What the Alison Sharland and Varsha Gohil divorce ruling means for wealthy individuals

 
Dr Alexandra Gooden
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The UK's highest court paved the way for divorce settlements to be renegotiated (Source: Getty)

Even after a divorce is settled, this ruling means that former spouses who are able to prove their ex-partner deliberately obscured their full financial position could seek an appeal, with their divorce settlements re-examined and potentially renegotiated.

For example, divorcees who may have hid behind the discretionary nature of a bonus and therefore deliberately under-disclosed the value of that bonus could now be considered to have acted fraudulently in their divorce case. Similarly, in the example of a private equity investor who relies on the uncertainty and volatility of their investment to deliberately under-disclose the value of that investment/portfolio during a divorce, when there is evidence of information that more accurately reflects the value, then this divorce could potentially be appealed.

The husbands in the high-profile cases of Sharland and Gohil, had both lied to the court about the true value of their wealth. Today, their former spouses were given leave to have their cases reheard, paving the way for divorce settlements to be re-examined and potentially renegotiated if one party has failed to provide full and frank disclosure of their assets.

While there is no need for alarm and divorce rules apply universally, not singling financial services or any other profession out, City workers, business owners and entrepreneurs whose wealth is based on significant shareholdings should be particularly mindful of this ruling. Valuing a private company is a perennial issue for the divorce courts – the challenge being agreeing a value in the absence of a purchaser to test the market - but where expert valuations have been obtained on a full disclosure of the material facts, divorcees have nothing to fear; the courts appreciate that market fluctuations are a fact of life.

Read more: Landmark ruling means divorce cases can be reopened

However those who deliberately under disclose or deliberately withhold information (such as negotiations for an IPO in the Sharland v Sharland case), open themselves up to a charge of misleading the court and a renegotiation of their settlement with punitive costs consequences. If the wronged spouse can prove deliberate non-disclosure and that the court would have made a materially different order had that information been known, here should be a retrial.

In practice, it can be difficult to prove non-disclosure and fraudulent spouses often rely on the absence of resource on the part of the financially weaker spouse to pursue their investigations, but this judgment is a warning shot across the bows of those tempted to under disclose as to the potential consequences.

The duty to disclose continues up to the point of a voluntary agreement being reached, or the court making an order in the context of litigation. It is often the case that many months have passed between the original financial disclosure exercise and the point of settlement. It is important that the unwary are alive to their obligation to disclose any material changes. There is a clear distinction between cases where assets have increased post- divorce in the normal course of business dealings or due to market forces and those where information on a crystallising event, such as a sale or acquisition has been hidden.

London already has a reputation as the divorce capital of the world – that is, a reputation for being more generous or at least fairer to the financially weaker party on a divorce than other jurisdictions. The Supreme Court’s decision does nothing to alter that in that it upholds fairness. The ruling by five Supreme Court judges today sends the right message that fraud in divorce cases is unacceptable and that parties should not be allowed to benefit from such deception. Whether it leads to a flurry of divorce appeals remains to be seen.

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