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Family - Domestic Agreements - Set Aside. Davies v. Jane
In Davies v. Jane (Ont CA, 2025) the Ontario Court of Appeal allowed a family law appeal (in part), this brought against "an order setting aside a separation agreement under s. 56(4) of the provincial Family Law Act, R.S.O. 1990, c. F.3 [SS: 'Setting aside domestic contract'], and, in the alternative, under s. 15.2 of the federal Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.)" [SS: 'Spousal Support Orders'].
Here the court, while considering these two provisions, amends the domestic contract to "bring it into substantial compliance with the objectives of the Divorce Act":[2] Under s. 56(4) of the Family Law Act, the court may set aside a domestic contract, or a provision in it, in certain enumerated circumstances related to the formation of the contract. Very different considerations justify court intervention under the Divorce Act. As set out by the Supreme Court of Canada in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, the court may override spousal support terms of an otherwise valid agreement where continued reliance thereon is unacceptable: Miglin, at para. 63.
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2. The trial judge erred in setting aside the second agreement under s. 56(4) of the Family Law Act
[27] Section 56(4) of the Family Law Act provides that, where a spouse seeks to set aside a domestic contract or one of its provisions, a court may do so only under the following conditions:(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract. [28] A determination under s. 56(4) is discretionary and therefore ordinarily attracts deference: Torgersrud v. Lightstone, 2023 ONCA 580, 93 R.F.L. (8th) 267, at paras. 10-11, leave to appeal requested but application for leave discontinued, [2023] S.C.C.A. No. 464. For the reasons already set out above at paras. 7 and 23-26, this is not an appropriate case for deference. Instead, I undertake a fresh analysis based on the record before this court, and substitute what is in my view the appropriate decision.
[29] Section 56(4) of the Family Law Act, as set out in Faiello v. Faiello, 2019 ONCA 710, 438 D.L.R. (4th) 91, at para. 17, addresses the “intrinsic flaws in the formation of a contract that nullify the apparent consent between the parties and invalidate the agreement, allowing a court to set aside the contract” (emphasis in original). The burden is on the party seeking to set the agreement aside to show that one or more of the conditions of s. 56(4) have been met. Even where one of the listed criteria is met, the decision to set aside a domestic contract, or a provision in it, remains discretionary. The judge must determine what is appropriate in the circumstances of the case: Faiello, at para. 20; LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 33.
[30] Domestic contracts are to be encouraged. Not every apparent flaw will result in setting aside an agreement. As stated in Anderson v. Anderson, 2023 SCC 13, 481 D.L.R. (4th) 1, at para. 33: “As a starting point, domestic contracts should generally be encouraged and supported by courts, within the bounds permitted by the legislature, absent a compelling reason to discount the agreement”.
[31] A lack of independent legal advice and formal financial disclosure can, but will not always, undermine informed choice. The absence of legal advice will not automatically vitiate a domestic contract: Dougherty v. Dougherty, 2008 ONCA 302, 89 O.R. (3d) 760, at para. 11. Evidence of prejudice arising from flaws in the negotiation process is an important consideration: Anderson, at paras. 10, 67 and 70.
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3. The trial judge did not err in applying s. 15.2 of the Divorce Act, as it relates to spousal support
[39] I would, however, uphold the trial judge’s alternative conclusion, guided by the Supreme Court of Canada’s decision in Miglin, insofar as it relates only to spousal support.
[40] Section 15.2 of the Divorce Act confers authority on a court to order spousal support corollary to a divorce application. That section, as interpreted by the Supreme Court of Canada in Miglin and noted by this court in Faiello at para. 16, does not grant authority to “set aside” a separation agreement but establishes that the existence of a valid separation agreement is one factor for the court to consider when determining whether to award spousal support. Support terms under an otherwise valid agreement may in some circumstances be “overridden”: Faiello, at para. 17.
[41] The decision of the Supreme Court of Canada in Miglin establishes a two-stage inquiry where, as here, a support application is made in the face of a valid agreement between the parties.
