Share float complicates Binding Financial Agreement
24-November-2011 Family Law By Simone Green
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 per cent 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
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 two 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.
Importance of full and frank financial disclosure
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.
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