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Financial Settlements Divorce: The Court’s Treatment of Disputed Debts When There Is No Independent Evidence and the Debtor’s Credibility Is in Doubt

Financial Settlements Divorce: Disputed Debts

Sometimes a party to a financial dispute will allege the existence of a debt owed to a family member – usually a parent. This may be deployed as a tactic to increase their the share of the matrimonial assets. Other times, the debt is legitimate. In determining whether the debt is legitimate, the court may have regard to:

  1. The credibility of the party alleging the existence of the debt; and
  2. Any independent evidence demonstrating the legitimacy of the debt (e.g., periodic debt re-payments).

In Surridge & Surridge [2017] FamCAFC 10, the Full Court heard an appeal from the wife against the trial judge taking account of debts alleged by the husband in determining the net value of the parties’ assets. The debts in question amounted to $192,000 and $36,000.

Financial Settlements Divorce: The Full Court’s Approach

The Full Court held that the trial judge erred in finding that the debts should be taken into account in determining the net value of the parties’ assets. This error was based on the Full Court’s determination that the trial judge’s findings lacked a sufficient evidentiary foundation. The basis for this determination was two-fold.

First, there was no objective evidence to support the husband’s allegation that the loans existed. The trial judge found that any findings made in favorr of the husband required independent supporting evidence. This was because the trial judge had made adverse findings in relation to the husband’s credit. These findings related to the husband’s attempts to mislead the court and the wife. The Full Court found that not only did the husband fail to provide independent supporting evidence, he failed to provide any evidence at all.

Second, the trial judge should have made findings in support of the wife’s allegation that the loans did not exist. This was based on the trial judge’s finding that any factual disputes between the husband and wife should be resolved in favour of the wife. The basis for this finding was, once again, the adverse findings relating to the husband’s credit. The parties’ evidence with regards to the loans conflicted. So, the trial judge should have found that the loans did not exist.

Financial Settlements Divorce: Concluding Remarks

Fundamentally, Surridge seems to be about the court’s approach to determining factual disputes in circumstances where one of the parties has attempted to deliberately mislead the court. Under such circumstances, the court should not be unduly cautious when it comes to making favourable findings in relation to the innocent party.

In Surridge, the husband deliberately attempted to mislead the court, and the Full Court made findings accordingly. So, when it comes to deciding whether a debt should be taken into account in valuing the parties’ net assets, credibility matters.

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