The Ex-Files with Jeremy Sutton: My ex says his business wasn’t profitable, but he’s just bought a new Tesla

"My ex-partner began driving a new Tesla ... He has also replaced most items of his wardrobe with new clothes."

Q: I have recently separated from my partner of four years. During our relationship, my now-ex-partner set up an air conditioning company with his best friend.

He said the business provides him with a modest salary but does not generate any real profit. In the past year, I have come to suspect otherwise. The business has hired several new employees and has refurbished its premises. A few months prior to our separation, my ex-partner began driving a new Tesla. When I questioned him about this, he said it belonged to his friend. He has also replaced most items of his wardrobe with new clothes.

My lawyer has requested full financial disclosure from my ex-partner, both personally and in relation to the business. He has provided some financial disclosure, including some bank account statements, but I suspect there are bank accounts he has not disclosed. I cannot see details of any of his new clothing purchases in the bank statements he has provided. Other expenses you would also expect to see, such as petrol and groceries, are missing. What do you recommend I do to ensure I get a fair division of relationship property?

A: Your question suggests that:

• Your ex-partner has not disclosed all his bank accounts;
• It is likely the Tesla will be in the company’s books because it will be able to be depreciated. The running expenses would be a company expense, less any adjustment for private use;
• The business may have value; it may be more than just an income source.

Until you receive full financial disclosure from your ex-partner, you will not be able to progress any division of relationship property.

As a next step, your lawyer could request the following:

• Confirmation as to whether to your ex-partner holds any other bank accounts, either in his sole name or jointly, or held by the business.
• If so, bank statements for those accounts should be provided for the past two years.
• If he maintains that he holds no other accounts, then you could request that he sign an authority enabling your lawyer to contact the banks to request whether they hold any accounts in his name. An order to this effect was made in a recent High Court case where the husband frequently changed banks hoping to evade the provision of disclosure.
• The registration details for the Tesla and evidence as to how the purchase price was met.
• Financial statements for the business for the past three years, together with bank account statements for any bank account held by the business for the last two years.

If, having made this request, the financial disclosure is still incomplete, then you could make an application to the Family Court for discovery.

The Family Court will only order discovery of those documents that are relevant and the discovery would have to be proportionate to the issues between you.

If you made an application for discovery without seeking them first by voluntary disclosure, you would probably get costs against you.

An application for discovery can be made prior to filing any substantive proceedings for division of relationship property. In many cases, once full discovery has been provided, a negotiated settlement can be achieved without the need for any further court proceedings.

Prior to filing the application for discovery, it may be worthwhile engaging a forensic accountant to help the court identify what disclosure appears to be missing.

The court can order that “third parties” - that is, those other than the couple dividing their relationship property - provide disclosure.

The third-party might be a new de facto, an accountant or, as here, a business partner.

If your ex-partner continues to maintain the Tesla does not belong to him, despite his full use of it, then your lawyer could consider filing an application for discovery from him.

Jeremy Sutton is a senior family lawyer specialising in divorce cases where there are significant assets, including family trust and complex business structures.