Non-Disclosure in Family Trial Leads to Significant Costs Award

One of the biggest issues in a family law trial is non-disclosure, which can significantly prolong the process and lead to costly consequences. Parties to a family law proceeding must make full and accurate financial disclosure for child support, spousal support, and family property division. Many issues to be dealt with during a divorce require proper disclosure. However, this can be difficult, as your disclosure obligations may be unclear, or the other party needs to be more cooperative. Either way, parties need to fulfill their duty to disclose, as non-disclosure can carry very expensive consequences. In particular, for repeated non-disclosure, the court can issue an escalating series of orders, including a significant cost award. 

This post will provide an overview of one’s disclosure obligations. We will also examine what can happen if a party refuses to comply with disclosure orders. In particular, we will discuss the case, Ma v. Xu, 2023 ABKB 346, in which the court ordered the husband to pay the wife approximately $41,000 in costs due to continual non-disclosure throughout their family law proceeding. This post will provide key takeaways for parties looking to understand their disclosure obligations and potential consequences for non-disclosure.

Parties have a duty to provide full and accurate disclosure in a family law case 

In a family law case, parties have a duty to provide full and accurate disclosure. This is so that child support, spousal support, and property division issues can be fairly determined. 

The disclosure provided must be complete, accurate, and up-to-date under the legislation, including the Divorce Act and the Federal Child Support Guidelines. Parties are responsible for ensuring they are providing a full picture of their financial information. Also, parties are required to provide up-to-date financial information, so this imposes a duty on parties to provide continually updated disclosure throughout the legal process. A party cannot simply omit to provide updates to their disclosure if there have been changes to affect issues of support and property division, such as a change in income or revised valuation of property. 

Disclosure is required even if the parties are not going to court. This includes disclosure during negotiations of a separation agreement. Otherwise, the agreement may risk being overturned if it is challenged later in court. During negotiations of a separation agreement, the court has recognized that this period can be highly emotional, which creates vulnerabilities in negotiating one’s settlement position. To ensure that negotiations are free from informational and psychological exploitation, the parties have a duty to fully and honestly disclose all relevant financial information. The disclosed financial information should be clear, non-cryptic, and not require additional investigation. 

In addition to financial information concerning one’s income, parties must also fully disclose any property they own under section 32 of the Alberta Family Property Act. Even if the property is outside Alberta, parties must fully disclose relevant documents concerning the property they own. Likewise, the parties must disclose information about the property they own in Alberta. 

What happens if a party does not provide adequate disclosure in their family law case?

Under the Alberta Family Law Act, section 65(1) further describes parties’ disclosure obligations to a family law proceeding and the consequences that can arise. Parties can request financial information for the determination of support. The other party is expected to respond to this request. If that party fails to comply with their duty to disclose or adequately respond to the request, then the court can make various disclosure orders that increase in severity. Where there has been non-disclosure, the court can do the following:

1. Draw an adverse inference against the non-disclosing party during an application or at trial;
2. Order the non-disclosing party to comply with the disclosure request; 
3. Order the non-disclosing party’s employer, partner, principal, or any other person to provide required financial information within the knowledge or control of the employer, partner, etc. 

If the non-disclosing party continues not to provide sufficient financial disclosure, the court can escalate the severity of their orders, including issuing the following: 

1. Dismissing the non-disclosing party’s application in part or in full;
2. Making a contempt order against the party (a severe form of order that may result in heavy fines or even jail time in some cases);
3. Drawing an adverse inference against the non-disclosing party during an application or trial; 
4. Awarding costs in favour of the other party to compensate for the costs of the proceeding, which can be significant, as we will discuss in the Ma v. Xu case below. 

Party ordered to pay $41,000 in costs for non-disclosure

The parties in Ma v. Xu married in 2001 and separated in 2012. They had one child together in 2002 and immigrated from China to Canada in 2009. Their trial dealt with child support and property division. 

The husband owned property in China under his name. In 2017, he sold the property without the wife’s consent or knowledge. During the sale, he alleged that he was not married so that he could sell the property. He claimed that he used the sale proceeds to pay off debts that the parties owed to his parents and his living expenses in 2017. By the time of this trial in 2023, various court orders had already required disclosure regarding the property in China. He did not comply with the disclosure orders and provided very limited information about what happened with the sale proceeds of the property in China. 

When assessing costs, the court found that the husband engaged in “systemic and persistent misconduct” for failing to comply with multiple court orders. He exhibited a pattern of refusing to comply with court orders despite being aware of them through his counsel and attending court on his own when he became self-represented. As a result of his misconduct, which involved significant non-disclosure, the wife needed to bring multiple applications before trial. Therefore, the court ordered the husband to pay the wife $41,000 in costs due to his continual non-disclosure throughout the proceeding. 

Key takeaways

Upon a divorce, there is a significant duty to disclose financial information, which includes income sources and property. The court discourages concealing assets or financial information and can make various orders to ensure parties comply with their disclosure obligations. If parties fail to provide sufficient disclosure, the court can order the non-disclosing party to pay a significant cost award to the other party. This can be extremely costly, with the court ordering costs of approximately $41,000 in the Ma v. Xu case.

Calgary Family Lawyers Assisting You With Your Disclosure Obligations

A family law proceeding requires full and accurate ongoing disclosure from all parties. There can be significant and costly consequences for failing to comply with disclosure obligations, so it is important to understand them from the outset. If you are seeking outstanding financial disclosure or require assistance with your disclosure obligations, you should speak with one of our family law lawyers at Mincher Koeman, who are experienced in assisting business professionals and entrepreneurs with disclosure issues in family law proceedings. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.

To book a consultation, please contact us online or by phone at 403-910-3000.