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Family - Domestic Agreements (2). MacEwen v. Daljit
In MacEwen v. Daljit (Ont CA, 2026) the Ontario Court of Appeal allowed an appeal, here brought against "an order setting aside a separation agreement .... under s. 56(4)(b) of the Family Law Act":[2] Section 56(4)(b) of the FLA provides that the court may set aside a domestic contract or a provision in it, “if a party did not understand the nature or consequences of the domestic contract”.
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a. The Analytical Framework
[61] The law favours parties’ autonomy to reach their own settlements on the issues arising from separation. As set out in Anderson v. Anderson, 2023 SCC 13, [2023] 1 S.C.R. 473, at para. 33, “[a]s a starting point, domestic contracts should generally be encouraged by courts, within the bounds permitted by the legislature, absent a compelling reason to discount the agreement.” See also: Davies v. Jane, 2025 ONCA 752, 21 R.F.L. (9th) 1, at para. 30.
[62] At the same time, however, courts recognize that the negotiations of domestic contracts take place in a unique and singularly challenging environment where emotions are charged and one or both parties may be vulnerable: Anderson, at para. 33, citing Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, at para. 74; Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295, at para. 40.
[63] Section 56(4) of the FLA operates protectively in this context, recognizing that intrinsic flaws in the formation of the contract may nullify parties’ apparent consent and invalidate the domestic contract. Section 56(4) was designed to address the concern that both parties fully understand their rights under the law when contracting: Faiello v. Faiello, 2019 ONCA 710, 438 D.L.R. (4th) 91, at para. 17; LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 50, leave to appeal to S.C.C. refused, [2008] 3 S.C.R. viii (note); Hartshorne v. Hartshorne, 2004 SCC 22 (CanLII), [2004] 1 S.C.R. 550, at para. 14.
[64] Section 56(4) authorizes a court to set aside a domestic contract or one of its provisions under the following three conditions:(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract. [65] This court has endorsed a two-step approach to the application of s. 56(4), as set out in LeVan. First, the party challenging the domestic contract or a term within it must demonstrate that s. 56(4)(a), (b), or (c) are engaged; and second, the court must then determine whether it is appropriate to exercise its discretion to set the contract aside: LeVan, at para. 51; Virc v. Blair, 2014 ONCA 392, 119 O.R. (3d) 721, at para. 52. Subsections (a), (b), and (c) are not silos, and facts may support findings under more than one subsection.
[66] Subsection 56(4)(b) addresses the claimants “understanding” of the domestic contract. The party seeking to set aside the domestic contract must establish either that they did not understand the “nature” of the domestic contract or that they did not understand its “consequences”. This court has held that s. 56(4)(b) is “broader than the common law grounds for setting aside a contract, such as non est factum or unconscionability”: Dougherty v. Dougherty, 2008 ONCA 302, 89 O.R. (3d) 760, at para. 25.
[67] Failure to understand the nature of the domestic contract refers to the failure to understand either the type of contract being entered into, or specific terms of that contract. For example, in Maka v. Maka, 2015 ONSC 3480, the court set aside a separation agreement where the claimant understood the agreement to be essentially a tax agreement. Failure to understand the “consequences” of a domestic contract refers to the failure to understand either the practical or legal effects of the contract or one or more of its terms. For example, in El Rassi-Wight v. Arnold, 2024 ONCA 2, 170 O.R. (3d) 687, this court upheld a trial judge’s decision to set aside a separation agreement under s. 56(4)(b) where the claimant did not understand the consequences of forfeiting “the house and all the assets, equity, and so on”.
