What are the costs of concealing the truth: potential consequences of failure to provide full and frank disclosure in family law property proceedings.
Navigating a financial settlement after separation can be one of the most challenging chapters in a person’s life. The practical demands of negotiating the division of assets and liabilities can feel overwhelming. This can be all the more challenging when one party is not transparent about their financial circumstances or fails to produce documents in accordance with their duty for full and frank disclosure. Whether it’s hidden bank accounts, undeclared assets, or undisclosed income, withholding key information can lead to severe legal consequences.
Under the Family Law Act 1975 and the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, parties engaged in family law property disputes are bound by a duty to give full and frank disclosure. This means providing comprehensive disclosure of that party’s financial circumstances.
Legal Consequences of Non-Disclosure
Failing to provide full and frank disclosure can lead to serious repercussions, including:
- Setting aside of Orders or Agreements – Agreements reached, or consent orders obtained in the absence of full and frank disclosure can be set aside by the Federal Circuit and Family Court of Australia under section 79A or section 90SN of the Family Law Act 1975. A successful application under these provisions of the Family Law Act can lead to consequences including costs orders, further litigation, and adverse findings.
- Adjustment in favour of the other party – Unfortunately, not all parties fully comply with their disclosure obligations. However, decisions of the Full Court suggest the repercussions for failure to disclose can be severe.
In the case of Weir & Weir [1992] their Honours in the Full Court wrote that in circumstances where a party fails to fulfill their obligation for full and frank disclosure the court, ”… should not be unduly cautious about making findings in favour of the innocent party…”.
In Black & Kellner [1992], the husband failed to comply with his duty of full and frank disclosure. The husband’s non-disclosure made it impossible for the trial judge to identify the asset pool or the husband’s income and so the trial judge, after making adverse findings concerning the credit of the husband, awarded him just 6.3% of the known asset pool. The husband appealed that decision to the Full Court wherein Nicholson CJ stated that “…on one view the husband was lucky to get the amount that he did by way of property settlement”.
As the authorities demonstrate, a court’s discretion is broad when faced with a party’s failure to provide full and frank disclosure.
- Costs Orders – The general rule in family law proceedings is that each party bears their own costs of proceedings. However, section 114UB provides for circumstances that may justify a departure from that rule to include the conduct of the parties in relation to discovery, production of documents and similar matters. Accordingly, when a party fails to provide disclosure, provides incomplete disclosure, or materially delays providing disclosure, a court may order the offending party to pay the innocent party’s costs.
- Orders for disclosure – A court may make any orders with respect to disclosure the court considers appropriate. This may include orders for the disclosure of specific or classes of documents or information. If a party fails to comply with orders for disclosure, a court may find that the order has been contravened and impose sanctions against the contravening party.
- Contempt – In the most serious cases, a party may be found in contempt of court for knowingly withholding relevant information. Where a person is found in contempt, the court may punish the contempt by committal to prison or fine or both.
- Stay or dismissal of proceedings – A court may stay or dismiss all or part of the proceedings for a party’s failure to provide full and frank disclosure.
- Practitioner’s obligations – Legal representatives have an obligation to provide separated parties with information about their duty of disclosure, the potential consequences of non-compliance, and to encourage compliance with that obligation. A failure to properly comply with your duty for full and frank disclosure may lead to your legal representative ceasing to act for you.
In family law proceedings, failure to provide full and frank disclosure can result in significant consequences and damage your credibility. If you are unsure about your obligations, you should seek legal advice early. The costs of concealing the truth could be far greater than you may think.
Written by
Matthew Fieldus
Family Law Solicitor
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