31 August 2018
Cards on the table: The importance of full financial disclosure in family law
When couples separate or divorce, the negotiation of finances can be one of the biggest challenges they face, with the potential for serious repercussions well into the future. There is a legal and ethical duty for all parties involved in a separation or divorce to fully disclose all of their assets and debts. Doing so will ensure a fair and enforceable resolution between the parties. When it comes to family law matters, simply put: full disclosure equals fairness.
In the often quoted court case Cunha v Cunha, 1994 CanLII 3195 (BCSC), the judge stated:
Non‑disclosure of assets is the cancer of matrimonial property litigation. It discourages settlement or promotes settlements which are inadequate. It increases the time and expense of litigation. The prolonged stress of unnecessary battle may lead weary and drained [parties] simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of a reasonably‑based suspicion that justice was not done. Non‑disclosure also has a tendency to deprive children of proper support.
In other words, to be dishonest or withholding of information during a financial negotiation can delay settlement, make the process more expensive, cause uncertainty and confusion, and result in an unfair settlement that may hurt ones’ children most.
The Family Law Act, at section 5(1), creates a duty to make a full and truthful disclosure in whichever process is used, to promote settlement by ensuring that the parties have all the information they need to reach a fair resolution.
Agreements made without appropriate disclosure may be set aside if challenged in the future (see Family Law Act, sections 93 and 164), and where the court sets aside an agreement based on non-disclosure the court may also penalize the person if they entered into the agreement knowing they were not disclosing significant property (Family Law Act, section 214).
In some cases, when a litigant is considered to be withholding financial information, the court can, pursuant to section 212 of the Family Law Act, make an order for disclosure. If the order is not complied with, meaning that the disclosure made is either delayed, false, or incomplete, the court has a variety of enforcement options under section 213 including fines or dismissing the non-disclosing parties’ case.
It is also important to remember that disclosure is not meant to be a one-time occurrence. There is a continuing duty to disclose, which means that you need to provide updates of any changes in circumstances until the conclusion of your matter, and even in some circumstances well after an Agreement or Order is done.
How does one provide proper disclosure?
For agreements and non-court proceedings such as collaborative divorce or mediation, the process can be less formal. It is important to list all assets and debts. This may require you to provide documents to your lawyer that supports your claims of assets and debts.
If a court proceeding (litigation) has been started, the process is more formal. Court rules, whether in the Provincial Court or the Supreme Court, require you to swear a financial statement. This is a very detailed document which shows your income, assets, debts and expenses. This is sworn as an affidavit, so is evidence in a court. In addition, there are documents which are required to be attached and form part of the financial statement. These include your recent tax returns, notices of assessment from the Canada Revenue Agency, recent pay subs and property tax notices. If you are self-employed, or a business owner, additional documents will be required regarding your income and business.
In a Supreme Court action you will also need to provide a list of documents. This list should detail all documents in your possession that are relevant to the issues in your case. This will include many financial documents if child or spousal support or the division of property is at issue. Any documents you intend to rely on at a trial must be listed.
To ensure a fair and equitable resolution of your separation or divorce proceeding that will hold up over time, it is critical that the disclosure of financial information be provided fully and in a timely manner. To do otherwise risks a prolonged proceeding, additional costs, increased stress, and can potentially further damage an existing co-parenting relationship.
If you have any questions about financially disclosure in a family law case please connect with any of the lawyers at the Watson Goepel Family Law Group .
Karen Roussy is a Paralegal in the Family Law Group.