Background
Lisa MacEwen (the Wife) and Sunil Daljit (the Husband) separated in August 2015 after a twelve-year marriage. Both worked as realtors. In early 2016, at the Husband’s suggestion, the parties jointly retained a family law lawyer for preliminary advice and then engaged an untrained consultant to help negotiate a separation agreement, primarily to facilitate the sale of the matrimonial home. The consultant repeatedly urged both parties to obtain independent legal advice (ILA). The Wife did; the Husband, despite being told by both the consultant and a real estate lawyer who witnessed his signature, did not.
The parties executed a Final Agreement on May 26, 2016. More than two years later, after the matrimonial home had been sold and the Agreement partly performed, the Husband challenged its validity. His pleadings alleged duress, lack of disclosure, and that certain paragraphs differed from an earlier draft the consultant had sent only to him — but he did not allege that the Wife had deliberately altered those paragraphs. At a focused hearing in April 2024, the hearing judge largely rejected the Husband’s pleaded grounds but, on his own initiative, developed and adopted a “trickery theory”: that the Wife had dishonestly and unilaterally changed the impugned paragraphs without the Husband’s knowledge, rendering him unaware of the nature and consequences of the Final Agreement under s. 56(4)(b) of the Family Law Act, R.S.O. 1990, c. F.3. The hearing judge set aside the entire Final Agreement and awarded the Husband $31,072.77 in costs on the basis of bad faith.
The Wife appealed, arguing that the trickery finding was never pleaded, never put to her in cross-examination, and unsupported by the evidence. She also sought to adduce fresh evidence that the Husband had submitted fabricated documents.
The Court’s Holding
Justice Madsen, writing for a unanimous panel (Trotter and Zarnett JJ.A. concurring), allowed the appeal. The court held that the hearing judge’s trickery finding could not stand because it was fundamentally procedurally unfair. The allegation of fraud or deception was never advanced in the Husband’s pleadings or affidavit, was never put to the Wife in cross-examination as required by the rule in Browne v. Dunn, and was instead introduced by the hearing judge himself — who directed the Husband’s counsel’s closing submissions toward that theory and whose own questions of the Wife formed the principal evidentiary basis for it. Deciding a case on a theory anchored in neither the parties’ pleadings nor their submissions displaces appellate deference and warrants intervention: Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.); Hayward v. Hayward, 2021 ONCA 175.
The court further held that, with the trickery finding stripped away, there was no independent basis on which to set aside the Final Agreement under s. 56(4)(b). The unchallenged findings below were that the Husband was a sophisticated, experienced businessman with no inequality of bargaining power, who freely chose not to seek ILA despite repeated professional advice to do so. The evidence established that the impugned paragraphs had been the subject of ongoing negotiation between the parties, and the Wife’s testimony — that the language in the Final Agreement reflected the parties’ actual discussions — was consistent with the contemporaneous record. A party who declines to read an agreement carefully or to obtain available legal advice, and who waits more than two years and part-performance before complaining, cannot rely on s. 56(4)(b) absent a genuine defect in understanding going to the nature or consequences of the contract.
The court also took the occasion to articulate the analytical framework for s. 56(4)(b) claims: a two-step inquiry (whether the ground is engaged, then whether discretion should be exercised) in which courts assess personal vulnerabilities, external pressures, and procedural safeguards holistically, while recognizing that parties bear a duty of personal due diligence — at minimum, reading the contract before signing and clarifying known deficiencies — proportionate to their capacity.
Key Takeaways
- A hearing judge may not decide a family law proceeding on a fraud or trickery theory that was never pleaded, never put to the opposing party in cross-examination, and originated with the court itself; doing so constitutes procedural unfairness warranting appellate intervention regardless of the judge’s factual findings.
- Under s. 56(4)(b) of the Family Law Act, setting aside a domestic contract requires genuine proof that a party did not understand the nature or consequences of the agreement; a sophisticated party who chose not to seek ILA despite repeated professional recommendations and who failed to read the final contract carefully cannot satisfy that threshold in the absence of identifiable vulnerabilities, external pressure, or misrepresentation.
- Parties to domestic contracts owe a duty of personal due diligence — including carefully reading the agreement, clarifying ambiguous terms, and remedying known deficiencies before signing — and a party who ignores that obligation may be unable to later resile from the contract.
- The three analytical categories relevant to s. 56(4)(b) — personal vulnerabilities, external pressures, and procedural safeguards — are non-exhaustive and must be weighed holistically; neither the absence of safeguards (such as ILA) nor the presence of safeguards is automatically determinative.
- Courts should encourage domestic contracts as an expression of party autonomy, consistent with Anderson v. Anderson, 2023 SCC 13; intervention is warranted only where compelling formation flaws are properly established through fair adversarial process.
Why It Matters
This decision is a significant reminder that procedural fairness constraints apply in family law proceedings with the same force as in general civil litigation, even where judges play an active case-management role. By overturning findings of dishonesty that were never put in issue by the parties, the Court of Appeal reinforces that litigants are entitled to know — and respond to — the specific case against them, and that judicial initiative cannot substitute for pleaded allegations in a credibility-based finding of fraud.
For family law practitioners, the decision also provides the most detailed appellate articulation to date of the s. 56(4)(b) framework: the three-category analysis of vulnerabilities, pressures, and safeguards, combined with the explicit personal due-diligence obligation, offers a structured road map for advising clients on the enforceability of separation agreements and the risks of signing without ILA. Sophisticated parties who proceed with eyes open — even without a lawyer — face a high bar to unwind bargains they later regret.