No Need to Disclose Affair When Negotiating Separation Agreements

In the case of D’Andrade v. Schrage, the Ontario Superior Court of Justice tackled the question of how much personal disclosure is required when spouses negotiate their separation agreements, specifically whether they are obliged to disclose the existence of an extra-marital affair.In this case, the husband and wife started living together in 1998 and married in 2001.  At the time, the husband had been married twice before and was in his 60s while the wife was in her 30s and this was her first marriage.Throughout their relationship, the husband had the wife sign a series of domestic agreements, providing her with financial support but making it clear in a specific clause that any payments were gratuitous and not to be considered as legal support of maintenance – emphasizing that he was under no legal obligation to her whatsoever.  Essentially, this “husband’s discretion” clause gave the husband the power in the event of separation to use his judgment in giving the wife whatever financial assistance he considered was fair.

The last of these agreements was entered into in 2007 and provided that the wife release all her rights to spousal support and equalization of net family property.  The agreement also set out her entitlements to various properties that they owned together.  However, this 2007 agreement was different from all the prior ones in two respects.  First, it inadvertently omitted the “husband’s discretion” clause that had appeared in every other prior version.  Secondly, and more importantly, the 2007 agreement had been negotiated and entered into at a time when, unbeknownst to the husband, the wife was having an affair and considering separating from him.  With the assistance of her lawyer, the wife negotiated with this potential prospect in mind.

The husband paid the wife almost everything she was entitled to under the 2007 agreement. However, once he found out about her affair, he did not go through with the obligation to buy her a home worth at least $250,000 as he had promised.  The wife brought the issue to court, arguing that the 2007 agreement should be enforced and that, because the “husband’s discretion” clause was not included in the 2007 agreement, the issue of the amount of support she should get was now wide open.

In opposition, the husband claimed that the 2007 agreement should be set aside, arguing the wife had a duty to negotiate and execute the 2007 agreement in utmost good faith.  Specifically, the husband claimed that the 2007 agreement was invalid because when the wife signed it, she was having an affair and was contemplating separation.

The court found for the wife, holding that the agreement should be enforced.  Respecting the omission of the “husband’s discretion” clause in the 2007 agreement, the court found that there was no evidence that there was a fraudulent or innocent omission on the part of his lawyer who did the drafting.  The contract could not be set aside on that basis alone.

Additionally, the court confirmed that, in principle, it had the power to set aside any domestic contract under the Family Law Act, in cases where one party had failed to disclose significant assets or debts or failed to understand the nature or consequences of the domestic contract.  The court considered, but ultimately rejected, the husband’s argument that the wife’s failure to disclose her affair and possible intention to leave was evidence of a lack of good faith nor fatal to the agreement’s validity.

The court found that not only was there no concrete evidence to show that the wife had actually decided to separate from the husband when the 2007 agreement was signed, but also that it was unreasonable to expect that as part of the negotiating process either party must disclose their respective thoughts about the likelihood of separating, or their involvement in any extra-marital affairs.

On this point, the court wrote: ‘To require spouses to disclose their thoughts about the likelihood of separation or their involvements in extra-marital sexual activity before signing a marriage contract could have serious implications for the survival of marital relationships. If the obli- gation to disclose is limited to thoughts of separation, the ques- tion becomes how serious those thoughts of separation were. Does there have to be evidence that the decision to separate has been actually made? If there does, the evidence in this case does not reach that threshold. Among other things, it was Mr. Schrage who actually made the decision that he and Ms. D’Andrade should separate. If this is not the threshold then what is? Is it any thought of separation or only serious thoughts of separation? If it is the latter, how “serious” is serious enough?”

Finally, the court emphasized that domestic contracts are financial arrangements and are not aimed at enforcing personal obligations, such as the duty to remain faithful.  As such, the only duty of fairness that arises on parties is the one in connection with disclosing their individual financial situations.  As a result, the court upheld the 2007 agreement in this case.