact, given full and frank disclosure, but she rejected the idea that the wife had done so in order to conceal the potential investment from her former husband.

“I am persuaded that she believed at the time that she had properly complied with her obligations of disclosure in the representations she made in her Form E. I am not prepared to find on the basis of the evidence before me that settlement was achieved … because of her anxiety to rush through an agreement so as to avoid having to disclose any further information about [her company]…. In my view, it was incumbent upon her to disclose the existence of [the investor’s] involvement with, and financial support for, the company prior to allowing H to commit to their agreement in ignorance of that fact. But I absolve her of any deliberate attempt to mislead him or the court on that occasion.”

It did not excuse her subsequent conduct. Much of what happens now will no doubt include consideration of the huge level of costs the parties have incurred in this titanic fight since 2012. The Judge continued:

“Where I believe W’s conduct does properly attract censure is her response to the enquiries which were subsequently raised on behalf of H. Much time and expense would have been avoided had she responded openly and at an early stage to his solicitors’ questions.”

The case should return to the court for further consideration, the Judge ordered.

“I am not prepared to substitute a different order at this stage without allowing further time for sensible reflection once each of the parties has had an opportunity to consider and reflect upon my judgment.”

The ruling can be read in full here.

And the moral of the story? A full frank honest and continuing duty of disclosure exists not only to the spouse but also to the court. Playing intellectual games will enrich your chosen lawyers but could also lead to financial ruin.

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