Cambridge Family Law Practice

The former-wife of a successful lawyer has persuaded the Family Court to set aside the financial settlement reached during her divorce, following lengthy proceedings, because he failed to disclose details of a possible sale of a company which impacted its value. The sale did take place and the company was sold for nearly £12.5 million.

Sitting in the Central Family Court, Her Honour Judge Gibbons noted that this was:

“…more than double the value attributed to it at final hearing, in circumstances where: (a) the husband had argued at trial that his shareholding was illiquid and that he could not sell it; (b) the trial judge found that the husband had no intention of selling the company for a few years until retirement; and (c) it is alleged that the husband failed to disclose steps taken in respect of a potential sale in the seven month period between the closing of evidence and the sealing of the final order.”

The company represented more than half of the couple’s wealth. The ex-wife also alleged the husband had transferred shares held in the names of their children onto the market and then bought some of these, thereby increasing his own holdings.

According to Judge Gibbons:

“It is alleged by the wife that this took place at the conclusion of a lengthy and deliberate process engineered by the husband which began prior to judgment [in their divorce] being handed down and was contrary to the husband’s stated intentions.”

This, her legal team successfully argued, undermined the “fundamental basis” on which the financial order had been reached. Unsurprisingly the husband denied these claims and insisted that any omissions had not been central to the settlement and had not therefore invalidated it.

After contemplating the evidence, Judge Gibbons noted:

“The wife says, and I accept, that had she known even that husband was considering a sale of the company, or indeed testing the market, she unquestionably would have pursued this and put her case [in the original divorce negotiations] differently… she would have wanted to take stock, the Court would have been informed and the pause button would have been pressed.”

Failure to disclose his plans for a sale must have been deliberate, Judge Gibbons concluded. The husband was:

“…a highly intelligent lawyer with considerable business acumen. I cannot accept that he genuinely believed that he was not under a duty to disclose this information or that it did…it is inconceivable, in my judgment, that the husband did not give thought to, and conclude, that the signing of the [sale] mandate was highly material [relevant to the case] and disclosable.”

The husband could not demonstrate that a different financial settlement would not have been reached had he disclosed his sales plans. In addition, his diversion of the shares allocated to the couple’s children represented additional value and that also had to be taken into account for a fair financial settlement. Consequently the Judge ordered that the financial order reached during their original divorce negotiations be set aside and the total value of the value of the couple’s assets be reassessed in order to reach a new settlement.

She declared:

“…a line now needs to be drawn under this litigation.”

Simon Bethel, one of the Partners here at Cambridge Family Law Practice, notes that: “This judgment is one of several that have recently been published relating to the issue of set aside. It is often helpful to lawyers to be reminded of how principles of law are applied in practice, and when it comes to non-disclosure cases it’s very helpful for the public to see the importance of the duty of full and frank disclosure in financial remedy proceedings ‘in action’. A failure to disclose material facts to the Court is likely to remain an issue in the future, and could well be costly in two respects: the husband in this case had to pay his former wife an additional sum in excess of £2m, and was also ordered to pay a contribution towards her legal fees of more than £225,000.”

Read the full ruling here.