Financial disclosure in family law matters
What is the 'duty of disclosure'?
The duty of parties to family law dispute or proceedings to disclose to the court and to each other party certain information which is relevant to any particular issue in the case. This requirement is embedded in the court rules and legislation governing family law proceedings (see below 'Why do I need to disclose my finances?'). This duty first arises in the pre-action stage of the proceedings (i.e. before the case starts) and continues until final orders are given and the case is finalised.
Disclosure and discovery
When does the duty of disclosure apply to me?
If you are a party to family law proceedings or a family law dispute that is yet to be commence in a family law court then the duty of disclosure applies to you. This duty applies both in parenting and property proceedings. However, for the purpose of this article we will focus primarily on property proceedings. If you are a party to family law property proceedings (whether they are parenting and property or solely property – including spousal maintenances cases) then you have a duty to provide full and frank disclosure of your financial circumstances.
Full and frank disclosure
Full and frank disclosure is defined in Rule 13.04 of the Family Law Rules to include disclosure of the following:
- (a) the party's earnings, including income that is paid or assigned to another party, person or legal entity;
- (b) any vested or contingent interest in property;
- (c) any vested or contingent interest in property owned by a legal entity that is fully or partially owned or controlled by a party;
- (d) any income earned by a legal entity fully or partially owned or controlled by a party, including income that is paid or assigned to any other party, person or legal entity;
- (e) the party's other financial resources;
- (f) any trust:
- (i) of which the party is the appointor or trustee;
- (ii) of which the party, the party's child, spouse or de facto spouse is an eligible beneficiary as to capital or income;
- (iii) of which a corporation is an eligible beneficiary as to capital or income if the party, or the party's child, spouse or de facto spouse is a shareholder or director of the corporation;
- (iv) over which the party has any direct or indirect power or control;
- (v) of which the party has the direct or indirect power to remove or appoint a trustee;
- (vi) of which the party has the power (whether subject to the concurrence of another person or not) to amend the terms;
- (vii) of which the party has the power to disapprove a proposed amendment of the terms or the appointment or removal of a trustee; or
- (viii) over which a corporation has a power mentioned in any of subparagraphs (iv) to (vii), if the party, the party's child, spouse or de facto spouse is a director or shareholder of the corporation;
- (g) any disposal of property (whether by sale, transfer, assignment or gift) made by the party, a legal entity mentioned in paragraph (c), a corporation or a trust mentioned in paragraph (f) that may affect, defeat or deplete a claim:
- (i) in the 12 months immediately before the separation of the parties; or
- (ii) since the final separation of the parties; and
- (h) liabilities and contingent liabilities.
What information exactly do I need to disclose?
The duty of parties to disclosure information relevant to the proceedings is set out in Rule 13.01 of the Family Law Rules and expressly states that ‘each party to a case has the duty to provide a full and frank disclosure of all information relevant to the proceedings in a timely manner’.
The duty to provide full and frank financial disclosure means that you must provide both to the court and to all other parties involved information regarding a variety of things such as income, sole assets, shares and any other financial resources which is inclusive of any relevant parenting expenses. This is why in matters that include children, the financial disclosure is to include any relevant financial information surrounding parenting such as medical reports, school fees, child support payments, Centrelink benefits received for the care of children and extra-curricular activities.
In family law matters you must provide financial disclosure of all of the above that are both in your name solely and jointly with your ex-spouse. The same principles apply to the other side requiring them to disclose to you all their sole assets and liabilities. This rule also applies to financial resources and any assets that you may have an interest in, such as a family trust to which you are a trustee or beneficiary, a current deceased estate that is in the stages of probate and administration and any properties that you may have an equitable interest in, regardless as to whether your name is on the title.
It is important to note that a financial disclosure is also inclusive of interests and earnings of property that go to a third party such as a child, de facto spouse, trust or company. Where the earnings are inclusive of an interest in a third party company an independent expert evaluator can be required to assess the value. It is essentially inclusive of any asset or income that the party has an interest in whether directly or indirectly.
Any property that has been disposed of, gifted or transferred in the year prior to final separation is also to be included in the disclosure as it is deemed to be assessable in regards to the settlement agreement.
mandatory disclosure obligations
Undertakings to give financial disclosure
During family law proceedings parties are required, pursuant to Rule 13.15 of the Family Law Rules, to give an undertaking to provide financial disclosure in a timely manner and to confirm that you have read and understand the Family Law Rules.
This undertaking is included in the contents of the financial statement document to ensure that the information the parties are submitting is truthful. You should note that giving this undertaking confirms to the court that you acknowledge that a breach of this undertaking may be contempt of court and penalties may be imposed (see below 'What happens if I do not disclosure all my finances?').
What happens if I do not disclose all my finances?
Rule 13.01 further states that failure to comply with the duty may result in the court excluding evidence that is not disclosed or imposing a consequence, including punishment for contempt of court. This Chapter sets out a number of ways that a party is either required, or can be called upon, to discharge the party's duty of disclosure, including:
- (a) disclosure of financial circumstances (see Division 13.1.2);
- (b) disclosure and production of documents (see Division 13.2.1); and
- (c) disclosure by answering specific questions in certain circumstances (see Part 13.3)
Failure to comply with disclosure obligations
The court has the power to order costs against you and to dismiss your case.
If you fail to comply with your duty of disclosure, the court may exercise its discretion to make a costs order against you. This means that you may be liable to pay not only your own legal costs but also the legal costs of the other party to the family law case. In addition to the above, in more extreme cases, the court can impose a fine or term of imprisonment for failure to disclose and giving false disclosure or a false undertaking.
If family law final orders have been made (whether by the court or through consent by the parties) and you have failed to provide full and frank disclosure prior to these orders being made, the result may be that those orders are set aside or varied. If a party becomes aware that the other has failed to disclose something they can make an application to the court to set the orders aside or have them varied to reflect the information that wasn't disclosed in the first instance.
If you find yourself in this situation it is important to seek legal advice from a specialist family lawyer as the penalties can be substantial. You could be fined for contempt of court, and have costs ordered against you. If the failure to disclose was significant you may also potentially face criminal charges of fraud.
It is important that you understand your duty to provide the court and other parties full and frank disclosure. Misunderstanding your duty may have dire consequences on your case. If you are unsure or would like further advice regarding your duty of disclosure please call our specialist family lawyers at Bainbridge Legal on 1300 148 110.