Sharland v Sharland

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 2012. On 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 can possibly be made good. Parties who apply to set aside orders on the ground of failure to disclose some relatively minor matter or matters, the disclosure of which would not have made any substantial difference to the order which the court would have made or approved, are likely to find their applications being summarily dismissed, with costs against them, or, if they are legally aided, against the legal aid fund.”

The judge considered that he was bound to apply that observation and ask himself whether the absence of full and frank disclosure had led him to make an order substantially different from that which he would have made if such disclosure had taken place. Having referred to the state of preparations for an IPO in July 2012 as disclosed by the husband, he said:

“38.

I cannot see how I could have done anything else but to have progressed the hearing as far as I could and then adjourn to wait to see (i) whether an IPO in early 2013 did take place (ii) what were its terms (iii) what value did X Co float at (iv) what price per share was offered and taken up and (v) what were the terms of any lock-in in relation to when the husband (the founder, majority shareholder and driving force of X Co) could realise his shareholding and whether in one complete block or in parcels over a period of time. The merits of this course of action would have been to achieve as much certainty and eliminate as much speculation as possible. If an IPO had taken place the facts relating to it would be known and I could then have proceeded safely upon that basis.

39.

If, by contrast, I had proceeded with the hearing and tried to divine the likelihood of an IPO taking place in early 2013, and all of its terms, I am confident that such an exercise would have been perilous, and would have run the risk of an order then being made upon a premise that could turn out to be false. i.e. that no IPO did in fact take place or that its terms were significantly different from what I might have divined them to be.

40.

If, therefore, I had adjourned the proceedings in July 2012 to await developments, then it is plain that no IPO has taken place. Subsequent events have shown that whatever was going on in July 2012 and before in relation to an IPO in early 2013, did not result in any IPO.”

That made it necessary in turn for the judge to ask himself what order he would have made in April 2013, given his then state of knowledge, and to compare it with the order that had resulted from the parties’ agreement. As to that he said:

“42.

What do the Heads of Agreement of July 2012 translated into the draft unsealed order give the wife? First, she has by far the greater share of the liquid assets. Second, her contribution to T’s trust is far less than the husband’s. Third, the wife is entitled when the husband disposes of any of his shares to a further lump sum but much more importantly to 30% of the balance of the net proceeds as per paragraph 5 of the draft order. Thus, an enquiry as to the likely value of X Co and/or its shares is eliminated. Critically, the wife will receive her 30% whenever the husband realises his shares. The husband is now 52. The parties separated in September 2010, 2½ years ago. If he continues in X Co until he is 60 or 65 and then realises his shareholding it could be strongly argued that, whatever share the wife may have been entitled to in these shares as at either September 2010 or July 2012 (let me assume 50%), has been diluted to a considerable extent by the work the husband put into the company thereafter. The husband’s shares would become less and less of a matrimonial asset in the future. But the wife nevertheless is entitled to a flat rate of 30%. The wife took the risk that the crystallisation of her entitlement might occur sooner than 3 years by agreeing to a flat rate of 30%.

43.

I thus conclude that any order which would have been made if proper disclosure had taken place would not have been substantially different from the heads of agreement incorporated into the draft, unsealed order which I approved. Accordingly, notwithstanding that the husband is guilty of non-disclosure, in all the circumstances I conclude that the non-disclosure was not material. Accordingly it follows that the wife’s application is dismissed. . . ”

The wife now appeals against that decision.

Although Mr. Chamberlayne Q.C. made a number of criticisms of the judgment, his main submission was that the wife had been tricked by the husband into compromising her claim for financial provision and should not therefore be held to the agreement. Had the husband given full and frank disclosure, he said, the wife would have ‘raised her sights’ (echoing the words of Thorpe L.J. in Bokor-Ingram v Bokor-Ingram [2009] EWCA Civ 412, [2009] 2 F.L.R. 922 at paragraph 17). The effect of the judge’s decision was to decide what was reasonable provision for the wife without giving her an opportunity to investigate the position fully by cross-examining the husband on his affidavit. In those circumstances it was wrong of him to accept the husband’s assertion that an IPO was no longer imminent. The judge should have re-opened the hearing and allowed her to argue the position fully.

