Why Family Law And Disclosure Can Never Be Torn Apart

A recent UK Court of Appeal decision involving a former manager of the Australian band INXS and a wealthy international family dispute has brought renewed attention to the fundamental importance of full and frank financial disclosure in family law proceedings. The decision carries important lessons for Australian parties about transparency, finality and the treatment of gifts and inheritances in family law matters.

While the lyrics ‘Don’t ask me what you know is true’ and ‘don’t have to tell you’ may be a powerful refrain in INXS’s 1987 hit song ‘Never Tear Us Apart’, this sentiment is fundamentally at odds with the core principles of family law.

In family law proceedings, assumptions cannot replace disclosure. One party has an entitlement to ask, and the other has an obligation to tell. This is the cornerstone of Australian family law - a party’s disclosure obligations etched into law and procedure.

The pun and fanfare stated above has not been used lightly. A recent UK decision in a long running legal battle involving a former manager of INXS highlights the perils of non-disclosure.

The case attracted significant attention, not only because of the sums involved, but because it demonstrates how even final family law outcomes can be unravelled where disclosure obligations are not satisfied.

The background

In this case, and as reported by the media, the former manager (the wife) split from her then husband and became engaged in a family law matter. It resolved with a UK court order compelling, among other things, a payment of £1.2 million from the wife to her husband.

The wife was also embroiled with her wealthy family in other legal proceedings. She subsequently became aware that, unbeknownst to her, her estranged mother had gifted £27.6 million to her husband. He did not disclose this gift whilst negotiating the UK Family Court Order, despite the gift being relevant to the parties’ respective financial positions.

Following discovery of the substantial gift, the wife sought a further order from the UK Court seeking a share of the £27.6 million gift. She was successful.

The husband and the wife’s estranged mother then appealed the wife’s success. They argued, among other things, that the gift was ‘non-matrimonial’ and that it would never have been made if the wife was going to share in it. So much so was the fracture in this family.

On appeal, it was held that the husband’s non-disclosure of the gift had a material effect on how the married couple’s assets were divided. As such, the wife maintained her entitlement to £14 million of the gift.

Why this matters in Australia

Whilst the case is of UK origin, its principles are equally important within the context of Australian family law proceedings. It reiterates that parties to family law matters:

1. Must comply with their legal obligations to provide full and frank financial disclosure of all material circumstances. That obligation extends to all documents which they have, or can obtain. Full and frank financial disclosure is non-negotiable.

1. Risk the loss of certainty and finality in settlements or court-ordered outcomes if there has been a failure to make full and frank financial disclosure. A court is entitled to exercise broad discretion to essentially undo finality in such circumstances.

Parties risk significant consequences if there has been a failure to make full and frank financial disclosure. These can include adverse findings and decisions made against them – as well as penalties, including imprisonment in certain circumstances.

The case also highlights the need for individuals to carefully consider other family law options prior to separation (for example, financial agreements), as well as their estate planning documents. Indeed, we often see that ‘two worlds collided’ with regard to family law and wills and estates.

Further, this famous example demonstrates the complexities that can arise in family law matters where there are inheritances and gifts. These can be included within the court’s exercise of discretion, regardless of the intentions.

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.