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Fraud ‘floodgates’ expected to open in UK divorce courts

By October 28, 2015No Comments

In the UK, a significant Supreme Court decision has been handed down, with rulings on two cases making it easier for spouses who have been financially misled during divorce proceedings to have their financial settlement reopened.

“The Supreme Court has sent out a clear message: spouses need to be open and transparent with each other on divorce, or they could regret it in future.”

If a divorcing spouse lies about his or her assets, the way has now been paved for the financial aspect of the divorce to be reconsidered and recalculated. Even spouses who had deliberately and fraudulently misled the court about their financial position have until now been able to ‘get away with it’, as long as their fraud was only exposed after their divorce settlement had been sealed. This is because in the UK, sealed financial ‘consent orders’ were very rarely able to be unsealed, even when there had been instances of fraudulent concealment of assets.

Even though spouses have a duty to make full and frank disclosure of assets, the courts must have also found that non-disclosure would have made a material difference to the financial agreement. A judge would have to be convinced that if the spouse had not lied, the financial award made to their ex would be completely different, and this has been hard to prove.

Now, spouses who have been misled will find it much easier to expose their fraudulent ex and have their agreement unsealed.

The Supreme Court cases

In the first case, Gohil v Gohil, the wife sought to reopen the financial element of her divorce proceedings after discovering that her husband had lied about his assets. His lies were exposed whilst he was being prosecuted in criminal court for money laundering.

In the second case of Sharland v Sharland, Alison Sharland challenged the financial award she received on divorce after discovering that her husband, Charles Sharland, had knowingly misled her as to the value of shares in his software business. He claimed they were worth £47m when the real value of the shares was estimated at approximately £600m.

The technical argument hinged on whether the husbands’ fraudulent behaviours had made a ‘material difference’ to the financial outcome, but the courts differed in their view of when that material difference mattered—with the Supreme Court ultimately deciding the fraud mattered if it affected the outcome at the time of the original agreement. This is because the husband’s fraud made it impossible for the wife to ‘properly consent’ to the original division of assets, and as such, the financial awards necessarily had to be reconsidered by the court.

Because of size of the payouts in dispute–Alison Sharland received more than 10million pounds in her orrigianl settlement–some commentators questioned why she was so doggedly fighting for more. While the issue was clearly about fraud and concealment, controversy erupted in some of the conservative British newspapers over ‘women-as-golddiggers’ getting at their ex-husband’s money. On the other hand, commentators highlighted the fact that Alison Sharland had been the primary carer of the couple’s children during a 17-year marriage, arguing her work in the home this enabled Charles Sharland to build his career and generate his wealth in the first place.  Those arguing for a greater recognition of non-financial contributions in divorce settlements will be pleased with the outcome, which has been described as ‘making the homemaker less vulnerable to the concealment of assets’.

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