In family law property cases one aspect that parties sometimes have difficulty with is the legal requirement that both parties make”full and frank disclosure” of their financial circumstances to the other party. the “full and frank disclosure” rule in effect requires that each party disclose everything about their personal financial situation – income, assets & liabilities – and that they provide the other party with copies of any documents they have or can get relating to their finances. These documents include things like payslips, bank savings and credit card statements, Superannuation statements, bills and any correspondence they have concerning financial matters. Obviously it is an invasion of a person’s privacy, made even more objectionable by the fact that this private information has to be given to an “ex” in the context of a history of emotional conflict and possibly also because the relationship broke down over financial issues in the first place.
As much as it may be an invasion of privacy the important point for people to understand however is that it is a lawful and mandatory invasion of privacy that cannot be ignored. The reason for the “full and frank disclosure” requirement is that it is just not possible to have a “just and equitable” (fair) division of matrimonial property for both parties if one party keeps information about that property secret from the other.
The importance of the “full and frank disclosure” requirement was demonstrated in a recent Federal Circuit Court of Australia case called Lane and Lane – you can read the full judgment here
In Lane’s case the husband had failed to disclose to the Wife, and the Court, that a mortgage on the real estate property from which he ranhis business was also secured by a mortgage the family home. The Court proceeded to make Final Orders for the division of all the property in the belief that the mortgages were separate from each other and that the Husband would assume sole responsibility for the mortgage on the business property, thereby leaving more of the equity in the family home available to be paid to the wife when it was sold under the Court Orders. However when the family home was sold the bank demnaded that the proceeds of sale be used not only to payout the home loan secutred on that rpoeprty but also part of the husband’s business loan which it turned out was secured by mortgages onboth properties. This substantially reduced the net proceeds of sale available to be paid tot he wife on the sale of the family home.
The wife was none to happy about this so she applied to the Court to have the previous “final” orders set aside on the ground that not to do so would result in a miscarriage of justice for her and that the previous Orders were based on incomplete infromation as a result of the husband’s failure to make “full and frank” disclosure of his financial situation. Mr. Lane opposed the application saying that he didn’t know that the family home was collateral security for the business property loan. Unfortunately for Mr. Lane the wife’s lawyers, as a result of a Subpoena sent to the bank, obtained a copy of a letter from the bank toMr. Lane from when he took out the business loan that made it clear that the family home would also be security for the business loan.
Judge Brown accordingly said:
“I am satisfied that the non-disclosure of this document, whether inadvertent or otherwise, given its moment, is sufficient to constitute a miscarriage of justice by reason of any other fact or circumstance, within the parameters envisaged by section 79A(1). In particular, I accept that both Mr Lane and Ms Lane are likely to have conducted their respective cases in a significantly different manner if the letter had been before the court.
The parties to property proceedings, brought under the Family Law Act, in this court, are under a duty to make a “full and frank disclosure” of their financial circumstances. This duty has been described as being “fundamental to the whole operation of the Family Law Act in financial cases…”.
In Weir & Weir the Full Court of the Family Court said as follows: “…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 contributions, or to properly assess section 75(2) factors.”
Accordingly, the duty to make a full and frank disclosure, in financial matters brought under the Family Law Act, does not arise merely by virtue of the rules or practice of the court but rather is a fundamental rule of law, which arises because of the necessity for the court, in each property proceeding arising before it, to consider all aspects of the financial circumstances of the parties concerned.
I accept that Mr Lane is a busy professional person with many calls on his time. I do not suggest that he deliberately suppressed the letter from the (omitted) Bank. However, in my view, the absence of the document and Ms Lane’s obvious ignorance of its potential consequences has caused a miscarriage in the exercise of the court’s discretion in the orders of February 2015. It follows therefore that the court must re-exercise the relevant discretion in the light of the fresh evidence available”.
So, because of the non-disclsoure of this letter from the bank the Court ordered that the previous final Order be set aside and proceeded to order that the husband pay to the wife an extra $132,000.00.
Although this case does not break any new legal ground it is a good example of the importance of making “full and frank” disclosure in family law matters … and of the perils in not doing so.
Buller McLeod Lawyers