A new ruling was made by the Supreme Court in relation to wealth and divorce settlements on the 14th of this month. If a spouse is misled to the amount of wealth possessed by the other in divorce proceedings they are now able to re-negotiate their settlement. The ruling now affirms that dishonesty or fraud by either party in failing to disclose the true extent of their financial assets are grounds for re-negotiating previous ancillary relief agreements.
The cases that sparked this judgement by Supreme Court judge Brenda Hale are those of Alison Sharland and Varsha Gohill. They claim that they did not know the true extent of their spouses’ wealth in the divorce proceedings, resulting in receiving less money in the divorce settlement than they were entitled to.
Ms Sharland in 2012 divorced her husband Charles Sharland which concluded in a settlement of £10m in property and cash. The order was made on the basis of her agreeing to accept 30 per cent of proceeds from any sale of his shares of his company AppSense, which he valued at between £50m to £75m (Morris, 2015). However, it later transpired that the actual value of her husband’s company was nearer $1bn (Morris, 2015). Supreme Court judge Hale explained in her judgement that Ms Sharland was, at the time of previous divorce proceedings, “deprived of a full and fair hearing of her claims” due to her ex-husband’s dishonesty.
What some may see as controversial about this ruling is that there are very few clients who are divorcing their millionaire partners and few can afford to re-negotiate settlements and pay for the legal costs themselves. In relation to the majority of clients the success of re-negotiation is determined by whether the concealment would have made a “substantial” difference to the settlement. Also there is currently no time limit to bring the claim to court.
The previous positions for parties making an ancillary relief claim was that when the final order was made it was seen as a “full and final” settlement, meaning once agreed on, it was not to be re-opened or reconsidered, even if it was later discovered that one of the parties was lying. Due to this, many wealthy clients were able to hide the true value and extent of their wealth, safe in the knowledge that once proceedings had concluded, even if and once their divorced spouse became aware of the deception, there was no hope for re-negotiation.
The main principle that this ruling is upholding is that lying in court is not tolerated and is against the principles of the English justice system. Now when a spouse knows that they are not being told the truth, they are able to challenge it and hold their ex-partner to account. What must be questioned is why has it taken so long for this ruling to come about now? It is an important step in protecting the dignity of the courts and those who use its proceedings believing it to result in a fair and just judgement.
Statistically speaking women are more likely to initiate divorce proceedings, in a survey by the Office of National Statistics revealed in 2012 there were a total of 118,140 divorces in England and Wales with 76,490 being initiated by women (2014). However, women are more likely to be at a loss when divorcing due having less in the way of finances as in 2012 the gender wage gap, as an EU report (Eurostat, 2012) estimates (based on the Structure of Earnings survey), it was 19.1% in the UK (measured by median gross hourly pay). Logic dictates that this leads to the conclusion of women, having less money at the start of proceedings, will have more at stake when their settlement is being finalised.
Graham Coy, a partner at the law firm Mundays, said: “This is a victory for common sense and a defeat for dishonesty – it just goes to show that if you don’t put all your cards on the table when divorcing it might come back to bite you further down the line. Importantly, today’s decision could open the floodgates for more people to try and renegotiate historic divorce settlements” (Bowcott and Gani, 2015). The ruling can be used as a powerful deterrent for partners to be upfront and honest about their wealth so as to make proceedings run as smoothly as possible.