This was the question that the Supreme Court of Canada tackled in a case a few years ago called Rick v. Brandesma. The question arose in the context of a separation agreement, which the husband and wife had negotiated after almost 30 years of marriage and five children together.
The wife later went to court to have the agreement struck down, claiming that in the course of those negotiations the husband had either deliberately concealed or under-valued assets (which included a dairy farm and certain shares in a company), and had taken advantage of her emotional instability. (Indeed, the trial judge had described the wife has having a “long-standing psychiatric disorder”, and “an unhealthy condition of the mind.” )
The resulting separation agreement had left the wife with $650,000 less than she should legally have obtained. She was successful at trial in having the agreement overturned, but that had been reversed on appeal.
In reviewing the case, the Supreme Court started by making the observation that the dissolution of a marriage – especially a long-term one – is uniquely emotionally charged and results in the potential for one or the other spouse to be particularly vulnerable. This potentially affects the integrity of the bargaining process. Special care has to be taken to ensure that the marriage assets are distributed in a manner that is free from exploitation both in terms of the psychological state of the parties, and information that is exchanged.
The key points from the Supreme Court were:
• Spouses are free to decide what they are prepared to settle for, but they must do so after being given all the relevant information.
• Each spouse is under an obligation to provide full and frank disclosure to the other of all relevant financial information.
• If an agreement is negotiated without such disclosure, a court may set it aside in the right circumstances, on the basis of unconscionability.
• Whether a court will intervene depends on the circumstances, including the extent of the defective disclosure, the degree to which it has been deliberately orchestrated, and the extent to which the resulting negotiated agreement is at odds with the goals of the relevant legislation.
The Court summed it up this way:
“In other words, the best way to protect the finality of any negotiated agreement in family law is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme.”
In the current case, the husband’s failure to make full and honest disclosure, his willingness to exploit the fact that negotiations were based on incomplete information, plus his awareness of his wife’s profound psychological instability, all dictated that the separation agreement was to be set aside.
For the full text of the decision, see:
Rick v. Brandesma, 2009 SCC 10,  1 SCR 295 http://canlii.ca/t/22hw5
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