The following case deals with the issue of the validity of a Memorandum of Agreement determining the division of property, equalization payment, support (both child and spousal) etc. stemming from the breakdown of the marriage of the parties. Mr. Ward contends that the agreement is valid and enforceable whereas Ms. Ward states that it is not and consequently cannot be binding.
The parties married on October 22, 1988 and entered into a marriage contract on the same day. This contract did not account for a number of assets held by Mr. Ward. The parties had two children and when they separated in 2005 the children continued to reside with Ms. Ward.
In order to arrive at an amicable resolution of all issues the parties chose to engage in Collaborative Family Law and both Mr. and Ms. Ward retained counsel to facilitate the process. They participated in 8 meetings, the result of which was a Memorandum of Agreement signed on November 30th, 2005.
Justice Matheson of the Ontario Superior Court of Justice was called upon to determine therefore whether or not the Memorandum could be held to be a valid and enforceable contract or whether, in the alternative, it could be held to be an agreement in principle and that other information is necessary to make it enforceable.
There are numerous interesting facts in this case that should be noted and which put the validity of the Memorandum into question. The first is that Ms. Ward claims that full financial disclosure was not made, and secondly the individual, Sandy Weststein, who was obtained to act as a mediator for both parties was Mr. Ward’s accountant. He was the individual responsible for providing both sides with all relevant financial information and advising them on the courses of action to take. Ms. Ward contends that he withheld information from her regarding certain properties and the financial affairs of Mr. Ward’s medical practice. Lastly, she states that she did not voluntarily sign the Memorandum rather she was pressured into doing so as a result of Mr. Ward’s threats to withhold $250,000 from her, which she needed to purchase a home for herself and her sons.
Mr. Ward only offered full and complete financial disclosure once the motion to set aside the Memorandum of Agreement was initiated.
Justice Matheson identifies the test to be applied when considering a claim to set aside a domestic contract for non-disclosure. It stems from the case of Quinn v. Epstein Cole LLP and involves a two-stage analysis:
(i) First, the party seeking to set aside the agreement must demonstrate that the other party failed to discharge its duty to disclose significant assets. The failure to disclose significant assets includes the making of a material misrepresentation about the true value of assets, and the failure to disclose changes in income. The significance of an asset is assessed by measuring the value of the asset against a party’s disclosed net assets. To conclude that a party has failed to disclose a significant asset, there must be some evidence to verify the value or extent of the party’s assets either at the date of marriage or the date of the agreement;
(ii) If a court finds that a party has failed to disclose a significant asset, the court must determine, in light of the facts of each case, whether it should exercise its discretion to rescind the domestic contract. The burden of proof lies on the party seeking to set aside the contract to persuade the court to exercise its discretion in its favour. The court will take into account a variety of factors in exercising its discretion …
Based on all the aforementioned, Justice Matheson ruled in favor of Ms. Ward. He concluded that the Memorandum of Agreement was simply an outline to arrive at a binding separation agreement. In order to be valid and enforceable the parties required much more financial information; including that which was excluded from the marriage contract signed in 1988.