Mr. Francis Q.C. for the husband was in the unenviable position of seeking to defend the position of a man who had lied to the court and misled both the wife and the judge. However, he submitted that the judge had applied the law properly and had been entitled to reach the conclusion that the order based on the compromise agreement was substantially no less favourable to the wife than that which would have been made if there had been full and frank disclosure and the case had been allowed to proceed to its conclusion.

In this case the wife is seeking to set aside the order made below by Sir Hugh Bennett, which, although not sealed, was nonetheless an effective order of the court. Accordingly, as the judge recognised, the starting point for any discussion of this question is the speech of Lord Brandon of Oakbrook in Livesey v Jenkins. In that case the parties to divorce proceedings had compromised the wife’s claim for financial provision, the terms of their agreement being embodied in a consent order. Within a week of the agreement, and before the consent order had been made, the wife became engaged to be married to another man and the marriage took place a few weeks later. On learning of his wife’s re-marriage the husband sought to set aside the consent order. The House of Lords held that the obligation to make full and frank disclosure of all relevant circumstances continued until the order had been made, that the wife’s engagement should therefore have been disclosed and that the order should be set aside.

The only reasoned speech was given by Lord Brandon, who at page 435D-H emphasised four matters, three of which are of direct importance to the present case. The first is that the court’s power to make orders for financial provision are derived solely from the relevant statutory provisions. The second is that no distinction is to be drawn for this purpose between orders made following a disputed hearing and orders made by consent of the parties; in each case the court is exercising the same statutory power. The third concerns the powers of registrars and does not bear on the present case. The fourth, which does, is that, when the court embodies in a consent order terms agreed between parties, the legal effect of those terms is derived from the order itself rather than the parties’ agreement. These principles underpinned his conclusion at page 436H-437A that the court cannot properly exercise its statutory powers unless it has been provided with full information about all the relevant circumstances, which in turn requires the parties to give full and frank disclosure.

It follows that an agreement to compromise a claim for ancillary relief cannot be treated as a simple contract between the parties to which each is bound, as would be the case with a compromise of a claim to enforce private rights. Thus, in Xydhias v Xydhias [1999] 1 FLR 683 Thorpe L.J. (with whom Stuart-Smith and Mummery L.JJ. agreed) was able to say at page 691D-E that “an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law” and (at page 292F-G) that “the payer’s liability cannot be ultimately fixed by compromise as can be done in the settlement of claims in other divisions”. The existence and terms of any compromise are, of course, likely to weigh heavily with the court when deciding whether to make an order, and if so in what terms, but the court is not bound by it and will take into account any circumstances affecting its fairness of which it has become aware. However, these principles cut both ways. Just as the wife in Xydhias v Xydhias could not treat the compromise as binding on the husband, so in this case misrepresentation by the husband of a kind that would ordinarily entitle the wife to rescind a contract does not necessarily entitle her to renounce the agreement and resume the proceedings. The judge had made his order when he gave his approval to the draft placed before him and, although he retained the power to set it aside or vary it until it had been sealed, it was necessary for the wife to satisfy him that he should do so.

