In Family Law proceedings sometimes there is a churning of the stomach as to whether the other party is being honest and providing all the information they need regarding their assets and liabilities.
The best way of avoiding this is making sure people in a relationship have full exchange of information during the good and tough times of the relationship regarding their financial situation. A couple who lives like this if they decide to go their separate ways will clearly know what is each other’s financial position. I guess that’s an added benefit of those finance date nights that the Barefoot Investor spruiks!
In reality most couples don’t run their lives like that. Sometimes life gets busy and before you know it you have lost track of where all of the finances are. Sometimes things go wrong and people are too embarrassed to show even to their own partner something that has gone wrong with their finances – whether that’s the finances to a business deteriorating, a bit of a gambling habit that has developed or perhaps just a little bit too much online shopping (not speaking from personal experience there!).
When a relationship is deteriorating there is usually significant breakdown of communication and having an understanding of your separate and joint finances is often something that suffers early. Therefore by the time people have separated and commence trying to work together for a property settlement, they have usually lost track of exactly what are the joint assets. Of course there are also people who naively think that they can hide things in a Family Law process and will start shifting assets around opening up extra accounts and so on.
So how can it be that when you and your lawyer are working through a property settlement that you can be sure that you have the whole picture?
The reassurance is that it is extremely rare that someone is able to hide assets.
The Family Law process requires that there is a process called “pre-action procedures” where each party is obliged to exchange all of the relevant financial information which includes the historical bank statements. Reconciling bank statements to things like records of property transactions, tax returns and so on will usually reveal if there are any movements of assets or money that has not been disclosed. For example, going through a bank account might reveal that there are transfers to an account that hasn’t been disclosed.
If a party is not co-operatively disclosing information then there are powerful ways in which the Court can ensure that this occurs including issuing subpoenas, making Costs Orders if people don’t comply with Court Orders regarding disclosure or ultimately drawing conclusions in the Court Orders or striking out a response and hearing the matter on an undefended basis.
In addition, in any Court documents including documents seeking that the Court make Orders by the agreement of the parties, a party must sign either an Affidavit or a Statement of Truth. If it is later found out that a party did not tell the truth or was hiding assets then not only is there the risk that the Orders will be set aside and the Court will make a new settlement, but also there is the potential that criminal charges regarding making false statements could follow. Therefore there is an extremely strong onus on people to tell the truth because:
- Experienced family lawyers and Judges are able to easily pick up where things don’t add up and trace the missing information.
- The risk of not telling the truth and that being found out later is so significant it is not worth doing.
On a really practical level though the open exchange of information early in your Family Law negotiations is the best way of making sure that you minimise both the time and cost of sorting out your Family Law property matters.
At O’Farrell Robertson McMahon we work hard with our clients to make sure that we have that disclosure happening early so that things happen as smoothly and quickly as possible for our clients.