On 14 October the Supreme Court (SC) gave judgments in Sharland v Sharland [2015] UKSC 60 and Gohil v Gohil [2015] UKSC 61. Both Mrs Sharland and Mrs Gohil were successful in the respective consent orders being set aside due to significant non-disclosure by their former husbands.

Lady Hale gave judgment in Sharland, which dealt principally with the factors governing an application to set aside due to non-disclosure. In Gohil the leading judgment was given by Lord Wilson and principally considered procedural matters and the admissibility of fresh evidence on appeal, in accordance with the Ladd v Marshall [1954] 1 WLR 1489 principles.

In a similar vein to the decision in Wyatt v Vince [2015] UKSC 14, much of the Sharland judgment focuses upon the distinction between family and civil proceedings. The parties in family proceedings cannot oust the jurisdiction of the court by way of an agreement entered into between them; an agreement does not give rise to a contract enforceable in law.

The court will however be heavily influenced by what the parties have agreed. By virtue of section 33A of the Matrimonial Causes Act 1973, the court may make an order in the terms agreed, unless it has reason to think that there are other circumstances into which it ought to enquire.

Closely allied to the court’s responsibility to safeguard the parties and the public interest is the parties’ duty to make full and frank disclosure to one another and to the court as established in Livesey (formerly Jenkins) v Jenkins [1985] AC 424. Having considered the principles in Livesey, Lady Hale identified the two differences between family and civil proceedings. First, in family proceedings a consent order derives its authority from the court and not the consent of the parties. Second, in family proceedings there is always a duty of full and frank disclosure, whereas that is not universal in civil proceedings.

In family proceedings, although the binding effect comes from the court’s order and not from the prior agreement of the parties, it does not follow that the parties’ agreement is not an essential part of the consent order. Quite the reverse: the court cannot make a consent order without the valid consent of the parties. Accordingly, if there is a factor which vitiates a party’s consent, then there may be a good reason to set aside the order. The issue for the court is whether it has any choice in the matter in such circumstances.

One form of vitiating factor may be an innocent non-disclosure of a material fact, as happened in Livesey. There was however no need for the SC to decide whether greater flexibility, which the court has in cases of innocent or negligent misrepresentation in contract, should also apply to innocent or negligent misrepresentation or non-disclosure in the context of consent orders, whether in civil or family cases. Lady Hale noted that it was clear from both Livesey and from the civil case of Dietz v Lennig Chemicals Ltd [1969] 1 AC 170 that the misrepresentation or non-disclosure must be material to the decision that the court made at the time.

By contrast, Sharland was a case of fraud. Lady Hale stated: ‘It would be extraordinary if a victim of a fraudulent misrepresentation… in a matrimonial case were in a worse position than the victim of a fraudulent representation in an ordinary contract case, including a contract to settle a civil claim’.

‘Fraud unravels all’ and should lead to the setting aside of a consent order obtained by fraud.

A defence is available to the perpetrator of the fraud. The perpetrator must satisfy the court that, when the order was made, the fraud would not have influenced a reasonable person to agree to it, nor, had the court known then what it knows now, would it have made a significantly different order, whether or not the parties had agreed to it. Lady Hale was however clear that the burden of satisfying the court on those issues must lie with the perpetrator. It would be wrong to place upon the victim the burden of showing that it would have made a difference.

The SC remitted the proceedings to the High Court for further directions. Although there had been non-disclosure justifying the setting aside of the order, that did not mean that the financial remedy proceedings must start from scratch as many issues may remain uncontentious. It may be possible to isolate the issues in contention and deal only with those. The approach adopted in Kingdon v Kingdon [2010] EWCA Civ 1251 was approved. Similarly, in Wyatt the Supreme Court had emphasised the enormous flexibility to enable the procedure to fit the case.

Lady Hale also makes obiter comments regarding the procedural problems arising from applications to set aside consent orders and endorses the observations made by Lord Wilson in his judgment in Gohil.

In Gohil, the original consent order made in April 2004 included a recital which stated that the wife believed the husband had not provided full and frank disclosure, but was compromising her claims to achieve finality. The husband contended that the recital effectively prevented the wife from making any complaint about his non-disclosure.

Lord Wilson held that a spouse has a duty to the court to make full and frank disclosure, without which the court is unable to discharge its duty under section 25(2) of the Matrimonial Causes Act 1973. Any order, made by consent or otherwise and which is made in circumstances of there not having been full and frank disclosure is, to that extent, flawed. One spouse cannot exonerate the other from complying with their duty to the court. Accordingly, the recital in the original order had no legal effect.

The husband was also uncommunicative regarding certain assets. In such circumstances, the court is entitled to draw adverse inferences. Reference was made to Prest v Petrodel Resources Ltd [2013] UKSC 34 in which Lord Sumption quoted the following from R v Inland Revenue Comrs, Ex p TC Coombs & Co [1991] 2 AC 283: ‘In our legal system generally, the silence of one party in the face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence.’

Lord Wilson stated that the Family Procedure Rule Committee is considering how best to formulate a clear procedure for those who wish to set aside financial orders made by courts at every level. The Court of Appeal is not the appropriate forum for enquiry into disputed issues of non-disclosure raised in financial remedy proceedings. By contrast, an application to set aside a financial order on the ground of non-disclosure should be made to the judge who made the original order. Such a power is presently contained by the recently inserted provision of section 31F(6) of the Matrimonial and Financial Proceedings Act 1984.

Much of the Gohil judgment considers the applicability of the Ladd criteria for adducing new evidence on appeal. In Ladd, Denning LJ said that fresh evidence would be allowed, or a new trial directed only when: (1) the evidence could not have been obtained with reasonable diligence for use at the trial; (2) that evidence would probably have an important influence on the result of the case; and (3) it was presumably to be believed, ie, it was ‘apparently credible’.

Lord Wilson however held that the Ladd criteria have no relevance to the determination of an application to set aside a financial order on the ground of fraudulent non-disclosure. Lord Wilson held that the CoA had been wrong to accept that the Ladd criteria should apply for the following reasons:

  • The CoA would not have embarked on the disputed fact-finding exercise as it was the inappropriate forum to do so. Accordingly, the rules for adducing fresh evidence before that court were irrelevant.
  • The first criterion under Ladd presupposes that there had already been a trial. By contrast, the wife’s first opportunity in this case to adduce evidence was at a later hearing before Moylan J.
  • The argument would not apply to an application to set aside a financial order made by a district judge, against which no appeal out of time to the CoA would lie. The level of the court should not precipitate different evidential rules.
  • The argument loses sight of the basis of an application to set aside a financial order for non-disclosure. If the application had originally gone to a contested hearing in 2004, the onus would have been on the husband to have disclosed his resources; it would not have been on the wife.

Andrew Newbury, Slater and Gordon

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