The circumstances in which the court can properly set aside a consent order were also considered in Livesey v Jenkins. In that case the order had been perfected and could not have been set aside by the judge who made it. In the present case, however, the order had not been perfected, so the judge had power to set it aside himself, but in my view nothing turns on that, since an order of the court is effective as soon as it is pronounced. In this case the consent order became effective as soon as the judge indorsed the draft submitted by the parties for that purpose, so the question for him was whether in the exercise of his discretion he should set it aside. In Livesey v Jenkins Lord Brandon was of the view that the circumstances which had not been disclosed (i.e. the wife’s engagement to be re-married) undermined the whole basis on which the consent order had been agreed and he was satisfied that the order should therefore be set aside. However, he does not appear to have considered that such an outcome should follow in all cases, since, in the passage at page 445G-H to which I have referred, he emphasised that an order obtained in the absence of full and frank disclosure should be set aside only in cases in which the court has been led into making an order substantially different from that which it would have made if proper disclosure had taken place. Mr. Chamberlayne’s submission that the court should set aside the order whenever it is satisfied that proper disclosure might have led to a different outcome, unless the respondent can persuade the court that no purpose would be served by doing so, is not in my view consistent with that passage in Lord Brandon’s speech.

One distinction that can be drawn between this case and Livesey v Jenkins is that the husband did not merely fail to disclose matters relating to AppSense; he deliberately and dishonestly concealed them. Does that make a difference? Despite the powerful views expressed by Briggs L.J., whose judgment I have had the benefit of reading in draft, I do not think so. Both parties are under a duty to give full and frank disclosure of all circumstances that might have a bearing on the court’s decision, an obligation which is not dissimilar to the obligation of disclosure in connection with a contract uberrimae fidei. It follows that a failure to give such disclosure, whether innocent, negligent or deliberate, is a serious abuse of the process sufficient to engage the court’s remedial jurisdiction. The court’s power, in an appropriate case, to set aside an order, whether made by consent or otherwise, obtained following non-disclosure is broad enough to enable it to deal with the whole range of cases and provides the principal remedy for the default, whatever form it may take. It follows that a failure to disclose relevant circumstances, although not equally culpable in all cases, has the same effect in relation to any order affected by it. Although in Livesey v Jenkins the House was not concerned with a case of fraudulent non-disclosure, it cannot have escaped Lord Brandon’s attention that in many cases a failure to disclose relevant circumstances will in fact involve the deliberate withholding of information thought to be damaging to the interests of the party which holds it. When parties have the benefit of legal representation inadvertent failures to make proper disclosure should be relatively rare. As a result, non-disclosure is most likely to occur because a party has chosen to withhold information from his or her lawyers with a view to promoting his or her own interests. It would be surprising if Lord Brandon had confined his analysis intended to the relatively uncommon cases of inadvertent non-disclosure and I do not think he intended to do so. Fraud would provide an additional ground for rescinding the compromise if the agreement had had contractual effect, but, as the cases show, it did not. The critical factor, as Livesey v Jenkins shows, is the effect of the non-disclosure on the court’s own decision embodied in its order. Deplorable though his conduct may have been, I do not think that the husband’s dishonesty adds anything of significance to the case, although it may be a matter to be taken into account when the court comes to consider the question of costs.

In the light of Lord Brandon’s observation the judge was in my view right to ask himself whether the husband’s non-disclosure had resulted in an order substantially different from that which he would otherwise have made and for that purpose to consider what order he would have made if the claim had been fought to a conclusion. The argument that the wife would have ‘raised her sights’ is not, in my view, very persuasive in this case. In Bokor-Ingram the prospects of the husband’s new employment at a substantially higher rate of remuneration was a matter which, in the view of this court, should have been disclosed. If it had been, it should have led to the adjournment of the proceedings to await developments, since, if he was successful, the wife could obviously have expected a more generous award. The present case is rather different, because the real question at issue was what proportion of the value of the husband’s shareholding in AppSense the wife should receive. The argument that the wife would have ‘raised her sights’ therefore amounts to little more than saying that the parties might have compromised the claim on terms more favourable to her. So they might, but they might equally well have not and there was no basis on which the judge could have decided that question. Mr. Chamberlayne submitted that the wife had been induced to give up 20% of the value of the shares in return for a greater share of the liquid assets and would not have done so if she had had access to information which suggested that the company was worth much more than her advisers thought. However, I do not see how the judge could determine what position either of the parties would have taken in negotiations or what the outcome would have been. What he had to, and could, decide was whether he would have made a substantially different order if the facts had been disclosed. That is an essential element of the test for setting aside an existing order because it is for the court, not the parties, to determine what order should be made. The wife was not entitled to resume the hearing simply to have the opportunity of negotiating a better settlement in the light of the additional disclosure.

