Two women who were misled by their ex-husbands and argued they should get more money in their divorce settlements won their case at the Supreme Court yesterday. Damian Baron, head of divorce and family law at Harrison Drury explains what this could mean for your divorce settlement.
Why is the court’s decision yesterday so significant?
In a nutshell, seven judges unanimously decided that dishonesty or fraud involving failure to disclose financial assets during a divorce are grounds for renegotiating previously resolved disagreements. It means spouses who were misled about the true extent of their partner’s wealth when they made divorce settlements can go back and challenge them.
What happened in these particular cases?
Alison Sharland, who accepted £10m in her divorce, and Varsha Gohil, who got £270,000, say their husbands hid the extent of their wealth when their divorce settlements were made. Ms Sharland believed the £10m settlement she accepted in her 2010 divorce from her husband Charles, a software entrepreneur, represented half of his wealth.
Under the settlement, Sharland would also receive 30% of the proceeds of shares held by her husband in his company when he sold them. It transpired he’d lied about his company’s value – which the financial press estimated to be worth about £600m, when the value used in the divorce case was £47m – as well as plans to float it on the stock market.
Ms Gohil accepted a car as well as £270,000 as a settlement when she divorced her husband Bhadresh in 2002. In 2010, Mr Gohil was convicted of money laundering and jailed for 10 years. At his criminal trial, evidence revealed he had failed to disclose his true wealth during divorce proceedings. The court indicated that both claims would return to the High Court to be heard again.
What is the legal reasoning for this decision?
Giving the judgement of the court, Lady Hale said Ms Sharland had been “deprived of a full and fair hearing” because of “her husband’s fraud”.
In other words, a division of a parties’ financial assets has to be based on a valid agreement. If there has been dishonesty and a misleading about the true value of assets, then a divorce settlement can’t be valid and the wronged party has the right to go back to court.
Does this mean I can have a judge look again at my divorce settlement?
If you are able to prove you were misled about your husband or wife’s true wealth when you made your divorce settlement, then theoretically yes. The legal test is whether there was a deliberate fraud involved. The extent of those assets will also be a factor in the decision.
So, for example, if you find out that your spouse had a couple of hundred pounds in a building society account that they say they forgot to tell you about, then it’s unlikely it will be worth having the case re-examined.
However, if we’re talking about more significant wealth and assets – such as business wealth, property or pensions – that were deliberately concealed from you when you reached your divorce agreement, then clearly you have a strong case for having your divorce settlement decided again by a court and should seek legal advice.
What if I’m currently considering a divorce?
If you are considering a divorce, or are about to reach a settlement, the lesson is very clear – there always needs to be full disclosure of all assets by both parties. This will save both husband and wife from potentially bitter litigation and significant legal costs in the long run.
This case should act as a powerful deterrent to those who are tempted to defraud their spouse, but equally should encourage those who believe their spouse is lying about their true wealth to seek specialist legal advice.
Damian Baron specialises in divorce and relationship breakdown cases involving the division of finances and property. He frequently advises clients where business assets are at stake, as well as other high-net-worth individuals. For more information on re-examining or reaching a divorce settlement, please contact Damian on 01772 258321