The news on 14 October 2015 that two ex-wives had secured victory in the Supreme Court over their ex-husbands’ non-disclosure of assets should send out a strong message to divorcing spouses – if you are not honest about your financial circumstances any settlement can be set aside.
The cases of Varsha Gohil and Alison Sharland were heard together by seven judges of the Supreme Court. The two women claimed that their ex husbands had not been truthful as to the value of their assets during the original divorce proceedings.
The scenarios were very different. Mrs Gohil had accepted capital of £270k by agreement in full and final settlement in 2004. Mrs Sharland’s case was at the other end of the spectrum. In 2012 she received capital of £10.4million and a 30% share in her husband’s company. The company was valued in the proceedings at between £31m and £47m; the financial press valued it a few weeks later at £600m. Mr Gohil was a convicted money launderer whose true value was stated in criminal proceedings to be £35m.
The common ground in both cases was that the husbands had not complied with the duty of “full and frank disclosure”. This duty applies in every financial case arising out of divorce and is ongoing; this is extremely important is litigation can go on for months, if not years.
Even if a settlement is agreed and obtaining a court order is just a formality, both parties have to complete and sign a document containing a “statement of truth”. It is very clear on any court document that if it is signed and the person signing is later found to be lying, they could be sent to prison for contempt of court.
Solicitors have professional duties to their client and to the court. These can conflict. In a divorce case a conflict will arise between the solicitor and the client if the client tells the solicitor they intend to hide assets from their spouse.
Professional standards for solicitors are contained in the Solicitors’ Regulation Authority Handbook. The Solicitors Code of Conduct sets out ten principles with which solicitors must comply. They include a duty to:
– uphold the rule of law and the proper administration of justice; and
– act in the best interests of each client
The principles are expanded upon in outcomes which solicitors are expected to achieve to ensure they comply with the principles.
One outcome is that solicitors must not attempt to deceive or knowingly or recklessly mislead the court and cannot be complicit in another person deceiving or misleading the court.
A solicitor’s duty to act in the client’s best interests includes the duty of confidentiality.
If a client tells their solicitor they have assets but they do not want to disclose these to the court and (necessarily) their ex, the solicitor’s duty of confidentiality conflicts with their duty not to mislead the court.
The Solicitors Code of Conduct is clear in that the principle which takes precedence is that which best serves the public interest in the proper administration of justice. In practice this means that a solicitor’s duty not to mislead the court is higher than the duty to the client.
In this situation the solicitor has conflict of interest and has to tell the client that they cannot continue to act for them.
This is not to say in any way that the solicitors for Mr Gohil and Mr Sharland continued to act when they should not have. The fact of the matter is that if a spouse is intent on deceiving the court, they will be careful not to let on to their solicitor either.
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