In family law contracts, including cohabitation agreements, separation agreements, and marriage contracts, if one party fails to disclose material financial information, the contract may be set aside by the court. However, it’s debatable whether a mutually accepted mistaken fact constitutes a failure to disclose.

In the recently published decision Butty v. Butty,* the Ontario Court of Appeal addressed the issue of mutually accepted mistaken facts in marriage contracts.

In Butty, the husband and wife were married for 10 years until their separation. When they were married, a marriage contract was entered into to protect Mr. Butty’s farm property, with the soon-to-be husband and wife obtaining independent legal advice. At the signing of the contract, Mr. Butty and all witnesses believed the farm property consisted of one parcel of land.

A decade later, the parties were experiencing serious marital problems. The wife made an application seeking to set aside the marriage contract before the court. Following a nine-day trial, the trial judge ordered that the marriage contract be set aside for the following reasons:

1. the farm property consisted of two parcels, not one;
2. there was confusion about the nature of a third party’s interest in the farm property;
3. the estimated value of the husband’s interest in the farm property was incorrect; and
4. the estimated value of the husband’s disclosed liability was overstated because of the incorrect estimate above.

The trial judge acknowledged that the first disclosure problem was the result of inadvertence because at the time the contract was entered into, neither the husband nor his lawyer knew that the farm property consisted of two parcels, rather than one.

The Court of Appeal held that issue #1 does not distract from the fact that Ms. Butty knew that she was giving up all claims against the whole of the farm property.

Issues #2 to #4 were not pursued by Ms. Butty despite her lawyer’s concerns when the contract was entered into. Therefore, the Court of Appeal ruled that “a party to a marriage contract cannot enter into it knowing of shortcomings in disclosure and then rely on those shortcomings as the basis to have the contract set aside.“^

The Court of Appeal distinguished the present matter from another recent decision of its own LeVan v. LeVan.#

In LeVan, the following factors led to the affirmation of a trial judge’s exercise of discretion in setting aside a domestic contract:

1. The husband failed to disclose his income tax returns and the value of his significant assets.
2. The wife did not receive effective independent legal advice and some advice provided was wrong.
3. The wife did not understand the nature and consequence of the marriage contract.
4. The husband misrepresented the nature and terms of the marriage contract to the wife.
5. The husband’s failure to disclose his entire assets to his wife was deliberate.
6. The husband interfered with the wife’s receipt of legal assistance.

*(2009) 99 O.R. (3d) 228

^Raaymakers v. Green (2006), 25 F.L.R. (6th) 54 (C.A.)

# (2008), 90 O.R. (3d) 1

Note: Please keep in mind that this article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.