Under Ontario law, spouses who separate have a legal duty to make full, frank and complete financial disclosure.
In fact, the laws and rules all create this mandatory obligation.
Section 21 of the Child Support Guidelines states:
“A spouse who is applying for a child support order and whose income information is necessary to determine the amount of the order must include the following with the application:
(a) a copy of every personal income tax return filed by the spouse for each of the three most recent taxation years;
(b) a copy of every notice of assessment and reassessment issued to the spouse for each of the three most recent taxation years;
(c) where the spouse is an employee, the most recent statement of earnings indicating the total earnings paid in the year to date, including overtime or, where such a statement is not provided by the employer, a letter from the spouse’s employer setting out that information including the spouse’s rate of annual salary or remuneration;
(d) where the spouse is self-employed, for the three most recent taxation years
(i) the financial statements of the spouse’s business or professional practice, other than a partnership, and
(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the spouse does not deal at arm’s length;
(e) where the spouse is a partner in a partnership, confirmation of the spouse’s income and draw from, and capital in, the partnership for its three most recent taxation years;
(f) where the spouse controls a corporation, for its three most recent taxation years
(i) the financial statements of the corporation and its subsidiaries, and
(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation, and every related corporation, does not deal at arm’s length;
(g) where the spouse is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust’s three most recent financial statements; and
(h) in addition to any income information that must be included under paragraphs (c) to (g), where the spouse receives income from employment insurance, social assistance, a pension, workers compensation, disability payments or any other source, the most recent statement of income indicating the total amount of income from the applicable source during the current year, or if such a statement is not provided, a letter from the appropriate authority stating the required information.
(2) A spouse who is served with an application for a child support order and whose income information is necessary to determine the amount of the order, must, within 30 days after the application is served if the spouse resides in Canada or the United States or within 60 days if the spouse resides elsewhere, or such other time limit as the court specifies, provide the court, as well as the other spouse or the order assignee, as the case may be, with the documents referred to in subsection (1).”
Rule 13 of the Family Law Rules states:
“If an application, answer or motion contains a claim for support, a property claim, or a claim for exclusive possession of the matrimonial home and its contents,
(a) the party making the claim shall serve and file a financial statement (Form 13 or 13.1) with the document that contains the claim; and
(b) the party against whom the claim is made shall serve and file a financial statement within the time for serving and filing an answer, reply or affidavit or other document responding to the motion, whether the party is serving an answer, reply or affidavit or other document responding to the motion or not.
(3.1) A party who is required under subrules (1) to (3) to serve and file a financial statement in relation to a claim for support shall serve the following information in accordance with subrule (3.2), unless the court orders otherwise:
1. The income and financial information referred to in subsection 21 (1) of the child support guidelines.
2. If the party became unemployed within the last three years,
i. a complete copy of the party’s Record of Employment, or other evidence of termination, and
ii. a statement of any benefits or income that the party is still entitled to receive from his or her former employer despite or as a result of the termination.
(3.3) A party who is required under subrules (1) to (3) to serve and file a financial statement in relation to a claim under Part I of the Family Law Act shall, no later than 30 days after the day by which the financial statement is required to be served, serve on the other party the following information, unless the court orders otherwise:
1. The statement issued closest to the valuation date for each bank account or other account in a financial institution, pension, registered retirement or other savings plan, and any other savings or investments in which the party had an interest on that date.
2. A copy of an application or request made by the party to obtain a valuation of his or her own pension benefits, deferred pension or pension, as the case may be, if any, as of the valuation date.
3. A copy of the Municipal Property Assessment Corporation’s assessment of any real property in Ontario in which the party had a right or interest on the valuation date, for the year in which that date occurred.
4. If the party owned a life insurance policy on the valuation date, the statement issued closest to that date showing the face amount and cash surrender value, if any, of the policy, and the named beneficiary.
5. If the party had an interest in a sole proprietorship or was self-employed on the valuation date, for each of the three years preceding that date,
i. the financial statements of the party’s business or professional practice, other than a partnership, and
ii. a copy of every personal income tax return filed by the party, including any materials that were filed with the return.
6. If the party was a partner in a partnership on the valuation date, a copy of the partnership agreement and, for each of the three years preceding the valuation date,
i. a copy of every personal income tax return filed by the party, including any materials that were filed with the return, and
ii. the financial statements of the partnership.
7. If the party had an interest in a corporation on the valuation date, documentation showing the number and types of shares of the corporation and any other interests in the corporation that were owned by the party on that date.
8. If the corporation in which a party had an interest was privately held, for each of the three years preceding the valuation date, i. the financial statements for the corporation and its subsidiaries, and
ii. if the interest was a majority interest, a copy of every income tax return filed by the corporation.
9. If the party was a beneficiary under a trust on the valuation date, a copy of the trust settlement agreement and the trust’s financial statements for each of the three years preceding that date.
10. Documentation showing the value, on the valuation date, of any property not referred to in paragraphs 1 to 9 in which the party had an interest on that date.
11. Documentation that supports a claim, if any, for an exclusion under subsection 4 (2) of the Family Law Act.
12. The statements or invoices issued closest to the valuation date in relation to any mortgage, line of credit, credit card balance or other debt owed by the party on that date.
