In family law proceedings, the first step is to identify the assets, liabilities and financial resources of the parties. This is not an easy task, as more often than not, assets are willfully hidden by parties.
Disclosure in Financial Cases
- Each party to a family law matter has an obligation to make full and frank disclosure of all information relevant to the case, in a timely manner.
- Rule 13.01 of the Family Court Rules 2004 (Cth) states the duty of disclosure is ongoing from the time that the parties begin conferring in regard to, a potential property settlement (even if they have not commenced proceedings in the Family Court) until the matter their property proceedings are finalised.
- As family lawyers, we frequently engage forensic accountants to not only unravel complex business structures but to assist with determining the extent of the asset pool, valuing interests of a party in various entities and providing advice as to structuring a settlement.
How can a Forensic Accountant assist their client with their disclosure obligations?
- Accountants have an important role to play in assisting family lawyers in family law proceedings.
- Accountants can assist Family Lawyers in presenting clients' information clearly by:
- creating a consolidated schedule of assets and liabilities;
- creating mind maps of entities;
- explaining complicated financial transactions; and
- clarifying complicated transactions.
- The following examples act as 'warning signs' that a party to proceedings may be hiding or undervaluing specific assets:
- Failure to disclose assets or resources held offshore – for example, in off-shore tax havens in blind trusts;
- Purchasing assets in the name of other parties;
- Sale or transfer of an asset at a lesser value to a friend – this may be done by a party to hold the asset until the family law matters is finalised in attempts to keep it out of reach of their former partner;
- Assets being undervalued;
- Undervaluing goodwill of a business;
- Concealing acquisition or disposal of assets post-separation;
- Excluding the work in progress in a partnership/business which has an impact on the businesses profit and asset value;
- Failing to disclose details in relation to contracts acquired which are yet to be performed;
- Prepaying tax;
- Faking a robbery; and/or
- Diverting funds – for example, a testator may choose to protect a party's inheritance from potential divorce proceedings by leaving a party's inheritance to their sibling.
Locating hidden assets: Where to look?
- If a client suspects that their former partner has not made full and frank disclosure, they can utilise one or more of the following contrivances to assist with their inquiries:
- searching Landgate or ASIC registers;
- making an application in the Family Court seeking interim orders that specific documents are produced;
- issuing a subpoena for the production of documents; and
- be careful, as a forensic accountant, your file is generally not subject to LPP so the entire file can be subpoenaed.
- seeking an Anton Pillar order from the Court for ex-parte seizure of property.
- Clients can also utilise the services of a forensic accountant to assist them with their inquiries.
- Additionally, it is imperative to marry up signed Form 13 Financial Statement to information available from other sources such as:
- tax returns;
- bank statements;
- balance sheets;
- depreciation schedules;
- financial statements or loan applications;
- credit card statements;
- passports; and
- BAS statements.
- Examining Family Court files for previous separations parties have undergone can also assist with revealing assets available to a party.
- We find that forensic accountants' knowledge and experience in analysing financial documents, auditing techniques and their awareness of common methods of secreting property, is extremely useful in uncovering hidden assets. Through close co-operation between lawyer and accountant, it is possible to discover these undisclosed assets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.