What is disclosure in family law matters?

In family law, parties have an obligation both to the court and to each other, to provide full and frank disclosure. What does that mean? The duty of disclosure is an obligation for each party to provide each other with copies of all documents that are relevant to the matter.  Disclosure is particularly important for family law property settlement matters.

Documents that the duty of disclosure applies to, for family law property dispute matters, include:

·      bank statements, including both personal and business accounts;

·      payslips;

·      tax returns;

·      business activity statements;

·      annual business reports;

·      payment records for loans; and

·      superannuation statements. 

The purpose for parties exchanging disclosure in financial matters so that each party has a shared understanding of the assets, liabilities, income and future earning capacity of both parties.

The legislative authority for the duty of disclosure can be found in chapter 6 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.

When should disclosure be exchanged?

Disclosure should be exchanged as soon as possible, and prior to any negotiations or settlement offers being exchanged between you and your ex-partner. When determining what is a a just and equitable settlement in family law, the first step is to determine the property pool. By exchanging financial disclosure early, parties can be satisfied as to what the total property pool is and can then go on to negotiate a settlement based on the current assets, contributions and future needs of the parties. Click here to read our article about how to work out a property split. 

If negotiations have failed and you and your ex-partner cannot come to an agreement, the Court expects that parties exchange disclosure as part of the pre-action procedures. Parties must now exchange full and frank disclosure prior to the first court date. Exchanging disclosure prior to the first court date ensures that the issues in dispute before the court can be narrowed as much as possible.

Is disclosure always required?

Technically, disclosure is always required.  However if the matter is not yet before the court and you have reached an amicable agreement with your ex-partner, disclosure can be waived. This could be because the parties already have an intimate knowledge of each other’s financial circumstances, such as only having recently separated, always maintained joint bank accounts, and a clear understanding of your ex-partner’s income. However, if parties agree to not exchange disclosure there is a risk that one party may have assets or income that the other is not aware of which, if not disclosed, would be excluded from any negotiations and the final settlement. Sometimes this can simply be because of innocent oversight rather than one party intentionally hiding their assets.

If you and your ex-partner agree to waive disclosure and have come to an agreement to finalise your property settlement by way of consent orders, the application for consent orders requires each party to provide information of all assets, liabilities, income, financial resources and superannuation, and must disclosure whether any property has been acquired or disposed of since separation. So, although formal disclosure of bank statements, tax returns and the like can be waived, each party is still required to provide information of their current financial position to each other and the Court under oath.

What if one party is refusing to exchange disclosure?

If negotiations can’t progress because one party is refusing to comply with their disclosure obligation, it may be necessary to initiate court proceedings. Once the matter is before the court, both parties have an obligation to the court to provide full and frank disclosure. The duty of disclosure is ongoing, which means for the duration of the matter, each party must continue to provide their updated disclosure material.

Parties must also file an undertaking as to disclosure before the first court date. This is a written notice to the court, stating that they have read Rules 6.01 and 6.02 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, are aware of their duty of disclosure, have complied with their duty to the best of their knowledge and ability, and acknowledge that a breach of the undertaking may be a contempt of court. This means that the parties must make a promise to the court that they understand their duty of disclosure and have complied with it.

Consequences for non-compliance with disclosure obligations

If the matter is now before the court and a party has not complied with their disclosure obligations, or has provided false or misleading information, the court has the power to:

·      dismiss all or part of the case (such as the party’s application or response material);

·      not allow the party to rely on the non-disclosed information as evidence in their case;

·      hear the matter as undefended;

·      reduce a party’s adjustment for contributions;

·      order the non-complying party to pay the other party’s legal costs; or

·      in very rare cases, impose a fine or term of imprisonment if the party is found guilt of contempt of Court.

Recently, the court has made it very clear that costs orders are likely if one party has failed to provide disclosure or complied with any other pre-action procedures.  This means that the non-compliant party may be ordered to pay some or all of the legal costs for the other party who has complied.

Parenting matters

The duty of disclosure also applies to parenting matters and parties must provide each other will copies of all documents relevant to the matter. Types of documents that the duty of disclosure applies to in parenting matters includes:

·      criminal record of the parties;

·      documents relating to a domestic violence order;

·      medical records of the parties and children; and

·      school reports of the children.

Caselaw

See the below cases for some real-life examples of the effect and consequences of non-compliance with the duty of disclosure.

Imprisonment

The case of Stradford [2019] FamCAFC 25 is the husband’s appeal of 12 month sentence of imprisonment for failing to comply with an order for full and frank disclosure. The primary judge declared that his failure to comply with disclosure had amounted to a contempt of court. The husband spent 6 days in a maximum-security facility and was classified as a risk to himself before he was granted a stay of the order pending appeal. The declaration of contempt and sentence of imprisonment were set aside by the Full Court. Although the primary judge’s decision was unanimously criticised by the Full Court, this case is a reminder of the potential significant penalties for non-compliance with disclosure obligations and court orders.

Reduced adjustment of final settlement

In the matter of Kannis & Kannis [2002] FamCA 1150 the Court found that the husband had failed to disclose all of his assets and as a result, the husband’s contributions were reduced from 60% to a 50% split of the property pool. The husband appealed the decision and court held:

“Whether the non-disclosure is wilful or accidental, is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute.”

Order for Costs

Kannis & Kannis applied the decisions of Chang & Su (2002) FamCA 156 and Weir & Weir (1993 FLC 92-338. In the matter of Weir & Weir the Court found that the husband had retained money from the family business for his own use. The Court could not determine the extent of the husband’s misappropriation but was satisfied that he had hidden or undisclosed property that could not be identified. The Court made was able to make the best estimation it could as to the property owned by the husband. The Court made final property orders and an order for the husband to pay half of the wife’s trial costs.

Non-disclosing party ordered to retain 0% of the known property pool

In the matter of Chang & Su the husband appealed a decision for the wife to retain all of the disclosed property, unencumbered. Meaning that the wife was to receive 100% of the property disclosed to the Court. In this case, the Court was unable to identify the value of the property available for division due to non-disclosure on by the husband. The Court referenced the matter of Weir & Weir stating that case “makes it clear, where there has been non-disclosure by one party, the Court should not be ‘unduly cautious’ about making findings in favour of the other party”. The husband’s appeal was dismissed and was ordered to pay the wife’s costs of the appeal.

Next steps

At Shorestone Legal we recognise that separation can be a stressful time and understanding your obligations in family law can feel overwhelming. Contact our office for an informative, fixed fee consult for advice and assistance with your family law matter. We can provide you with detailed advice about your obligations around disclosure, and help you identify what your ex-partner must provide, to ensure a just and equitable family law settlement.