Failing to make full and frank disclosure costs Husband nearly 2 million dollars – what we can learn from the decision in Pearce and Pearce

In a recent case before the Full Court of the Family Court of Australia at Brisbane, Pearce & Pearce [2016] FacCAFC 14, the Court dismissed the Husband’s appeal against an earlier decision made by Justice Dawe of the Family Court of Australia, requiring him to make a payment of nearly 2 million dollars ($1,967,000.00) to his Wife, nearly 10 years after they entered into Consent Orders resolving property matters.

By way of background the parties commenced living together in 1992, were married in 1997 and separated in 2003. The parties entered into Consent Orders for their property matters and those Orders were made by the Court on 20 July 2005. The parties reconciled for a short period and were divorced in January 2010. The Wife subsequently filed an Application to the Court seeking a further payment of 3 million dollars and sought the earlier Consent Orders be set aside on the basis that there was a miscarriage of justice in the making of the Consent Orders because of the suppression of evidence by the Husband, or some other circumstance. At the time of the Hearing by Justice Dawe the Wife was 41 and the Husband 45. The parties had two children to the marriage.

The Consent Orders made by the Court in 2005 provided for the Wife to be paid $185,000 and to retain a property. The Husband was to retain two properties and his interest in a company. The Consent Orders contained a notation to the effect that the value of the Husband’s interest in the company was to be considered to be nil and that the company had not returned a profit for a number of years and in the Application for Consent Orders the Husband noted that he has no expectation of a significant increase in his income at least over the next few years.

When the Consent Orders were negotiated, the values provided for the real properties were some $1,035,000. The business interest was to be nil. When the matter was heard in 2014 by Justice Dawe, the value of the property pool was found to be around 10.6 million, a significant increase.

When the Wife’s Application was heard, over 16 days, Justice Dawe, ordered the Husband to pay the Wife nearly 2 million dollars as she found that the Husband had failed to make full and frank disclosure of all material facts to the Wife and to the Court in particular:-

  • The husband failed to disclose to the wife significant information concerning negotiations and proposals regarding his acquisition in the business and a further property;
  • The husband failed to disclose his shares in other investments;
  • The husband failed to disclose the representation he had made to the bank that a property was worth $700,000 when he provided a value of $550,000 in the Consent Orders; and
  • The husband failed to disclose the greater expectation of income from the business.

Justice Dawe noted “[w]hen considered together these factors establish that there was significant information available to the husband which was not disclosed to the wife prior to the Consent Order being made” and had the Wife been aware of these matters that the Husband failed to disclose the Wife would “…have made further enquiries before consenting to the property settlement order…”.

The Court emphasised the Wife was not afforded the opportunity to undertake further investigations, and had she had the information available to her, then she should have done so.

In property matters parties are required to make full and frank disclosure pursuant to r. 1304 of the Family Law Rules 2004. The Court prescribed brochure ‘Duty of Disclosure’ helpfully sets out disclosure obligations.

This case serves as a warning to parties that even when agreement is formalised by way of Consent Orders and a number of years have passed, if you do not properly disclose there is a risk that the previous Order will be set aside which could have significant consequences.

At McLaughlins Lawyers, your Family Lawyers on the Gold Coast, we are able to provide you with practical family law advice for your individual circumstances and needs. We invite you to call our office on (07) 5591 5099 to speak to one of our family lawyers today.

Author: Nicole Fitzgibbon

Partner: Sophie Pearson

Date: 19/05/2016