In a recent decision, an Ontario court considered the interesting question of when it might be appropriate to set aside a separation agreement. As it turns out, the answer to this question may be more complicated than it seems.

 

The Parties’ Story

The parties were married for approximately 19 years and separated in 2008. They had two children together.

After their separation, the parties participated in mediation. Both had legal representation. The mediation resulted in the parties agreeing to a separation agreement, which was executed in April 2010. The parties divorced approximately six months later.

Among other things, the separation agreement provided that the husband would pay the wife $10,000 per months in child and spousal support. It also stipulated that the husband would pay all of the children’s special expenses. The wife agreed to pay the husband an equalization payment in the amount of $181,578.

Four years later, the wife brought an application for an order setting aside the separation agreement on the basis that the husband had failed to disclose significant assets (the wife had learned that the husband had failed to disclose interests in certain family businesses that he had acquired during the parties’ marriage, as well as payments that he received on a shareholder loan, and capital income he received from the sale of shares by a corporation he controlled).

The trial judge dismissed the wife’s application. She found that while the husband had indeed failed to disclose considerable assets and while this non-disclosure was blameworthy, the assets were not “significant” in the sense required by the legislation (see below) in the context of the negotiation of the settlement agreement.

The wife appealed.

 

Section 56(4) of the Family Law Act provides that a court may, on application, set aside a domestic contract (including a separation agreement), or a provision in it, if one party has failed to disclose to the other party significant assets that existed when the domestic contract was made.

 

The Court’s Decision

The court decided to dismiss the wife’s appeal.

The court noted that while incomplete disclosure attracts the risk that an agreement might be set aside, s. 56(4) of the Act makes it clear that this will not always be the case. The court also explained that determining the significance of non-disclosed assets was not a purely mathematical exercise of comparing the value of the non-disclosed assets against the value of the disclosed assets; rather, the term “significant” must refer and be measured in the context of the entire relationship between the parties, and should not be considered in isolation of all of the surrounding circumstances.

Furthermore, the court noted that the finding of significance was only the first step in the analysis. That is, once the party trying to set aside a separation agreement has established that s.56(4) of the Act applies, it is still up to the court to determine whether it should exercise its discretion to set aside the agreement. Some of the factors the court may take into account in making this determination include:

  • whether there had been concealment of the asset or material misrepresentation;
  • whether there had been duress, or unconscionable circumstances;
  • whether the petitioning party neglected to pursue full legal disclosures;
  • whether the petitioning party moved expeditiously to have the agreement set aside;
  • whether the petitioning party received substantial benefits under the agreement; and
  • whether the other party had fulfilled his/her obligations under the agreement.

In this case, the trial judge found that more disclosure would not have changed the outcome of the mediation for the wife, and that the assets that the husband did not disclose were not significant. The court concluded that this finding was available on the record, and that there was no basis to interfere with it.

 

Lessons Learned

It is not necessarily easy to set aside a separation agreement. Before making such an order, the court will have to determine if one spouse failed to disclose significant assets to the other spouse at the time the parties entered into the agreement – and what is “significant” will vary according to each specific circumstance.

This can be a tricky process to navigate. For that reason, separation and divorce are best handled with the assistance of a knowledgeable family law lawyer. At Gelman & Associates, our lawyers – who are knowledgeable and compassionate, but also tough when necessary – provide exceptional legal representation in all family law matters. Our goal is to always empower clients to make informed decisions about their future. We give all prospective clients a comprehensive family law kit during their initial consultation, as well as a copy of our firm’s handbook on separation and divorce. This information is full of resources that will help you understand and navigate the difficult and often complicated separation and divorce process.

With six offices throughout Aurora, Barrie, Downtown Toronto, Mississauga, North York and Scarborough, we are easily accessible by transit and off-highway. Our phone lines are open Monday to Friday from 8:00 a.m. to 8:00 p.m. Call us at (844) 769-0737 or 1-844-769-0737, or contact us online for an initial consultation.