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Natalie 135The Supreme Court has delivered its judgment in the case of Gohil v Gohil, which it heard at the same time as Sharland v Sharland [2015] UKSC 60, a case also dealing with non-disclosure and whether or not the duped spouse has the right to reopen their claim.

Both cases have garnered heavy press interest, and for good reason. Providing full and frank disclosure in financial cases is the bedrock of all financial remedy applications on divorce. Both parties, from the outset of the application, to the trial itself, have an ongoing duty to be honest with the court as to their respective financial positions. Without this, the court cannot be satisfied that the orders made are fair and just.

It has long been the temptation of the financially stronger party (usually the husband) to attempt to minimise their asset base in the hope that the financial settlement will not be as generous to the financially weaker party (usually the wife) as they fear it might be.

Whilst the financially weaker party (usually the wife) may feel in their bones that the husband is not being truthful in his financial presentation, proving this has always been the challenge.

With this ruling, the Supreme Court justices have sent a very strong message to those would be rogues: “lie to the court at your peril”.

What the Supreme Court actually decided:

It decided that the Order of Moylan J, overturned on appeal by Mr Gohil to the Court of Appeal, should be reinstated.

This Order set aside paragraph 5 of the original order made by consent and approved by Baron J, in April 2004, namely the dismissal of Mrs Gohil’s capital claims. By so doing, Mrs Gohil is now permitted to revisit her entire capital divorce settlement from scratch.

The reason for this decision is based on material non-disclosure by Mr Gohil.

The facts and progress to the Supreme Court

Mrs Gohil petitioned for divorce in May 2002 based on Mr Gohil’s adultery and unreasonable behaviour. Decree Nisi was pronounced in March 2003. Decree Absolute was pronounced in 2004.

Mrs Gohil issued an application for financial remedy and the Financial Dispute Resolution appointment was heard before Mrs Justice Baron on 30 April 2004. Mrs Gohil was sceptical of her husband’s financial disclosure. He claimed that he had limited resources in his own name but Mrs Gohil asserted that his expenditure and lifestyle painted a very different picture. However, in order to achieve finality (and because of lack of evidence to the contrary at the time) she reached a settlement with Mr Gohil which provided her with a modest settlement (lump sum of £270,000, transfer to her of the family car and ongoing maintenance).

As part of the Order, both parties agreed to a Recital recording the fact that Mrs Gohil has reservations as to the validity of the disclosure but was compromising her claims despite these reservations in order to achieve finality.

In April 2006 Mrs Gohil applied for an upwards variation of her maintenance award and enforcement of certain terms of the 2004 order. She also applied for leave to appeal out of time against the 2004 consent order but was unsuccessful in this application.

On 3 July 2007 Mrs Gohil issued an application to set aside the 2004 consent order on the grounds of serious material non-disclosure and misrepresentation. That application eventually came to be heard before Moylan J on 25 September 2012, 5 years later.

Prior to that hearing, in November 2010, Mr Gohil had been found guilty in the Crown Court of four counts of money laundering valued at over US$20m. Two weeks later he pleaded guilty to two further charges including fraud and 6 counts of money laundering valued at US$37m. He was sentenced to 10 years’ imprisonment and he remains there now.

Mrs Gohil had attended the Crown Court hearings and had gleaned certain financial information from the evidence heard in that case which she wished to use in her application to set aside. She therefore sought the disclosure of that information into her financial case. However, this was opposed by the Home Secretary and the CPS on the grounds that the evidence was derived pursuant to “mutual legal assistance” (MLA) from other jurisdictions and was, therefore, limited to use in the criminal proceedings.

Moylan J heard Mrs Gohil’s application and ordered the disclosure of this MLA evidence into the financial proceedings. The CPS and Home Secretary appealed this order and they were successful. Their appeal was heard on 26 November 2012. However, Mrs Gohil’s financial case was heard by Moylan J on 25 September 2012, before his decision on the disclosure of the MLA evidence was overturned by the Court of Appeal. It follows, therefore, that the MLA evidence would become inadmissible and should not have been relied upon by Moylan J.

In deciding whether or not Mr Gohil was guilty of material non-disclosure, Moylan J stated that there were 2 bases for him to consider. Firstly, was there non-disclosure which would lead the court to make an order it would not have made had proper disclosure been made (Livesey v Jenkins [1985] FLR 813); and/or was there new evidence which would probably have an important influence on the result (Ladd v Marshall [1954] 1WLR 1489)?

In respect of new evidence, to justify the reception of fresh evidence it needs to meet 3 conditions:

  1. the evidence could not have been obtained with reasonable diligence for use at the original trial;
  2. the evidence must have an important influence on the case; and
  3. the evidence must be apparently credible.

Moylan J considered four elements of new evidence, namely the MLA evidence, the testimony of Mr Gohil’s father which he gave in support of Mrs Gohil’s case, transactions in bank statements from Bank Schroder (the Odessa accounts) and the purchase of two flats in Mumbai.

Moylan J found that there was credible evidence that Mr Gohil’s resources, both capital and income, were not limited to those disclosed in the original proceedings and that they satisfied the Ladd v Marshall test.

He also found that Mr Gohil failed to make full and frank disclosure of his resources in 2004 and that such failure was to a material extent in that, had he made full and frank disclosure, the court would have been likely to make a substantially different order.

Moylan J, therefore, ordered the setting aside of paragraph 5 of the 2004 Order which would allow Mrs Gohil to make another application for a capital claim and a 5 day hearing in June 2014 was listed.

