PROPERTY SETTLEMENT – WHEN ONE PARTY ISN’T HONEST ABOUT WHERE THE MONEY WENT
May 28, 2018
When a husband wasn’t truthful about what debts he had, among other things claiming he owed his parents $192,000 and wouldn’t explain where $886,000 had gone, his failure to be open and honest was a big factor when the Family Court made orders for property settlement. How important is it for parties to fully and honestly disclose their assets and liabilities?
Disclosure in property settlement
Identifying the property pool
Property settlement is the division of assets and liabilities between spouses or de facto partners following separation. But what does this actually mean? What are the “assets and liabilities” of the relationship? Can former spouses or partners claim on everything owned by the other or what is included? What about family trusts, companies, businesses, or even inheritances that one party has received?
While specific legal advice should be sought from an experienced family law lawyer for each individual situation, the Court’s usual first step is to identity what assets and debts actually exist. This is regardless of whose name they are in or even if it’s the name of a company or trust operated by one of the parties. This process is performed to identify what forms the property pool available for division. Once the property pool is identified specific legal arguments can be made to determine which item, or how much of an item, should be considered an asset or liability of the relationship and available for division between the parties.
This determination of the property pool can be a complicated procedure and requires both parties to be truthful about what interests they own and owe. This is called providing ‘full and frank disclosure’ (‘disclosure’).
Full and frank disclosure will allow both parties to see exactly their net worth, and allows their lawyers to advise on what is an appropriate outcome for their property settlement. This in turn usually allows negotiations and offers to be made in an attempt to resolve the case, if both parties are prepared to negotiate.
Complications with disclosure
Parties are required by the Family Law Rules to provide each other with full and frank disclosure, but of course there can be situations when one party refuses or fails to provide all the relevant information.
Not providing full and frank disclosure can have significant implications on determining the value of the property pool, and accordingly the parties’ entitlements. For example, one party might not disclose an asset – such as a significant bank account – and it could mean that party is retaining more of the asset pool. This failure to provide information or ‘disclosure’ is also a failure to comply with the Court Rules and serious penalties apply.
A failure to comply with disclosure can also have implications with a party’s credibility at Trial and convincing the Court that a certain debt or asset exists. This occurred in the decision of Surridge & Surridge. In this case the Court considered whether Mr Surridge had failed with his duty to provide disclosure. Mr Surridge said that he had certain debts owed to other persons including his parents, and also claimed he had spent some of the matrimonial monies on expenses. These debts and spending were not fully supported by evidence or could not be explained by Mr Surridge to the Court satisfactorily. The amount allegedly spent by Mr Surridge was in the hundreds of thousands of dollars, possibly millions, but it was difficult for the Court to make any finding on the exact amount given Mr Surridge’s insufficient explanations and lack of evidence. These missing monies were still considered substantial in Mr and Mrs Surridge’s property settlement matter and represented a significant portion of what would have been the value of the property pool and available to divide between them.
Mrs Surridge was alleging the husband had spent the missing monies to benefit himself, but could not prove it due to Mr Surridge’s non-disclosure. Mr Surridge could not prove the debts he had allegedly paid due to lack of evidence. The Court was in a tricky situation in determining the value of the property because of the missing monies allegedly spent by Mr Surridge.
In this case the Court determined that Mr Surridge’s non-disclosure and dishonesty was a fact or circumstance that compelled it to consider the ‘justice of the case’. This is a specific provision under the Family Law Act that allows the Court to consider additional circumstances to determine whether the final outcome is truly just. The Court considered that due to the husband’s non-disclosure it would not be “unduly cautious” in making findings that were favourable to Mrs Surridge who had complied with the disclosure obligations. In other words, the Court can make findings that are more favourable to the party who has complied with disclosure and this can in effect increase the amount that complying party is to receive overall from property settlement.
The Court in this case granted a large adjustment to Mrs Surridge of approximately $750,000 of the known property pool, that is the property pool without the missing monies, so that she received net assets of over $2.2 million. By comparison Mr Surridge was to receive less than $800,000. There were other factors considered by the Court in making this adjustment, however the key message is that non-disclosure can and has resulted in orders adverse to the non-disclosing party. Had Mr Surridge made full disclosure he could have had certain legal arguments available to him that may have persuaded the Court to give him more than what he ultimately was granted by the Court in the current case.
If court proceedings are already afoot and non-disclosure is an issue, parties to the proceedings can seek a Subpoena to produce documents. Subpoenas are orders of the Court compelling the production of information or documents from third parties. Subpoenas are another option available to address issues of non-disclosure and obtaining legal advice is vital to lodging a valid Subpoena that seeks the information you are seeking.
You can read the Family Court’s information and brochures on your duty of disclosure here.
Our family law lawyers at Websters Lawyers can help you with all aspects of property settlement including ensuring all parties comply with their disclosure obligations. We can also provide you with advice on arguments that could be used to include or exclude assets or liabilities into the property pool available for division between the parties.