The requirement of financial disclosure underpins all family law property matters pursuant to the Family Law Act 1975. It requires both parties to provide a full and frank disclosure of their financial circumstances in all matters concerning property settlement, spousal maintenance, child support, consent orders, or binding financial agreements. This obligation is not merely ethical, but legal, facilitating fair negotiations and equitable outcomes.
Financial disclosure in Family Law property proceedings is governed by Rule 6.06 of the Family Law Rules 2021 (Cth).
Under these rules, parties to a financial proceeding are obligated to make full and frank disclosure of their financial circumstances when a financial case has started. They must continue to do so until the case is finalised. The typical documents required to comply with these disclosure obligations, often include, but are not limited to:
a) Party's Earnings: This can be demonstrated through payslips, income tax returns, or other proof of income, including income assigned to another party, person or entity.
b) Vested or Contingent Interest in Property: Evidence might include property deeds, market valuations, and mortgage documents.
c) Interest in Property Owned by a Legal Entity: Documentation could include business records, share certificates, or proof of control over the entity.
d) Income Earned by a Legal Entity: Similar to (c), documentation could include financial statements, tax returns, or evidence of assignment of income to another party, person or entity.
e) Other Financial Resources: This might include superannuation statements, life insurance policies, investment portfolios or other evidence of financial resources.
f) Trusts: Documentation related to trusts would depend on the specific circumstances, but could include trust deeds, statements of account, and evidence of the party’s power in relation to the trust.
g) Disposal of Property: This could involve contracts of sale, transfer documents, or gift deeds relating to any property disposed of in the 12 months before separation or since separation that could affect a claim.
h) Liabilities and Contingent Liabilities: Documents to disclose these could include credit card statements, loan documents, and any other evidence of debts and potential liabilities.
Non-disclosure can lead to extremely serious consequences. It's essential to consult with a family lawyer to ensure you've adequately disclosed all relevant financial circumstances.
If your matter has not yet reached Court, the duty of financial disclosure is set out under pre-action procedure in Schedule 1 of the Rules. The rules provide that as soon as practicable on learning of the dispute and in the course of exchanging correspondence the parties must exchange the following:
(a) a schedule of assets, income and liabilities;
(b) a list of documents in the party's possession or control that are relevant to the dispute;
(c) a copy of any document required by the other party, identified by reference to the list of documents.
The process can be complex, and the repercussions for non-disclosure severe, hence seeking legal advice is highly recommended.
You may be aware that consent orders are a common tool used to formalise an agreement between parties regarding property division after separation. It's critical that both parties are fully aware of each other's financial circumstances to ensure a just and equitable division of assets before consent orders can be prepared and executed. Providing incomplete or misleading financial information when obtaining a consent order can lead to dire consequences – i.e. consent orders being set aside and at the very least, costs orders against the non-disclosing party.
The Court is able to overturn consent orders after it is discovered that one party had not disclosed significant assets. This results in an entirely new property settlement, causing significant distress and further legal costs for both parties. Such instances underline the importance of financial disclosure, not only for ethical reasons but also to ensure that the agreements reached are durable and won't be overturned at a later date due to non-disclosure.
Similarly, in financial agreements (often referred to as 'pre-nuptial' or 'post-nuptial' agreements), full financial disclosure is a prerequisite for the agreement's validity. An agreement may be set aside if the court finds that a party engaged in fraud, including non-disclosure of a material matter.
A financial agreement can therefore be nullified due to a party’s failure to disclose the full extent of his or her financial assets. If the complying party signs the agreement under the mistaken belief that he or she was receiving a fair share, not only can the agreement be invalidated, but the non-disclosing party is often ordered to pay the other party’s legal costs.
Lastly, seeking and providing financial disclosure isn't just about avoiding legal ramifications. It's also about fostering trust and transparency, which can go a long way in minimising disputes and facilitating smoother negotiations.
Takeaway
The process of financial disclosure is often a labyrinthine task that needs a methodical touch. You're talking about sifting through a haystack of documents: tax returns, bank statements, superannuation records, and whatnot. You simply can't dash through this like a mad bull, it's a meticulous process.
It is understandable that you might be tempted to rush things to get your settlement over and done with, but believe us when we say, rushing will only leave you worse off. It's like trying to run a marathon without warming up, you're just going to pull a hamstring. Financial disclosure is a slow burn, it requires time, patience, and a keen eye for detail, that often only an experienced lawyer can provide.
In summary, the requirement of full and frank financial disclosure in family law matters is not just a legal obligation, it also contributes to fair and equitable outcomes, fosters trust and aids in efficient conflict resolution. It is strongly recommended that individuals going through a family law settlement engage an experienced family lawyer, like our trusted lawyers at Surge Legal, who can guide them through the process and ensure that their rights and interests are well protected.