The importance of financial disclosure in family law
Financial disclosure plays a crucial role in family law as it ensures transparency, fairness, proper financial support and the equitable division of property between parties involved in a family law proceeding. By providing a comprehensive overview of each party's financial circumstances, including income, expenses, assets, debts, and more, financial disclosure allows for a fair assessment of the parties' financial positions. Ultimately, financial disclosure enables the courts to make just and equitable determinations and parties to make fair agreements. Zantingh v Zantingh, 2021 ONSC 7959 explains:
Parties in matrimonial litigation have a positive duty to provide complete, accurate, and timely financial disclosure…Non-disclosure and/or partial disclosure that begs more questions than it answers is clearly insufficient and non-compliant. It delays and adds to the cost of the litigation. It undermines the objectives of the Family Law Rules and the legislation dealing with family property and support. It is the bane of family litigation….
Rule 13 of the Family Law Rules
Rule 13 of the Family Law Rules outlines the extensive financial disclosure requirements in family law. Parties are required to provide financial statements to each other, regularly update their financial statements, correct them when necessary, back the figures up with disclosure and more. Parties are allowed to “question” each other on their respective financial statements pursuant to the Rules. The Rules even provide that in the event there is failure to provide disclosure, the court can order disclosure to be made.
Some of the potential consequences of non-disclosure of financials
The potential consequences arising from a failure to provide financial disclosure pursuant to a court order can be quite significant. For example, the party may be found in contempt of court and may suffer any of the consequences outlined in Rule 31 of the Family Law Rules, including temporary imprisonment as was the case in C v. C, 2020 ONSC 10995:
...It is clear to the court that the husband sought to suppress disclosure of his offshore income and banking affairs, has misled his Trustee in Bankruptcy and has deliberately, and repeatedly, misled this court. It is equally clear that the husband has failed to comply with paragraphs 5(a) to (c) and (f) to (l) of the Order of Sutherland J. There is no evidence of steps taken by the husband to comply with those terms of the Order.
While custodial sentences for contempt in family law proceedings are rare, the husband's behaviour is inexcusable, clearly contumacious, and merits a period of imprisonment.
Additionally, Rule 1 (8) of the Family Law Rules allows the court to strike a party’s pleadings who fails to obey court orders. However, this remedy is only available in the most serious and exceptional cases. This occurred in S v. A, 2021 ONSC 3161, where the moving party was allowed to proceed by way of an uncontested trial (see the case for the legal test). The court commented:
The most basic obligation in family law proceedings is the duty to disclose financial information. The requirement is immediate and ongoing: Roberts v. Roberts, 2015 ONCA, 450. As Myers, J. stated in Manchanda v. Thethi, 2016 ONSC 3776 (CanLII), "it has been clear for over 15 years that financial disclosure — early, voluntary and complete financial disclosure — provides the factual foundation for the resolution of financial issues in family law proceedings".
I agree with the sentiments expressed by D.L. Chappell J. in Levely v Levely, 2013 ONSC 1026:
The frequency with which Family Law litigation degenerates into an abusive game of delay tactics, stonewalling, and dodging of judicial authority is a concern which must remain at the forefront of the judge's mind in considering remedies for a party's failure to participate as required in court proceedings or to comply with court orders. Family Law litigants who come to the court for assistance must come with a strong sense of assurance that the process will be an effective means of mending and stabilizing the family fabric, rather than a futile money pit of failed justice. The court has a critical responsibility and role to play in ensuring that proceedings which are intended to protect families and lead to resolution of pressing and emotionally divisive issues are not hijacked by a party and transformed into a process for further victimizing the other party and the children in their care.
…His refusal to comply with the FLRs and his ongoing breaches of Court Orders, justifies the striking of his pleadings and the matter proceeding without his participation.
Financial disclosure is not only important in court. It is also important in private agreements outside of court, as demonstrated next.
Crucial in agreements between the parties
As seen in previous posts, the Family Law Act also provides that any agreement made between the parties related to finances should contain the necessary financial disclosure so that people know what agreements they are getting into or what they are giving up. The Family Law Act states that it is possible to overturn an agreement If there was no financial disclosure or deficient disclosure in coming to the agreement (subject to judicial discretion and the standard test to overturn agreements). Section 56(4) of the Family Law Act provides for this jurisdiction in Ontario.
In conclusion, financial disclosure is of paramount importance in family law. It serves as a fundamental pillar of transparency, fairness, and equitable resolution of financial matters between parties involved in family law proceedings. By providing a comprehensive overview of each party's financial circumstances, financial disclosure ensures that hidden assets, income manipulation, and fraudulent activities are prevented, maintaining a level playing field for all parties. Failure to provide accurate financial disclosure can have serious consequences, including contempt of court. It is crucial for parties to comply with the financial disclosure requirements outlined in the Family Law Rules. Moreover, financial disclosure plays a significant role in agreements between parties, as the absence of disclosure may render an agreement subject to being overturned. Overall, financial disclosure promotes trust, accountability, and the pursuit of justice in family law proceedings, enabling courts to make informed and fair decisions.