Henderson Heinrichs LLP

The Importance of Being Honest

Kevin Heinrichs

Written by: Kevin Heinrichs (View All Posts • View Bio) Published: June 26, 2014

Categorized: Divorce.
Tags: , , , , .

A large portion of what a Toronto family lawyer or Toronto divorce lawyer does,  is advise people on their obligations and rights when they separate or divorce, and to negotiate on their behalf. Frequently, at the end of that process, we draft separation agreements. As Toronto family lawyers, we go to trial when we must, but if the opposing party is reasonable, reasonable lawyers help their clients settle their differences with a separation agreement (or consent order), not a trial.

 

But what happens when the other party is very unreasonable to the point of lying about his or her assets? And what happens if you sign a separation agreement based on those lies? Whose responsibility is it to dig into the often complex details regarding the value of your spouse’s assets? Does the old saying “buyer beware” apply to divorce and separation?

The Ontario Court of Appeal recently considered this question in Virc v. Blair, 2014 ONCA 392. In that case, a couple negotiated a separation agreement and signed it. The wife had been a lawyer for 10 years and had received a Master of Law degree after that. She was obviously a very smart person, although the motions judge found she had no experience valuing businesses. And she had no experience as a Toronto family lawyer.

Her husband, in contrast was “an experienced businessman,” according to the motions judge, “who considered himself an expert in business valuations and had substantial experience in that regard,” according to the Court of Appeal.

But years after the parties separated, the wife said that the husband intentionally misled her about the value of his companies at the beginning of their relationship. The wife did not dig too deeply during separation and assumed the husband was being honest—which he was legally obligated to do. The wife did not get independent legal advice from a Toronto family lawyer or Toronto divorce lawyer and she did not discuss the financial terms of the separation agreement with an accountant.

No judge decided that the husband intentionally lied. That was not the question at this point in this case.

But the motions judge at the Ontario Superior Court of Justice dismissed the wife’s case. She said that, even if the husband had intentionally lied, the wife could have found out if she questioned his valuations and dug more deeply. As a result, she decided the wife would have no chance of success at trial, and dismissed the case.

The Court of Appeal, however, disagreed.

In short, the Court of Appeal found that if the wife had actually known that the husband lied, but signed the agreement anyway, then she could not complain about the lie and ask for the agreement to be set aside.

But if she only could have known or even should have known, but did not actually know, then she still had a right to ask for the agreement to be set aside if the husband intentionally lied.

The Court of Appeal put it like this:

“It is one thing to disclose assets and liabilities and their values believing the disclosure to be true. It is quite another to deliberately misrepresent the values of assets and liabilities knowing them to be untrue. The law does not entitle a liar to succeed just because the recipient of the falsehoods has not ferreted them out.”

The Court of Appeal said it would be unfair to put the obligation on the wife to investigate whether the husband was lying. In fact, it was the husband’s (and every family law parties’) legal obligation to tell the truth in his financial disclosure. If he intentionally lied, then he could not hide behind a separation agreement based on that lie.

Moral of the story? Do not lie in separation agreements, or you may be wasting your time (and money) because they may be set aside later. And if you think you have been lied to, and signed a separation agreement based on that lie, then talk to a Toronto family lawyer or Toronto divorce lawyer who can advise you on steps to take.

As a side note, no one actually watched the parties sign the separation agreement in this case. Someone later signed the document as a “witness” to their signatures, but that is not the proper way to do it. In some cases, such as this one, that is not a reason to set the agreement aside. But in other cases it might be. If you are going to sign a separation agreement, make sure a witness actually watches you and your spouse sign it. It is always best to consult a Toronto family lawyer or Toronto divorce lawyer to discuss technicalities like this.

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