UNSETTLING SETTLEMENTS: SETTING ASIDE CONSENT ORDERS ON THE GROUND OF MATERIAL NON-DISCLOSURE
A Guest Blog by Julia Townend, barrister at 4 Paper Buildings.
Litigants in financial remedies proceedings often face a difficult conundrum: To settle outside of court or at a Financial Dispute Resolution Hearing on the basis of sometimes less than satisfactory financial information from your ex with the benefit of ending the stress of proceedings and legal costs, or to continue to incur the expense of trial, hoping that the assets of your ex will be rigorously scrutinised and the court will impose a fair decision? This conundrum is always complicated by the non-disclosing ex who misleads the court as to their true wealth.
Usually it is very difficult to set aside a consent order reached in the course of financial remedies proceedings because it is made with the express agreement of both parties. Any challenge must generally be on the basis of material non-disclosure, fraud/misrepresentation, mistake, undue influence or supervening events which invalidate the basis of the order.
This issue recently received a great deal of press attention when the Supreme Court considered the matters of Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61. These recent cases led to renewed consideration of the impact of non-disclosure on a financial settlement agreed between a husband and wife on divorce. The judgments were handed down on 14 October 2015. By way of background in relation to each case:
- In Sharland v Sharland, at the final hearing Mr Sharland gave evidence that there was no Initial Public Offering on the cards for his computer software company. The valuers of the company had proceeded on this basis, and the parties settled the case midway through the trial and before the valuers gave oral evidence. The judge approved an agreement and a draft consent order was drawn up. Before the order was sealed, it became clear that Mr Sharland’s company was being actively prepared for an Initial Public Offering which would have rendered the company far more valuable than had been reported. Upon discovering this Mrs Sharland invited the judge not to seal the consent order and for the final hearing to be resumed. The judge found that Mr Sharland’s oral evidence had been dishonest and misleading. Notwithstanding this, the judge refused to set aside the consent order on the basis that the non-disclosure was not material because it had not resulted in an order significantly different from that which the court would otherwise have made at the conclusion of proceedings. The Court of Appeal dismissed Mrs Sharland’s appeal.
- In Gohil v Gohil, Mr Gohil, a solicitor, claimed that his ostensible wealth comprised assets held by him on behalf of his clients such that personally his assets versus liabilities yielded a net deficit of £311,512. Notwithstanding this the parties settled their financial remedies proceedings at a Financial Dispute Resolution hearing in 2004. Mrs Gohil was concerned as to the true position, and a recital was included within the consent order of Baron J as follows: “The [wife] believes that the [husband] has not provided full and frank disclosure of his financial circumstances (although this is disputed by the [husband]), but is compromising her claims in the terms set out in this consent order despite this, in order to achieve finality”. In 2007 Mrs Gohil applied to set aside the consent order on the basis of Mr Gohil’s fraudulent non-disclosure of his resources at the time of settlement. No substantive hearing of the application occurred until 2012 because Mr Gohil was convicted of offences of money-laundering and conspiracy to defraud resulting in his imprisonment and confiscation proceedings. At the hearing Moylan J granted Mrs Gohil’s application to set aside part of the 2004 consent order on the basis of Mr Gohil’s material non-disclosure, allowing her to adduce fresh evidence in support of her case. The Court of Appeal allowed the appeal of Mr Gohil, concluding that there was no admissible evidence to support Moylan J’s conclusions of material non-disclosure.
The Supreme Court unanimously allowed the appeals of both Mrs Sharland and Mrs Gohil, remitting the cases for consideration in the High Court. Critics of the decisions argue that the ‘floodgates’ have now been opened, and thousands of claims to set aside orders will come before the courts such that finality cannot really ever be achieved for litigants. Others are delighted at the judgments, arguing justice has been served and the message communicated that concealment of assets and lies by parties to proceedings will not be tolerated.
In the context of material non-disclosure as a ground for set aside, in Sharland v Sharland Lady Hale drew a distinction between:
- Innocent/inadvertent non-disclosure where the party alleging non-disclosure must prove non-disclosure which is sufficiently material that, if the court had been in possession of the full facts at the time, the order it made would have been substantially different; and
- Deliberate/fraudulent non-disclosure where the materiality of the non-disclosure will be assumed. The non-discloser must show that the fraud would not have influenced a reasonable person to enter the agreement and the court would not have made a significantly different order irrespective of whether the parties agreed.
In Gohil v Gohil Lord Wilson highlighted the crucial point that a party’s duty to provide full and frank disclosure is not something which can be avoided by the parties’ agreement.
If material non-disclosure is made out, a court should carefully consider the extent to which the order must be set aside (isolated parts may be set aside) and there should be robust case management such that proceedings are conducted proportionately and not necessarily from scratch.
It can be difficult for litigants and lawyers to know what procedure to follow if seeking to apply to set aside a financial consent order. In Gohil v Gohil Mrs Gohil’s application to set aside the consent order took the form of a simple notice issued within the divorce proceedings. In Sharland v Sharland the consent order had not been sealed, but that did not preclude the trial judge from revisiting his order.
- The Supreme Court confirmed that the Family Procedure Rule Committee is currently considering how best to formulate a clear procedure for this at every court level within the ‘Setting Aside Working Party’.
- The current options are to commence a fresh action to set aside the consent order, to appeal against the order (considered by Munby P in CS v ACS [2015] 1 WLR 4592) or to make an application to the first instance judge in the matrimonial proceedings.
- The Supreme Court took the view that a court at the same level as that which made the original order is the most appropriate forum for consideration of set aside applications. This is because the Court of Appeal is not the most suitable forum for hearing and resolving factual disputes which often arise on an application to set aside.
If you believe that you entered into a financial settlement when the information provided by the other side was misleading or dishonest, you should take legal advice as to whether there are merits in applying to set aside the order and the best procedure to follow. In any event, the recent decisions are a helpful reminder of the duty to fully and frankly disclose your assets, liabilities and income to ensure finality in your financial settlement.
JULIA TOWNEND
4 PAPER BUILDINGS
28.01.2016
Julia Townend is a specialist family law barrister practising from 4 Paper Buildings Chambers with extensive court and advisory experience. She has a keen interest in the financial consequences of relationship breakdown (including enforcement) and private law children proceedings (including child arrangements and applications for permission to remove children from the jurisdiction permanently and temporarily).
Temple Church, London by Simon Brighton
