“The Ontario Court of Appeal considered the principles applicable to setting aside a marriage contract in LeVan v. LeVan, 2008 ONCA 388. At para. 50, the court observed:
Section 56(4) of the FLA was designed to address and codify prior concerns maintained by the courts that both parties fully understood their rights under the law when contracting with their spouses. It has been characterized as the “judicial oversight” provision of marriage agreements: Hartshorne v. Hartshorne, 2004 SCC 22 (CanLII), [2004] 1 S.C.R. 550 at paragraph 14. The provision is of such significance that, in accordance with s. 56(7), it cannot be waived by the parties.
The authors of Ontario Family Law Practice 2021, Volume 1, (Coats, Steinberg, Perkins, Lenkinski and James), LexisNexis Canada, Toronto, note at p. 1565 in their annotation to s. 56 of the Act:
… the doctrine of unconscionability is imported into s. 56(4) as part of the law of contract. This doctrine focuses on the circumstances surrounding the formation of the contract.
In addition, s. 33(4) of the Act gives the court jurisdiction to set aside provision for support or waiver of support in a domestic contract if the results of the provision are unconscionable.
As the court explained at para. 51 of LeVan, there is a two-part analysis with respect to whether an agreement should be set aside pursuant to s. 56(4). First, the burden is on the party seeking to set aside the agreement to show that one or more of the circumstances enumerated in this section apply. Second, the court must determine whether to exercise its discretion to set aside the agreement.
At para. 52 of LeVan, the Court of Appeal approved of the conclusion of Madam Justice Mesbur in Patrick v. Patrick [citation omitted] that “parties are not permitted to contract out of the obligation to disclose.”
The court in LeVan, at para. 52, emphasized that in order to contract out of the Family Law Act by means of a marriage contract, parties must have a clear understanding of their rights and obligations under the Act if there were no marriage contract. It described financial disclosure as critical to this process.
The court in LeVan also commented on the importance of financial disclosure and independent legal advice for parties entering into domestic contracts, citing Dubin v. Dubin [citation omitted] at para. 53:
… knowing assets and liabilities at the date of the agreement is fundamental to an eventual calculation of net family property. A party needs to know what asset base might potentially grow, in order to determine what he or she is being asked to give up in the agreement. Coupled with financial disclosure is the notion of understanding legal rights and obligations under the legislative scheme. This second notion carries with it the concept of independent legal advice. Thus, a party must know what assets and liabilities exist at the date of the contract and must understand the general legislative scheme in order to know what he or she is giving up in the proposed agreement.
The trial judge in LeVan relied on Demchuk v. Demchuk (1986) 1986 CanLII 6295 (ON SC), 1 R.F.L. (3d) 176 (Ont. H.C.J.) to conclude that financial disclosure includes disclosure of the value of assets: para. 57. The Court of Appeal decided LeVan on other grounds and did not comment on that conclusion.
However, in Gibbons v. Mulock, 2018 ONSC 4352, at para. 16, the parties’ net worth statements were exchanged as part of the negotiation of a marriage contract. In my view, it is not sufficient to simply disclose the nature of a party’s asset without disclosing its value. To do so may be misleading.
Exchanges of sworn financial statements or statements of net worth are a starting point for understanding what each party gains or loses up upon entering into a marriage contract. They constitute a base line from which future gains or losses may be calculated should the agreement or a portion of the agreement be set aside. Indeed, without a disclosure of value, it may be impossible to accurately calculate the value of debts and assets at the date of marriage in the event that the contract is set aside.”