Our website is set to allow the use of cookies. For more information and to change settings click here. If you are happy with cookies please click "Continue" or simply continue browsing. Continue.

Family Law

The leading authority on all aspects of family law

14 OCT 2015

Sharland v Sharland [2015] UKSC 60

Sharland v Sharland [2015] UKSC 60
(Supreme Court, Lord Neuberger P, Lady Hale DP, Lords Clarke, Wilson, Sumption, Reed and Hodge, 14 October 2015)

[The judicially approved judgment and accompanying headnote has now published in Family Law Reports [2015] 2 FLR 1367]

Please see attached file below for the full judgment.

Background to the appeal

This appeal considers the impact of fraudulent non-disclosure on a financial settlement agreed betweena husband and wife on divorce, especially one embodied in a court order.

The parties were married in 1993 and separated in 2010. They have three children, one of whom hassevere autism and will require care from Mrs Sharland throughout his life. Mr Sharland is anentrepreneur who has a substantial shareholding in a software business, AppSense Holdings Ltd,which he developed. In the financial proceedings between the parties the value and manner ofdistribution of this shareholding was the principal matter in dispute. Both parties instructed valuers,who produced valuations on the basis that there were no plans for an Initial Public Offering (IPO) ofthe company.

In the course of the trial in the High Court in July 2012, after Mr Sharland gave evidence confirmingthat there was no IPO ‘on the cards today’, the parties reached an settlement by which Mrs Sharlandagreed to receive 30% of the net proceeds of sale of the AppSense shares whenever that took place,together with other assets. The judge approved the agreement and a draft consent order was drawn up.Before it was sealed, however, Mrs Sharland became aware that AppSense was being actively preparedfor an IPO which was expected to value the company at a figure far in excess of the valuationsprepared for the hearing.

Mrs Sharland immediately invited the judge not to seal the consent order and applied for the hearing tobe resumed. At the hearing of her application in April 2013 the judge found that Mr Sharland’s earlierevidence had been dishonest and, had he disclosed the IPO plans, the court would have adjourned thefinancial proceedings to establish whether it was going ahead. However, by the time of the hearing,the IPO had not taken place and an IPO was not now in prospect. The judge declined to set aside theconsent order on the ground that he would not have made a substantially different order in thefinancial proceedings, applying the decision of the House of Lords in Livesey (formerly Jenkins) v Jenkins[1985] AC 424.

The Court of Appeal upheld the judge’s order (Briggs LJ dissenting) and Mrs Sharland appealed to theSupreme Court.

Judgment

The Supreme Court unanimously allows Mrs Sharland’s appeal. The consent order will not be sealedand Mrs Sharland’s application for financial relief will return to the Family Division of the High Courtfor further directions. Lady Hale gives the only judgment.

Reasons for the judgment

It is in the interests of all members of a family that matrimonial claims should be settled by agreementrather than adversarial battles in court [17]. Such an agreement cannot oust the power of the court tomake orders for financial arrangements [18] and does not give rise to a contract enforceable in law [19],but the court will make an order in the terms agreed unless it has reason to think there arecircumstances into which it ought to inquire [20]. Allied to this responsibility of the court is the parties’duty to make full and frank disclosure of all relevant information to one another and to the court [21].

Family proceedings differ from ordinary civil proceedings in two respects: a consent order derives itsauthority from the court and not from the consent of the parties and the duty of full and frankdisclosure always arises [27]. The consent of the parties must be valid. If there is a reason whichvitiates a party’s consent there may also be good reason for the court to set aside a consent order.Whether the court is bound to do so is the question arising on the appeal [29].

It is not necessary to decide in this case whether the greater flexibility which the court now has in casesof innocent or negligent misrepresentation in contract law, restricting a victim’s right to rescind theagreement, should also apply to such misrepresentations or non-disclosure in consent orders in civil orfamily cases. The present case is one of fraud. It would be extraordinary if the victim of a fraudulentmisrepresentation in a matrimonial case was in a worse position than the victim of a fraudulentmisrepresentation in an ordinary contract case, including a contract to settle a civil claim. Briggs LJ inthe Court of Appeal was correct to apply the general principle that ‘fraud unravels all’ and should leadto the setting aside of a consent order procured by fraud [32]. The only exception is where the court issatisfied that, at the time when it made the consent order, the fraud would not have influenced areasonable person to agree to it, nor, had it know then what it knows now, would the court have madea significantly different order, whether or not the parties had agreed to it. The burden of establishingthis must lie with the perpetrator of the fraud [33].

On the facts of this case it is clear that the judge would not have made the order he did, when he did,in the absence of Mr Sharland’s fraud, and the consent order should have been set aside. The judgehad misinterpreted Livesey, which had drawn a distinction between triviality and materiality at the dateof the order and not at some later date [34]. He had also been wrong to deprive Mrs Sharland of a fulland fair hearing of her claims by re-making his decision at the hearing of the application on the basisof the evidence then before him [35]. The consent order should not be sealed and the matter shouldreturn to the Family Division for further directions [36].

The final part of the judgment discusses the procedure to be followed by parties seeking to challengethe final order of a court in family proceedings. The court retains jurisdiction over a marriage evenafter it has been dissolved and s 31F(6) Matrimonial and Family Proceedings Act 1984 gives the familycourt power to vary, suspend, rescind or revive any order by it. It is open to the parties either to makea fresh application or to appeal against the consent order. Lady Hale endorses the observations ofLord Wilson in the judgment in Gohil v Gohil [2015] UKSC 61 on the question of how suchapplications should be made, while emphasising that the renewed financial remedy proceedings neednot start from scratch and the court may be able to isolate the issues to which the misrepresentation ornon-disclosure relates [37-43].

References in square brackets are to paragraphs in the judgment

Michaelmas Term[2015] UKSC 60
On appeal from: [2014] EWCA Civ 95

Before

Lord Neuberger, President Lady Hale, Deputy President Lord Clarke Lord Wilson Lord Sumption Lord Reed Lord Hodge

Sharland
(Appellant)

v

Sharland (Respondent)


JUDGMENT GIVEN ON14 October 2015
Heard on 8, 9 and 10 June 2015

Martin Pointer QC and Peter Mitchell (Instructed by Irwin Mitchell LLP) for the Appellant (Sharland)
Nicholas Francis QC and Nicholas Allen (Instructed by JMW LLP) for the Respondent (Sharland)


Sharland v Sharland [2015] UKSC 60

JUDGMENT

Family Law

journal

"the principal (monthly) periodical dealing with contemporary issues" Sir Mark Potter P

More Info from £49.00
Available in Family Law Online

Family Court Practice 2016, The

(Red Book)

Order your copy today and get the Autumn Supplement

More Info from £465.00
Available in Family Law Online
Subscribe to our newsletters