John Sculley: The Importance of Full and Frank Financial Disclosure
It has been reported that former Apple CEO John Sculley is being sued by his ex-wife, Carol Sculley, for "allegedly hiding more than $25 million in assets from her at the time of their divorce". The former couple settled their divorce in 2011. Carol claims that Sculley hid his assets by transferring them to family members.
In Ontario, section 56(4) of the Family Law Act provides:
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, or significant debts or other liabilities, existing when the domestic contract was made;
- If a party did not understand the nature of consequences of the domestic contract; or
- Otherwise in accordance with the law of contract.
As such, if the couple resided in Ontario, Carol may be able to attack the agreement on the basis of the lack of full and frank financial disclosure. Further, as a result of the lack of financial disclosure, Carol may have not understood the nature and consequences of the domestic contract.
Despite the fact that full and frank disclosure was not provided, however, it was held in Levan v Levan that:
A finding that a party has violated a provision of s. 56(4) of the Family Law Act does not automatically render the contract a nullity. Rather, a trial judge must determine whether it is appropriate, in the circumstances, to order that the contract be set aside. This is a discretionary exercise.
However, if Carol can demonstrate to a Court that Mr. Sculley intentionally hid $25 million in assets from her for the purposes of settling the divorce, a Court may be more inclined to set aside the Agreement. Upon setting aside the Separation Agreement or provisions contained therein, the parties would then have to reach an Agreement with respect to same or have a Court adjudicate the matter.