Mr. Chamberlayne’s two most attractive submissions were that the wife had been tricked into an agreement that she would not otherwise have made and that in the absence of a full trial, at which the husband could be cross-examined about his plans for realising the value of his shares in AppSense, the judge was not in possession of sufficient information to enable him to reach any reliable decision about what order he would have made at the conclusion of the hearing. In other circumstances these two arguments might have been very powerful, but they have to be viewed in the context of the way in which the case had developed. Although the value of the husband’s shares in AppSense might depend on when and how they were realised, the real dispute was not about their value but about what proportion of their value the wife should receive. As time passed the extent to which the shareholding could be regarded as a matrimonial asset would reduce and with that in mind the judge had already raised with counsel the possibility of granting relief on a tapering basis, thereby reducing the wife’s share over time. The wife had been led to believe that no disposal was imminent. On that basis she agreed to accept 30% of the value of the shares whenever realised. If AppSense had been successfully floated in early 2013, she could have said with some justification that she had been tricked into making a disadvantageous agreement, but as things stood in July 2012 there was sufficient uncertainty for the judge to have waited to see how things developed before making any order and in the event an early flotation did not take place.

By April 2013 the judge was in a position to see that there had been no IPO or any other disposal and that none was imminent and even if an IPO were to made at some time in the future, it was unlikely that the husband would be able to realise the whole value of his shareholding immediately. The judge explained his assessment of the position in paragraph 42 of the judgment, to which I have already referred. In my view he had ample information to enable him to assess the extent to which it was reasonable for the wife to share in the value of AppSense. That did not depend on the husband’s particular plans for the future of the company, but primarily on the passage of time. A tapered award might well have produced a less beneficial outcome than a simple award of 30%. Mr. Chamberlayne complained that by refusing to resume the hearing the judge had deprived the wife of the opportunity of challenging in cross-examination the husband’s assertion that there were no immediate plans for an IPO, but in my view there is nothing in that point. The sooner the husband was likely to dispose of his shares the stronger would be the wife’s claim to an equal share of the proceeds and the stronger, therefore, her argument that the order should be set aside and the hearing resumed. Any challenge to the husband’s evidence about his plans for the company should have been made at the hearing; the wife should have applied to cross-examine him on his affidavit there and then.

Mr. Chamberlayne also criticised the judge for holding that the husband’s non-disclosure had not significantly affected the outcome, despite having accepted in the judgment he delivered on 11^th December 2012 that it was prima facie material. However, it must be borne in mind that the judge’s task on that occasion was not to decide whether the hearing should be re-opened, but whether the husband should be ordered to file an affidavit responding to the wife’s evidence and for that purpose he needed to be satisfied only that she had made out a sufficiently strong case to justify the order she was seeking. He was therefore dealing with a different question and his observations on the merits of the wife’s substantive application were intended to be no more than provisional, as I think he made clear.

It may be unusual for a judge to conclude that despite a deliberate failure by one party to give full and frank disclosure the resulting order should not be set aside, but ultimately that must depend on the nature of the non-disclosure and its effect on the outcome of the proceedings. In this case the husband’s non-disclosure was deliberate and dishonest, but because of the rather unusual circumstances there were good reasons for concluding that it had not resulted in an order significantly different from that which the court would otherwise have made at the conclusion of the proceedings. In my view the judge was entitled to hold that the wife had not made out sufficient grounds for re-opening the hearing. That called for an exercise of judgment on his part and in my view his decision was one that was open to him.

I would therefore dismiss the appeal.

