No Obligation to Disclose Value of Assets Prior to Signing Marriage Contract, Court RulesAugust 12, 2021
What is a Marriage Contract?
Section 52(1) of the Family Law Act (“FLA”) provides that two persons who are married to each other may enter into an agreement, also known as a marriage contract, in which they agree on their respective rights and obligations under the marriage or on separation. This includes the rights and obligations of the parties in relation to the ownership in or division of property.
Such agreements may be signed before or after the marriage and normally set out such matters as division of property, estate plans and establishing how future matters will be decided in the event of a breakup.
Couple Gets Married and Moves in Together
In the case under review, the man and woman started dating in September 2011 and were married on May 19, 2012. They separated on January 17, 2019. They have one child, born in 2013.
At the time the couple were married, the woman owned a property in Georgetown, Ontario which she had purchased in 2004. Prior to the marriage, the woman lived at the property with her two sons from a previous marriage. The man moved into the home with the woman and her sons and the property became the matrimonial home.
Couple Signs Marriage Contract Four Years After Wedding
The man and woman signed a marriage contract dated November 30, 2016. The man received independent legal advice from a lawyer and he signed a Certificate of Independent Legal Advice, which was appended to the marriage contract at the time of execution.
The language and intent of the marriage contract prevented the man from making a claim for any interest, present or future, vested or contingent, in the woman’s property. Furthermore, the marriage contract confirmed that the woman had brought the property into the marriage and that she had no debt, except a small mortgage.
In addition, the terms of the marriage contract confirmed that the man did not have an interest in the property, despite the fact it became the matrimonial home within the meaning of the FLA. The marriage contract expressly provided that the property was to be excluded from any division of property, equalization calculation or other method whatsoever in the event the parties separated.
The man acknowledged in the marriage contract that he agreed to be bound by it, and that the marriage contract was entered under s. 52 of the FLA.
Man Challenges Validity of Marriage Contract in Divorce
While the man did not deny that he signed the marriage contract, he submitted that he had not received full, proper and independent legal advice at the time. He sought an order setting aside the contract on the following grounds:
- The woman did not make the necessary disclosure required by law;
- He failed to understand what rights or benefit he was giving up; and
- He signed the marriage contract when the woman was exerting undue influence on him, and he was under duress.
Fundamentally, the man argued that the woman had made no financial disclosure of the value of the property she was seeking to exclude from any equalization process at the time they entered the contract.
In response, the woman argued that, to the contrary, awareness of the other party’s assets is sufficient to avoid setting aside an agreement. Additionally, she submitted that a party cannot enter a marriage contract knowing of shortcomings in disclosure beforehand, and then rely on those shortcomings when attempting to set the agreement aside. Individuals are expected to conduct their due diligence in a timely fashion, and to be held accountable for their failure to ask obvious questions.
Legal Framework for Setting Aside a Marriage Contract
Any challenge to set aside or to nullify a marriage contract in Ontario is brought under s. 56(4) of the Family Law Act, which states:
Setting aside domestic contract
(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
The court explained that the proper approach on an application to set aside a marriage contract under s. 56(4) involves a two step process. First, the party seeking to set aside the contract must demonstrate to the court that one of the listed circumstances within s. 56(4) has been engaged. Second, the court must then consider whether it is appropriate to exercise its discretion in favour of setting aside the agreement or a provision within it. When exercising discretion under this second step, fairness between the parties is a guiding consideration.
Court Refuses to Set Aside Marriage Contract
Regarding the man’s first ground in challenging the validity of the marriage contract, the court held the woman had not failed to disclose a significant asset, as there was no requirement that she disclose the property’s value, stating:
“[The man] could have requested that [the woman] provide the information from which the value of the [property] could be ascertained, or taken steps to obtain that value directly. [The man] cannot now use his own failure to carry out his due diligence as a basis to avoid the marriage contract….
I also note that s. 56(4)(a) does not contain the words “financial” or “value” to describe the nature of the disclosure of a significant asset.”
The court further dismissed the man’s second ground, finding that there was no evidence to support his claim that he did not understand what he was signing.
Finally, the court dismissed the man’s third ground in challenging the contract, stating:
“I find as a fact that [the man] did not sign the marriage contract while subject to the undue influence of [the woman]. Nor did she exert illegitimate pressure over [the man] to sign the marriage contract to raise duress as a ground. [The man] is now experiencing the remorse of a party who has signed a marriage contract and seeks to leverage his litigation position in the aftermath of a separation.”
Additionally, the court found no reason to exercise its discretion to set the contract aside.
In the result, the court therefore rejected the man’s claims and upheld the validity of the marriage contract.
At Feigenbaum Law, our goal is to help you move forward following the breakdown of a relationship while retaining as much financial stability as possible and ensuring your children are provided for. Mark Feigenbaum is able to counsel his clients on all potential risks that may result from a family law dispute, not just those related strictly to the breakdown of a marriage. Contact Mark online or call him at (905) 695-1269 or toll-free at (877) 275-4792 to book a consultation.