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No discrimination in non-disclosure

This week, there’s been another interesting case in the courts about non-disclosure. By this we mean what happens when, after a divorce has occurred and a final financial settlement has been achieved, one person finds evidence to suggest that the other has hidden assets. There are two interesting twists to this particular story: one is that the former couple involved were both women, and had a civil partnership rather than a marriage (that option not being available to them at the relevant time); and the other is that the woman – Carol – who has been alleged to have hidden assets has unfortunately passed away since the settlement was made final.

The two women had been in a relationship for a number of years before they entered into a civil partnership in December 2008. The deceased was a businesswoman involved in property investment and development, and she funded the couple’s lifestyle, which was fairly extravagant.  The deceased paid her civil partner – Helen – a nominal “salary” from her company of £2,300 per month from 1999 until the couple separated ten years later.

The couple separated in September 2009. In August 2010 their civil partnership was dissolved.  Although it is clear that things were very difficult between the former couple in the early days after the separation, they became friends again eventually and Helen says Carol was supporting her financially again before her death in September 2013. Carol died without a will.

At the time of the negotiations after their relationship broke down, there were initial court proceedings about interim maintenance before the women were able to work out a settlement between them. It was agreed that Carol would pay Helen a lump sum of £162,000, together with two years’ maintenance at £18,050 per year. On the short disclosure form that accompanied their application to court for a consent order, Carol stated that her annual income was £55,312, that she had assets of £766,000 and pensions worth £285,000. The judge queried the agreement on the basis that Helen had previously put forward a case that Carol was very wealthy, and the settlement was modest; however, both women wrote to the court and reiterated their desire to achieve the order in the agreed terms. The judge made the order on 1 December 2010.

One year later, Carol signed off final accounts for the year ending 30 June 2010, which she had not disclosed in draft form to Helen or to the court. Helen found out that these accounts showed shareholder funds of £5.5m and that Carol’s annual salary for that year was £150,000 – much more than she had admitted to.  In 2014, the year after Carol died, Helen asked the court to overturn the financial agreement and consent order on the basis that she would not have agreed to the settlement she received if she had known the true extent of her former civil partner’s wealth.

The judge who originally heard Helen’s application dismissed it as “without merit” and “doomed to failure”. An application to appeal that decision was refused. But then three cases came through the courts that clarified the way the law should be interpreted, and the landscape shifted for Helen, so she asked the court to take another look. These cases were Wyatt v Vince, which clarified the powers of judges to dismiss family financial claims at an early stage without full investigation to be very narrow, and made it clear that delay is no bar to a claim; and Sharland and Gohill, two conjoined cases that reached the Supreme Court, and which clarified that fraud or material non-disclosure can lead to the setting aside of a court order if it can be established that understanding the true situation would have led to the making of a substantially different order. This is true whether or not the parties took legal advice on the order.

The court agreed that the early dismissal of Helen’s application to set aside the consent order on the basis of Carol’s alleged non-disclosure had been incorrect, and has sent the case to be considered in full by a judge under the principles in Sharland and Gohill. It’s worth bearing in mind this doesn’t necessarily mean that she will win, and that the order will be overturned and a new one put in its place – what she has been granted is the opportunity to argue her case, denied until now. This time she will have the opportunity to tell a High Court judge why she believes the order should be overturned, and Carol’s estate will have a full opportunity to refute the claims she makes.

This case is welcome confirmation that the law about non-disclosure applies to same-gender and opposite-gender couples alike, both to former civil partners and those formerly married, and alive or dead. It is also a good reminder that if you don’t fully and frankly disclose the true extent of your financial arrangements when working out a settlement after divorce or civil partnership dissolution, no matter whether you do it round the kitchen table, through solicitors, in mediation, in court or in any other process, things are never completely final. If you’d like to speak to Adam, Sue, Gail, Tricia or Simon about any of the issues raised in this blog or any other family law question, please give us a call on 01223 443333 to make an appointment.

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