[42] At the first stage, the court considers “the circumstances in which the agreement was negotiated and executed to determine whether there is any reason to discount it”: Miglin, at para. 80. Circumstances of negotiation that do not amount to unconscionability may be relevant, but the court is not to presume an imbalance of power: Miglin, at para. 82. Where the court is satisfied that the conditions under which the agreement was negotiated are satisfactory, the court then considers whether the substance of the agreement substantially complies with the objectives of the Divorce Act, reflecting an equitable sharing of the economic consequences of the marriage. The court considers the agreement in its totality, bearing in mind that all aspects of the agreement are linked and that parties have broad discretion to set goals and priorities for themselves: Miglin, at para. 84; Faiello, at para. 46.
[43] If the agreement “passes” the first stage of the Miglin analysis, the inquiry proceeds to consider the circumstances at the time of the application for spousal support. As stated in Miglin, “[i]t is only where the current circumstances represent a significant departure from the range of reasonable outcomes anticipated by the parties, in a manner that puts them at odds with the objectives of the Act, that the court may give the agreement little weight”: at para. 91.
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[47] The objectives of spousal support set out in the Divorce Act recognize both compensatory and non-compensatory considerations. Under s.15.2(6) of the Act, spousal support should,(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. ....
4. The appropriate spousal support terms
[51] Where the court determines that an agreement fails to comply substantially with the Divorce Act, whether at the first or second stage of Miglin, this does not mean that the entire agreement is to be ignored: Miglin, at para. 86. To the contrary, the court states:Provided that demonstrated vulnerability and exploitation did not vitiate negotiation, even a negotiated agreement that it would be wrong to enforce in its totality may nevertheless indicate the parties’ understanding of their marriage and, at least in a general sense, their intentions for the future. Consideration of such an agreement would continue to be mandatory under s. 15.2(4). For example, if it appeared inappropriate to enforce a time-limit in a support agreement, the quantum of support agreed upon might still be appropriate, and the agreement might then simply be extended, indefinitely or for a different fixed term. [Emphasis added.] [52] As in Pustai, I would adjust the parties’ “original bargain” only to the extent necessary to bring it into substantial compliance with the objectives of the Divorce Act, while still respecting the framework the parties negotiated. By contrast, the trial judge essentially discarded the entire agreement, setting a support quantum afresh, without regard to the parties’ original terms. . Tsarynny v. Topchiy
In Tsarynny v. Topchiy (Ont CA, 2025) the Ontario Court of Appeal dismissed a family law appeal, here from orders which "set aside the separation agreement":The application judge did not err in setting aside the separation agreement
[9] The application judge set aside the separation agreement pursuant to s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), which provides that:A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract. [10] The appellant argues that, while failing to disclose a significant asset can be a “fundamental” or “crucial” factor in the analysis as to whether to set aside a separation agreement, the absence of disclosure on its own is not “fatal.”
[11] In deciding whether to set aside a domestic agreement, this court in LeVan set out a two-step process. First, a party seeking to set aside the agreement must satisfy the court that there was non-disclosure by the opposing party of a significant asset, and second, the court must consider whether it is appropriate to exercise its discretion to set the agreement aside.
[12] In her analysis, the application judge concluded both that the appellant’s company was a significant asset and that the exercise of her discretion to set aside the separation agreement was warranted on fairness grounds. In LeVan, this court confirmed that fairness is an appropriate consideration in the exercise of this discretion.
[13] In Dochuk v. Dochuk (1999), 1999 CanLII 14971 (ON SC), 44 R.F.L. (4th) 97 (Ont. S.C.), relied upon by the appellant, the Court found a significant asset had not been disclosed but that this had no effect on the parties entering into a domestic agreement. In this case, however, the application judge reached the opposite conclusion. She was not satisfied the respondent would have entered into the separation agreement had she known the value of the appellant’s company.
[14] The application judge stated that she was taking into account the non-exhaustive factors set out in Dochuk. These include: (a) whether there had been concealment of the asset or material misrepresentation; (b) whether there had been duress, or unconscionable circumstances; (c) whether the petitioning party neglected to pursue full legal disclosures; (d) whether he/she moved expeditiously to have the agreement set aside; (e) whether he/she received substantial benefits under the agreement; and (f) whether the other party had fulfilled his/her obligations under the agreement: Dochuk, at para. 18, relying on Demchuk v. Demchuk (1986), 1986 CanLII 6295 (ON SC), 1 R.F.L. (3d) 176 (Ont. H.C.).
