Duty of disclosure
Separating couples have a “duty of disclosure” from the date of separation until the finalisation of their property settlement. Duty of disclosure means that all parties to a family law dispute, regardless if the matter is in Court or not, must disclose to each other all relevant information about their financial position in a timely manner.
The premises for duty of disclosure is to enable the parties to make informed decisions about their financial affairs and a financial settlement. A party cannot reasonably decide whether a property settlement is in their best interest or fair if they are not aware of the full asset pool.
In financial settlements, the Family Court Act 1997 (WA) and the Family Law Act 1975 (Cth) require parties to “exchange disclosure” and negotiate a settlement first before applying to the Court for property orders. This process is known as the “Pre-action Procedure”. Exchanging disclosure means that the parties have an obligation to provide to each other documents relating to all of their assets, liabilities and financial resources. This includes, but is not limited to:
- Documents evidencing earning capacity (tax returns, payslips, employment contracts);
- Banks statements including credit card statements;
- Loan statements (whether formal loans or informal loans from friends and family);
- Documents evidencing any interest in real estate;
- Details of any interest in a company, trust, shares or partnerships;
- Property appraisals and car valuations;
- Superannuation statements;
- Evidence of any assets disposed of post separation or assets acquired post separation; and
- Other relevant financial documents.
In respect of disposed assets, a party must disclose any asset that has been disposed of in the year before separation and since separation. Disposing of assets includes selling the asset, transferring or gifting it to someone else. This is important to disclose in the event that one party was attempted to defeat or deplete a property claim.
The parties have ongoing disclosure obligations to each other. If one of the parties’ financial situation has changed since the commencement of negotiations or Court proceedings, that party has an obligation to inform the other party about any such change. For example, change of employment or receipt of an inheritance. Further, the duty of disclosure is not simply providing documentations but extends to providing an explanation as to the parties financial position if requested.
The duty of disclosure is not limited to assets and liabilities in a party’s name. The duty of disclosure places an obligation on the parties to provide full and frank disclosure about all of their assets and liabilities including assets that are in someone else’s name but held for the party’s interest. Thus indirect assets and financial disclosure must also be given. For example, if your new partner received funds on your behalf or owns a property that is in their name but you have an equitable interest in that property, then you must disclose that to your former partner.
If the parties are satisfied of what the other party has by way of assets and liabilities or if all assets and liabilities are in joint names, then the parties do not need to formally provide each other documents relating to those assets and liabilities. The level of disclosure required will depend on the issues in dispute in the case and each case is different. However, there is a general and specific duty of disclosure that each party has and can at any stage (until finalisation of a property settlement) can request documents from the other party regarding disclosure.
The duty of disclosure is not to be abused by the parties. A party cannot be unreasonable with their request of disclosure by way of a fishing expedition or to increase the other’s legal costs or wasting the other party’s time. A request for disclosure must be genuine and for the purpose of ascertaining the asset pool in an attempt to reach a settlement.
Failure to comply with disclosure requirements
There are serious consequences to not complying with duty of disclosure.
If a party refuses to provide disclosure documents, the other party can commence Family Court proceedings and seek an order for disclosure. If the matter is already in Court, the party who is seeking disclosure can make an application for order for disclosure order and costs application against the other party.
If you do not comply with the duty of disclosure, the Court can make the following orders:
- An order that you pay the other party’s costs;
- An order in favour of the other party;
- Stay or dismiss some or all of your case;
- Fine you or imprison you if you are found to be guilty of contempt of the court for failing to comply with court orders (including failing to provide disclosure document).
The parties should be aware that failure to provide full and frank disclosure to each other can lead to a financial settlement and orders being turned over and dismissed. Parties must not deceive, conceal or hide their financial assets as any settlement arising from the non-disclosure, can be over-turned. Further, the Court can award a greater division of the asset pool to the other party due to a non-compliance with a duty of disclosure.
Parties should take their obligation of disclosure seriously and comply with the same.
Parties are advised to obtain independent legal advice before agreeing to financial settlement to make sure that the settlement is in their best interest and that it is a fair settlement.
At Lynn & Brown Lawyers, half of our lawyers are practicing family lawyers and we are more than happy to discuss your obligations in regards to disclosure of other family law matters.
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About the authors:
Christina Ati was admitted in the Supreme Court of WA on 1 August 2014 and has developed and refined her skills as a Perth family lawyer. Christina has experience in both children’s issues and matrimonial/de facto property settlement matters. Jacqui Brown is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in family law, mediation and estate planning. Jacqui is also a Nationally Accredited Mediator and a Notary Public.