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;

1. If a party failed to disclose to the other significant assets, or significant
   debts or other liabilities, existing when the domestic contract was made;
2. If a party did not understand the nature of consequences of the domestic
   contract; or
3. 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.