Do you have to tell your ex spouse everything about your finances when in family law financial negotiations or court proceedings?
During family law financial court proceedings and negotiations, both parties must provide to each other all relevant documentation about their financial circumstances and do so in a timely manner. This obligation is called a person’s “duty of disclosure” and producing the documents is called “discovery” or “disclosure” of documents.
The Family Law Rules say that the aim of disclosure is to help parties focus on genuine issues, reduce cost and encourage settlement. The duty begins when parties start negotiating with each other and continues until their case is finalised.
What will happen if you don’t disclose all financial information?
Lawyers have an obligation to take “appropriate action” if a client will not disclose a fact or document that is relevant to the case, meaning that they can cease to act for that client.
If the dispute is before the Court, failure to comply with the duty of disclosure can result in a punishment for contempt of court or an order to pay the costs of the other side.
Judges have consistently assumed that, if a party has deliberately failed to make full and frank disclosure, then they are hiding assets. This was demonstrated in the case of Chang & Su  FamCA, where the Court made orders for 100% of the assets to be paid to the innocent party.
Failure to comply with the duty of disclosure is a serious matter that can carry significant consequences. Recently, Judge Salvatore Vasta of the Federal Circuit Court sentenced a man to a maximum 12 month’s jail for contempt of court because he failed to comply with an order to disclose relevant financial information.
In that case the parties, known by the pseudonyms of Mr and Mrs Stradford, were both self- represented. On 6 December 2018 Judge Vasta ordered that Mr Stradford be jailed as he found Mr Stradford had not provided his full financial records to the court on time. This was despite Mrs Stradford asking Mr Stradford not be jailed, due to the significant impact it would have on their two children, who were five and nine. Ultimately, Judge Vasta’s decision was successfully appealed by Mr Stradford but not before he had spent six days on suicide watch in a maximum security prison.
Whilst Judge Vasta’s decision was unanimously criticised by the Full Court of the Family Court, it reminds us that the Court can and will impose significant penalties for a person’s failure to comply with their duty of disclosure.
Why is disclosure so important?
A financial settlement with a former spouse is one of the most significant and emotional financial decisions a person will make. Such a decision cannot be made fairly unless both parties and the court know all the financial information relevant to making that decision. Just as a bank won’t approve a loan in a person’s favour until they are satisfied they have all of the relevant financial information, a judge or party to a family law financial settlement cannot make a decision about that party’s financial entitlements and future without all of the relevant financial information.
What is relevant financial information?
Relevant financial information can include:
- Tax returns, payment summaries and pay slips for an individual or an entity that is financially related to the individual;
- Bank statements;
- Superannuation statements;
- Trust deeds, partnership agreements, company constitutions;
- BAS Statements, Profit and Loss statements;
- Documentation about the sale or transfer of an asset;
- Documentation about the acquisition of an asset;
- Valuations of an asset.
This is not an exhaustive list and depending on your circumstances, there may be additional documents which will need to be disclosed. If you have any questions about your duty of disclosure, please contact our family law team at Mellor Olsson. We can help to ensure that you comply with your duty of disclosure and achieve a timely and fair financial settlement.