In Virc v. Blair, a recently decided Ontario Court of Appeal case, the Court considered the requirement to make full financial disclosure prior to signing a separation agreement and the parties’ respective obligations to investigate the veracity of said financial disclosure.

Virc was initially decided on a summary judgment motion. The parties had executed a separation agreement which purported to conclusively deal with all support and property issues.  Two years later, and after the completion of several business courses, the wife came to the realization that the deal might have been improvident and brought an application to have the agreement set aside. The husband moved for and was granted summary judgment against the wife. Of chief concern to the motion judge was the fact that the wife had apparently failed to question and investigate the financial disclosure that had been provided by the husband during the negotiations.

As it turned out, there was evidence that the husband had inflated the value of his assets at the date of marriage by at least $8,909,292. But for this deceit, the wife would have been entitled to an equalization payment of $1,300,000 and not the $954,000 that the husband had claimed the wife owed to him in equalization.

The Court of Appeal held that the onus was on the husband to prove the wife had actual knowledge of the misrepresentation before it could act as a bar to her recovery. Merely being afforded the opportunity to investigate or test the veracity of the disclosure provided by the husband did not make up for his material and (possibly) deliberate misrepresentations.

In allowing the appeal and ordering a trial of the issues, the Court of Appeal concluded that this case could not be appropriately decided on a summary judgment motion. There were a number of relevant factors that required a determination before the enforceability of the separation agreement could be decided.

One aspect of the summary judgment decision was upheld by the Court of Appeal. This related to s. 55(1) of the Family Law Act which requires that all domestic contracts be made in writing, signed by the parties and witnessed.

The parties had signed the separation agreement without any witnesses present, but had later attended the husband’s workplace at which point a co-worker had recognized and identified the parties’ signatures.  The wife attempted to rely on the lack of witnesses present at the execution of the agreement as a ground to set it aside. The Court of Appeal concluded that the wife could not successfully assert non-compliance with s. 55(1) where had she admitted to signing the agreement, had accepted the benefits of the agreement and had waited for close to two years before raising the issue of non-compliance.

This case underlines the importance of making full and accurate financial disclosure prior to the execution of a separation agreement. While cases such as Butty v. Butty, 2009 ONCA 852, prohibit a party who had actual knowledge of the shortcomings of disclosure at the time the agreement was negotiated from later relying on said shortcomings to have the agreement set aside, Virc demonstrates that the court will not impose a positive duty to investigate the other spouse’s financial disclosure.

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