By Martina Storgato, Partner and Gabriel Storgato, Law Clerk

The proliferation of digital assets has introduced a novel and complex dimension to the Australian family law property framework. From cryptocurrencies and Non-Fungible Tokens (‘NFTs’) to valuable in-game assets, these holdings, once considered novelties, are now firmly within the ambit of the Federal Circuit and Family Court of Australia (‘FCFCOA’).

While these assets may present as intangible, the FCFCOA is clear: digital assets are considered property and are subject to the same disclosure obligations as traditional assets.

The Court’s Approach to Digital Property

The foundational principle of property settlement in Australia is the requirement for full and frank disclosure, as mandated by s 71B and s 90RI of the Family Law Act 1975 (Cth). This statutory duty requires parties to disclose all property, liabilities, and financial resources, irrespective of their form. The FCFCOA has confirmed that this obligation extends to digital assets. This approach is consistent with the broad definition of “property” under the Act, which includes any real or personal property.

The foundational principle remains that if an asset can be valued and realised, it forms part of the parties’ asset pool.

Valuation: A Dynamic Challenge for the Modern Solicitor

Valuation of digital assets presents a unique challenge, primarily due to their extreme volatility. The value of a cryptocurrency can fluctuate dramatically between the date of a parties’ separation and the date of a final hearing. The court typically values assets at the date of the hearing, exposing both parties to significant market risk.

To mitigate this, a solicitor may include seeking orders for the liquidation of a digital asset portfolio at a specific, agreed-upon date to lock in its value. Alternatively, a sophisticated settlement may involve one party retaining the digital assets while the other is compensated with an equivalent value from more stable assets, such as real estate or superannuation. For bespoke assets like NFTs, an independent expert’s valuation may be required, considering factors such as market liquidity, scarcity, and sales data.

The Disclosure Conundrum

The truly complex hurdle with digital assets is discovery. Unlike traditional financial institutions that operate under regulatory scrutiny, many digital assets are decentralised and can be held in a “cold wallet,” accessible only via a private key. This decentralised, un-auditable nature makes concealment of such non-tangible assets a real possibility.

The burden of proof falls to the legal team to uncover these hidden assets. This requires a forensic approach, including a meticulous examination of bank statements, tax returns, and other financial documents for any evidence of transactions with cryptocurrency exchanges. The court’s power to compel discovery is extensive, with Rule 6.02 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 allowing a party to seek an order compelling the other party to provide specific documents. A failure to comply can be met with serious judicial disapproval.

Consequences of Non-Disclosure

The FCFCOA takes a very dim view toward non-disclosure, viewing it as an attempt to undermine the integrity of the judicial process. A party who is found to have failed in their duty of disclosure faces serious legal repercussions. The court may draw an adverse inference, as demonstrated in cases such as Blackwood v Blackwood [2021] FamCA 268, where the court assumed a non-disclosed asset had a greater value than had been admitted, and adjusted the property pool accordingly. This effectively penalises a non-disclosing party.

Furthermore, s 114UB(2) of the Act provides the court with the power to order a party who fails to comply with their disclosure obligations to pay the legal costs of the other party. This financial penalty underscores the court’s expectation of transparency.

The message from the court is unequivocal: the cloak of digital anonymity is no shield from the long arm of Australian family law. Navigating this new frontier requires a deep understanding of both the technology and the law to ensure that just and equitable outcomes are achieved in family law matters.