As Part 1 of this series explained, courts generally respect the arrangements negotiated by parties in separation agreements, but can “set aside” (cancel) a separation agreement for several different reasons. Part 1 discussed two common grounds, (i) misunderstanding of the nature or consequences of the agreement, and (ii) duress, undue influence, fraud, misrepresentation, or public policy reasons. This Part 2 covers another common ground, failure to meet the financial disclosure requirements of the Family Law Act.
Financial disclosure is the key obligation in family law. One of the most common reasons separation agreements are set aside (canceled) is for lack of financial disclosure or inadequate financial disclosure. Under the Family Law Act, parties cannot waive financial disclosure before entering into a separation agreement.
Under the Family Law Act, the court can set aside a separation agreement if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the separation agreement was made. The failure to disclose needs to happen before the agreement is signed, not after. Values for each asset, debt or liability must be disclosed as well. For a Separation Agreement, this includes disclosure of assets, debts, and other liabilities on the marriage date as well as on the date of separation. Parties must make this disclosure whether or not there was a request for same.
Parties who did not disclosure truthful financial information should beware, as there is no time limit on when a party can ask the court to set aside an agreement under this ground. However, parties should be mindful, the non-disclosure needs to relate to “significant” assets or debts. This includes significant underreporting or undervaluing an asset or debt. The court must decide whether the nondisclosure was so significant that its effect would have led a party to reconsider entering into the terms of the agreement. If a party knew the other party did not disclose assets or undervalued assets, they are unlikely to be successful in setting aside an agreement under this ground.
Spouses also need to include evidence of their income for support purposes. Under the Family Law Act, the court may also set aside a provision for spousal or child support or a waiver of spousal or child support, if this provision or waiver results in unconscionable circumstances.
Exchanging and providing sufficient financial disclosure is key to any successful separation agreement. If parties want their agreement to withstand challenge in the courts, fulsome disclosure is necessary.
Please contact Gilbertson Davis LLP if you are considering a separation agreement, varying a separation agreement or having a separation agreement set aside. Our experienced family law counsel advises and represents clients drafting and negotiating separation agreements and other domestic contracts, including marriage contracts and cohabitation agreements. Our family law counsel is also well versed in varying agreements and court orders. Our family law counsel is a certified collaborative lawyer and a member of the Collaborative Divorce Toronto practice group.
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