Failure to Disclose - Variation of Final Property Settlement Orders

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Failure to Disclose - Variation of Final Property Settlement Orders

Section 79A of the Family Law Act provides that the Court can exercise a discretion to vary or set aside orders if there has been a miscarriage of justice in the making of those orders by reason of suppression of evidence.

In this matter, the parties had agreed on a property settlement. Consent orders were made on 18 December 2012. It later came to light that the Husband had failed to disclose assets and had also received undisclosed payments.

The Wife applied to the Federal Circuit Court in Brisbane. An order was made pursuant to Section 79A of the Family Law Act on 15 February 2016 varying the consent orders made in December 2012. The Judge found that there had been “a miscarriage of justice arising from non-disclosure of information and documents by the husband prior to the making of those orders”. His Honour ordered that the Husband pay to the Wife an additional sum of $300,000. Given that the parties had agreed in the previous settlement document that the net pool had an estimated value of around $622,000, this was a significant adjustment in the Wife’s favour.

At issue were undisclosed amounts. The parties separated in March 2011. The Husband’s employment was terminated in September 2012. The Wife was aware that there was a possibility that the Husband may receive some entitlements through termination of his employment. The Judged noted though:

“It would very probably be the case that she could not understand or decipher the amounts to be paid pursuant to the wording of the contract, and disclosed material has to be in a form so that it can be understood”.

Just prior to the consent orders being made, the Husband received a payment of $44,586 which he did not disclose to the Wife. He also disposed of shares and received $55,950.

Just after the consent orders being made, the Husband received further payments of $11,775 and $35,000.

His Honour noted:

“The lack of disclosure over issues I have referred to are material to the husband’s case and to his credibility. He lacks credibility on this evidence…. In my view, referring to all of the above evidence and facts as I have set them out, the wife has discharged the onus on her of proving that there has been a miscarriage of justice based on the suppression of evidence by the husband”.

The Husband appealed the decision. The appeal was heard by the Full Court of the Family Court of Australia.

 

Ground 1 – Denial of procedural fairness

The first issue considered during the appeal was whether His Honour had afforded the Husband procedural fairness when he varied the original orders of 18 December 2012 pursuant to Section 79A of the Family Law Act 1975. At issue was the fact that after His Honour decided to set aside the consent orders, the Husband was not afforded the opportunity to make submissions as to the new order.

On appeal, it was held that the Husband was denied procedural fairness. On that basis alone, the Husband’s appeal must succeed.

 

Ground 2 – Failure to take account of relevant factors

The Husband argued that after His Honour made the decision to vary the original consent orders, he failed to give consideration to Section 79(4) and Section 75(2) factors. The Wife’s argument was that as the orders were just being varied and not set aside, there was no requirement for the court to consider these factors.

The appeal court noted that at paragraph 37 “Under Section 79A of the Act, the Court may vary the relevant orders or set them aside. Variation may be appropriate where the overall structure is to remain but some changes either by additions or deletions are appropriate and sufficient. If the Court chooses to set aside the relevant orders they cease to operate from that time. In that situation the Court would then proceed to make another order under section 79… it must follow the normal section 79 steps and procedures”.

It was found that in this case the Judge did not have the necessary evidence to make another Section 79 order. He did not consider whether it was just and equitable to make the order as required by Section 79(2).

There was found to be merit in ground 2 of the Husband’s appeal.

 

Ground 3 & 4 – Did the Husband have an obligation to explain documents?

The Judge found that the Husband not only had a duty to provide disclosure of financial documents but to explain such disclosure of his financial circumstances so as understood by the Wife.

The Wife had available to her a copy of the Husband’s employment contract and she was legally represented.

The Husband was unsuccessful in this ground of appeal as the appeal Court held at paragraph 59 “It is tolerably clear that His Honour meant no more by his remark than that the husband had to be frank so as to place the wife in possession of the information he had, which would, in turn, allow the wife to form her own view of the likelihood of him receiving benefits under the contract”.

 

What orders should have been made?

The Husband’s appeal was allowed. The matter was remitted for rehearing.

This case reiterates to lawyers and their clients that a family law property settlement should be conducted as a “show and tell” not a “hide and seek” exercise. Any other approach may result in the final orders being set aside.