Understanding Financial Disclosure in Family Law Proceedings

Financial disclosure is a fundamental component of any family law proceeding involving child support, spousal support, or property division. It ensures transparency and fairness, allowing the court—and the parties involved—to make informed decisions based on accurate financial information. This blog discusses who is required to provide disclosure, what happens when circumstances change, and the consequences of failing to comply.

What are relevant documents that should be disclosed in a Family Law proceeding in BC?

Part 5-1 of the Supreme Court Family Rules, sets out the applicable income documents, as follows:

"applicable income documents" means, in respect of a person,

(a) a copy of every personal income tax return filed by the person for each of the 3 most recent taxation years,

(b) a copy of every notice of income tax assessment or reassessment issued to the person for each of the 3 most recent taxation years,

(c) if the person is receiving employment insurance benefits, a copy of the 3 most recent employment insurance benefit statements,

(d) if the person is receiving workers' compensation benefits, a copy of the 3 most recent workers' compensation benefit statements,

(e) if the person is receiving income assistance, current documentary evidence of the income assistance that is being received by that person,

(f) if the person is an employee,

(i) the most recent statement of earnings indicating the total earnings paid to the person in the year to date, including overtime, or

(ii) if that statement is not provided by the employer, a letter from the person's employer setting out the information referred to in sub-paragraph (i) and including the person's rate of annual salary or remuneration,

(g) if the person is self employed, the following information for the 3 most recent taxation years:

(i) the financial statements of the person's business or professional practice, other than a partnership;

(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the person does not deal at arm's length,

(h) if the person is a partner in a partnership, confirmation of the person's income and draw from, and capital in, the partnership for each of its 3 most recent taxation years,

(i) if the person controls a corporation, the following information for the corporation's 3 most recent taxation years:

(i) the financial statements of the corporation and its subsidiaries;

(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation and every related corporation does not deal at arm's length,

(j) if the person is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust's 3 most recent financial statements, and

(k) if the person owns or has an interest in real property, a copy of the most recent assessment notice issued from an assessment authority for each property.

Who Must Provide Financial Disclosure in a Family Law Proceeding?

In almost all family law cases, both parties are required to provide full financial disclosure. This obligation arises in several specific contexts:

1. Each Party as Required Under the Child Support Guidelines

When child support is being claimed or contested, the Federal Child Support Guidelines require both parties to provide detailed financial information. This includes income tax returns, notices of assessment, pay stubs, and other income documentation. Even in cases where a payor is a salaried employee with straightforward earnings, this information is necessary to calculate appropriate child support amounts.

2. When Special or Extraordinary Expenses Are Claimed

Special or extraordinary expenses—often referred to as “section 7 expenses” under the Guidelines—include things like daycare, medical costs, tutoring, or extracurricular activities. If one parent is seeking a contribution from the other toward these expenses, both parties must disclose their respective incomes so the parties can determine a fair sharing of costs based on proportional income.

3. When Spousal Support Is Being Claimed

Spousal support claims require even more comprehensive financial disclosure. The court looks not only at current income but also at expenses, assets, and debts to assess entitlement, amount, and duration of support. This can include bank account statements, stock option information, RSU’s, pension valuations, and financial statements that give a full picture of each party’s financial position.

4. When Property and Debt Division Is Being Claimed

In proceedings involving the division of family property and debt, financial disclosure is crucial. Each party must provide a complete statement of assets and liabilities, including real estate, vehicles, investments, credit card balances, and more. This ensures that property is divided fairly and in accordance with applicable family law legislation.

What Happens When There Is a Change in Financial Circumstances?

Financial situations can change significantly over the course of a family law proceeding. A party may lose a job, receive a raise, incur unexpected expenses, or undergo major life changes. When this happens:

1. Information Must Be Kept Current

Each party is under a continuing obligation to keep their financial information up to date. This includes updating income figures and disclosing changes to assets or debts as they occur. A failure to do so can lead to delays in the proceedings and undermine the credibility of the party involved.

2. You May Be Required to Provide Additional Documents

If circumstances change or if initial disclosure was incomplete, a party may be asked—or ordered—to provide additional documents. This may include updated tax returns, revised financial statements, or explanations for significant financial transactions. Timely and full cooperation is key to avoiding complications.

What Happens When a Party Does Not Comply with the Disclosure Requirements?

In Cunha v. Cunha, 1994 CanLII 3195 (BCSC) the Court said: “Non-disclosure of assets is the cancer of matrimonial property litigation.” Non-compliance with financial disclosure obligations is taken very seriously. Failure to provide accurate or complete disclosure can result in significant consequences, including:

1. The Court Can Order Disclosure

If a party refuses to voluntarily disclose financial information, the court may issue an order compelling them to do so. These orders are enforceable, and ignoring them can lead to more serious consequences.

2. The Court Can Dismiss All or Part of That Party’s Claim

In cases of serious non-compliance, the court may dismiss some or all of the claims made by the non-compliant party. This is particularly relevant when someone is seeking support or a share of property but refuses to provide financial records.

3. The Court Can Strike Out a Party’s Response to Family Claim or Counterclaim

Similarly, if a party fails to respond with the required financial disclosure, the court may strike out their response entirely, effectively removing their ability to participate further in that part of the proceeding.

4. Contempt of Court

Willful refusal to comply with court-ordered disclosure can be considered contempt of court. This is a serious offence that may result in penalties, including imprisonment in extreme cases.

5. The Court May Impose a Fine

Fines may be levied against a party who fails to comply with disclosure obligations. This is intended to penalize the behavior and deter further non-compliance.

6. The Court May Draw an Adverse Inference

If a party withholds financial documents, the court is permitted to draw an adverse inference. This means the court may assume the hidden information would have been unfavorable to the non-disclosing party.

7. The Court May Attribute Income to That Party

In cases where a party has failed to disclose income or is suspected of underreporting, the court may impute income—assigning an income figure the court deems fair based on available evidence.

8. The Court May Make an Order on Costs

Lastly, the non-compliant party may be ordered to pay the other party’s legal costs related to the disclosure issue. This can be a significant financial burden and adds to the overall consequences of non-compliance.

Conclusion

Financial disclosure is not optional—it is a legal obligation set out in the Supreme Court Family Rules, that plays a vital role in ensuring fairness and justice in family law proceedings. Whether you're dealing with child support, spousal support, or property and debt division, providing timely and accurate financial information is essential. Failing to do so can result in serious legal consequences that may impact the outcome of your case.

If you're involved in a family law matter, consult our team of Vancouver family lawyers to ensure you understand your rights and responsibilities when it comes to financial disclosure.