[15] The application judge concluded, at para. 9, “At best, the [appellant], was negligent in his material misrepresentation about PostBeyond and, at worse, purposeful. Either way, I accept the [respondent’s] position that her approach to the negotiations would have been different had she thought that there was more to PostBeyond than the [appellant] had represented.” She added, at para. 10, “Given such circumstances, it would be unfair to the [respondent] to hold her to a bargain that she made without relevant information.”
[16] In our view, it was open to the application judge to set aside the separation agreement based on her conclusions with respect to the respondent’s failure to disclose information about his company, and with respect to the unfairness to the respondent in enforcing the agreement. . Singh v. Khalil
In Singh v. Khalil (Ont CA, 2024) the Ontario Court of Appeal dismissed a family law appeal, here where the court considered setting aside a domestic agreement [here a marriage contract]:[10] The motion judge correctly set out the law governing setting aside a marriage contract under s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3, and accurately summarized the factors for consideration. He appropriately considered the factors summarized by McGee J. in Harnett v. Harnett, 2014 ONSC 359, 43 R.F.L. (7th) 464, at paras. 87–96, which include whether the party seeking to set aside the agreement is not the victim of the other party, but rather of his or her own failure to self-protect. See also Mundinger v. Mundinger, 1968 CanLII 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.). . El Rassi-Wight v. Arnold
In El Rassi-Wight v. Arnold (Ont CA, 2023) the Court of Appeal considered an appeal of a family law order that held a domestic agreement, ostensibly transferring an interest in the matrimonial home, to be unenforceable. In these quotes the court considers the FLA s.55 ['Form and capacity'] formal domestic agreement requirements (ie. "in writing, signed by the parties and witnessed"):(a) The significance of the video recording
[14] With respect to the appellant’s first ground of appeal, the video recording made by the appellant confirmed the respondent’s acknowledgement that he had signed the August 2 Document. However, the purpose of the formal requirements in s. 55(1) of the FLA is not just to “provide proof that [a document] was in fact signed by the parties”, but also to “ensure a measure of formality in the execution of a domestic contract”, and to “avoid ‘kitchen table’ agreements”: Gallacher, at para. 24 (citations omitted). As Pepall J.A. explained in Virc v. Blair, 2014 ONCA 392, 119 O.R. (3d) 721, at para. 78:The purpose of this provision is in part to provide some assurance that the parties were deliberate in reaching their agreement and understood the obligations being imposed: see A. Swan & J. Adamski, Canadian Contract Law, 3rd ed. [Toronto: LexisNexis Canada Inc., 2012], at para. 5.50. [15] In the circumstances here, we are not persuaded that the trial judge made any error in concluding that the video recording did not serve as a complete substitute for the document having been properly witnessed. Among other things, the video recording is only around 20 seconds long, and it does not capture the full extent of the discussions that led up to the document being drafted and signed. Some portion of these discussions was also audio-recorded by the appellant, and the trial judge found that this latter recording caused her “to have concerns about the circumstances surrounding the negotiation and execution of the contract”.
(b) The legal test for relaxing the formal requirements of s. 55(1) of the FLA
[16] With respect to the appellant’s second and third grounds of appeal, we are also not persuaded that the trial judge applied the wrong legal test for deciding whether it was appropriate in the circumstances of this case to treat the August 2 Document as a valid domestic contract even though it had not been witnessed.
[17] In particular, we do not agree that there is any real inconsistency between this court’s observation in Gallacher, at para. 24, that one of the purposes of s. 55(1) of the FLA is “to ensure that [domestic contracts are] free from undue influence, coercion or duress”, and the court’s later statement at para. 27 (reproduced again here for ease of reference) that:[T]he strict requirements of s. 55(1) may be relaxed where the court is satisfied that the contract was in fact executed by the parties, where the terms are reasonable and where there was no oppression or unfairness in the circumstances surrounding the negotiation and execution of the contract. [Citations omitted]. [18] At paras. 28-30 of Gallacher, this court went on to discuss some of the relevant factors that bear on the question of whether the formal requirements of s. 55(1) should be relaxed in a particular case. The trial judge considered and applied these factors.
