A cornerstone of family law cases is the requirement for full exchange of financial information between the parties. Each party must disclose all information about their financial position, including all debts, assets, company information, accounts held with third parties, and so on. Parties will not be able to work out a meaningful settlement of all their issues, particularly support and property, if they are not fully informed about the other party’s situation. For example, one party could hide a bank account with a lot of money in it, and the other party could be legally entitled to half the money in the account.
There is often a large unwillingness of many parties to disclose their financial position; such parties often state that their interest in their parents’ business, for example, is none of their spouse’s business. However, any financial interest that a party may have is relevant in family law proceedings.
The requirement for full financial disclosure is particularly important when child support is an issue. The full extent of the payor’s financial position and, therefore, ability to pay child support should be known. Child support is the right of the child, not of the parent receiving child support on behalf of the child. Children should not be deprived of the benefits and lifestyle enjoyed by one parent just because their parents are now separated.
In the recent case of Skoronski v Hagel, where Mincher Koeman Family Law Chambers represented the mother, the father was a beneficiary to a family trust. The father had refused to give full information about the family trust, and his lawyer had knowledge about the family trust, but was not open about the details of the trust and its financial benefits to the father. This case shows that the obligation to disclose is not just on parents or parties but also on counsel. Here, the Court awarded costs against the lawyer personally because the lawyer was found to be stonewalling the disclosure process.
The case of Cunningham v Seveny outlines which parent has the obligation to show their true income if that parent is self employed or controls a corporation. In this case, the court states that it is the parent who is self-employed who must show that certain business expenses or deductions being claimed are reasonable for the purposes of calculating income for child support.
Cunningham shows that it is the payor parent’s obligation to show and fully disclose all business expenses. In short, a parent cannot just say that their business has a lot of expenses without justifying those expenses exactly.
The consequences for not disclosing income can be severe and imposing.
The Federal Child Support Guidelines allow a court to impute an income on a parent who has failed to provide income information, when under a legal obligation to do so. This means that the court can direct that a parent has to pay child support based on any income that the court thinks appropriate.
The courts take financial disclosure obligations very seriously.
Entering into a marriage or common-law relationship with someone has serious financial consequences and just because the relationship ends does not mean that those consequences or obligations also end.