[68] In applying the two-step approach to s. 56(4)(b), courts have considered factors that may be loosely grouped into three categories:(1) Personal vulnerabilities
(2) External pressures
(3) Procedural safeguards [69] Personal vulnerabilities may include:(a) language barriers: Stupka v. Stupka, 2012 ONSC 1133, at para. 76, aff’d 2013 ONCA 365;
(b) significant mental or physical health challenges: Stevens v. Stevens, 2012 ONSC 706, 109 O.R. (3d) 421, at paras. 111-49, aff’d 2013 ONCA 267, 114 O.R. (3d) 721; Ward v. Ward, 2011 ONCA 178, 104 O.R. (3d) 401, at paras. 28-30; and
(c) the level of “sophistication” of a party: Tozer v. Tassone, 2019 ONCA 285, 25 R.F.L. (8th) 159, at para. 10; and,
(d) power imbalances or other inequalities in the relationship: Anderson, at paras. 8, 34, 69-71; Rick, at para. 61. [70] External pressures may include:(a) pressure from a spouse or third party not to obtain ILA or resulting in inadequate or conflicted ILA: LeVan, at paras. 35, 61;
(b) financial, professional or emotional pressure(s): Ward, at paras. 28-30; LeVan, at paras. 25-26;
(c) perceived or actual time constraints: LeVan, at para. 37; and
(d) any misrepresentation as to the nature, purpose, or consequences of the agreement: LeVan, at paras. 35, 37; Maka, at para. 65. [71] Procedural safeguards may include:(a) full and frank disclosure of all relevant financial information: LeVan, at paras. 34-37; Stupka, at para. 3;
(b) timely and comprehensive independent legal advice: Anderson, at paras. 69-70; Rick, at paras. 46-48;
(c) other professional assistance, such as adequate translation or accounting assistance: Virc, at para. 15; Raaymakers v. Green (2006), 2006 CanLII 719 (ON CA), 25 R.F.L. (6th) 54 (Ont. C.A.), at paras. 47, 50. [72] None of these descriptions should be taken as exhaustive. All, however, may be relevant to a holistic determination of whether s. 56(4) is engaged as well as whether the court should exercise its discretion to set a domestic contract aside. The absence of the safeguards identified above will not necessarily be fatal to a domestic contract. Conversely, their presence will not necessarily immunize a contract against the impact of personal vulnerabilities and/or external pressures. The more balanced the process, the more comprehensive and timely the disclosure, and the more impartial the legal advice, the greater the likelihood of a domestic contract surviving judicial scrutiny: Anderson, at paras. 34- 35.
[73] I would add the following: Inherent in the autonomy recognized by permitting parties to contract out of the legislative scheme through a domestic contract is an element of personal due diligence. That is, courts have recognized an obligation on a party to take reasonable steps, within their capacity and control, and recognizing any vulnerabilities or pressures as discussed above, to protect and advance their own interests.
[74] These proactive measures are not onerous, but include, at a minimum: fully and carefully reading the domestic contract before signing; clarifying terms where necessary; and taking steps to remedy known deficiencies in the domestic contract: Singh v. Khalill, 2024 ONCA 909, 20 R.F.L. (9th) 119, at paras. 12, 15; Smith v. Smith, 2017 ONCA 759, 418 D.L.R. (4th) 454. A party who declines to take proactive measures or who chooses to sign a domestic contract despite awareness of flaws, may be unable to later resile from the contract: Butty v. Butty, 2009 ONCA 852; 99 O.R. (3d) 228, at paras. 57, 60.
[75] The relevant time to assess the impact of any asserted personal vulnerabilities, external factors, safeguards, and personal due diligence is during negotiations and at execution of the domestic contract, not at the time of the claim: Ward, at para. 29.
[76] Further, a court will consider the complexity and purpose of the domestic contract; any delays on the part of a party moving to set aside a domestic contract, and any reasons for same; whether part or all of the contract has already been implemented; and any benefits already realized by the claimant under the domestic contract.
[77] In applying both steps of the analysis set out in LeVan to the application of s. 56(4)(b), the court takes a contextual view, weighing the interrelationship of factors such as those listed above. The factors are not a “checklist” and will often overlap. What is required in each case is a careful and holistic assessment rooted in the “starting point” of respect for parties’ autonomy to reach their own agreements: Anderson, at para. 33. This is a highly discretionary exercise entitled to significant deference.
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