EK v DK

Factual and Procedural Background

This judgment concerns an application by the Wife to set aside a consent order dated March 2018, entered into between the parties who are now divorced. The original consent order was approved following a final hearing in early 2018, which resolved financial provision claims including property transfers, lump sum payments, and periodical payments. The Wife later applied in August 2019 to set aside the order on grounds of fraudulent non-disclosure by the Husband. The set-aside application was delayed and ultimately heard in September 2021. The Husband is alleged to have deliberately withheld material financial information, including his ability to purchase a property and details regarding overseas litigation, which would have influenced the Wife's decision to settle and the court's approval of the order. The Husband denies fraud and contends the Wife is attempting to revisit the settlement without proper basis.

Legal Issues Presented

1. Whether the Husband engaged in fraudulent or dishonest non-disclosure material to the consent order.
2. Whether the consent order should be set aside on the basis that the Husband’s non-disclosure vitiated the Wife’s consent.
3. Allocation of the burden of proof regarding materiality of non-disclosure and whether the fraud would have influenced a reasonable person to agree to the order.
4. Whether estoppel principles bar the Wife from setting aside the consent order.

Arguments of the Parties

Wife's Arguments

• The Husband deliberately misrepresented his liquidity by understating his ability to draw from his director’s loan account and failing to disclose a £3 million loan from his brother.
• The Husband concealed an offer and intention to purchase a property for approximately £X million at the time of the hearing, which he was obliged to disclose.
• Had the true financial position been known, the Wife would not have agreed to the settlement on the same terms and would have pressed for a higher lump sum or a sale of the business.
• The Husband failed in his duty of full and frank disclosure and engaged in deception amounting to fraud, justifying setting aside the consent order.
• The Husband’s post-settlement expenditure and financial dealings demonstrate liquidity inconsistent with his evidence at the original hearing.

Husband's Arguments

• The Husband denies any undisclosed assets or fraudulent intention, asserting that he is an experienced businessman who manages liquidity through various legitimate means including relationships with lenders.
• The Wife’s approach is described as scattergun litigation lacking a 'killer blow' to justify setting aside the order.
• The Husband contends the Wife is estopped from revisiting the settlement as she accepted the terms with knowledge of the circumstances and that the principle of cause of action estoppel applies unless fraud is proven.
• The Husband argues that developments post-settlement, including overseas litigation success and property sales, were not in existence at the time and do not amount to non-disclosure.
• The Husband asserts that the new property purchase was a business opportunity, not a concealed personal asset, and that financing was not secured at the time of the offer.
• The Husband denies that the yacht sale introduced cash liquidity and explains the accounting entries accordingly.

Table of Precedents Cited

Court's Reasoning and Analysis

The court conducted a detailed review of the evidence and submissions, focusing on whether the Husband had engaged in fraudulent non-disclosure that would vitiate the Wife’s consent to the 2018 consent order. The court found that the Husband deliberately withheld material facts about his financial position, notably his intention and arrangements to purchase a property for approximately £X million contemporaneously with the hearing and approval of the consent order. This concealment was found to be a deliberate lie by omission, undermining the Wife’s ability to negotiate a fully informed settlement.

Further, the court found that the Husband was less than frank regarding the overseas litigation, specifically failing to disclose that he had been orally advised the chances of success were approximately 50/50 and that the arbitration award was imminent, which was material to the valuation and settlement considerations.

The court also considered the Husband’s liquidity and expenditure post-settlement, which contradicted his earlier representations, further supporting the conclusion of dishonest non-disclosure.

Although the court did not make findings on all issues raised, such as the yacht sale, it concluded that the cumulative effect of the Husband’s misrepresentations justified setting aside the entire consent order. The court applied the Supreme Court’s principles from Sharland and Gohill that fraud unravels all and that the burden lies on the perpetrator of the fraud to prove the order would have been made regardless, which the Husband failed to do.

Holding and Implications

The court’s final decision is to SET ASIDE the March 2018 consent order in its entirety.

As a result, the parties’ financial claims will be reopened, and the case will proceed to a rehearing with full disclosure of all material facts. The Husband’s deliberate concealment of material information has negated the validity of the prior settlement and consent order. The court emphasized that this decision does not guarantee a greater award for the Wife but restores her right to a full and fair hearing based on complete information.

No new precedent beyond the application of established Supreme Court authority was created. The court urged the parties to engage in disclosure and negotiation to avoid protracted litigation.