Money Laundering vs Coming Clean
Here is some news that is not going to come as a shock. Not everybody involved in disputes after relationship breakdown is honest in disclosing their financial positions. Despite the fact that the Family Law Act imposes a duty of full and frank financial disclosure, people do not always comply. Part of the job of a good family lawyer is to do his or her best to ensure that disclosure is made, but what happens when it isn't?
The Family Law Act provides that if a court is satisfied that there has been a miscarriage of justice by reason of fraud or suppressing evidence including failure to disclose, false evidence or any other circumstance, then the court orders can be set aside or changed. So if you feel that you have been cheated, you have to show that there was a miscarriage of justice and that it was caused by fraud or suppression of evidence or failure to disclose relevant information or falsity. There are other grounds as well but the purpose of this article is to address dishonesty.
Miscarriage of justice really means that if the truth had been known, the court would have made substantially different orders. It applies if the court is misled or if the other party is misled. So on the face of it, the person who is misled has the job of persuading the court second time around that there was a failure to tell the truth and that it was significant enough to cause a substantial difference in outcome if the truth had been known.
Two recent cases from England have made potentially a substantial difference to the law there and it is one that perhaps might be considered here. Both cases were heard at the same time. I am indebted to Farrer & Co, leading London lawyers, for a report on the two cases of Sharland & Sharland and Gohil & Gohil. Both judgments were delivered at the same time by the highest court in the UK, the Supreme Court. Mr Sharland was a multimillionaire software developer. He told the court and his ex that his shares in a company were worth £31.5million. What he didn't say was that he was pursuing a public float of the company and that this valued the company at over £600million.
Mr Gohil had bad luck all around. Not only was his family law property settlement ripped up but he was gaoled for ten years for fraud and money laundering. During his criminal trial the prosecution found he was worth at least £35million, which is a lot more than he had told his ex wife.
Both wives asked the court to set aside the previous orders. The court did this but in doing so, it took a new step. The Supreme Court distinguished between intentional fraudulent disclosure and accidental, innocent, or negligent disclosure. If the court found that the nondisclosure was intentional, the deceived party no longer had to convince the court that there had been a miscarriage of justice: the burden of proof flipped. It was the dishonest party that then had to show the court two things:
The fraud would not have influenced a reasonable person to agree to the orders; and
Had the court known the right information, the order would not have been significantly different.
This is a really tough stand against dishonest divorcing parties. That does not apply here, because on the face of it, the person applying to set aside court orders still has to prove the miscarriage of justice and the reason why it occurred.
In the next article I want to discuss the effect of fraud or failures to disclose information on prenuptial agreements or financial agreements and whether the burden of proof can be flipped in those circumstances.
In the meantime, the English courts have taken a step in favour of transparency and honesty.
