The courts demand full financial disclosure in family law cases

Family Law /
Gene C. Colman
Latest posts by Gene C. Colman (see all)

By Paul Russell, LegalMatters Staff • For more than two years, Toronto family lawyer Gene C. Colman has been telling people how important it is to make full and honest financial disclosure when they are involved in a family law dispute.

That message is still not getting through to everyone, though he says he is heartened to learn that both the Ontario Court of Appeal and the Supreme Court of Canada have echoed the same sentiments in recent judgments.

In October, the appeal court overturned a summary judgment given to a man dismissing his ex-wife’s claims for equalization and spousal support that she had brought years after the 2008 settlement.  The couple had been divorced for more than 10 years, and the judgment notes the couple’s finances were “complex.”

Zero net worth or $21 million?

According to court documents, the husband, a land developer, produced a financial statement in 2008 showing that he had zero net worth. The motion judge granted his request for a summary judgment, dismissing her application for equalization and spousal support.

“In October 2021, the Court of Appeal said, ‘Not so fast,’” says Colman, principal of the Gene C. Colman Family Law Centre.

He notes that the reason the ex-wife launched her application and then her appeal was that 10 years after she settled the proceeding, she learned that her ex-husband had represented to banks that his net worth was approximately $21 million “at the same time that he stated in a sworn financial statement that his total assets amounted to $0.”

“Because an accurate financial statement was not filed prior to the ex-husband’s summary judgment motion, she was at a procedural disadvantage,” says Colman, explaining that if it had been, her lawyers could have cross-examined him on that.

Decision violated Family Law Rules

According to the judgment, one of the key questions was should the ex-husband’s motion for summary judgment be granted even though he did not formally reply to her application for support and equalization, as required by Rule 16 of the Family Law Rules.

“As the appeal court ruled, “the motion judge made a palpable and overriding error in concluding that an answer was not required before proceeding with the summary judgment motion,’” says Colman.

Another “palpable and overriding error” of the lower court was to accept the man’s arguments that his ex-wife “knew or ought to have known all information about the trusts and the corporations,” the judgment reads.

“All of his arguments about what she knew or should have known do not amount to a hill of beans,” Colman tells LegalMattersCanada.ca. “The Court of Appeal put it in more elegant terms, but essentially what they are saying is full and frank financial disclosure is needed in every case. No ifs, ands or buts!”

Judgment ‘is precedential’

As the appeal court noted, “The requirement for both parties to provide financial statements at the outset is closely related to the importance of disclosure in family law proceedings, a particularly salient principle in the present case. This court has repeatedly emphasized this point in recent years, and it has been recently emphasized in the Supreme Court of Canada decision in Colucci v. Colucci.”

Colman says the appeal court decision “is precedential, and binding throughout Ontario and persuasive throughout Canada.

“People are not appreciating how important it is to present their financial disclosure completely and on a timely basis,” he says. “Don’t give partial statements. Give more disclosure than the other side wants. That is going to hold you in good stead.”

On Oct. 23, 2019, Colman says he wrote a blog post about what people have to disclose and the consequences of holding back information.

A message he has given before

“As I wrote then, ‘Even if you and the other party agree on support and property equalization, you must disclose. Otherwise, this deficiency leaves your agreed-upon settlement vulnerable to be overturned later.’”

After the COVID-19 pandemic hit, his firm conducted a series of webinars, including a well-attended webinar on financial disclosure, expanding on points raised in the 2019 article. He reiterated many of the same points in a 2020 post on LegalMattersCanada.ca, noting, “If everyone does what they are supposed to do, we can make great headway in resolving the financial issues. So please, take disclosure seriously, save your money and help us wrap up your case.”

That was followed by a September 2021 blog post about the four key mistakes people make when trying to reach a spousal support agreement, the fourth being hiding finances.

“Not only is lying about your finances during divorce a moral misstep, but it is also a hugely serious legal one,” Colman wrote. “Concealing assets, undervaluing assets, and hiding or misreporting income are all big no-no’s.  Less than frank and comprehensive financial disclosure is a prescription for disaster and it most likely will backfire against you in one way or another.”

Trying to save the client’s money

“If you go to the webinar, you will see I really feel strongly about this,” he says. “And one of the factors that drives me is that I want to save my clients’ money, as it will cost them if we have to chase them to obtain financial information.”

Colman says that he conducts all the consultations at his firm, where he tries to impress upon prospective clients the absolute, non-negotiable necessity of proving full disclosure.

“After the consultation, the person receives a summary of the highlights of our conversation, including a list of things to do if they want our firm to represent them,” he says. “The memorandum also has a paragraph referring readers to my Financial Disclosure Webinar, and information about the importance of full financial disclosure.”

With a tinge of frustration in his voice, Colman laments that despite his speaking and writing extensively about the necessity of providing comprehensive and timely financial disclosure, his own clients do not always fully integrate the message.

“Not that the other party is any better,” he adds.

Colman summarizes: “Family law clients on both sides have to take these issues to heart. Once the finances are fully on the table, only then can the lawyers realistically come to grips with the issues and settle the case. And in this day and age when vaccinations are a touchstone issue, it is high time that people realize that in family law they have to immunize themselves here too. This immunization is against having their settlements potentially overturned years later.”