I have reached the opposite conclusion, and would have allowed this appeal. Since I find myself in a minority, and since my Lord and my Lady have in substance concurred with the reasoning of a judge with great experience in these matters, I shall explain my reasoning as briefly as I can.

I gratefully accept the whole of my Lord’s summary of the facts, of the important procedural history of this matter and, subject to one point, of the applicable law. In particular I accept that an order for financial provision upon divorce made by consent is importantly different from a consent order made in ordinary civil proceedings, for all the reasons given by Lord Brandon in the Livesey case, and summarised by my Lord in paragraph 18 of his judgment. It is an order made solely pursuant to statutory powers, in which the parties’ agreement plays an important part, but one which falls short of binding contract. I agree that it follows that the principles which apply to an application to set such an order aside are not simply to be equated with those applicable to the setting aside of a contract.

For the purposes of explaining my reasons, the relevant facts can be summarised very briefly. Much the largest family asset in issue was the husband’s shareholding in AppSense. There was a large dispute between the experts as to its value, but they proceeded upon the assumption that no IPO was imminent, or under consideration. The husband maintained both before, and in evidence during, the trial that no IPO was imminent or likely in the near future. It has now been established (and is not challenged on this appeal) that this was a fraudulent misrepresentation by the husband both to the wife and to the court about a matter highly material both to the value of the husband’s shareholding, and to the time at which it might be realised.

The husband’s fraudulent misrepresentation was material both to the agreement and to the consent order for two reasons. The concealment that preparation for an IPO was then in full swing undermined the basis upon which his shareholding in AppSense had been valued, and therefore the ability of the wife to address the proportionality of agreeing a discount below her claimed 50% of his shareholding against the receipt of a larger share of the other family assets. Secondly, it created a false basis for the wife to assume, as the judge had by then warned, that a deferred realisation by the husband of his shareholding might justify a tapered reduction in her entitlement to share in the proceeds, upon the ground that the value later realised could not properly be described as entirely family property. Further, as the judge pithily observed in paragraph 33 of his judgment, the very fact that the husband dishonestly concealed the planning for the IPO, both by his evidence and by failing to disclose relevant documents, effectively demonstrated the materiality of the non-disclosure or, as I consider better describes it, his fraud.

That the husband had fraudulently misrepresented material matters both to the wife and to the court was sufficiently demonstrated by the contrast between his evidence during the part-heard trial and the affidavit later sworn by him pursuant to the judge’s order, without the need for any cross-examination upon the contents of that affidavit.

The same affidavit purported to suggest however that, by April 2013, the IPO planned during the previous year had been aborted, and that a further IPO was no more imminent, or likely in the short term, than the husband had falsely suggested in July 2012. For the purpose of her application to set aside the judgment, and obtain a re-hearing of her claim for financial provision, the wife chose not to investigate that assertion, either by cross-examination of the husband on his affidavit, or by seeking further documentary disclosure. Mr. Chamberlayne QC told us that those matters would have been pursued, had she obtained an order for a re-hearing.

Having decided that, viewed as at July 2012, the husband’s dishonest non-disclosure fell entirely outside that category of “relatively minor matter or matters” referred to in the final paragraph of Lord Brandon’s speech in the Livesey case, the judge nonetheless considered that the same paragraph fell to be re-applied in April 2013, leading to his conclusion that, by then, the original non-disclosure had ceased to be material.

