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DOMESTIC CONTRACTS AND SEPARATION AGREEMENTS - Types - Separation agreements - Consensus, lack of - Misrepresentation - Fraudulent or intentional misrepresentation

Wednesday, June 21, 2017 @ 8:48 AM  


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Appeal by the husband from an order setting aside the parties’ separation agreement, awarding the wife equalization, and ordering the husband to pay retroactive child support of $450,000. The parties met in 1991 when the wife worked as a lawyer and the husband and his businesses were clients of the firm where she worked. They moved in together in 1993 and the husband commenced divorce proceedings against his former wife. The wife started working exclusively for the husband and his companies in 1993. The parties’ three children were born in 1994, 1997 and 1999. The husband’s outstanding family law proceedings with his former wife were settled in 1999. The wife left the practice of law in 2001. The parties separated in 2008. The wife accepted the husband’s figures for the valuation of their family property and agreed that she owed him almost $1 million in equalization. In their 2008 separation agreement, the wife was released from her obligation to make a $954,150 equalization payment. No child support was to be paid because the children were to spend equal time with both parties. The issue of child support was to be reviewed yearly after 2010. After she signed the agreement, the wife became concerned that the husband had overvalued the corporate assets he brought into the relationship, resulting in her owing him an equalization payment. Documents that were filed in the husband’s first divorce proceedings established that he essentially brought no assets of value into his second marriage. The wife applied in 2009 to set aside the separation agreement based on the husband’s misrepresentations about his assets, but her claim was summarily dismissed because she had failed to conduct her own investigation into the values when she had the opportunity to do so. She succeeded on appeal. The appeal judge found that the wife bore no onus to inquire about the veracity of the husband’s figures in circumstances where he made deliberate material misrepresentations. A trial was ordered, at which the husband was found to have intentionally misrepresented the value of his corporate holdings at the date of the marriage at $6 million over their actual value. The trial judge gave no value to litigation assets the husband claimed he was entitled to at the date of the marriage, finding that the deluge of litigation in which the husband was then involved and the lack of credible evidence upon which to determine the likelihood of settlement about any of the litigation receivables claimed precluded a reasonable assessment of their value. Retroactive child support was ordered because the wife’s post-separation income was lower than anticipated, while the husband’s was higher than anticipated, and because the husband had engaged in blameworthy conduct in misrepresenting his assets.

HELD: Appeal dismissed. The trial judge did not err in setting aside the separation agreement. Inherent in the duty to disclose was the duty of the titled spouse to fairly value the asset. The onus was on the party asserting the value of an asset that he or she controlled to provide credible evidence as to its value. The trial judge did not err in finding that the husband misrepresented the value of his corporate assets at the date of marriage. The trial judge was entitled to exclude expert valuation evidence adduced by the husband as lacking in independence and impartiality, and in so doing to accept the only other evidence as to the valuation of the corporate interests at the date of the marriage, which set the value at nil. The trial judge was correct to conclude that in the face of a deliberate material representation, the onus was on the husband as the disclosing party to establishing that his wife had actual knowledge of the falsehood. The judge was entitled to rely on representations that the husband made in his first divorce about the fact his corporate holdings had no value in finding that they indeed had no value. The judge made no factual error in calculating equalization. The retroactive child support award for the two older children was supported by evidence of the wife’s income, the fact that the children lived primarily with the wife post-separation, their attendance at university, thereby remaining children of the marriage, and the husband’s blameworthy conduct.

Virc v. Blair, [2017] O.J. No. 2535, Ontario Court of Appeal, J.I. Laskin, M.L. Benotto and G.T. Trotter JJ.A., May 17, 2017. Digest No. TLD-June192017007