Family Law Blog

Financially Candid: To be or not to be?

Posted by on 4 Feb 2013

A very wealthy London man has recently been sentenced by the High Court in England to six months’ imprisonment as a result of failing to disclose his financial circumstances to the Court in his family law dispute with his former wife, and also for falling behind in his child support payments.

The Sydney Morning Herald reports that Mr Young is worth in the vicinity of AUD$600million, and owes almost AUD$1million in outstanding child support payments. The man claims to be poor, and was unable to retain a barrister to appear for him at the hearing. Unfortunately, the man could not explain how he spent the $600million he admitted to owning in 2006, and so he was taken to jail carrying his Louis Vuitton overnight bag (see Sydney Morning Herald, “Tycoon jailed for hiding $600m wealth in divorce battle”, 17 January 2013).

Clearly, this is an extreme case and not all disputes as to financial disclosure will result in a jail sentence. But what does happen if tax returns are botched to show a lower income to reduce child support payments? What action will a Court take to a litigant who is not being entirely frank as to his or her financial circumstances to avoid paying more to their former spouse by way of property settlement?

 

The Child Support Agency, linked closely with the Australian Taxation Office, reviews assessments of child support upon a parent lodging his or her taxation return. If a payee is in arrears of child support, any reimbursement that parent is due to receive from the Australian Taxation Office will be paid to the other parent, via the Child Support Agency, in reduction or discharge of that debt and so it is hard for the paying parent to get away from meeting their child support payments.

As with all government departments, where a person owes a debt the remains unpaid for some period, enforcement action can be taken against them by the courts to recover the money owing.

A parent’s failure to meet his or her obligations to maintain a child are also now a factor for the family law courts in determining what is in a child’s best interests when making parenting orders, and so a parent’s disregard for his or her financial needs may, in some cases, have an impact on how much time they spend with their child or children.

When it comes to family law property settlement disputes, the law requires all parties involved to make full and frank financial disclosure at the outset of the dispute, including all income, assets, liabilities and financial resources owned by each party either directly or indirectly via some other person or beneficiary. The law goes further to require parties to disclose information about the disposal of property within the 12 months before their separation or otherwise after the break-up. So if a wife is preparing to separate from her husband, or vice versa, and decides to close her secret bank account and transfer the balance of thousands, or hundreds of thousands, of dollars to her brother’s bank account – the Court can make a finding as whether the wife still owns that money.

The consequences for being dishonest are simple, and the applicable penalty will depend on the seriousness of the lie, or rather the omission:

  • The non-disclosed document(s) cannot be used in the case without the other party’s consent or the Court’s permission
  • The party may be guilty of contempt and as a result may be fined, sentenced to a jail-term, or both
  • The party may be ordered to pay the other party’s legal costs (subject to a scale rate)
  • The Court may dismiss all or part of that party’s case.

While not all of us are fortunate to have owned millions of dollars, and may not always have much to hide, this case was a reminder that being honest is crucial in family law, as it is in life, and there a serious consequences for dishonesty.