The recent case involving a Mr and Mrs Sharland caused ripples through the legal world. The Court of Appeal decided that, in circumstances where Mr Sharland had lied, Mrs Sharland was not entitled to appeal against the terms of an Order that she had agreed before.
The background to the case is quite simple. Mr Sharland had a large interest in a company. He told the court that there was no prospect of selling the company. But at the same time he was in negotiations to float the company on the American stock exchange. He didn’t tell Mrs Sharland.
After three days at the initial hearing before the High Court, Mrs Sharland came to an agreement with Mr Sharland. They agreed that she would receive around two thirds of the liquid assets (about £10 million). A further part of the Order stated that she was to receive, if the husband sold the company, a further capital lump sum of almost £2 million. Plus 30% of the sum that the husband would receive from the sale. Before the above agreement was finally approved by the court she found out about the proposed flotation. She appealed the proposed ‘agreement’.
The wife argued that if she'd known the company was going to float immediately, she would never have agreed to 30%. She would have wanted 50%, so the husband’s lies had deprived her of a large sum of money.
Since 1985, the court has tried to limit appeals based on the fact that there was material non-disclosure. The case of Livesey v Jenkins decided that there were two tests that had to be satisfied before the court would allow an appeal. The first was that a wife would have to prove that there had been an absence of “full and frank disclosure”. The second was that the absence had led the court to make an Order that was “substantially different” to the Order that they would have made if they had had full disclosure.
Unfortunately for Mrs Sharland, the flotation of Mr Sharland’s company failed and did not take place. The case might have had a different outcome if it had gone ahead. It's not surprising that the Court of Appeal was slow to change the principle. As far as they're concerned, it's operated well so far since 1985 (in limiting the number of appeals). The court said that if Mrs Sharland had known there were plans for the company to float, then the main proceedings would adjourn until after the flotation had taken place. But since the flotation didn’t take place, it was putting the parties back into the position that they were at the date of the initial hearing. So there was nothing to suggest that Mrs Sharland would have agreed anything different to that which she did agree. Although all three Judges castigated Mr Sharland for his complete ignoring of the principle of full and frank disclosure, two out of three of the Appeal Court Judges decided that Mrs Sharland’s appeal must fail.
Unfortunately, some newspapers headlined the story in a manner which suggested that Mr Sharland had “got away with it” and that it was alright to “tell lies”. My view is that if the flotation had gone ahead then the court would have found in favour of Mrs Sharland. This was not a case which should give any encouragement to those who think that failing to make full and frank disclosure will not give rise to potential consequences.
There’s much opinion within the legal professsion which suggests that Mr Sharland should, in spite of the Court of Appeal decision, still face consequences through contempt of court proceedings for having failed to tell the truth. It’s not a course of action that is often pursued, but there are many who think that it should be.