Show me the numbers: Financial disclosure in Family Law
Justice Kurz stated in the case of Figaro v Figaro, “It is now trite to say that full disclosure is the lifeblood of family law and that the absence of disclosure is its cancer.”
Before entering into a domestic contract, whether that be a cohabitation agreement, marriage contract or separation agreement, it is important for parties to exchange financial disclosure. While this is an important exercise, contracts may still be valid where parties have not disclosed their income, assets, debts and liabilities. Under the Family Law Act, a domestic contract is enforceable if made in writing, signed by the parties and witnessed.
Similarly, in the context of separating spouses, if one spouse commences an application to court for child support, spousal support or property division, a sworn financial statement is required to be served on the other party and filed with the court.
From time to time, and usually in an effort to avoid expensive legal fees, parties prepare their own agreements and fail to exchange any financial disclosure.
In the case of Figaro v Figaro, referred to above, a motion was brought by the Applicant wife to set aside a “kitchen table” agreement on the basis that the parties had not exchanged financial disclosure. The parties had discussed the terms they wished to have incorporated into the agreement and the Respondent husband prepared the agreement. The agreement was executed and witnessed by a notary.
The Applicant wife claimed that she had no knowledge of the Applicant’s financial situation at the time of entering into the agreement so could not understand she may have been entitled to more in support or an equalization payment. Accordingly, the Applicant wife sought an order for further financial information.
The Respondent husband argued this was unnecessary and her requests for information were “overbroad.” Counsel for the Respondent husband provided the court with a case for consideration, namely Hartnett v Hartnett which noted the following:
- Courts will generally uphold the terms of a valid enforceable domestic contract;
- It is desirable for the parties to settle their own affairs;
- Parties are expected to use due diligence in ascertaining the facts underlying their agreements;
- A domestic contract will be set aside when a party was unable to protect him or herself;
- The court is less likely to interfere when the party seeking to set aside the agreement is not the victim of the other, rather his or her own failure to self-protect;
- The court must not look at which party made the better bargain but rather, to whether one party took advantage of their ability to make a better bargain;
- The test for unconscionability is not weighing the end result but rather the taking advantage of any party due to the unequal positions of the parties; and
- The onus is on the party seeking to set aside the contract to demonstrate that a party failed to disclose significant assets, debts or liabilities at the time the contract was made; that a party did not understand the nature or consequences of the agreement; or that the contract was not made in accordance with the law of contract.
Justice Kurz agreed with the Applicant wife’s position that there appeared to be significant financial information missing and that the Applicant wife could not be in a position to demonstrate that the separation agreement should be set aside on the basis of nondisclosure “without the disclosure necessary to determine the truth of the those allegations.” The court ordered that the Respondent husband produce the requested financial disclosure within 30 days of the date of the Order.
If you have any questions about the exchange of financial information as well as your obligations for production of disclosure, it is important to seek legal advice before entering into a domestic contract.
This article was originally published by The Hamilton Spectator.
