15 Oct 2015
Alex Carruthers comments in the Financial Times re Divorce cases can be reopened if ex lied about wealth
Divorce cases can be reopened if ex lied about wealth, court says
Jane Croft and Vanessa Houlder
People who discover that their former spouses lied about their wealth during divorce proceedings will be able to reopen their settlements following a landmark ruling at the Supreme Court.
The UK’s highest court on Wednesday allowed appeals from two women who argued that their divorce cases should be reopened on the grounds that their husbands hid key financial information from them during their divorce cases.
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The ruling sends a stark warning to divorcing couples about the consequences of non-disclosure at a time when judges are dealing with more and more cases where spouses fail to disclose all their assets in an attempt to reduce their payout in a divorce.
The Supreme Court’s decision is a victory for Alison Sharland, who has fought the appeal since she was awarded a £10.35m settlement in 2012 against Charles Sharland, the Cheshire IT entrepreneur who founded software business Appsense.
She had wanted to reopen the hearing into the settlement on the grounds that Mr Sharland had failed to disclose talks about a possible flotation of his company to the court in 2012 when the judge was considering how much she could be awarded.
Mr Sharland had said during the 2012 trial there was no flotation on the cards and his wife’s legal team concluded the company was worth £88.3m. However, just before the court order was sealed, Mrs Sharland became aware that Appsense was being actively prepared for an IPO, which was expected to value the company at up to $1bn.
The ruling also comes as a victory for Varsha Gohil, who was awarded a Peugeot car and £270,000 after her divorce from solicitor Bhadresh Gohil, who had claimed he was of modest means.
Mr Gohil was later sentenced to 10 years after admitting to charges including money-laundering. Mr Gohil was linked to James Ibori, the former Nigerian state governor who was jailed in 2012. Ms Gohil argued there had been material not disclosed at the time of her divorce settlement in 2004.
Lawyers say the ruling will “open the floodgates” for more people to renegotiate their settlements — although courts will need actual evidence to overturn existing arrangements.
Richard Collins, family lawyer at Charles Russell Speechlys, warned that those seeking to reopen their divorce cases would not find it easy. “This will encourage plenty of disgruntled people to pick up the phone because they suspect their spouse has not told the truth at the time of their divorce,” he said, “but that is different to having evidence of material non-disclosure.”
Some lawyers say the ruling will also lead to further legal wrangles over exactly what financial information needs to be disclosed to the court.
Alex Carruthers, partner at law firm Hughes Fowler Carruthers said: “If you are running a company, you might be getting regular speculative takeover approaches that come to nothing. If one takeover offer ever came to fruition, the question is whether it could be argued that you were being fraudulent in not disclosing it.”
Ros Bever, divorce lawyer at Irwin Mitchell who represented the two women, said the ruling showed that dishonesty in any legal proceedings would not be tolerated. “We are thrilled that Supreme Court has confirmed that the family court is not an exception to the general rule and that it is no more acceptable to lie there than it is in any other court,” she said.
Marilyn Stowe, a leading family lawyer, said: “In the past some spouses might have thought it was all right to get away with non-disclosure just because it’s the family court and it is a dispute just involving their other half.”
Jeffrey Nedas, a forensic accountant who is often involved in high-value international matrimonial cases, said the hard line taken by Supreme Court will “make life much easier for the party that needs the information”.
He said his own work had often been severely hampered by the other party’s refusal to disclose financial information. “Non-disclosure is the biggest single issue in trying to achieve a settlement.”
The ruling underscores a tougher line being taken by the judiciary on parties who have hidden assets away in court proceedings or in complex offshore structures.
In 2013, the Supreme Court ruled that Yasmin Prest, the ex-wife of Michael Prest, a wealthy oil trader who was worth £37.5m in 2011, could receive millions of pounds in property assets from three offshore companies despite them being distinct legal entities from her former husband.
In 2013, Michelle Young was awarded £20m after divorcing her husband, Scot Young, a fixer for the super-rich, who fell to his death from his Marylebone flat last year. He had claimed he was penniless and could not afford to pay, but she alleged he was worth millions. The judge in that divorce case said in his ruling that Mr Young had “misled the court as to his finances to a very significant extent”.
In another ruling last year, Mr Justice Mostyn found that British jeweller Dharmesh Dwarkada Bhura, who moved to the US state of Georgia, was “a dishonest litigant” who “spirited away a large amount of valuable jewellery with the intention of defeating the wife’s claim for a financial remedy”.
Read the full article in the Financial Times here.