In Family Law, “Disclosure” Means “Full Disclosure”
In a recent case the court examined in detail the so-called “disclosure” that had been provided by the husband in a matrimonial dispute, and the effect any deficiencies might have on the legal validity of a negotiated marriage contract that relied on that information.
As background, the spouses had met almost 20 years ago in the now-47-year old wife’s native Romania where she worked as a cosmetician. She also owned her own condominium while studying social psychology. The husband, now aged 61, had sponsored her to come to Canada. After having a traditional marriage for 18 years, they decided to separate.
At the time of their union they had entered into a relatively straightforward marriage contract in which each of them waived spousal support from the other. The validity of this marriage contract became an issue requiring the court’s determination, since its purported effect was to foreclose the wife from pursuing the spousal support to which she would otherwise be eligible under Ontario law.
The wife complained that the marriage contract was unfair: It’s In the actual wording of the contract the husband had failed to disclose the full extent of his assets, liabilities and debts, and had been vague and incomplete in his job description, all of which might have affected the calculation of any spousal support entitlement she might have had under the contract.
The wife’s allegations of non-disclosure were important because section 56(4) of the Ontario Family Law Act specifically allows a marriage contract to be set aside if one of the spouses fails to disclose significant assets, debts or liabilities when the marriage contract was made.
The court considered the circumstances, and pointed out that in the context of negotiating a domestic contract, the duty to make full and honest disclosure is required to protect the integrity of the result of negotiations undertaken in the “uniquely vulnerable circumstances” inherent in marital disputes. In this case, the court observed:
It cannot be said that the Applicant husband provided complete, fair and frank disclosure of his relevant financial information. Clearly he did not. The marriage contract refers only to his job as a mechanic, not a business owner, and his ownership of a family residence, not a commercial building. It is not enough that he told the Applicant wife he owned his home and worked as a mechanic. It is further not enough if he told her he owned the Bloor Street property and his own mechanic business. The Applicant husband never disclosed the market value of his home, the market value of the Bloor Street property, or any mortgages thereunder. He never disclosed the value of his companies, or his belongings including his tools which he values at $25,000-$30,000. The Applicant husband did not tell the Respondent wife anything about his income and he did not produce his income tax returns or bank statements to her or [her lawyer]. I have concluded, therefore, that the Respondent wife has satisfied her onus of proving her circumstances fall within s. 56(4)(a) of the Family Law Act.
(The court was quick to add that the husband had no lied about this information; rather it found he “simply did not disclose his assets, debts and liabilities in a meaningful way”).
Still, the court made several factual findings that precluded a decision to set the marriage contract aside entirely, including the observation that even with full disclosure as to assets and incomes, the wife’s spousal support entitlement would not have changed (since the contract itself did not refer to the business, commercial building, property value, income, or the value of his various companies). The contract remained legally valid because the husband’s “shortcomings in disclosure did not impact significantly upon the final agreement reached between the parties”. More importantly, the wife had independent legal advice prior to signing it, and ample written opinions from lawyers advising against doing so, which advice she chose to ignore.
Still, the court set the contract aside because it left matters in an unconscionable state in light of the sacrifices the wife made to come to Canada from Romania almost 20 years ago: she was allowed to pursue a claim for spousal support pursuant to the provisions of the Family Law Act.
For the full text of the decision, see: