Disclosure of Financial Affairs

The parties were married from October 1968 to September 1986. There are two children of the marriage. In July 1990, the wife instituted proceedings against the husband for property settlement and child maintenance. The trial judge dismissed the claim for child maintenance and concluded that the property of the parties should be divided equally.

On appeal, the wife claimed that the husband has not disclosed $153,065 of income from his business which was relevant to the property settlement portion of the dispute. The court noted that parties to a property settlement have a duty to make full disclosure of their financial affairs to the court and that the husband in this case had not fulfilled this duty as he “had in fact pocketed the proceeds of a substantial number of cash sales”. The court opined that when there has been deliberate non-disclosure, such as in this case, the court “should not be unduly cautious” when making a finding in favour of the other party, which in this case is the wife.

The importance of full disclosure of financial affairs is evidence by the court’s statement that:

“the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contribution, or to properly assess s 75(2) factors”

The court allowed that wife’s appeal and ordered that the original orders be varied to have the husband pay the wife $50,000 (in addition to the money in the original orders), as well as half of her taxed costs.

The husband and wife cohabited for nine years, then were married for three and a half years. At the beginning of the marriage, the wife owned property in her own right and the husband owned a chiropractic practice.

At first instance, proceedings for property settlement resulted in the husband being awarded 6.3% of the present value of the wife’s property (amounting to $40,000) while retaining his chiropractic practice. The husband had not fully disclosed his financial affairs in this hearing.

The husband appealed the first instance decision. On appeal, in reconsidering the property settlement (among other issues), the court recognised that “[t]he assets of the parties could not be ascertained in full because of obvious non-disclosures”. The court determined that the husband’s income was greater than the figures he disclosed and that the failure to present an accurate record of financial affairs prevented the trial judge from fulfilling their obligation to consider the incomes of the parties under s 75(2) of the Family Law Act 1975 (Cth). The court considered full and frank disclosure of financial affairs to be fundamental in property settlement matters. The husband’s appeal was dismissed.

In coming to its decision, the court quoted Livesey v Jenkins [1985] All ER 106 in which the House of Lords stated:

“… in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. … This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required. In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred.”

Therefore, there clearly is a well-recognised duty of full and frank disclosure of financial affairs in cases of property settlement.

These cases are good examples of the importance of making full and frank disclosure of your financial affairs when entering a property settlement. If you fail to disclose in full, this can have negative implications for you in the outcome in the case.

For more information on property settlements, see our page ‘Property Settlement’.

The Importance of Full and Frank Disclosure of Financial Affairs in Property Settlement

In the Marriage of Weir (1992) 16 Fam LR 154

In the Marriage of Black and Kelner (1992) 15 Fam LR 343