Financial Disclosure – A “Necessary Evil” in Family Litigation
In last week’s blog ‘The importance of diclsoure in family law settlements’ http://bit.ly/qsQaQi , a case named Ward v.Ward was reviewed, where the Ontario Court of Appeal considered the validity of a separation agreement that had been negotiated by two spouses. Among other things, the wife had claimed that the agreement was not valid because the spouses had not exchanged sworn Financial Statements leading up to the negotiations, and she later felt there had been some inconsistencies and non-disclosure relating to the husband’s financial affairs.
Ultimately, the Court concluded that even though neither spouse had exchanged sworn Financial Statements (which were not strictly necessary because they had agreed to participate in the collaborative law process, which does not involve going to court), they nonetheless each had sufficient knowledge of the other’s financial situations. Accordingly, there was no reason to set aside the negotiated separation agreement on the sole basis that there had been non-disclosure.
The dispensing with financial statements in Ward v. Ward is certainly not typical. Indeed, the full disclosure and knowledge of the financial circumstances of the parties is a vital part of the family litigation process, a point that was expressly emphasized by the Court in Ward v. Ward. In Ontario, this generally involves the preparation of a sworn Financial Statement by each spouse, which is embodied in specified court forms (Form 13 for support claims; Form 13.1 for property and support claims; both under the Ontario Family Law Rules, O. Reg. 114/99). It requires the party filling it out to list income from all sources, detail his or her living expenses, and provide the value of property as well as the extent of debts and liabilities at various time-points. This includes bank accounts, registered savings plans, credit card debts, and pensions. The form is long, cumbersome and – unfortunately – mandatory under the provisions of the Family Law Rules. A family law matter may be filed with the court, without it.
However, even in cases where the spouses do not intend to proceed to court (i.e. where they hope to resolve their differences by way of mediation or arbitration), it may be prudent for each of them to complete a Financial Statement, nonetheless.
This is because (perhaps ironically), the full disclosure of assets, debts and liabilities by both parties will actually serve to protect each of them. For example, as was seen in Ward v. Ward, under the Family Law Act a court has the power to potentially set aside a negotiated separation agreement in cases where there has not been full disclosure by a spouse; a sworn Financial Statement from both parties therefore amounts to a relatively easy way to ensure that there has been full disclosure. Also, the exchange of Financial Statements long before a court date will allow the parties’ respective lawyers to provide accurate legal advice on matters such as the range of child or spousal support that may be owed from one spouse to another; this can reduce or even eliminate the time that a court would have to spend determining the issue. Finally, the good-faith full and early exchange of comprehensive financial information sets the right “tone” for any subsequent litigation: it avoids one spouse having to compel the other to provide disclosure, which would require the court’s intervention. Plus any reluctance on one party to provide information may lead the court to conclude that he or she has something to hide.
In addition to being experienced in all areas of family law, Russell Alexander, Family Lawyers can assist with the preparation of Financial Statements in preparation for family litigation. For more information, visit us at www.RussellAlexander.com