The division of assets after a couple has separated can be finalised by way of financial agreement, consent orders or proceedings in the Federal Circuit and Family Court of Australia.
The Family Law Act 1975 (Cth) requires parties to make genuine efforts to resolve disputes. This is underlined in Schedule 1 of the Family Law Rules 2004. Parties must participate in dispute resolution, explore options for settlement and comply, as far as practicable, with their duty of full and frank disclosure.
Certain ‘pre-action procedures’ must be followed before commencing proceedings in the Federal Circuit and Family Court of Australia, the objectives of those procedures being:
- to encourage early disclosure through the exchange of information;
- to minimise the potential for legal action by reaching an early settlement based upon all relevant information;
- to construct a process to resolve a matter quickly and to limit costs; and
- if proceedings are necessary, to assist in their efficient management by identifying the real issues in dispute.
What is the duty of disclosure?
Broadly, the duty of disclosure requires that the parties exchange information and documents (whether or not these are known to both parties) that are relevant to an issue in the case.
The disclosure obligations exist from the beginning of the matter and continue until the case is resolved. This means that a party must disclose when certain circumstances change or new information or documents come to that person’s attention.
Full financial disclosure is essential to enable lawyers to properly advise a party on his or her rights regarding property settlement and disclosure obligations must be followed even if the parties settle their financial affairs without going to Court.
Disclosure in property matters
The information and types of documents required to be disclosed in property matters will depend on the particular asset pool and the business or financial interests of the parties.
The Rules set out an exhaustive list of disclosure requirements. Compliance may be met by providing a statement of financial circumstances, producing certain documents and / or answering specific questions.
Generally, the types of disclosure documents required include:
- all sources of earnings including income from paid employment and business interests, rental income and interest on shares and investments;
- other financial resources;
- financial interests whether existing or contingent, in property, including real estate and other assets;
- details of property disposals (whether by sale, transfer, assignment or gift) made within 12 months before separating;
- taxation returns and assessments;
- superannuation details;
- market valuations for certain assets, particularly if values are not agreed;
- liabilities and contingent liabilities.
More exhaustive information is required if the parties have interests in a company, trust or a partnership. The parties will usually need to provide balance sheets, profit and loss statements, business activity statements, recent annual returns, deeds and agreements.
Additionally, where there are matters in dispute, such as an assertion by one party of having made significantly greater financial contributions than the other, then evidence to support those claims is going to be required.
A practical approach
The duty of disclosure refers to ‘relevant’ matters and for the parties to comply ‘as far as it is practicable’. Whilst this is not a mechanism for avoiding the disclosure obligations, it does foster a sensible and practical approach.
Disclosure is required so that an understanding of the parties’ asset pool and financial resources can be ascertained. It need not extend to disclosure of information from third parties unless that person’s financial circumstances are relevant to the issues in dispute.
Matters that are common knowledge between the respective parties do not need exhaustive documentation.
Locating, identifying and collating the necessary disclosure information can be onerous. Your lawyer will explain the extent of your obligations and provide guidance to assist you in meeting your obligations.
Risks of non-disclosure
Lack of disclosure and ongoing disputes regarding the parties’ financial circumstances will exacerbate settlement, add unnecessary legal and other costs, and risk depleting valuable resources.
Importantly, there are significant penalties that may be imposed by the Court for failing to disclose relevant information or attempting to mislead the other party.
A person failing to disclose a relevant document as required or providing a false or misleading document may result in that person:
- being unable to rely on the document as evidence in proceedings;
- having his or her matter dismissed or postponed;
- having the Court attribute a value to an undisclosed asset (which is generally not in that party’s favour);
- being found guilty of contempt, leading to fines or imprisonment;
- being ordered to pay legal costs.
Conclusion
The parties to a family law property settlement have an obligation and ongoing requirement to be transparent with respect to their financial affairs.
The duty of disclosure ensures that the Court is fully informed of the parties’ financial position and is relevant whether or not a matter proceeds to Court.
If you or someone you know wants more information or needs help or advice, please contact us on (08) 8344 6422 or email [email protected].