David Harris-Lowe, Associate, Family Law

The Ontario Court of Appeal made a decision in the case Virc v. Blair this past May.  It raises questions about the circumstances when a separation agreement can be set aside.  It’s also a cautionary tale about negotiating a separation agreement properly in the first place.  The parties in this case separated in early 2008 and signed a separation agreement a few months later.  Ms. Virc did not get legal advice and the financial information provided by Mr. Blair was at best poor and at worst intentionally inaccurate.  Two years later Ms. Virc commenced court proceedings to set aside the separation agreement.

So when can a separation agreement be set aside?  How do you avoid having an agreement set aside in the first place?

A separation agreement can be set aside if:

a)    the agreement doesn’t meet the requirements for a valid separation agreement;

b)    a party fails to disclose significant assets or debts, a party didn’t understand the nature or consequences of the agreement or otherwise in accordance with the law of contract; and,

c)    a court exercising its discretion finds the agreement is basically unfair when compared to the parties’ rights under the law.

If the negotiation of the agreement has problems and if the agreement is basically unfair (compared to your legal rights) then the work of reworking the agreement begins.  This means exchanging accurate financial information and there’s a good chance a court application will follow.  In the right circumstances, this is the appropriate step to take.

In Virc v. Blair, the Court of Appeal was only deciding whether Ms. Virc’s application to set aside the separation agreement could proceed.  Six years after their separation and four years after the separation agreement was signed and they’re only just at the beginning of the process…

The real point is that when you’re negotiating a separation agreement in the first place both parties should retain a lawyer and make sure you exchange complete and accurate financial information – even if this means exercising more patience than you want to.  Hiring a lawyer and exchanging financial information ensures you get proper advice regarding property division, child support and spousal support.  It ensures that you understand what you’re signing and why.  It also results in an agreement that is more effective and lasting than one without legal advice and financial disclosure.