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    The Importance of Full and Frank Disclosure

    Jul 19, 2019 3:04:16 PM

    The Duty of Disclosure

    In Family Law matters, parties are required to make full and frank disclosure of all information which is directly relevant to the matter, as set out in Rule 13.04 of the Family Law Rules 2004 (Cth) and Rule 24.03 of the Federal Circuit Court Rules 2001 (Cth). This means that a party must provide to the other party, usually through their respective lawyers, any information or documentation that pertains to the issue at hand.

    This duty of disclosure is particularly evident in financial matters, where the first step of negotiating a property settlement is typically the exchange of financial documents to ascertain each party’s financial position. In In the Marriage of Briese (1985) 10 Fam LR 642, Smithers J stated that a party “has a positive obligation to set out at an early stage [their] financial position in a clear and comprehensive manner” as “the need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance”.

    The type of documents required will depend on the individual circumstances of the matter and the particular assets, liabilities or financial resources at play. Nonetheless, parties are usually required to disclose the following:

    • Individual tax returns;
    • Bank account statements, including for accounts held with third parties or overseas;
    • Appraisals or valuations of properties;
    • Share statements;
    • Superannuation statements;
    • Documentation relating to any interest held in a business or company;
    • Documentation relating to any interest in a trust;
    • Documentation relating to any financial resources, including interest in a deceased’s estate; and
    • Documentation relating to the disposal of assets leading up to and since separation.

    Importantly, the parties’ duty of disclosure is an ongoing obligation. This means that the parties to a Family Law dispute will need to continue to disclose all material facts relating to their financial position for the duration of their matter, particularly as their circumstances change. The party’s duty of disclosure only comes to an end once the matter has been finalised by way of agreement between the parties or by final orders being made by a Court.

    The Issue of Non-Disclosure

    There are serious consequences for a party that does not comply with their disclosure obligations. If a party is failing to disclose information, the Court will often make specific orders for parties to make documents relating to their financial circumstances available. The other party can also request leave to issue subpoenas to third parties who hold records or information relevant to the non-disclosing party.

    If, despite these avenues, the other party refuses to provide disclosure or hides an asset or financial resource, a number of consequences can be imposed, including but not limited to:

    • The non-disclosing party being found guilty of contempt, with punishment including fines or possible imprisonment;
    • A judge exercising their discretion in favour of the innocent party and making an order that goes beyond the identified property in deciding how to divide the property pool; or
    • A judge making adverse findings against that party.

    The Full Court in In the Marriage of Morrison (1994) 18 Fam LR 519 found that:

    The obligation to make a full and frank disclosure is regarded as so crucial to the functioning of this jurisdiction that the deliberate failure by one party to meet that obligation may result in the court drawing adverse inferences against the non-disclosing party where there is material upon which such inferences can be based.

    Such was the case in Pearce & Pearce [2016] FamCAFC 14. In this case, the Full Court of the Family Court dismissed a husband’s appeal against an earlier decision by Justice Dawe requiring him to pay the wife just under $2 million more than under the original Consent Orders. The original Consent Orders resolving property matters were entered into nearly 10 years prior to this decision but the Full Court upheld the trial judge’s decision to set aside the orders on the ground of the significant failure to make full and frank disclosure. Justice Dawe found that the husband failed to disclose to the wife information as to:

    • His negotiations and proposals regarding his acquisition of a substantial interest in a business and a further property;
    • His shares in other investments;
    • His representation to the bank of a higher value for one of his properties than he had previously asserted; and
    • His expectation of greater income from the business.

    It is therefore crucial that both parties take their obligation to disclose seriously, as failure to disclose financial circumstances can result in a division of assets which is unfavourable or to the detriment of that party. If a discovery that a party to the proceedings failed to disclose their true asset position is made after Court proceedings have been finalised or final Orders made in a family law matter, the other party can file a fresh application for the Court to set aside the previous property Orders and make new Orders based on the parties’ true financial position. This usually involves a significant costs order being made against the non-disclosing party.

    If you have any questions about a party’s duty of disclosure in family law matters, please contact Karla Elias at kelias@franklaw.com.au

    This is not legal advice. 

    Photo by Gabrielle Henderson on Unsplash.

    Karla Elias

    Written by Karla Elias