Settlements or agreements between parties can be obliterated when a party intentionally fails to disclose a material fact.
In this case, the Respondent presented the Appellant with on Offer to Settle in October of 2019. The Respondent offered to receive roughly $4,000 per month in spousal support for several years, on a fixed and non-variable basis. At the time of the Respondent’s offering, she was under the impression the Appellant was earning roughly $200,000 per year.
In March 2020, the pandemic hit. The Appellant’s salary was eventually reduced to $150,000 per year. The Appellant promptly informed the Respondent about his salary reduction on May 12, 2020. Notwithstanding, on May 15, 2020, the Appellant accepted the Respondent’s October 2019 Offer to Settle.
On or before May 12, 2020, the Appellant received a job offer at a different company. The salary offer was for $225,000 per year. By May 13, 2020, the salary increased to almost $300,000, not including a generous bonus. The Appellant accepted this job on May 18, 2020. He never told the Respondent.
The Respondent learned about the Appellant’s new employment and salary in June 2020. In August 2020, the Appellant moved to enforce the May 15, 2020 agreement, whereby he would pay support pursuant to the October 2019 offer.
Is this agreement valid?
The judge noted the LeVan v LeVan two stage analysis in contemplating the enforceability of a domestic agreement.
First, is one or more of the circumstances in section 56(4) of the Family Law Act engaged?
(1) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(2) if a party did not understand the nature or consequences of the domestic contract; or
(3) otherwise in accordance with the law of contract.
Quite obviously, the Appellant failed to disclose his new job and income. This non-disclosure was ultimately deemed “material” because the amount of income received would directly impact the spousal support award in Court. Thus, this was a material misrepresentation.
Second, the judge must decide, in their discretion, whether it would be appropriate to set aside the agreement. In setting aside this specific agreement, the judge found that the Respondent would receive far less than her actual entitlement if the agreement remained valid. Thus, it was appropriate to set it aside.
The judge refused to enforce the settlement agreement because, prior to accepting the offer in question, the Appellant engaged in intentional and material non-disclosure. In the motion judge’s view, the Appellant did not act in good faith.
In addition to this, the judge discussed Rule 13(15) of the Family Law Rules and the obligation for both parties to provide each other with updated financial information as soon as they discover it. The Appellant’s failure to disclose the new job and salary meant that the Respondent was deprived of the ability to properly consider whether she should withdraw her original offer.
The Court of Appeal saw no reason to interfere with this analysis.
The Appellant’s main argument on appeal was in relation to the fixed and non-variable character of the proposal in the October Offer to Settle.
In October 2019, the Respondent came up with a number that she wanted for spousal support, roughly $4,000, which was likely less than what the SSAGs would have afforded. In other words, the Respondent likely knew her original offer was discounted. Further, the Respondent’s offer was on a fixed and non-variable basis, meaning that if the offer was accepted and the Appellant’s income changed for better or for worse, the amount of spousal support would not be altered. So, in essence, if the Appellant accepted the offer in October 2019, then his new 2020 job would not have altered his support obligation.
The obvious problem is that the Appellant did not accept the offer in 2019. He only accepted it after discovering he had a new job with a higher salary.
The Respondent was entitled to withdraw her Offer to Settle at any time prior to its acceptance (Rule 18). To properly contemplate the decision to withdraw an offer, the Respondent was entitled to ongoing disclosure as provided for in the Rules. She was entitled to know about the Appellant’s new salary. Yet, the Appellant intentionally failed to disclose this material fact.
Obvious takeaways? Make sure you give full disclosure when entering into domestic contracts! In this case, spousal support was the main issue. Thus, a change in job and salary was a relevant piece of material that should have been disclosed!