[19] We also do not agree with the appellant that the test articulated in Gallacher for relaxing the formal requirements of s. 55(1) is flawed because it does not track the statutory language in s. 56(4) of the FLA for setting aside a properly formalized domestic contract. In particular, we disagree that as a matter of principle the tests ought to be the same under both sections, as the appellant contends. Rather, we agree with counsel for the respondent that this approach would unduly undermine the legislature’s decision to require domestic contracts to ordinarily have at least some degree of formality, in part to underscore their importance and ensure that the parties who sign them take them seriously.
(c) The trial judge’s application of the Gallacher test
[20] With respect to the appellant’s fourth ground of appeal – that the trial judge erred in concluding that the formalities of s. 55(1) of the FLA should not be relaxed in the circumstances here – we are satisfied that the trial judge properly considered the factors identified in Gallacher.
[21] Unlike the situation in Gallacher, the trial judge found as fact that in this case neither party had received independent legal advice before signing the August 2 Document. She also found that the document was vague, and that the respondent had not understood some key terms. The trial judge also noted that the document left important questions unresolved. For instance, while the respondent was said to be giving up “the house and all assets, equity and so on”, the document did not address which of the parties would be responsible going forward for paying the mortgage or covering the other costs associated with the property.
[22] The trial judge concluded:In order to forgo compliance with section 55(1) of the FLA, both parties must understand the agreement they have reached and the obligations it imposes. Given the circumstances surrounding the preparation of the August 2nd agreement and the wording used, I am not satisfied that this condition has been met in this case. [23] The appellant also relies on the Supreme Court of Canada’s recent judgment in Anderson v. Anderson, 2023 SCC 13, 481 D.L.R. (4th) 1, which was released some ten months after the trial judge’s decision in the case on appeal. We are not persuaded that anything that was said in Anderson undermines the trial judge’s analysis or conclusions.
[24] Several features of Anderson render it distinguishable from this case on the facts. First, unlike in the present case, the agreement in Anderson was witnessed. The issue with the agreement in that case was the absence of an additional safeguard under Saskatchewan legislation, namely, that “the parties formally acknowledge that they understand the nature and effect of the terms of the agreement in the presence of independent counsel”: Anderson, at para. 4.
[25] In Anderson, at para. 42, Karakatsanis J., writing for a unanimous court, emphasized the importance of statutory formalities, noting that they “serve to impress upon spouses the significance of their agreement and to encourage and preserve the validity of binding family property settlements”. She explained further at para. 35:Concern about vulnerabilities may be countered by the presence of procedural safeguards. For example, full and frank disclosure of all relevant financial information between the parties can go far to assuage concerns of informational asymmetry …. Similarly, professional assistance, such as independent legal advice, can serve as a hallmark of a fair bargaining process … although the curative impact of legal advice in the negotiation of domestic contracts should not be taken as given. [Citations omitted]. [26] Karakatsanis J. held further that the domestic agreement in that case, which was in writing, and signed and witnessed, should be enforceable despite the absence of the additional safeguard stipulated in the Saskatchewan legislation that the parties acknowledge their understanding of it in the presence of a lawyer. Importantly, however, she also held at para. 71, that “there was nothing to suggest that the parties did not understand the terms or effect of their agreement”.
[27] In contrast, the trial judge in the case at bar found as fact that the respondent did not understand key aspects of the August 2 Document, in part because the agreement itself was “overly broad and vague”. As we have already noted, we are required to defer to her assessment of the evidence and her findings of fact. . El Rassi-Wight v. Arnold
In El Rassi-Wight v. Arnold (Ont CA, 2023) the Court of Appeal considered an appeal of a family law order that held a domestic agreement, ostensibly transferring an interest in the matrimonial home, to be unenforceable. In these quotes the court considers the FLA s.56 ['Provisions that may be set aside or disregarded'] set aside provisions:(d) Setting aside the contract under s. 56(4) of the FLA
[28] Turning to the appellant’s fifth ground of appeal, we see no basis to interfere with the trial judge’s alternative conclusion that even if the August 2 Document was a valid domestic contract, despite not having been prepared in accordance with s. 55(1) of the FLA, she would have set it aside pursuant to s. 56(4).