In my view the judge’s earlier conclusion that the husband’s fraud undermined both the parties’ agreement and the consent order which followed ought to have been the end of the matter, and to have led to the setting aside of the consent order, and an order for a new (or perhaps resumed) hearing. I consider that the second stage of the judge’s analysis, by reference to the apparent position as at April 2013, leading to his conclusion that the consent order should not be aside, involved three errors of law or principle. The first is that it underrated the significance of the fact (as he had found) that the husband’s conduct was fraudulent. The second is that he wrongly derived a special rule or principle from the final paragraph of Lord Brandon’s speech in the Livesey case, or at least misapplied it. The third is that he overrode the wife’s right to a fair hearing of her claim, in circumstances where her consent to a settlement had been vitiated by fraud, by an essentially summary determination of the relevant facts, on the basis of an affidavit from the dishonest husband which had only been ordered to be sworn to enable the court properly to determine whether there had been a material non-disclosure in the first place, and which was deployed only in the context of an interim application for a re-hearing. I will deal with each of those points in turn.

I consider that the now undisputed fact that the husband’s conduct was fraudulent is a cardinal aspect of this appeal. The general principle that ‘fraud unravels all’ is, as far as I am aware, no less applicable to judgments and orders of the Court than to contracts. Although there has been long-standing debate about how it should properly be litigated, (for which see the useful summary of this court in Owens v Noble [2010] EWCA Civ 224), it has never been in doubt that once it is established that a judgment or order has been procured by a process involving material fraud, then the interests of justice require that the judgment be set aside. By ‘material fraud’ I mean fraud which, as in the present case, was material in the obtaining of the judgment sought to be set aside, in this case the consent order approved by the judge on 25^th July 2012.

The fact that non-disclosure or misstatement is fraudulent is not merely relevant to materiality. It means that the process by which the judgment was obtained involved a serious abuse of process. There is a public interest in the protection of the court’s processes from fraud which transcends other case management considerations, such as finality, economy and speed. I do not by that mean to undermine or disagree with my Lord’s conclusion that non-disclosure in these or comparable circumstances in civil proceedings will almost always involve some abuse of process, but there remains in my view a step-change in gravity between that which is shown to be dishonest and that which is not.

I consider that the court should be very slow to depart from that healthy principle. I am aware of no case before this one where such a departure has occurred. In the present case the husband has sought to hold onto an order tainted by material fraud on his part by rearranging his affairs (in this case the affairs of AppSense which he controls) so as to bring them broadly into line, but after the event, with the false picture originally portrayed by him. I have come nowhere near being persuaded that he should thereby have been allowed to do so.

Secondly, nothing in the final paragraph of Lord Brandon’s speech in the Livesey case seems to me to give rise to a principle which requires or even entitles the Court to take that course. The ratio of the Livesey case lies in the earlier opinion of Lord Brandon that:

“Since the fact which was not disclosed undermined, as it were, the whole basis on which the consent order was agreed, that order should be set aside and the proceedings for financial provision and property adjustment remitted to the Family Division of the High Court for rehearing by a judge of that Division.”

The House of Lords was concerned in that case with simple non-disclosure. The wife had become engaged to be re-married after the settlement agreement had been made, but before the Court order which reflected that agreement had been applied for or made. There was no allegation of fraud. The order was set aside because the disclosure duty persisted beyond the date of the settlement agreement, until the order was made, so as to enable the court to consider whether to approve the agreement on the basis of all material facts then available.

My reading of Lord Brandon’s speech is that he was delivering a sensible warning against the use of trivial non-disclosure for seeking to set aside orders for financial provision, by reference to a sensible test requiring it to be shown only that, but for the non-disclosure, a substantially different order would have been made than that which was made, at the time when the order sought to be set aside was in fact made. He was proposing a single comparison between triviality and materiality, as at the date of the order sought to be impugned. He was not, on the facts of that case, concerned at all with the unusual situation which has arisen in the present case, where a non-disclosure which was unquestionably material rather than trivial at the time when the order was made is alleged to have passed its shelf-life because of changes in circumstances which had occurred between that date and the determination of the application to have the order set aside. But above all he was not concerned with a case of fraud.

