The case of Nyles & Nyles highlights the importance of giving full and frank financial disclosure at the time that terms of settlement are being entered into of any circumstance which may impact the future value of an asset even if that event has not yet occurred and its future worth is unknown.  

In this case the parties entered into consent orders and a Binding Financial Agreement  (“BFA”) dealing with the adjustment of property interests in 2004.

According to the terms of settlement the husband was to receive 60% of the net assets which were set out and annexed to Binding Financial Agreement. At the time the parties entered into the BFA and consent orders the wife was a director of a public company and the shareholding in that company was disclosed to the husband in the asset schedule attached to the BFA.

Floating of Company on Stock Market

At the time the parties signed the terms of consent and the Binding Financial Agreement however, the wife’s company was in the process of converting from a private company to a public company. The company floated on the stock market less than 2 months after the Agreement was signed, the wife sold her shares and made a large profit.
The Husband then sought to set aside the Binding Financial Agreement by making an Application to the Court under s79A of the Family Law Act for reason of non-disclosure of relevant information and the fact that he relied on the wife’s assertion as to the value of the assets in making the Agreement.

Full and Frank Financial Disclosure

Full and Frank financial disclosure is a fundamental element of justice and applies as much to out of court settlements as it does to contested proceedings.

The complicating factor in this case was that the wife’s shares were subject to strict confidentiality obligations. The wife was not able to provide the husband with any documents with respect to the pending commercial transactions due to confidentiality issues. The Husband’s evidence was that the Wife disclosed the floating of the shares at the time it was occurring but alleged the wife said that the float would not happen for a number of years and that the value of the shares would be minimal. The wife’s evidence was that she directly discussed with the husband the possibility of the shares being floated and made an offer of settlement during mediation in which her proposal involved the transfer of some of those shares to the husband which he failed to take up.

The husband was advised by his solicitors that it was not in his best interest to enter into the Binding Financial Agreement until further disclosure was to hand. The husband therefore failed in his Application to set aside the consent orders and the BFA as it could not be said that he was induced to enter into the BFA by the misconduct of the wife and he had made an informed decision.  This was despite the fact that the Court actually found that the wife had failed to make full and frank financial disclosure and to some degree acted fraudulently.