Case law: Domestic contracts and financial disclosure

Virc v. Blair 2014 ONCA 392: The wife in this case is a lawyer. She met her husband when she became involved as litigation counsel to his company. They began living together in 1992. In 1993, the wife left her law firm to assist with her husband’s litigation. They were married in 1994 and had three children. The wife worked part-time as a sole practitioner and continued to do her husband’s legal work until 2001. The parties began discussing a separation in 2007/2008.

After signing a separation agreement, the wife brought an application to, among other things, set it aside. The husband brought a summary judgment motion seeking to dismiss the application. The motion judge assumed, for the purposes of the motion, that the husband had deliberately and materially misrepresented the value of his property on the date of marriage for the parties’ equalization calculation, but found that the wife’s failure to question that value was fatal to her case. She determined that no trial judge would set aside the parties’ separation agreement in those circumstances. She accordingly granted the husband’s summary judgment motion and, for the most part, dismissed the wife’s application.

The wife appealed from that decision to the Court of Appeal.

A court has the discretion to set aside a domestic contract or a provision in it pursuant to s. 56(4) of the Family Law Act, which provides that domestic contracts may be set aside on the basis of three criteria: failure to provide significant financial information when the contract was made; failure by a party to understand the nature or consequences of the domestic contract; and other grounds based on the law of contract.

Justice Pepall of the Ontario Court of Appeal outlined this test in his decision

In LeVan v. LeVan 2008 ONCA 388, the Court of Appeal found that s. 56(4) required a two-stage analysis:

(i)   Can the party seeking to set aside the agreement demonstrate that one or more of the s. 56(4) circumstances is engaged?

(ii)   If so, is it appropriate for the court to exercise its discretion to set aside the agreement?

The Court of Appeal in this case found that the motion judge, in purporting to apply this two-stage test for setting aside a domestic contract, had effectively (and incorrectly) shifted legal responsibility for confirming the false financial information to the wife. The proper place for the onus of providing accurate financial disclosure is on the party who is disclosing it, in this case, the husband. The Court of Appeal overturned the lower court’s decision.

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