Sharland v Sharland

An order for financial provision made by consent is an exercise of statutory power, not a private contract. Non-disclosure, whether innocent, negligent or deliberate, engages the court’s power to set the order aside. The decisive question is whether it led to an order substantially different from that which the court would have made on full disclosure. A possible better negotiation or different outcome is insufficient. The assessment concerns the effect on the order, not the culpability of the default. The majority applied Livesey v Jenkins [1985] A.C. 424 and dismissed the appeal.

The wife’s claim for financial provision following divorce was compromised during a part-heard hearing. The judge approved a draft consent order, but it had not been sealed when the wife discovered that the husband had dishonestly concealed active preparations for an initial public offering of his principal shareholding.

The High Court retained jurisdiction, received further evidence, found the husband’s conduct dishonest, but concluded that later events showed that the non-disclosure had not produced an order substantially different from that which would otherwise have been made. The wife’s application to resume the hearing was dismissed: [2013] EWHC 991 (Fam). The central issue on appeal was whether the fraud required the consent order to be set aside and the financial-provision claim reheard.

The appeal was dismissed by a majority. Lord Justice Moore-Bick delivered the leading judgment, with Lady Justice Macur agreeing. Lord Justice Briggs dissented.

1. A financial-provision order made by consent remains an exercise of the court’s statutory powers. Its legal effect derives from the order, rather than the parties’ agreement. The court therefore requires full and frank disclosure of relevant circumstances before approving the order. The order became effective when pronounced or approved, although the judge retained power to set it aside or vary it before sealing. These principles were drawn from Livesey v Jenkins [1985] A.C. 424.
2. A compromise of an ancillary-relief claim is not an enforceable private contract. Accordingly, misrepresentation which might ordinarily justify rescission of a contract does not, by itself, entitle a party to renounce the compromise and resume proceedings. The court must decide whether to set aside or vary its order, applying the principles explained in Xydhias v Xydhias [1999] 1 FLR 683.
3. The governing question is whether the absence of full and frank disclosure led the court to make an order substantially different from that which it would have made if proper disclosure had occurred. It is insufficient that disclosure might have produced a different result or enabled the parties to negotiate more favourable terms. The comparison is between the order made and the order the court would have made, not between the actual settlement and a possible negotiated settlement. The approach in Bokor-Ingram v Bokor-Ingram [2009] EWCA Civ 412 was distinguishable because the undisclosed future employment prospects there justified awaiting developments.
4. Fraudulent non-disclosure is a serious abuse of process and engages the court’s broad remedial jurisdiction. However, its greater culpability does not replace the materiality inquiry or automatically require the order to be set aside. The judge was entitled to conclude that the absence of an early flotation, the percentage-based provision and the passage of time meant that the wife had not shown that a substantially different order would have been made. Dishonesty could remain relevant to costs.
5. Dissenting: Lord Justice Briggs considered that material fraud which induced a consent settlement should ordinarily lead to a rehearing where the claim had not received a full hearing. He proposed that the applicant need show only a real, rather than fanciful, prospect of doing better at a full hearing, with the interests of justice taking precedence over finality, economy and speed.

The wife’s appeal was dismissed.

• Court of Appeal (Civil Division): [2014] EWCA Civ 95. By a majority, the appeal was dismissed.
• High Court (Family Division): Sir Hugh Bennett, [2013] EWHC 991 (Fam). The application to resume the financial-provision hearing and set aside the approved consent order was dismissed.