Sharland v Sharland

A matrimonial financial consent order derives its authority from the court, but valid consent remains essential. Fraud which induces a party to compromise a financial claim ordinarily requires the order to be set aside. The perpetrator can avoid that result only by proving both that the fraud would not have influenced a reasonable person to agree and that, with the truth known at the time, the court would not have made a significantly different order.

Materiality is assessed when the order was made, rather than through hindsight. If set aside, the victim is entitled to reopen the claim, although active case management may confine the renewed proceedings to affected issues. The governing principles are the same whether or not the order has been sealed.

The husband and wife agreed a financial settlement during matrimonial proceedings. Its principal component concerned the husband’s shares in a software company. He had represented that no flotation was then contemplated, although preparations for an initial public offering were under way. The judge approved the agreement, but the deception emerged before the draft consent order was sealed.

The High Court found that the husband had dishonestly given seriously misleading evidence, yet directed that the order be perfected because subsequent events suggested that the resulting award was not substantially different from the order the court would otherwise have made: [2013] EWHC 991 (Fam), [2013] 2 FLR 1598. A majority of the Court of Appeal dismissed the wife’s appeal: [2014] EWCA Civ 95, [2014] 2 FLR 89.

The central issue before the Supreme Court was whether fraud inducing a matrimonial financial settlement required the consent order to be set aside, and who bore the burden of establishing the fraud’s materiality.

1. Appeal allowed unanimously. Lady Hale delivered the judgment, with which all the other Justices agreed. The draft consent order was not to be perfected, and the matter was returned to the Family Division of the High Court for further directions.

2. A matrimonial consent order derives its binding authority from the court’s exercise of its statutory powers, rather than from the parties’ contract. Nevertheless, the parties’ valid agreement is indispensable. The court cannot make a consent order without valid consent, and a factor which vitiates consent may justify setting aside the order. The statutory function under the Matrimonial Causes Act 1973 does not confer immunity upon an order procured by fraud.

3. Livesey (formerly Jenkins) v Jenkins [1985] AC 424 established the continuing duty of full and frank disclosure and the materiality requirement for innocent non-disclosure. It was not, however, a fraud case. A victim of fraudulent misrepresentation inducing a matrimonial compromise cannot be placed in a worse position than the victim of fraud inducing an ordinary contract or civil settlement.

4. Fraud ordinarily unravels the agreement and the resulting consent order. The only exception arises where the perpetrator proves both that the fraud would not have influenced a reasonable person to agree and that, had the court known the truth at the time, it would not have made a significantly different order. The burden lies on the perpetrator, not the victim.

5. The husband’s dishonesty was material. It affected the experts’ valuation assumptions and the wife’s assessment of the balance between liquid assets and her deferred shareholding entitlement. It was sufficient that the judge would not have made the order when he did had the truth been known. Later events could not cure the fraud retrospectively.

6. Once the order was set aside, the judge could not determine the renewed financial claim within the set-aside proceedings on the evidence then available. The wife was entitled to negotiate a new settlement or obtain a full and fair rehearing with all relevant facts disclosed.

7. The same substantive principles apply whether or not the order has been sealed. Because this order remained unperfected, the trial judge retained power to revisit it. For final orders, Lady Hale further explained that a challenge may be brought by appeal or by application to a first-instance family judge. The powers in section 31F(6) of the Matrimonial and Family Proceedings Act 1984 and rule 4.1(6) of the Family Procedure Rules 2010 permit the family court to entertain a set-aside application based on fraud, mistake or material non-disclosure.

8. Renewed financial proceedings need not begin wholly afresh. Active case management should preserve uncontentious matters, identify the issues affected by the deception and tailor further procedure accordingly.

1. United Kingdom Supreme Court: The wife’s appeal was allowed unanimously. The draft consent order was not to be perfected, and the proceedings were remitted to the Family Division for further directions: [2015] UKSC 60.
2. Court of Appeal: By a majority, the court dismissed the wife’s appeal. Briggs LJ dissented and would have set aside the order because the husband’s fraud was material when the agreement and order were made: [2014] EWCA Civ 95, [2014] 2 FLR 89.
3. High Court, Family Division: Sir Hugh Bennett found that the husband had dishonestly given seriously misleading evidence, but directed that the agreed order be perfected because he considered that the non-disclosure had not ultimately produced a substantially different order: [2013] EWHC 991 (Fam), [2013] 2 FLR 1598.