[29] In this regard, we do not agree with the appellant’s argument that the trial judge made any implicit finding that the respondent signed the document under duress, nor do we agree that s. 56(4) required her to make any such finding.
[30] As Karakatsanis J. noted in Anderson, at para. 3, “in deciding how much weight to give the agreement, a reviewing judge generally examines both the fairness of the bargaining process and the substance of the agreement, in accordance with the legislative scheme”. In Ontario, s. 56(4) of the FLA permits courts to set aside domestic contracts on multiple bases, including when “a party did not understand the nature or consequences of the domestic contract” (s. 56(4)(b)). While a finding of duress might have entitled the trial judge to invoke s. 56(4)(c), which authorizes the setting aside of domestic contracts “otherwise in accordance with the law of contract”, s. 56(4)(b) does not require a finding of duress.
[31] The trial judge found as fact that the respondent did not understand precisely what he was giving up, noting that “[n]either party reviewed any of their financial records prior to signing the document”, and finding further that the respondent, in particular, did not understand the meaning of the term “equity”. In our view, these findings would have given the trial judge a sufficient basis to allow her to set aside the contract under s. 56(4)(b), had it been necessary for her to do so. . Torgersrud v. Lightstone
In Torgersrud v. Lightstone (Ont CA, 2023) the Court of Appeal considered the statutory test for setting aside a domestic agreement under the FLA (here it was a Quebec domestic agreement):[7] The application judge added that, if she was in error, she would exercise her discretion to set aside the contracts based on s. 56(4) of the FLA, because the husband had failed to disclose significant assets and the wife did not appreciate the instruments’ nature and consequences. The husband’s parents had both died before the marriage, and he was their sole heir. The wife did not know the extent of the husband’s financial position at the time the instruments were executed. She knew his family had interests in shopping malls in Montreal but was not made aware of the details of the ownership, including the value of the ownership interests. The husband also did not make the necessary inquiries to enable him to fulfil his duty of full financial disclosure. He did not know the value of his future inheritances until several years later. His disclosure in this proceeding indicates his net worth at the date of the marriage was approximately $4 million. This amount was the value of the first tranche of his inheritance from his mother’s estate, which came to him at age 25, a few months after the marriage. He did not make his wife aware of this.
[8] The application judge decided to exercise her discretion to set aside the contract. This was a long marriage and if the Quebec contracts were upheld, the wife would not be entitled to an equalization of net family properties under Ontario law. She signed the contracts without discussion of the parties’ financial circumstances and without receiving an inventory of the husband’s assets. She was trying to keep the peace and appease the husband. She was hurt that the husband was putting his family above her but also trusted him when he said they needed to execute the contracts to protect his family’s business. Referring to the factors in Dochuk v. Dochuk (1999), 1999 CanLII 14971 (ON SC), 44 R.F.L. (4th) 97 (Ont. Gen. Div.) and Demchuk v. Demchuk (1986), 1986 CanLII 6295 (ON SC), 1 R.F.L. (3d) 176 (Ont. H.C.), the application judge held that this was a proper case to set aside the marriage contracts.
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[11] The application judge determined that s. 56(4) of the FLA was engaged and exercised her discretion under that section to set aside the contracts.
[12] Section 56(4) provides:Setting aside domestic contract
(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract. R.S.O. 1990, c. F.3, s. 56 (4). [13] With respect to s. 56(4)(a), the application judge found, at para. 246, thatthe husband failed to disclose the value of assets as of the date of the marriage contract, specifically that he was about to receive 1/3 of his mother’s estate (as declared in his financial statement and NFP statement, for a total of approximately $4M). This is not a paltry sum. [14] The application judge found that the wife “met her onus” under s. 56(4)(b), because she did not understand her entitlements under the law and therefore did not understand what rights she was renouncing in signing the contract. The meetings with the notary were short with little time to reflect, and the instruments did not contain details of her legal entitlements at the marriage breakdown and did not provide detailed waivers and releases which would have directed her to understand what wealth she might otherwise be entitled to share under the governing legislation.
[15] The application judge concluded, at para. 260:I find that the wife would have rethought her position and what she was giving up if she knew she was renouncing her future rights to a division of property of that magnitude.
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