Dealing with non-disclosers – the case of Sharland vs Sharland

The case of Sharland V Sharland would suggest not.

In this case, Mrs Sharland was able to show that there had been fraudulent non disclosure as a matter of fact, but she failed the second part of the test to set aside the final order and so her application was also refused.

Mr Sharland owned two thirds of the shares in a company which he valued at £50m and Mrs Sharland valued at £75m. During the first instance trial (which did not run its course as the parties reached a settlement part of the way through), Mr Sharland said the company might be floated on the New York stock exchange but it was unlikely to be in the next three years and probably not until five to seven years in the future.

After the parties had reached an agreement by consent, Mrs Sharland found out that in the months before the trial, Mr Sharland had been in active preparations for a flotation of his company.

Mrs Sharland made an application to the court to set aside the agreement she had made with Mr Sharland on the basis of his non-disclosure about the IPO preparations, arguing that had she known of the IPO preparations, she would not have agreed to settle on the terms that were agreed.

However, by the time the application was heard by the Court of Appeal, it had become clear that the flotation would not take place. As a result, although the Court found that Mr Sharland was ‘a man who had lied to the court and misled both the wife and the judge’ his failure to give full and frank disclosure did not lead the court to make an order that was ‘substantially different from the Order it would have made if such disclosure had taken place’. The question to ask is whether the non-disclosure made any difference to the outcome and, in this case, the court said it had not.

The Court of Appeal decision, concerning an application to set aside consent orders on the basis of non disclosure in the case of Sharland v Sharland demonstrates that certainty can sometimes come at a high price.

Although the courts had sympathy with Mrs Sharland’s application involving issues of public policy (in relation to criminal activity in the first and fraudulent non disclosure in the second), the application to set aside the consent order was refused.

The Court of Appeal has held that the correct test to apply when considering whether a consent order should be set aside for material non-disclosure is as follows:

1. That there has been, as a matter of fact, material non-disclosure; and

2. As a result, the Court made an order which is substantially different from the order which would have been made if proper disclosure had been given.

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