Sharland v Sharland

JurisdictionEngland & Wales
JudgeLady Hale
Judgment Date14 October 2015
Neutral Citation[2015] UKSC 60
Date14 October 2015
CourtSupreme Court

[2015] UKSC 60


Lord Neuberger, President

Lady Hale, Deputy President

Lord Clarke

Lord Wilson

Lord Sumption

Lord Reed

Lord Hodge


Michaelmas Term

On appeal from: [2014] EWCA Civ 95

Appellant (Sharland)

Martin Pointer QC Peter Mitchell

(Instructed by Irwin Mitchell LLP)

Respondent (Sharland)

Nicholas Francis QC Nicholas Allen

(Instructed by JMW LLP)

Heard on 8, 9 and 10 June 2015

Lady Hale

(with whom Lord Neuberger, Lord Clarke, Lord Wilson, Lord Sumption, Lord Reed and Lord Hodge agree)


What is the impact of fraud upon a financial settlement which is agreed between a divorcing husband and wife, especially where, as will almost always be the case, that agreement is embodied in a court order? Does "fraud unravel all", as is normally the case when agreements are embodied in court orders, or is there some special magic about orders made in matrimonial proceedings, which means that they are different? This case happens to concern a husband and wife in divorce proceedings, but the same questions would also arise in judicial separation proceedings, and between same sex partners who are either married or in a civil partnership in divorce, dissolution or separation proceedings. They entail consideration, in particular, of the leading case on non-disclosure in matrimonial financial proceedings, Livesey (formerly Jenkins) v Jenkins [1985] AC 424 (" Livesey").

The facts

The husband and wife (who are not yet divorced) were married in 1993 and separated 17 years later, in 2010, having had three children together. When their financial proceedings were heard, in July 2012, the children were aged 17, 15 and 12. The wife has been the children's primary carer throughout the marriage and she anticipates that she will remain responsible for the care of their elder son, who has severe autism, for the rest of her life. Sadly, the parties also cannot agree about matters relating to the future care of their son and so there are also proceedings in the Court of Protection about him.


The husband is a computer software entrepreneur. He has developed a very successful software business, AppSense Holdings Ltd, in which he holds a substantial shareholding. The value and manner of distribution between them of this shareholding was the principal matter in dispute between the parties. It was not in dispute that, in addition to that shareholding, there were liquid assets of some £17m, of which around £13.8m was in cash, £2m in the parties' three homes, and the balance in other assets and investments.


It is only necessary to give a brief outline of the dispute about the value of AppSense and the husband's shareholding in it. In early 2011, Goldman Sachs had paid US$70m for a 33.5% share in the company. The wife contended that this valued the company as a whole at around US$255m and the husband's remaining shares at around US$132m. The husband contended that the development of the company was not going according to plan and it was worth far less. Each party instructed a valuation expert. Both valuers approached their task on the basis that there were no plans for an Initial Public Offering (IPO). The wife's valuer concluded that the company as a whole was worth £88.3m (making the post-tax valuation of the husband's shareholding something between £22.24m and £31.9m). The husband's valuer concluded that the company was worth £60m (valuing the husband's shareholding at something between £6.674m and £8.085m).


The case came on for trial before Sir Hugh Bennett in July 2012. The wife's case was that all the assets should be divided equally. She should receive 50% of the liquid assets and 50% of the net proceeds of any sale of the AppSense shares, whenever that took place. The husband's case was that the assets should be divided equally, but that the wife should receive the whole of her share from the liquid assets, leaving him with the unencumbered AppSense shares. He also argued that, if his valuer's view of the value of those shares was not accepted, his special contribution would justify a departure from the principle of equality. However, under cross-examination, he abandoned this second argument, at least in relation to assets acquired during the marriage.


Much of the husband's evidence was about when the value of his shares might be realised. His written evidence was that an exit, although theoretically possible at any time, was unlikely before three, five or seven years after July 2012. He also gave the impression that various exit strategies were being contemplated but only when the time was right. In oral evidence he said that there might be an exit in between three and seven years' time, but that "o]ne thing is for sure – that there's nothing on the cards today".


