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Full and Frank Disclosure and Family Law

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A fundamental feature of property division and spouse maintenance court proceedings under the Family Law Act  is the requirement for each person to make full and frank disclosure of their whole financial position to each other and to the Court.

This requirement has always applied to separating husbands and wives and now extends to de facto couples where separation occurs after 1 March 2009.

Two recent decisions highlight how the Courts deal with the full and frank disclosure requirement.

In a case known as Wavers, there was an asset pool for division between the husband and the wife totalling $700,000.

There was strong evidence suggesting that the asset pool had been substantially reduced to that level by the husband’s gambling activities.

A forensic accountant analysed transactions on various bank accounts, loan accounts and from investments, and identified about $2 million of unexplained withdrawals by the husband. The forensic accountant asked the husband’s solicitors for a range of documents and details to explain the withdrawals, but the husband did not comply with the requests.

The Family Court ordered the husband to provide all of the requested documents and details to the forensic accountant within 28 days. Also the court determined that if the husband did not comply, he would not be allowed to contest the wife’s property division claim without the express permission of the Court, and the wife’s case could go ahead uncontested.

In another case called Mayne the wife received a number of inheritances during a long marriage. One inheritance was worth $376,000, but the wife failed to disclose what she had done with about $173,000 of that amount, despite requests by the husband’s solicitor for these details.

The Federal Magistrate  added $173,000 back into the asset pool available for division between the husband and the wife. In effect the wife was taken to still have that amount of the inheritance. The Court found that overall the wife had made a greater contribution to the parties’ assets, taking into account all the inheritances she had received, but the $173,000 still notionally formed part of the total asset pool for division between the husband and the wife.

This obligation of full and frank disclosure is unique to court proceedings under the Family Law Act. As these two cases show, failure to comply with financial disclosure requirements can have serious ramifications. If you are involved in family law proceedings, it is vital that you completely understand the extent of your obligations and fully comply with them.

The full and frank disclosure obligation also applies during the Pre-Action Procedures before any court proceedings have actually commenced.

Author: Steven Edward