As family lawyers, we are often advising clients in respect to their concern that their partner may be attempting to hide or reduce assets so as to minimise the matrimonial pool available for distribution pursuant to a property settlement. In almost all these scenarios, the failure to provide full and frank financial disclosure results in protracted and costly litigation with increased animosity and mistrust between the parties.
The Family Law Act 1975 (Cth) (“the Act”) requires parties to maintain an ongoing duty of full and frank disclosure to each other and the Court. This duty arises at the request of the other party and exists during any pre-litigation negotiations (i.e. before Court proceedings are on foot). The duty of disclosure is also ongoing and will continue to exist up and until the Court hands down final Orders or the parties have reached an agreement which is legally binding. Therefore, you are required to provide disclosure of any change in circumstances in your life, even if the change occurred post separation.
What is your Duty of Disclosure?
The duty of disclosure is your obligation under the Act to provide, both to the other party and the Court, information about your personal circumstances as well as copies of all documents which may be relevant to the proceedings. This duty is often referred to in property matters but may also be relevant in other proceedings such as parenting matters.
In financial matters, this obligation applies whether the asset, liability, or financial resource is in your sole name, the joint name of you and your former partner, the joint name of either you or your former partner and another person, held by or on behalf of a party to the relationship by another person, held pursuant to a family trust or held in a separate legal entity such as a company to which you or your partner has an interest in. You should also disclose information which demonstrates your future needs, for example evidence of any benefit you receive from the Government as a result of the breakdown of the relationship and your most recent payslips from your employer.
This obligation of disclosure also extends to a duty to advise of any property you have disposed of. For example if you sell a motor vehicle post separation, you will need to provide evidence to the other party and the Court in respect to your method of disposal (i.e. sale, transfer, assignment or gift) and the value you received for such disposal. If the vehicle is sold, you will also need to advise where the net proceeds of sale are being held as a result of the sale.
Whilst the duty of disclosure is most commonly referred to in property matters, it may also be relevant in parenting matters as well. In some parenting matters it may be necessary to disclose information such as medical or school reports. Remember, the duty of disclosure relates to any document or evidence which is material or relevant to an issue in dispute.
It is also important to remember that your duty of disclosure is ongoing. Therefore, if your circumstances change post separation and prior to a Court making an Order or an Agreement being reached and entered into by you and your partner, you will have a duty to disclose such information (Rule 13.01 of the Family Law Rules 2004). For example, if you receive a promotion and/or pay rise from your employer in the post separation period, you will be required to disclose this to your partner and (where applicable) the Court.
What are the Consequences of Non-Compliance?
There are a number of consequences that may follow if the Court finds that you did not comply with your duty to disclose:
- The Court may refuse to grant you permission to rely upon information which has not previously been disclosed;
- The Court may dismiss or stay all or part of your application;
- The Court may order costs against you in favour of your partner;
- The Court may order that you pay a fine or make a finding that you are guilty of contempt of Court; or
- The Court may assign a value to the asset or liability in question to determine the net pool of assets attributable to the relationship (which could have the consequence of inaccurately valuing your asset/liability).
Most importantly, where a party has been found to have breached their duty of disclosure, it may result in a Judge using his or her discretion adversely, whether consciously or subconsciously, against that respective party. After all, your family law matter is being determined by a human being who is attempting to make Orders which in their view is ‘just and equitable’.
Finally, remember that if both parties comply with their duty of disclosure it is more likely that the dispute will resolve quicker and without resolve to litigation. This is also likely to reduce the legal fees you pay and of course the stress that comes with litigation.