I acknowledge that, in a case not involving fraud, the constant need to balance the interests of economy and finality in litigation with the interests of justice may lead to a conclusion that an application of Lord Brandon’s materiality threshold as at the time of the hearing of the application to set aside, rather than the making of the impugned order, may call for careful consideration. But that is not this case. It is precisely where fraud in the obtaining of an order has been conclusively established (rather than merely alleged) that the interests of justice trump the interest in finality, see per Smith LJ in the Owens case at paragraphs 22 and 27.

In my view the judge’s third error was to deprive the wife of a full hearing of her claim for financial provision in circumstances where the only conventional basis for doing so, namely that she had settled it with the Court’s approval, had been undermined by fraudulent non-disclosure. The purpose of the hearing in April 2013 was not to determine her claim but only to decide whether the order apparently determining it should be aside, and a rehearing ordered. It was an interim application, but one in which any issue as to whether the husband had been guilty of material non-disclosure was to be finally determined. As I have already observed, determination of that issue did not require cross-examination of the husband on his later affidavit. It was a plain case in which he had lied to the Court about a highly material matter.

But the judge went on to decide, on an essentially summary basis (i.e. without a full hearing) that circumstances had sufficiently changed since the date of the consent order so as to render the non-disclosure no longer material. The judge reached an essentially summary conclusion about what the outcome of a full hearing in or after April 2013 would have been.

I have considerable sympathy with the judge in taking that course. He had heard four days of the original trial, which preceded the settlement agreement. He had had considerable time then, and thereafter, to form provisional views about an appropriate order. He may have thought that the wife had done very well by her settlement agreement, regardless of the imminence or otherwise of an IPO. He may well have wished, if possible, to avoid subjecting the parties to further substantial effort and expense, much of which might have been duplicative of that which had already been undertaken.

But in my judgment where a party has given up a prima facie right to a full hearing of her claim by being fraudulently induced into a settlement of it by her opponent, she should not lightly be deprived a full hearing, even if the Court considers on a summary review that she would be unlikely to do better at a full rehearing than the settlement already achieved. This is in part because of the abiding sense of injustice which the deceived party will be likely to carry away from the process.

The judge appears to have interpreted the Livesey case as imposing upon a party seeking to set aside a financial provision order for material non-disclosure a burden to prove that she would otherwise have obtained a substantially different order, if necessary by the testing by cross-examination of fresh evidence about the matter originally not disclosed. If that were a general rule applicable to all such applications, I consider that it would risk turning what should be relatively short interim applications to set aside into virtual trials (or, in the family context, full final hearings). This would, at least in cases where the original order was made by consent, be unfortunate, since it would risk duplication of effort and expense, as occurs in applications for summary judgment in ordinary civil proceedings which are allowed to turn into mini-trials. In my view, where an order has been made by consent, the non-disclosure is material in the sense that (as here) it induced the settlement, and where there has been no full hearing of the claim for financial provision, a better rule would be that the applicant need only show that the non-disclosure has deprived her of a real (rather than fanciful) prospect of doing better at a full hearing. This should be a fortiori the rule where the original non-disclosure was fraudulent.

In that context I am unable to agree with my Lord’s and my Lady’s conclusion that the absence of cross-examination of the husband, and the judge’s apparent acceptance of his affidavit evidence that no IPO was then likely in the near future, is fairly attributable to a failure by the wife’s legal team to cross-examine him at the interim hearing of her application to set aside the consent order. I bear in mind that the judge offered the wife the opportunity to cross-examine, although not, as far as I can see, on the express basis that he was contemplating a two stage consideration of the materiality test. For all the reasons which I have already given, I consider that the wife’s application was well-founded without the need for cross-examination, and would indeed have succeeded if the judge had not made what I regard as the errors of principle to which I have referred.

For the reasons given by my Lord, Lord Justice Moore-Bick, I too would dismiss this appeal. In other circumstances it would be otiose to say anything further but in deference to the carefully reasoned and dissenting judgment of my Lord, Lord Justice Briggs, the draft of which I have read, I feel it incumbent to substantiate my agreement.

