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Caselaw

Supreme Court Ruling on Material Non-Disclosure

Posted by Gunes Saybak on May 11, 2016

This is an Application to the Supreme Court by the Appellant (Mrs Gohil) against the order of the Court of Appeal (CoA) dated 13/03/14 setting aside a judgment in her favour dated 25/09/12 and dismissing her claims against the Respondent for material non-disclosure during their Family Law financial settlement process.

Background

The Appellant and the Respondent were married in 1990 and had 3 children together.  The Respondent was a partner in a small law firm servicing wealthy overseas clients who sought assistance to protect their wealth.

In 2002 the Appellant filed for divorce. In response to her financial claims, the Respondent asserted that all of the wealth attributable to him was, in fact, assets held on behalf of his clients. He produced a balance sheet demonstrating that his personal wealth was in deficit of £311, 512.

At the Financial Dispute Resolution (“FDR”) meeting before Baron J on 30/04/04, agreement was only reached by the Appellant’s compromise. The final order of the court contained Recital 14  (“the Recital) which stated that “the [wife] believes that the [husband] has not provided full and frank disclosure of his financial circumstances (although this is disputed by the [husband]), but is compromising her claims in the terms set out in this consent order despite this, in order to achieve finality”.

As part of the settlement, the court ordered the Respondent to make a lump sum and periodic payments which he indicated could only be made with the assistance of his family. The Respondent only complied with the orders for periodical payments until 2008 and made the first lump sum initial payment in 2009.

Application to set aside the settlement order

In 2007, the Appellant sought to set aside the settlement order of 30/04/04 on the ground that the Respondent had fraudulently failed to disclose his financial circumstances.

The Appellant’s substantive application came before Moylan J on 13/02/12. Proceedings were largely delayed as in 2008, the Respondent had been charged with money laundering offences. He was convicted in November 2010 and, in separate proceedings, pleaded guilty to six further counts of money-laundering and conspiracy to defraud. The Respondent was sentenced for 10 years in prison.

On 30/05/12, Moylan J ordered the Crown Prosecution Service (“CPS”) to make extensive disclosure of documents which it had obtained for the purpose of the criminal proceedings against the Respondent. The CPS objected and obtained interim relief from the CoA on the basis that the disclosure request referred to documentation that had been obtained  under the Crime (International Co-operation) Act 2003 (“the 2003 Act”) which precluded any use of them other than that specified in the initial requests. The CoA subsequently granted an interim order in favour of the CPS.

The Appellant was permitted to relate and rely on evidence referred to during her attendance at the Respondent’s criminal trials and on 25/09/12, after an 8 day hearing and without the benefit of the requested CPS disclosure, Moylan J granted the Appellant’s application and set aside the order of 30/04/04.

He did so relying on the principles of Ladd v Marshall [1954] EWCA Civ 1 relating to the introduction of fresh evidence in circumstances where the following three conditions were fulfilled:

  1. first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial
  2. second, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive
  3. thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible

Moylan J concluded that there had been material non-disclosure by the Respondent and that the

Appellant’s evidence satisfied the criteria in Ladd v Marshall.

Respondent’s Appeal to the CoA

The Respondent challenged the decision of Moylan J to the CoA on the following grounds:

  • As a judge of the High Court, Moylan J did not have jurisdiction to set aside an order of the High Court and that only the CoA could undertake that function.
  • The wording of the order of 30/04/04, in particular Recital 14, restricted the Appellant from pursuing a complaint about non-disclosure on the Respondent’s part.
  • that Moylan J had incorrectly applied the criteria set out in Ladd v Marshall

The CoA held that the Ladd v Marshall principles were only relevant to demonstrate what evidence the Appellant could adduce to establish non-disclosure by the Respondent. It allowed the Respondent’s appeal concluding that it had not been open to Moylan J to have made a finding of material non-disclosure on the basis of evidence that was inadmissible under the 2003 Act and therefore did not satisfy Ladd v Marshall criteria.

The Appellant appealed this decision to the Supreme Court (SC)

Question of law before the Supreme Court

The question of law before the court was whether, in an application to set aside a financial order in divorce proceedings on the ground of a fraudulent nondisclosure of resources, the principles on admissibility of fresh evidence set out in Ladd v Marshall had any relevance.

Observations and findings of the Supreme Court

The court made observations in respect of the Respondents grounds before the CoA:

  1. Jurisdiction of the High Court to Set Aside

The SC noted that the CoA was not the forum for inquiries into non-disclosure issues raised in proceedings for the setting aside of a financial order, especially where intense fact-finding was necessary. There had therefore been the need for a definitive confirmation of the High Court’s jurisdiction to set aside a financial order made in that court and endorsed the conclusion of the Family Procedure Rule Committee in relation to its “Setting Aside Working Party” meeting on 20 April 2015 the relevant section of which stated: “(i) there is power for the High Court and the family court to set aside its own orders where no error of the court is alleged and for rules to prescribe a procedure; (ii) the rule should be limited so as to apply to all types of financial remedy only; (iii) …; (iv) applications to set aside should be made to the level of judge (including magistrates) that made the original order; and (v) if an application to set aside can be made, any application for permission to appeal be refused.”

  1. The wording of Recital 14 in the order of 30/04/04

The SC held that the wording in the Recital had no legal effect and that one spouse could not exonerate the other from complying with their duty to make full and frank disclosure of their assets to the court.

  • The relevance and applicability of Ladd v Marshall

The SC held that the Ladd v Marshall criteria had no relevance to the determination of an application to set aside a financial order on grounds of fraudulent non-disclosure. This is because the first Ladd v Marshall criteria had presupposed a trial, however the Appellant’s first opportunity to provide evidence was at the hearing before Moylan J. Had the matter not settled on 30/04/04 and, instead, proceeded to trial, the burden of proof would have been on the Respondent to explain his resources.  As such an application to set aside a financial order made by a District Judge and the evidential criteria should not depend on the level of court.

Additionally, the CoA would not have conducted the 8 day fact-finding exercise that Moylan J had been in a position to undertake in order to reach a finding in favour of the Appellant. The criteria for determining the admissibility of evidence in that court was therefore irrelevant.

Conclusion

The SC held that there was no injustice to the Respondent by its decision not to remit to the lower court the issue of whether there had, in fact, been material non-disclosure. This was because it was clear that Moylan J would have decided that the Respondent had been guilty of material non-disclosure even if he had solely based his decision on the totality of the admissible evidence.

The SC unanimously allowed the Appellant’s appeal and reinstated Moylan J’s order of 25/09/12.

CONTACT US

If you would like to discuss an application to set aside a financial order call our offices on 0208 995 3556 or email us at info@descartessolicitors.co.uk.