The Duty of Full Disclosure in Relationship Property Matters

by Maretta Twentyman & Debbie Dunbar - Morrison Kent

Providing clear, full and frank disclosure in relationship property matters is essential – whether you are negotiating an agreement following a separation, going through court proceedings or preparing a contracting out (pre-nuptial) agreement.

As family lawyers, one of the reasons we advise clients to provide and obtain full disclosure is to avoid the risk that the settlement could fall over in the future. It is in everybody’s interests for matters to be final, allowing people to move on without the worry of a future challenge.

The Family Court has the power to set aside a relationship property agreement if giving effect to it would cause “serious injustice”. There have been many cases where the non-disclosure of relevant financial information and circumstances has been held to meet this high threshold.

If the Court makes final orders for the division of relationship property, but it is later discovered that one party made a material non-disclosure, it may be possible for the orders to be set aside.

From a practical perspective, proper negotiation cannot be undertaken unless everyone knows what they are dealing with. If there is a concern that full disclosure is not forthcoming, it is possible to apply to the Court for “discovery” – whether you are going through proceedings or not.

It is easy to imagine some of the issues raised by a lack of disclosure. A few examples are:

  • A case where a wife signed a contracting out agreement despite her lawyer’s disclaimer that they were unable to properly advise her because the husband had not made full disclosure. The Court held that the wife could not seek to overturn the agreement at a later point based on that lack of disclosure.

  • In one case the Court noted that more substantial discovery could be ordered when it believes that a party has concealed information or otherwise sought to be misleading about the scope of relationship property.

  • More unusually, there was a case in the UK last year where a husband had exaggerated his financial resources before the marriage when signing a pre-nuptial agreement.

The agreement recorded that each party had each fully and frankly disclosed their respective means, and neither would make a claim against the other on the dissolution of their marriage. The main intention in signing the agreement was to protect the wife’s substantial inheritance, which was mostly held in trust and valued at around £27 million. When the marriage broke down, the wife sought to rely on the agreement but the husband challenged it and claimed that typographical errors had been made.

The Judge noted that the exaggeration of financial resources made by the husband was “designed very probably to reassure [wife] that his motives for entering into the marriage with her were not purely financial”. It was found to be fair to hold the husband to the agreement, and that he had to accept responsibility for the disclosures he had given.

In summary, going through a full disclosure process helps to ensure that the resulting settlement reflects your legal rights and entitlements.
 

If you would like any further information or advice please contact either of the article authors: Maretta Twentyman or Debbie Dunbar, or the Morrison Kent Wellington office (04) 472-0020. 


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