When suspicions and fears arise in a marriage that is beginning to deteriorate, it is not uncommon for concerns about hidden assets to emerge. This is particularly true if one spouse has been excluded from financial management during the course of the relationship. In order to prevent potential legal issues later on in the divorce process, it is crucial to address these matters early on.
If you suspect that your spouse may be attempting to destroy evidence of financial wrongdoing, there are legal steps you can take. Duty of disclosure requires all parties to a family law dispute to provide to each other party all information relevant to an issue in the case. This includes information recorded in a paper document or stored by some other means such as a computer storage device and also includes documents that the other parties may not know about. This duty starts with the pre-action procedure before the case starts and continues until the case is finalised.
As a party, you must continue to provide such information as circumstances change or more documents are created or come into your possession, power or control.
Full and frank disclosure
In any financial case, complete and open disclosure is crucial. Beyond the general requirements, there are specific rules regarding full and frank disclosure (refer to Rule 6.06). Parties involved must disclose their entire direct and indirect financial circumstances, including all sources of earnings, interests, income, property (vested or contingent interests), and other financial resources. This obligation extends to properties, resources, and earnings owned by the party directly or by others (such as children or de facto partners), as well as those held in corporations, trusts, companies, or similar structures.
Additionally, information regarding any property disposal that occurred in the year leading up to the separation or since the final separation must be disclosed. This includes sales, transfers, assignments, or gifts that could potentially impact, undermine, or deplete a claim.
But what if someone attempts to manipulate the situation?
In such cases, an injunction can be sought in order to prevent or limit a party from taking actions that would diminish the assets available for division in a property settlement. An injunction is an effective tool for safeguarding the asset pool and restraining one party from unilaterally dealing with property. The court grants an injunction when there is a genuine risk of harm to the applicant if it is not granted.
The court’s powers to restrain a party from specific actions are extensive. Examples of these actions include prohibiting a party from selling or increasing the mortgage on jointly owned real estate, engaging in high-risk business ventures, disposing of superannuation, shares, or investment funds, occupying the former couple’s home, entering the other party’s workplace, or causing damage to the other party’s property.
Furthermore, it is important to consider the possibility of concealed assets or missing funds. Some spouses may employ tactics to conceal income and property during settlement negotiations, aiming to manipulate the distribution of assets in their favour. Typically, the wealthier spouse or the one with greater control over finances may attempt to retain a larger portion of the assets, resulting in an unfair financial settlement.
By prioritizing full disclosure, seeking injunctions when necessary, and remaining vigilant against attempts to hide assets, individuals can help ensure transparency and protect their interests in financial cases.
Complications however, can often arise in family law cases involving corporate structures. There is recent case law available that sheds light on issues related to hiding assets in divorce proceedings. One notable case is Atkins & Hunt and Ors [2020] FamCAFC 252 (9 October 2020). In this particular matter, final orders had initially divided the parties’ assets 80% / 20% in favour of the husband. However, upon successful appeal by the wife the case was sent back for re trial. The husband operated a business called X Pty Ltd, owning half of its class A shares while company Y Pty Ltd held the rest. With him holding a 99% ownership stake in that company as well. During the first appeal process he transferred most class A shares from both companies into X Pty Ltd. giving them to his children for a nominal financial consideration. The wife argued that the corporate structure of X Pty Ltd was merely an “alter ego” of the husband and that these share transfers were done in an attempt to undermine a predicted property settlement.
The wife persisted with her appeal. Arguing that X Pty Ltd and Y Pty Ltd were effectively extensions of the husbands’ self. However, the Full Court countered this assertion emphasizing that mere control was insufficient to establish such a claim. Atkins & Hunt and Ords serves as an illustrative example of the difficulties and disputes that may arise when corporate entities—especially those connected to family—are introduced into divorce proceedings. During separation it becomes even more crucial to seek legal counsel promptly when corporate structures are involved. This ensures comprehensive asset identification and prevents pre settlement asset concealment.
Contemplating how to divide your asset pool or suspecting your spouses’ potential concealment of assets prior to separation and divorce demands immediate legal guidance. Without effective legal representation. Navigating this complex process can be difficult and prolonged. By taking early action while securing sound legal advice tailored to your circumstances you can significantly enhance your chances of achieving a just financial resolution
