Gohil v Gohil [2015] UKSC 61

Mrs Gohil sought to set aside a 2004 consent financial order on the ground of her former husband's fraudulent non-disclosure of assets. The Supreme Court held that Ladd v Marshall principles do not apply to such applications and reinstated the trial judge's order.

Facts

The parties married in 1990 and divorced in 2004. The husband, a solicitor, claimed in financial proceedings that his ostensible wealth represented assets held for clients and produced a balance sheet showing a net deficit. On 30 April 2004, at an FDR before Baron J, a consent order was made requiring the husband to pay the wife a lump sum of £270,000 and periodical payments. The order contained recital 14, recording the wife’s belief that the husband had not provided full and frank disclosure but that she was compromising her claims to achieve finality.

In 2007, the wife applied to set aside the order on the ground of fraudulent non-disclosure. Meanwhile, the husband was convicted in 2010-2011 of money-laundering offences (relating to assistance given to a Nigerian state governor, Mr Ibori) and sentenced to ten years’ imprisonment, with confiscation proceedings under the Proceeds of Crime Act 2002 commenced against him.

Moylan J heard the wife’s application over eight days and, on 25 September 2012, set aside the dismissal of her remaining capital claims. He relied partly on evidence drawn from the criminal trials. Subsequently, the Court of Appeal held (in separate proceedings) that material obtained under the Crime (International Co-operation) Act 2003 was inadmissible in the family proceedings. The Court of Appeal then allowed the husband’s appeal against Moylan J’s order, holding that Moylan J had wrongly applied the Ladd v Marshall principles, but that those principles nonetheless applied to limit the evidence the wife could adduce.

Issues

The principal issue was whether the principles in Ladd v Marshall [1954] 1 WLR 1489, governing the admissibility of fresh evidence on appeal, have any relevance to the determination of a spouse’s application to set aside a financial order in divorce proceedings on the ground of fraudulent non-disclosure.

Subsidiary issues included: (i) the jurisdiction of the High Court to set aside its own financial orders; (ii) the legal effect of a recital such as recital 14; and (iii) whether, given the inadmissibility of evidence obtained under the 2003 Act, Moylan J’s order could be reinstated or whether a rehearing was required.

Arguments

Husband

The husband argued (i) that the High Court lacked jurisdiction to set aside its own orders by reason of section 17 of the Senior Courts Act 1981 (an argument not ultimately pressed); (ii) that recital 14 disabled the wife from complaining of non-disclosure; (iii) that the Ladd v Marshall principles applied to the admissibility of the wife’s evidence before Moylan J; and (iv) that any post-2005 assets were the product of his criminal activities and not probative of non-disclosure in 2004.

Wife

The wife contended that the husband had been guilty of material non-disclosure of resources in 2004 and that the Ladd v Marshall criteria had no relevance to her application. She relied on extensive evidence from the husband’s father concerning properties, vehicles and bank accounts, and on transactions in the Odessa account inconsistent with the husband’s earlier disclosure.

Judgment

Ladd v Marshall

Lord Wilson (with whom the other Justices agreed) held that the Ladd v Marshall principles have no relevance to an application to set aside a financial order on the ground of fraudulent non-disclosure. The criteria are evidential, designed for the unusual situation of a party seeking to adduce fresh evidence on appeal following a trial. Applied to a first-instance set-aside application, the first criterion (reasonable diligence) is misconceived because the hearing is the spouse’s first opportunity to adduce evidence. Critically, the burden of disclosure lies on the spouse with the resources; the other spouse should not be penalised for not having unearthed undisclosed assets earlier.

Recital 14

Such a recital has no legal effect in the context of a financial order in divorce proceedings. A spouse owes a duty to the court (not merely to the other spouse) to make full and frank disclosure under Livesey (formerly Jenkins) v Jenkins [1985] AC 424. One spouse cannot exonerate the other from that duty. The reasoning in Hayward v Zurich Insurance does not extend to matrimonial non-disclosure cases.

Jurisdiction

While the jurisdictional point was not pursued, the Court observed that the Court of Appeal is an inappropriate forum for fact-finding on disputed non-disclosure issues and endorsed the Family Procedure Rule Committee’s conclusion that the High Court and family court have power to set aside their own orders, with applications to be made at the level of judge who made the original order.

Reinstatement of Moylan J’s order

Although Moylan J relied on inadmissible evidence obtained under the 2003 Act, the Supreme Court held that, on the admissible evidence alone, he would still properly have found material non-disclosure. The father’s evidence concerning the Bhayander and Ashoka flats, the Mercedes, the BMW proceeds transferred to Hempton, the Banque Indosuez account and the Odessa account ownership was highly significant. The evidence regarding transactions in the Odessa accounts in 2007 (inconsistent with the husband’s claim that they were depleted) and the purchase of the Raj Classic flats in Mumbai, combined with the husband’s failure to explain the source of funds, justified adverse inferences. The Court relied on Lord Lowry’s statement in R v Inland Revenue Comrs, Ex p TC Coombs & Co [1991] 2 AC 283 (quoted in Prest v Petrodel):

In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence.

Lord Neuberger, agreeing, set out three alternative tests for reinstatement, all of which he considered satisfied: that Moylan J would have reached the same conclusion absent the inadmissible evidence; that the appellate court could safely so conclude on the admissible evidence; and that any judge on rehearing could only realistically reach that conclusion. He noted that Moylan J had described aspects of the husband’s evidence as to put it mildly, unconvincing and inconsistent.

Implications

The decision establishes that Ladd v Marshall has no application to first-instance applications to set aside financial orders for fraudulent non-disclosure. The duty of full and frank disclosure owed to the court in matrimonial financial proceedings is paramount and cannot be circumvented by recitals recording the receiving spouse’s scepticism. Practitioners advising parties to include such recitals as a protective device should appreciate that they carry no legal weight in this context.

The judgment confirms (alongside Sharland v Sharland [2015] UKSC 60, handed down the same day) the robust approach the courts will take to fraudulent non-disclosure. It also clarifies procedural matters: the High Court and family court have power to set aside their own financial orders, and such applications should be made to the court (and judicial level) that made the original order, not by way of appeal to the Court of Appeal, which is institutionally unsuited to extensive fact-finding.

The Court also confirmed that adverse inferences may legitimately be drawn against an uncommunicative spouse who fails to explain the origin of assets, building on Prest v Petrodel Resources Ltd. The wife’s substantive claim was remitted to Moylan J, with the practical complication that the husband’s assets may overlap with those subject to confiscation proceedings under the Proceeds of Crime Act 2002, and the court will ordinarily decline to transfer property representing the proceeds of crime (citing CPS v Richards).

Verdict: Appeal allowed. The Supreme Court set aside the order of the Court of Appeal dated 13 March 2014 and reinstated the order of Moylan J dated 25 September 2012, which had set aside the dismissal of the wife’s remaining capital claims under the consent order of 30 April 2004. The wife’s claim for further capital provision is to proceed before Moylan J.

Source: Gohil v Gohil [2015] UKSC 61