Sharland v Sharland
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lord Justice Briggs,Lady Justice Macur |
| Judgment Date | 10 February 2014 |
| Neutral Citation | [2014] EWCA Civ 95 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 February 2014 |
| Docket Number | Case No: B6/2013/1328 |
[2014] EWCA Civ 95
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE (FAMILY DIVISION)
Sir Hugh Bennett
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-bick
Lord Justice Briggs
and
Lady Justice Macur
Case No: B6/2013/1328
Mr. Patrick Chamberlayne Q.C. and Mr. Peter Mitchell (instructed by Irwin Mitchell) for the appellant
Mr. Nicholas Francis Q.C. and Mr. Nicholas Allen (instructed by JMW Solicitors LLP) for the respondent
Hearing date: 16 th December 2013
Approved Judgment
This is an appeal against the order of Sir Hugh Bennett dismissing the application of the appellant wife to resume the hearing of her claim for financial provision following her divorce from the respondent.
The claim had come on for hearing before Sir Hugh in Liverpool on 9 th July 201On 13 th July, by which time both the husband and the wife had given evidence, the parties were able to reach agreement and the hearing was brought to an end. By 25 th July the terms of a draft order had been settled and approved by the judge. However, on 30 th August the wife's solicitors made an urgent request to the court not to seal the order and in due course the wife made an application to resume the hearing of her claim on the grounds that her agreement to the proposed order had been obtained by fraudulent non-disclosure on the part of the husband. The matters which it was said he had failed to disclose concerned arrangements then being made to float on one of the New York stock exchanges by means of an initial public offering ("IPO") a successful company, AppSense Ltd, (referred to by the judge as "X Co.") of which he owned about two thirds of the shares.
The parties' positions at the outset of the hearing were described by the judge as follows:
"8. At the hearing last July the broad thrust of the parties' cases was as follows. There was no dispute about the 50/50 split of all the matrimonial assets. The real battleground related to the husband's shareholding in [AppSense] The husband's case was that he should retain all of his shares in X Co, that after the parties' separation and in to the future the business assets were non-matrimonial in that he would be building them up until X Co was floated (i.e. IPO) or purchased outright and thus the wife should have no share in the ultimate proceeds. By contrast the wife's case was that the husband's shareholding in X Co was a matrimonial asset and that she should be entitled to 50% of the net proceeds upon disposal whenever that took place i.e. now or in the future, even in 20 years time. The value of X Co was in dispute. The husband asserted that it was worth circa £50m and the wife asserted it was worth circa £75m. Thus on these figures the husband's shareholding was worth either £31.5m or £47.25m, respectively.
9. However, as I understand it, those valuations, certainly by Mr D of KPMG on behalf of the wife, were given on the basis of X Co's future maintainable earnings leading to an EBITDA valuation. It is plain from para 5.3.9 of Mr D's report of 10 February 2012 that he had been told by X Co's Chief Development Officer (CDO) that there was "currently no discussion regarding a public offering of X Co"."
The value of the husband's shares depended in part on when and in what manner he was able to sell them. One, but by no means the only, way in which that might come about, was through an IPO. The husband's evidence at the hearing was that although in theory such a step might be taken at any time, it was most unlikely that there would be an IPO (or any other step leading to a disposal of his shares) in less than 3 years time and probably not until 5–7 years into the future.
It was against that background that the parties reached their agreement which the judge summarised as follows:
"3…. The parties married in 1993 and separated in 2010. They have 3 children, one of whom is T… . .
4. The settlement gave the wife circa £10.355m of cash and properties and the husband about £5.64m worth of cash and properties. The husband is the founder, and owns circa 63% of the issued share capital, of X Co with circa 29% owned by Bank A. In addition the husband agreed to pay the wife a deferred lump sum within 14 days of receipt by him of the cash proceeds of any disposal by him of any of his shares in X Co, having first deducted costs of sale and CGT, then £4m into T's trust, then £1,714,286 to the wife absolutely, and 30% of the remaining balance to the wife. There were then agreed terms relating to transfer of properties and bank accounts, periodical payments for the children and the setting up of a trust for T … "
The wife's application to resume the hearing was based on her discovery that, contrary to what he had said in evidence, the husband had been holding discussions with various investment bankers earlier in 2012 as part of active preparations for an IPO of AppSense.
