Supreme Court allows appeals in Sharland and Gohil

The Supreme Court has allowed both wives’ appeals in Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61. The key points from each judgment are set out below but the wider points with implications for family lawyers and their clients are:

  • the duty of disclosure in family proceedings is to the court  - one spouse cannot exonerate the other from complying with this duty
  • if there is a reason that vitiates a party’s consent there may also be good reason for the court to set aside a consent order
  • where there are issues relating to fraud in family proceedings, it would be extraordinary if the victim of a fraudulent misrepresentation in a matrimonial case was in a worse position than the victim of a fraudulent misrepresentation in an ordinary contract case - ‘fraud unravels all’
  • the Ladd v Marshall [1954] 3 All ER 745 criteria has no relevance to the determination of an application to set aside a financial order on grounds of fraudulent non-disclosure

Sharland v Sharland

Key aspects of the decision in Sharland are:

  • it is in the interests of all members of a family that matrimonial claims should be settled by agreement rather than adversarial battles in court
  • such an agreement cannot oust the power of the court to make orders for financial arrangements and does not give rise to a contract enforceable in law but the court will make an order in the terms agreed unless it has reason to think there are circumstances into which it ought to inquire - allied to this responsibility of the court is the parties’ duty to make full and frank disclosure of all relevant information to one another and to the court
  • family proceedings differ from ordinary civil proceedings in two respects: a consent order derives its authority from the court and not from the consent of the parties and the duty of full and frank disclosure always arises
  • the consent of the parties must be valid - if there is a reason that vitiates a party’s consent there may also be good reason for the court to set aside a consent order - whether the court is bound to do so was the question arising on the appeal
  • the Supreme Court considered that it is was not necessary to decide in Sharland whether the greater flexibility that the court now has in cases of innocent or negligent misrepresentation in contract law, restricting a victim’s right to rescind the agreement, should also apply to such misrepresentations or non-disclosure in consent orders in civil or family cases
  • the issues in Sharland related to fraud and it would be extraordinary if the victim of a fraudulent misrepresentation in a matrimonial case was in a worse position than the victim of a fraudulent misrepresentation in an ordinary contract case, including a contract to settle a civil claim
  • Briggs LJ in the Court of Appeal was correct to apply the general principle that ‘fraud unravels all’ and should lead to the setting aside of a consent order procured by fraud - the only exception is where the court is satisfied that, at the time when it made the consent order, the fraud would not have influenced a reasonable person to agree to it, nor, had it know then what it knows now, would the court have made a significantly different order, whether or not the parties had agreed to it - the burden of establishing this must lie with the perpetrator of the fraud
  • on the facts of Sharland the Supreme Court considered it was clear that the judge would not have made the order he did, when he did, in the absence of the husband’s fraud, and the consent order should have been set aside
  • the judge had misinterpreted Livesey (formerly Jenkins) v Jenkins [1985] 1 All ER 106, which had drawn a distinction between triviality and materiality at the date of the order and not at some later date
  • the judge had also been wrong to deprive the wife of a full and fair hearing of her claims by re-making his decision at the hearing of the application on the basis of the evidence then before him
  • the Supreme Court ordered that the consent order should not be sealed and the matter should return to the Family Division for further directions

The Supreme Court also provided guidance on the procedure to be followed by parties seeking to challenge the final order of a court in family proceedings, ie:

  • the court retains jurisdiction over a marriage even after it has been dissolved and section 31F(6) of the Matrimonial and Family Proceedings Act 1984 gives the family court power to vary, suspend, rescind or revive any order by it
  • it is open to the parties either to make a fresh application or to appeal against the consent order
  • Lady Hale endorsed the observations of Lord Wilson in the judgment in Gohil v Gohil [2015] UKSC 61 (see below) on the question of how such applications should be made, while emphasising that the renewed financial remedy proceedings need not start from scratch and the court may be able to isolate the issues to which the misrepresentation or non-disclosure relates

The full judgment can be accessed here.

Gohil v Gohil

The husband had suggested that, as a judge of the High Court, Moylan J did not have jurisdiction to set aside an order of the High Court. This argument was not pursued in the Court of Appeal, but the Supreme Court made the following observations:

  • the Court of Appeal has long recognised that it is an inappropriate forum for inquiries into non-disclosure issues raised in proceedings for the setting aside of a financial order
  • this is shown by the case of Gohil, where an intensive fact-finding hearing was necessary
  • there is an urgent need for definitive confirmation of the High Court’s jurisdiction to set aside a financial order made in that court
  • the Supreme Court endorsed the conclusion of the Family Procedure Rule Committee in relation to its “Setting Aside Working Party”, set out in the minutes of its meeting on 20 April 2015

Key points from the judgment are:

  • words such as those used in the recital in Gohil have no legal effect in a financial order in divorce proceedings - the husband owed a duty to the court to make full and frank disclosure of his resources, without which the court would be disabled from discharging its duty under section 25(2) of the Matrimonial Causes Act 1973 and one spouse cannot exonerate the other from complying with this duty
  • the Ladd v Marshall [1954] 3 All ER 745 criteria has no relevance to the determination of an application to set aside a financial order on grounds of fraudulent non-disclosure and the Court of Appeal was wrong to accept an argument that the criteria should apply to determine what evidence could be adduced because: (a) the Court of Appeal would not have conducted the necessary fact-finding exercise, so the criteria for determining the admissibility of evidence in that court were irrelevant; (b) the first Ladd criterion presupposes that there has been a trial whereas, in this case, the wife’s first opportunity to adduce the evidence was at the hearing before Moylan J; (c) the argument would not apply to an application to set aside a financial order made by a district judge and the evidential criteria should not depend on the level of court, and (d) the argument ignores the fact that, had the wife’s claims proceeded to trial in 2004, the duty would have lain on the husband, not on her, to explain his resources
  • in light of the erroneous approach to the admissibility of the wife’s evidence, the Supreme Court held that the dismissal of her set aside application cannot stand

The Supreme Court went on to consider the consequences of its decision in Gohil as follows:

  • to decide whether Moylan J’s order could be reinstated, it was necessary to consider what admissible evidence was before him and ask whether he would properly have found that the husband had been guilty of material non-disclosure in 2004
  • through no fault of his own, Moylan J had relied on evidence from the husband’s criminal proceedings obtained from sources outside the UK (which had since been held inadmissible and had been discounted by the Court of Appeal) however, even if Moylan J had referred only to the remaining admissible evidence, he would, in the light of his findings on it, still have concluded that the husband was guilty of material non-disclosure
  • several factors made it clear that the material non-disclosure issue should not be remitted, provided that there was no risk of injustice to the husband - the court was satisfied that: (a) Moylan J would have decided that there had been material non-disclosure even if he had not received the inadmissible evidence; or (b) looking at the totality of the admissible evidence, it could safely be concluded that there had been material non-disclosure; or (c) if the issue was remitted, the judge could only realistically come to that conclusion in light of the totality of the admissible evidence

The full judgment can be accessed here.

Geraldine Morris is a solicitor and Head of LexisPSL Family.

Twitter: @GeraldineMorris

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