Consequences of Lying in the Family Court

Introduction

Before a division of property can be agreed by parties following a divorce or separation, it is important that the extent of the assets and liabilities that are available to be divided is agreed.

If you have been in a relationship for any significant period, you may consider that you know what are those assets and liabilities. However, this is not always the case. For example, where one or both parties have been considering separating for a while before they actually do so, they may have been saving funds in a separate account to prepare for their expected costs on separation. Other people may make investments in their own name or sell assets in the lead up to a separation.

Lying in court by a party is something that you can expect the family courts to directly address. One of the ways in which the court tries to ensure that it has accurate information from each party is by requiring that each party discloses their true net asset position. The court rules require that each party makes full and frank disclosure of their true financial position to the other party. That requirement applies whether or not you are in court and even where you come to a mutual agreement about how the assets and liabilities will be divided between you. Financial disclosure essentially requires that each party discloses what assets they have and what is the current value of their assets and liabilities.

The Family Law Act 1975 (Cth) addresses the issue where a person may transfer or sells property with the intent of defeating their former partner’s family law claim for property settlement. Section 106B of the Family Law Act 1975 (Cth) allows the Court in appropriate cases to set aside or restrain the making of such a transaction.

Recent Case Law

In a recent case, Lennon & Lennon (No.2) [2018] FCCA 3132 which appeared before the Federal Circuit Court of Australia at Brisbane, Judge Egan was forced to make findings where one party was found to have deliberately failed to make adequate financial disclosure.

The Husband and Wife in that case had been married for 12 years, owned properties and ran businesses throughout the relationship. Unfortunately, through the mismanagement of the businesses and failure to pay taxation, the property pool which could have otherwise been valued at around $1 million was only worth around $240,000 due to various liabilities owed.

Court Analysis

Although the husband was not expressly lying in court, it seems that he was avoiding providing the required level of disclosure so that certain values could not be determined. On account of the Husband’s conduct in proceedings and in particular failure to provide financial disclosure, the Court was left in the position of being unable to quantify the exact value of the asset pool. The Judge therefore made adverse inferences against the Husband in respect of the extent to which he hid money away for his own benefit without having made appropriate disclosure.

This led the Court to dismiss a majority of the Husband’s evidence and otherwise accept the bulk of the Wife’s evidence to make the decisions about value and division of the assets.

The Court ultimately decided that the wife was to retain all funds from the sale of the party’s house after payment of debts together with all of her superannuation and other assets in her possession (car, furniture etc).

Orders

The Court also ordered pursuant to section 106B of the Family Law Act 1975 (Cth), the trust or other document that had established a certain discretionary trust be set aside, and that the wife be paid 50% of the value of the trust’s assets with the balance to be paid to the husband. The Court held that the husband had set up the trust with a view to concealing the payment of monies from the wife, rather than benefitting the one child of the marriage under that trust arrangement.

Additionally, the Court Ordered the Husband to pay a portion of the Wife’s legal fees.

Leave a Reply