The husband apparently perjured himself. His deceit was practised throughout the proceedings and during negotiations. Necessarily, it tainted the agreement reached between him and the wife and which formed the basis of the order which the Court was asked to and did approve. Sir Hugh recognised and adjudged this to be the case.

It is inevitable thereby that the husband is, and will be, rightly subject to the opprobrium of this and the lower court and law abiding members of the public generally and may be subjected to criminal prosecution, civil contempt proceedings and/or a costs penalty. In these latter respects the abuse of the court process is penalised and deterrent measures achieved.

However, the audacity and extensive practice of a deceit cannot be determinative of the degree of its materiality to the substance of an order of the Court. It may be material in negotiations between the parties to an action or a contract or within the hearing, not least in terms of the integrity of the participants, but, applying the ratio in Livesey v Jenkins as I consider it to be, entirely in accordance with the exposition by my Lord, Lord Justice Moore-Bick, it will not necessarily undermine the rationale or content of an order made, whether by consent or after hearing in matrimonial proceedings.

In this case Sir Hugh, not being functus officio, considered the matter having directed and received further evidence from the husband and submissions from Counsel, and determined that ultimately it did not.

I cannot agree with my Lord, Lord Justice Briggs, that the procedure which he adopted is able to be described as “summary” or was otherwise unfair or wrong. Sir Hugh devised and implemented a process that was fair to both. Having made clear that he found the husband to have been dishonest, he subsequently invited leading Counsel for the wife to cross examine the husband upon his affidavit. This afforded the wife the opportunity to demonstrate, if she could, the substantial adverse influence which the deception had made to the order of the Court; that is materiality or relevance to substance. No time constraints were imposed. The civil standard of proof applied.

For whatever reason the invitation was refused. Those representing the wife obviously considered there to be a good reason, although I struggle to see it. It may not have been their preferred option, they may have engaged under protest but there was an obvious consequence in them not participating. Parties do not dictate court procedure.

Regardless of the husband’s self serving mitigation contained within the affidavit and the absence of more evidence that may have resulted from cross-examination, Sir Hugh’s conclusion as to the materiality of the fraud is unsurprising given that (i) the passage of time allowed retrospective and actual verification of the state of affairs which had been previously falsely contended by the husband as to likely timing of sale; (ii) the division of proceeds of sale by percentage rather than by specified amount. I do not consider his conclusion to be wrong or capable of being demonstrated to be so.

It does not appear to me that my Lord, Lord Justice Briggs, in paragraph (20) in propounding the “better rule … that the applicant need only show that the non-disclosure has deprived her of a real (rather than fanciful) prospect of doing better at a full hearing” relieves the party seeking to set aside the order from the need to establish materiality of the non disclosure to the substance of the order, or the necessity of the relevant court to make an assessment of the same, whether in the case of a fully contested or compromised action. The availability of this further judicial assessment clearly recognises the necessity to protect the court process from fraud. That is, if material to outcome, non-disclosure of whatever nature trumps “finality, economy and speed.”

However in that he considers that this should be the rule “a fortiori … where the original non-disclosure was fraudulent” is to erroneously assume relevance to outcome in every case and necessarily spawns either ‘satellite’ litigation in the event of one party denying fraud as opposed to negligence or innocent oversight or otherwise the temptation for disappointed litigants and those who have thought better of their settlement to attempt a second bite at the cherry where no ground of appeal exists. That is, this could well prove to be illustrative of the adage ‘hard cases make bad law.’

Litigants may lie for any number of reasons and not necessarily to obscure assets or the proper evaluation of an ex-spouse or partner’s claim. It is not unknown for the wealthiest of litigants to fraudulently conceal comparatively small amounts to conceal the source or existence of an undisclosed and covert lifestyle. The amount might be inconsequential in the scheme of things but on the basis of my lord’s judgment would require any award to be set aside. The court system would grind increasingly slowly. The impact would be more far reaching than upon the parties concerned.