Friday, November 05, 2010

Kingdon v Kingdon: Order vitiated by material non-disclosure does not have to be set aside

In Kingdon v Kingdon [2010] EWCA Civ 1251, the Court of Appeal yesterday held that where an ancillary relief order is vitiated by material non-disclosure, the order does not necessarily have to be set aside.

The facts: On 18 April 2005 the court had, by consent, made an order for ancillary relief between the parties, on a clean break basis. The husband failed to disclose to the wife prior to the making of the order that on 9 July 2004 he had acquired 200,000 £1 shares in the company of which he was finance director when the order was made. On 2 November 2006, the husband sold 93,749 of the shares, for which he made a net gain of £1,268,000. He made no gain in respect of the remainder of the shares, due to the downturn in the market.

In January 2008 a third party suggested to the wife that the husband had held the shares and received benefit from a sale of them. She instructed her solicitors to make enquiries, and in July 2008 applied to have the order set aside on the basis of material non-disclosure on the part of the husband.

The judge held that the non-disclosure was material, but that it was unnecessary and inappropriate to set aside the whole of the order dated 18 April 2005 and to direct a full rehearing of the wife's application for ancillary relief. Instead, he awarded the wife a further lump sum of £481,000, being 35% of the husband's net gain, plus interest.

The husband appealed.

Held: Lord Justice Wilson dealt with the points raised by the husband's counsel:

1. Materiality: That the judge was wrong to hold that the non-disclosure was material. The husband had contended that, if disclosed in the proceedings in 2004/05, the existence of the shares would not have led to provision for the wife different from that contained in the order dated 18 April 2005, in that the shares had had no value at that time. However, Lord Justice Wilson found that it was: "inconceivable that in April 2005 the court would not have treated the husband's shares ... as likely to prove of value in the foreseeable future and thus as properly subject to the sharing principle in one proportion or another" (paragraph 29).

2. Rehearing: That, having found that the non-disclosure was material, the judge should have set aside the whole order dated 18 April 2005 and have given directions for the wife's application for ancillary relief to be re-heard. Lord Justice Wilson concluded that the judge was entitled to proceed there and then to repair the defect by enlargement of the lump sum provision in the order dated 18 April 2005, for the following reasons (paragraph 38):

(a) he had a discretion as to how best to proceed;

(b) in exercise of the discretion he was required to seek to deal with the case justly, and thus in a way which was proportionate to the complexity of the issues and which would save expense and ensure expedition;

(c) the non-disclosure was of a discrete element of the husband's assets and it generated a defect which could be cured by one simple enlargement, to be devised pursuant to the sharing principle, of provision in the order dated 18 April 2005;

(d) the order had been fully implemented and there was no need to reverse any part of its implementation; and

(e) the husband's lies in the proceedings in 2004-05, compounded by his further lies in correspondence which preceded issue of the present proceedings, yielded a conclusion that, were there to be a second, updated, enquiry into all the matters specified in s.25(2) MCA, no assertion on his part in relation to his financial circumstances, for example of any current inability to pay to the wife what would otherwise have been her appropriate share of the gain on the shares, would be likely to be accepted unless clearly established following protracted and costly examination. In the words of Thorpe LJ in Williams v. Lindley, the procedure needed to reflect the degree of the husband's turpitude.

3. 35%: That the judge was wrong to award the wife as much as 35% of the net gain on the shares, as it was in part post-separation and in part non-matrimonial property. Counsel for the husband argued that in such cases there should be a starting-point of 25%, and that here there were no good reasons to depart from that figure. This argument was not accepted by Lord Justice Wilson, who was not prepared to interpose any subsidiary starting-point into the sharing principle (paragraph 45).

4. Credit for £200,000: In the consent order, the wife had received an extra lump sum of £200,000 over and above what was required to achieve equality of division. It was argued on behalf of the husband that this was to cover her needs, and would not therefore have been required if the order had included provision which would have resulted in her receiving an extra £481,000 - the £481,000 award should therefore have been reduced by £200,000. However, Lord Justice Wilson found that the primary rationale for the extra £200,000 was not the wife's needs, but rather to compensate her for the fact that the husband was likely in the future to generate vastly greater earnings than was the wife (paragraph 47).

The appeal was therefore dismissed.

1 comment:

  1. I didn't think that the Kingdon empire was part of the Federation's duristiction.


Thank you for taking the time to comment on this post. Constructive comments are always welcome, even if they do not coincide with my views! Please note, however, that comments will be removed or not published if I consider that:
* They are not relevant to the subject of this post; or
* They are (or are possibly) defamatory; or
* They breach court reporting rules; or
* They contain derogatory, abusive or threatening language; or
* They contain 'spam' advertisements (including links to any commercial websites).
Please also note that I am unable to give advice.

Note: only a member of this blog may post a comment.