13. Any available documentation showing the value, on the date of marriage, of property that the party owned or in which he or she had an interest on that date, and the amount of any debts owed by the party on that date.
(11) If a party believes that the financial disclosure provided by another party under this rule, whether in a financial statement or otherwise, does not provide enough information for a full understanding of the other party’s financial circumstances,
(a) the party shall make a request in writing to the other party for the necessary additional information; and
(b) if any requested information is not given within seven days of the request, the court may, on motion or at a case conference or settlement conference, order the other party to give the information or to serve and file a new financial statement.
(15) As soon as a party discovers that a document that he or she has served under this rule is incorrect, incomplete or out of date, the party shall serve on the other party and, if applicable, file, a corrected, updated or new document, as the circumstances require.
(16) As soon as a party discovers that he or she failed to serve a document required to be served under subrule (3.1), (3.3), (3.4) or (5.0.1), the party shall serve the document on the other party.
(18) The duty to provide information under this rule does not affect any other duty set out in any other Act or regulation for the party to provide information to the other party in relation to a claim to which this rule applies.
Some judges have even called financial non-disclosure the cancer of family law [see https://www.canlii.org/en/ca/scc/doc/2006/2006scc25/2006scc25.html ]
The laws and rules have become so demanding that there are severe penalties in case of financial non-disclosure.
Sections 22-24 of the Child Support Guidelines states:
“22. Where a spouse fails to comply with section 21, the other spouse may apply
(a) to have the application for a child support order set down for a hearing, or move for judgment; or
(b) for an order requiring the spouse who failed to comply to provide the court, as well as the other spouse or order assignee, as the case may be, with the required documents.
(2) Where a court makes an order under paragraph (1)(a) or (b), the court may award costs in favour of the other spouse up to an amount that fully compensates the other spouse for all costs incurred in the proceedings.
23. Where the court proceeds to a hearing on the basis of an application under paragraph 22(1)(a), the court may draw an adverse inference against the spouse who failed to comply and impute income to that spouse in such amount as it considers appropriate.
24. Where a spouse fails to comply with an order issued on the basis of an application under paragraph 22(1)(b), the court may
(a) strike out any of the spouse’s pleadings;
(b) make a contempt order against the spouse;
(c) proceed to a hearing, in the course of which it may draw an adverse inference against the spouse and impute income to that spouse in such amount as it considers appropriate; and
(d) award costs in favour of the other spouse up to an amount that fully compensates the other spouse for all costs incurred in the proceedings.”
This duty of financial disclosure is based on the equitable doctrine of Uberrima Fides which means “the utmost good faith”. This means that spouses must deal in good faith, making a full declaration of all material information needed to settle the issues of support and property division, before cohabitation or marriage, upon separation and even when past support orders are re-negotiated years later.
Many spouses are unaware of their obligations. This fiduciary duty includes the obligation to act in good faith, avoid taking advantage of the other spouse, and otherwise acting candidly, fairly and ethically with the other spouse.
Some spouses falsely believe that their fiduciary duty ends at separation. However, this is the time when the duty to disclose is the very highest.
The fiduciary duties include:
- providing information regarding all assets and debts, however owned and wherever owned;
- releasing all financial records even if they are unfavourable;
- avoiding the mismanagement of income, assets and debts and indeed maximizing income, preserving assets and avoiding liabilities; and
- providing complete financial transparency.
Although many separating spouses treat the settlement of support and the division of property in good faith, some spouses will hide assets or commit various fiduciary breaches. They may sell assets at below market value to family or friends, gift away assets, frivolously spend money, hide bank accounts or property, provide inaccurate valuations of assets, incur new debt or commit other acts to take financial advantage of their spouse.
In cases such as this, judges have very little patience and can make severe orders especially in cases of malice, fraud or oppression.
In our recent case of Lakhtakia v. Mehra, the husband was found to have committed severe financial non-disclosure. He lost his case and was ordered to pay our client over $1,000,000 in legal costs.
Trial decision: https://lnkd.in/emAiJnR9
Appeal decision: https://lnkd.in/expKmgyg
Editorial Note: Originally published in 2023, this article details the legal obligation of spouses to disclose full financial information during separation. These fiduciary duties remain a cornerstone of family law practice, and the piece offers a crucial reminder of the ethical and legal standards expected in any divorce proceeding.
Steve Benmor, B.Sc., LL.B., LL.M. (Family Law), C.S., Cert.F.Med., C.Arb., FDRP PC, is the founder and principal lawyer of Benmor Family Law Group, a boutique matrimonial law firm in downtown Toronto. He is a Certified Specialist in Family Law, a Certified Specialist in Parenting Coordination and was admitted as a Fellow to the prestigious International Academy of Family Lawyers. Steve is regularly retained as a Divorce Mediator/Arbitrator and Parenting Coordinator. Steve uses his 30 years of in-depth knowledge of family law, court-room experience and expert problem-solving skills in Divorce Mediation/Arbitration to help spouses reach fair, fast and cooperative divorce settlements without the financial losses, emotional costs and lengthy delays from divorce court.
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