Court Addresses Whether Hidden Assets Constitute Are Significant Enough To Alter Separation Agreement
Separation agreements exist to provide parties involved in a separation or divorce with a clear understanding of considerations such as what happens to the matrimonial home, how assets are divided, equalization payments, and more. However, there can be instances where one party may want to revisit a separation agreement. In a recent case before the Court of Appeal for Ontario, one party in a divorce asked the court to set aside some of a separation agreement’s terms because she had found out her former husband had failed to disclose some assets.
The separation agreement
The parties were married for 19 years and had two children together. They separated in 2008 and resolved their financial issues through mediation. A separation agreement was executed in April 2010, and the parties divorced about six months later.
The separation agreement contained a provision requiring the husband to pay the wife $10,000 per month in child and spousal support. Additionally, the wife agreed to pay the husband an equalization payment of $181.578.
Requesting to set aside the separation agreement.
Four years after the separation agreement was signed, the wife sought an order to set it aside under s. 56(4) of the Family Law Act (“the Act”). That particular provision of the Act states that a court “may, on application, set aside a domestic contract or a provision in it if a party failed to disclose to the other significant assets…existing when the domestic contract was made”.
The trial judge agreed that the husband had failed to disclose his interests in certain family businesses that he had acquired during the marriage. He was also found to have failed to disclose payments he received on a shareholder loan and capital income from the sales of shares of a corporation he controlled.
The trial judge found that while the husband’s failure to disclose these sources of income was blameworthy, the application was dismissed because actions were not “significant” as required by the Act.
There were two reasons the trial judge arrived at this conclusion. The first was that the wife had obtained a very favourable settlement, with the husband agreeing to pay more child and spousal support than he was legally obligated to. Secondly, the trial judge found the husband to have made a number of substantial concessions during the mediation, and simply imputing the value of the non-disclosed assets would not have any impact on either the equalization payment or the support.
The mother argued the trial judge made multiple errors in her analysis of the Act, specifically that “that the trial judge erred by placing an onus on (the wife) to inquire as to the existence and value of the respondent’s assets. While incomplete disclosure rightfully attracts the risk that an agreement might be set aside, s. 56(4) makes it clear that failure to disclose even a significant asset does not necessarily attract that consequence. Additionally, the wife argued the trial judge erred in determining that the assets in question were not “significant.”
The court did not agree, writing,
“Determining the significance of non-disclosed assets is not, as the appellant argued, the purely mathematical exercise of comparing the value of the non-disclosed assets against the value of the disclosed assets. Rather, the trial judge appropriately relied on case law finding that “the term significant must refer and be measured in the context of the entire relationship between the parties.”
The court also agreed with the trail judge’s finding that the equalization payment and support payments would not have been impacted by the inclusion of the assets.
With the court agreeing with the trial judge’s decision, the appeal was dismissed.
Contact the experienced family lawyers at Jason P. Howie if you have questions around separation agreements or modifications to them. We provide knowledgeable advice and skilled representation to separated spouses and families in Ontario and have been doing so for over 25 years. Many of our clients are referred to us by former and current clients, as well as by lawyers, accountants and other professionals. Please call us at 519.973.1500 or reach us online to see how we can help you today.