On 25 th September 2012, on an application by counsel for the wife, the judge directed that the matter be listed before him for further directions. In the meantime he ordered the wife's solicitors to set out in correspondence the directions she sought. The husband was given permission to make and file an affidavit identifying the extent to which he opposed the wife's application; he was also given permission to argue that, since the order had already been made (albeit not sealed), the judge was functus officio and thus had no jurisdiction to entertain the wife's application. The husband made a cross-application for an order that the wife show cause why the order reflecting the agreement reached on 13 th July 2012 should not be sealed.
In a judgment delivered on 11 th December 2012 the judge held that until the order had been perfected by being sealed he retained jurisdiction in the matter, and there is no appeal against that part of his decision. As to the substance of the application, the judge found that the wife's evidence supported a prima facie inference that shortly before the agreement had been made on 13 th July 2012 the husband had made arrangements to meet representatives of three investment bankers in New York in the last week of July to discuss an IPO of AppSense. If that was the case, the husband should have disclosed it in the proceedings which were then still pending. Having considered the speech of Lord Brandon in Livesey (formerly Jenkins) v Jenkins [1985] A.C. 424, [1985] FLR 813, the judge held that the non-disclosure was material and might have affected the eventual outcome of the wife's claim, since an early IPO might have a dramatic effect on the value of the company and the date at which the husband could realise his interest in it. The judge concluded that both the wife and the court appeared to have been badly misled. However, in the absence of evidence from the husband he felt unable to reach a final conclusion. He therefore ordered the husband to make and file an affidavit describing in detail his discussions with the investment bankers in relation to AppSense. In January 2013 the husband filed an affidavit to which he exhibited documents running to 684 pages.
On 13 th February 2013 the wife formally issued an application for an order for directions to enable her claim for financial relief to be resumed, with a view to obtaining an order that there be an equal division of the parties' assets, including the net proceeds of sale of the husband's shareholding in AppSense. The matter came back before the judge on 15 th April 2013. In a judgment delivered on 29 th April 2013 he found that the husband's evidence at the hearing in July 2012 had been seriously misleading, indeed dishonest, because, contrary to his assertion that no disposal of any kind was likely for at least three years, planning for an IPO in early 2013 had been in full swing from January to August 2012. That was of great importance, because, as he said:
"33. In my judgment had I known the facts which I now know it seems to me inconceivable that I would not have regarded them as relevant to the exercise of my discretion. It is true that, had the husband sought to downplay their significance as asserted in his affidavit of January 2013, I would have had to have made findings as to the probability of an IPO in early 2013 actually taking place. But the non-disclosure cannot be described as "some relatively trivial minor matter", see the final paragraph of the speech of Lord Brandon [in Livesey v Jenkins [1985] A.C. 424] at page [445]. The husband in the instant case laid a false trail a) by his dishonest evidence and b) by his failure to disclose the documents exhibited to his affidavit of January 2013. Why lay a false trail, I ask rhetorically, if what is sought to be suppressed is immaterial? The very fact of a) dishonest evidence and/or b) suppression of documents must indicate some materiality as at July 2012."
However, that was not the end of the matter. In the passage in his speech in Livesey v Jenkins to which the judge referred Lord Brandon had said at page 445G-H:
"It is not every failure of frank and full disclosure which would justify a court in setting aside an order of the kind concerned in this appeal. On the contrary, it will only be in cases when the absence of full and frank disclosure has led to the court making, either in contested proceedings or by consent, an order which is substantially different from the order which it would have made if such disclosure had taken place that a case for setting aside...
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