The primary legal requirement for each party in a property settlement is ‘full and frank disclosure”. When it doesn’t happen in an instance where Consent Orders are filed between the parties, the Family Court has the power to set aside the Order and make a new one.
In a recent case, the husband was found – 10 years after the Consent Orders were finalised – to have failed to “fully disclose” some of the real values of the properties.
The Court decision resulted in the husband having to pay the wife almost $2 Million more.
In July 2005 the husband and wife both signed Consent Orders to settle property proceedings between them in the Family Court of Australia.
The Consent Orders provided that the wife receive payment of $185,000 and one property, and the husband receive two properties and his share in an unprofitable business.
The Consent Orders also contained a notation that the husband was negotiating to obtain a 50% share in a company and the value of the acquisition if successful would be $200,000. In the parties’ joint application for Consent Orders, it detailed the company made a profit of $50,408 in 2004 and there was no expectation of a significant increase in income over the next few years.
Around the time of signing the Consent Orders, the husband was finalising his purchase of a 50% share in the new company, with the estimated value being $500,000. This was not disclosed to the wife.
Further, it emerged that the company had earnings of $757,144 and a net profit of $623,000 for the financial year up to 31 January 2005. This was also not disclosed to the wife.
The parties did not have any professional valuations completed on their properties and they both agreed upon estimates. Around the time of signing the Consent Orders, the husband estimated the value of a property at $550,000. However, he also made separate representations when seeking finance that this same property was worth $700,000. This was not disclosed to the wife.
The trial judge concluded that the husband failed to disclose significant information concerning the negotiations and acquisition of the company and he failed to disclose that he had made representations that the property was worth $700,000.
The Appeal Court of the Family Court dismissed the husband’s appeal against an Order setting aside the consent order as a result of his failure to disclose to the wife “significant information”.
The trial Judge the trial judge found there was a miscarriage of justice under section 79A of the Family Law Act 1975.
Section 79A allows a court to set aside previous orders where there has been a miscarriage of justice.
It was the view of the trial Judge that if the representation had been disclosed, that the wife would have been on notice of the discrepancy between that representation as to value and the significantly different representation as to the value made in the consent order. The wife was denied that knowledge, and the opportunity to make further enquires as she might choose. She was also denied the opportunity to negotiate settlement terms that may have reflected the difference.
The Consent Order was set aside not because the property and company may or may not have had particular value, but because the wife’s consent was not a fully informed consent.
If you have any questions regarding ‘full and frank disclosure’ involved in a Property Settlement, please contact us to speak to one of our Family Law Specialists.
Keywords: Consent orders; full and frank disclosure; informed consent; miscarriage of justice; section 79A; property orders; disclosure.
The Case: The case of Pearce & Pearce [2016] FamCAFC 14 (11 February 2016) was an appeal brought by the husband against the orders of Justice Dawe (“trial judge”) of the Family Court of Australia made 12 December 2014. The appeal was dismissed by the Court and costs were awarded against the husband.