After the parties had given their evidence, but before the valuers had given theirs, the parties reached an agreement. The wife would receive over £10m in cash and property, and 30% of the net proceeds of sale of the AppSense shares (in the shape of a deferred lump sum), whenever that might take place. They would also set up a trust for their elder son, into which each would pay £1m immediately and the husband would pay £4m from the proceeds of sale of his AppSense shares. The husband would also pay child support for each of the children.


On 13 July 2012, this agreement was explained to the judge, who approved it. A draft consent order was drawn up. Before it was sealed, however, reports appeared in the press indicating that AppSense was being actively prepared for an IPO, which was expected to value the company at between US$750m and US$1000m.


The wife immediately invited the judge not to seal the order and applied for the hearing to be resumed. The husband argued that the judge was functus officio, but the judge rejected that and ordered the husband to file an affidavit responding to the wife's allegation of material non-disclosure. He directed a further hearing, which was listed for 15 April 2013. At that hearing he had before him the wife's application for the hearing to be resumed and the husband's application that the wife show cause why the order reflecting the agreement should not be sealed. He gave judgment on 29 April 2013: [2013] EWHC 991 (Fam), [2013] 2 FLR 1598.


The husband's affidavit, filed in January 2013, continued to deny that there was any imminent prospect of an IPO of AppSense or that he had misled the court in his evidence. The press reports were mere public relations "fluff" put out by one or more investment banks. However, the documents which he exhibited to that affidavit told a very different story. As the judge put it, planning for an IPO in early 2013 had been "in full swing from January to August 2012" (para 29); by early July 2012 the company had sent out invitations to various banks inviting them to pitch for the role of bankers to the IPO; and the husband had been due to and did meet potential bankers the week after the hearing. The husband had knowingly misled both of the expert valuers and his evidence at the hearing had been false. It was "absolutely plain" that the husband's evidence about AppSense had been "seriously misleading" (para 29). "W]hen placed against the documents which he has now disclosed", his evidence "can only be categorised as dishonest". The documents exhibited to his affidavit had not previously been disclosed "because he did not want the wife or the court to know the true facts. He thus gave dishonest evidence, no doubt in the hope that this would lessen his exposure to the court's discretionary powers" (para 31). Had the judge known the true facts, it was "inconceivable" that he would not have regarded them as relevant to the exercise of his discretion. This was not "some relatively trivial minor matter", in the words of Lord Brandon in Livesey. Why would the husband lay a false trail if what was sought to be suppressed was immaterial (para 33)?

The decisions of the High Court and Court of Appeal

The judge having reached that conclusion, it might have been expected that he would direct that the draft consent order agreed in July 2012 not be sealed and give directions for the case to be heard again. Instead, however, he acceded to the husband's application that the order be perfected.


His grounds for doing so were, in summary, that had he known the truth about the plans for an IPO in 2012, he would have asked himself "what is the likelihood of an IPO actually happening?" (para 37); he would have progressed the hearing as far as he could and then adjourned to see whether an IPO did take place, on what terms, at what value and at what price (para 38); as in fact no IPO had taken place (para 40) and the husband's evidence that no IPO was now contemplated had not been challenged, he was compelled to accept that none was now in prospect (para 41); under the draft order, the wife had "by far the greater share of the liquid assets"; she was to make a smaller contribution to the son's trust; and she was to get 30% of the net value of the husband's shares whenever they were realised, although it was "strongly arguable" that the value of the shares "would become less and less of a matrimonial asset in the future"; she took the risk that crystallisation of her entitlement might occur sooner than three years by agreeing to a flat rate of 30% (para 42); and so the order he was now being asked by the husband to make was not substantially different from the order which he would have made had there been full disclosure at the outset; hence the non-disclosure was not now material (para 43).


The Court of Appeal, by a majority, dismissed the wife's appeal: [2014] EWCA Civ 95, [2014] 2 FLR 89. The leading judgment was given by Moore-Bick LJ. In summary, it was clear from Livesey v Jenkins and other cases that the authority of an order...

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