Mr Gohil appealed to the Court of Appeal.

The Court of Appeal upheld Mr Gohil’s appeal and reversed the decision of Moylan J. It concluded that there are two distinct stages when considering a Livesey v Jenkins application. Firstly, the court must determine, as a matter of fact, whether there has been material non-disclosure. Secondly, if so determining, whether the original order should be set aside. Any consideration of whether fresh evidence should be admitted (the Ladd v Marshall test) can only be within the first stage.

The Court of Appeal stated that Moylan J should have adjourned the first stage of the process to a full fact finding hearing where whatever evidence Mrs Gohil could call would be presented and tested before the court. The Judge would then be in a position to determine, with precision and clarity, whether any material non-disclosure had actually been established to the requisite standard of proof.

The Appeal judges said that what Moylan J was not permitted to do, which he did, was to go from the preliminary stage of allowing fresh evidence to making an order actually setting aside the 2004 order without any proper fact finding hearing and on the basis of findings of non-disclosure that were not, on the material available, open to the court.

They concluded that Moylan J erroneously considered that there was jurisdiction to set the original 2004 order aside solely on the basis of the existence of fresh evidence within the Ladd v Marshall guidelines.

Mrs Gohil appealed to the Supreme Court.

The Supreme Court upheld Mrs Gohil’s appeal and reinstated the decision of Moylan J. It concluded that, notwithstanding the suggestion made by the Court of Appeal to the contrary, Moylan J did conduct a full fact finding hearing (over 8 days) and did find, as a fact, on the balance of probabilities, that Mr Gohil had been guilty of non-disclosure and that that non-disclosure had been material.

The Court of Appeal seemed to conclude that all the evidence produced by Mrs Gohil was inadmissible but the Supreme Court disagreed. It held that the Court of Appeal’s approach to the admissibility of evidence was erroneous and therefore the dismissal of Mrs Gohil’s application could not stand.

The Supreme Court accepted that the MLA evidence was clearly inadmissible but that Moylan J had not based his decision only on this evidence. He also relied on the evidence of Mr Gohil’s father, the Odessa accounts and the purchase of the Mumbai flats.

In respect of the father’s evidence the Supreme Court found this to be “admissible and highly significant”. It directly contradicted the evidence given by Mr Gohil in the 2004 proceedings. Moylan J found the father’s evidence to be apparently credible and that the evidence of Mr Gohil was “to put it mildly, unconvincing and inconsistent”.

Moylan J stated that he placed the greatest weight on the Odessa accounts (as well as the MLA evidence). Mr Gohil was not able, or not willing, to explain discrepancies in these accounts. Moylan J therefore inferred, and the Supreme Court said that he did so legitimately, that had Mr Gohil been willing to truthfully explain the source of the funds the trial would likely have led to the discovery of other assets which ought to have been disclosed in 2004. Moylan J also found Mr Gohil’s explanations as to the purchase of the Mumbai flats to be entirely lacking in credibility.

Mr Gohil tried to argue that even if Moylan J found there to be undisclosed assets in 2006/2007 this would not prove that he had those assets in 2004. In addition, in light of his criminal convictions, any assets obtained after 2005 would have been the result of criminal activity and therefore not available to share with Mrs Gohil.

The Supreme Court had a robust answer to this argument: adverse inferences. It found that Mr Gohil was well aware that in 2012 Moylan J was conducting an investigation into his assets in 2004. Mr Gohil would have been well aware of the origin of those assets in 2006 and 2007 that were under inquiry. Had Mr Gohil clearly demonstrated that they originated after 2005 then the matter would have been closed and Mrs Gohil would have failed. However, he chose to obfuscate their origin. The Supreme Court therefore held that it was reasonable for Moylan J to infer that a truthful explanation of their origin would have been probative of the existence of undisclosed assets in 2004 and that Mr Gohil’s withholding of it should be no less probative.

In respect of the Recital which the parties agreed to include in the original 2004 order, the Supreme Court held that spouses have a duty to the court to make full and frank disclosure of their resources, without which the court would be disabled from discharging its duty under s 25 (2) of the Matrimonial Causes Act 1973 and any order, by consent or otherwise, is to that extent flawed. It held that one spouse cannot exonerate the other from complying with their duty to the court. Therefore, it mattered not that Mrs Gohil had agreed to that Recital. Mr Gohil’s duty was to the court and he failed in that duty.

The Supreme Court therefore ordered that Moylan J’s order should be reinstated and that Mrs Gohil’s claims for further capital provision could proceed. However, it remains unclear as to whether Mrs Gohil will succeed in that application and, if so, to what extent.

Implications?

The effect of this decision has been to allow Mrs Gohil, who compromised her financial remedy claims by agreement, to unravel that consent order on the basis of material non-disclosure. She has the right to have her claims heard again, from scratch. Whilst there is no guarantee that the outcome will be different, she has won the right to go back to court.

This is a victory for the financially weaker party who has been duped by the financially stronger party.

It sends a clear message to the financially stronger party (usually the husband) that they lie to the court at their peril. No longer can they be satisfied that final orders will necessarily remain final orders if their ex-spouses later down the line come into possession of incriminating evidence.

Those spouses in the future will be forever grateful to Mrs Gohil and Mrs Sharland for paving the way to the Supreme Court for this landmark decision which has clarified the law on set aside applications. Hitherto not every wife has had the financial resources to litigate in this way. Will it really result in all husbands being more honest? Maybe not. But, they are unlikely to rest easy knowing that that final order could be reopened at any time in the future.