Financial Disclosure in Canadian Divorce:  What You Need to Know

Divorce can be one of the most challenging experiences in your life. It can lay bare a lot of your emotions, dashed hopes, and deeply-held fears – not to mention your finances. 

Financial disclosure is a mandatory step in the Canadian divorce process. Both spouses must provide a full and honest account of their financial situation, including income, assets, debts, and expenses. This transparency ensures fair division of property, child support, and spousal support.

Failing to disclose financial details can lead to legal consequences, delays, or even penalties. Understanding financial disclosure is crucial for protecting your rights and securing a fair settlement.

What is Financial Disclosure?

Financial disclosure is a legal requirement in Canadian divorce proceedings. It involves fully and continuously revealing your financial status, including income, assets, debts, and expenses. Mandated under Canadian Family Law, financial disclosure ensures transparency, fairness, and equitable division of property, spousal support, and child support.

Failing to provide complete financial disclosure can result in legal penalties, delays, or an unfair settlement.

From a practical standpoint, it’s more than just divulging your salary. It involves providing comprehensive information about all aspects of your financial situation, including:

• Income: This includes all sources, such as employment income, investment income, pensions, and government benefits.
• Assets: This includes your real estate, vehicles, bank accounts, investments, pensions, and personal property.
• Debts and Liabilities: This includes mortgages, credit card balances, lines of credit, and personal loans.
• Expenses: You must provide an overview of your monthly and annual expenses.

Complete and accurate financial disclosure is fundamental to ensure you and your spouse (as well as the courts) have all the needed information to allow you to engage in fair and informed negotiations. Ideally this will lead you and your spouse to reach an equitable and enforceable resolution of any Family Law disputes: Boutin v. Boutin, 2022 ONSC 4776.

Related: The Divorce Process in Ontario

Where Does Your Duty to Make Financial Disclosure Come From?

In Canada, your obligation to provide financial disclosure is embedded in both federal and provincial legislation.  

If you are divorcing, it arises mainly under the federal Divorce Act. The information you provide through the financial disclosure process will go into allocating responsibility for child support and spousal support, among other things.  There are also disclosure obligations established in other sources, such as the Child Support Guidelines, and the Family Law Rules which govern the procedure.

If you are unmarried and splitting up, the Ontario Family Law Act and the related Family Law Rules impose a financial disclosure requirement to assist courts in resolving property claims especially, as well as certain support matters.

How is Financial Disclosure Made?

Financial disclosure is made by filling out and submitting specified government-issued Forms.  (In Ontario:  Form 13: Financial Statement (Support Claims) if you or your spouse are claiming child or spousal support; and Form 13.1: Financial Statement (Property and Support Claims) if you or your spouse are claiming both property division and support).

The Forms require detailed information about income, expenses, assets, debts, and liabilities. They must be supported by documentation such as:

• Recent Income Tax Returns and Notices of Assessment
• Pay stubs or proof of income
• Bank and investment account statements
• Property appraisals and mortgage statements
• Business financial statements, if applicable.

Depending on the nature of the claim, financial disclosure may also include: 

• Pension, RRSP and savings and investments
• Municipal Property Assessment Reports, for real property that you own on your valuation date (i.e. separation date from your spouse) 
• Information about life insurance policies you own
• Any interest in a sole propretiorship or self-employment arrangement
• Other financial statements for any business or professional practice you have
• Any partnership agreement that governs a partnership you are interested in, and the financial statements of that partnership
• Financial statements for any corporation that you are involved in, plus any income tax returns filed by the corporation
• Any documentation showing the value of property you owned on the date of marriage.

Related: How to Prepare a Financial Statement

When Does the Duty to Disclose Begin?

A recent case called Baker v Baker, 2023 ONSC 4082 made the following points clear: 

• The fundamental legal obligation for you to make full financial disclosure begins as soon as your proceeding is commenced. 
• This obligation is a continuing one. This means you must update your financial information as necessary, including correcting any erroneous information, and providing any omitted financial information as soon as it becomes known or is available. 

Disclosure cannot be selective, nor a “costly game” requiring you and your spouse to ferret out information from each other:  Shinder v. Shinder, rev’d on other grounds 2018 ONCA 717.

Canadian courts take the duty of financial disclosure very seriously. The Supreme Court of Canada recently called timely disclosure of financial information to be the “linchpin of a just and effective family law system”. (Colucci v. Colucci, 2021 SCC 24, at para. 4.)  In a case called Roberts v. Roberts, 2015 ONCA 450 the Ontario Court of Appeal called it “the most basic obligation in family law” and noted the requirement to disclose is “automatic” as well as “immediate and ongoing”.  It added: 

[12] Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled.

Another court characterized the failure to make complete and accurate financial disclosure to be a “cancer” in Family Law proceedings (Cunha v. Cunha (1994), 1994 CanLII 3195 (BC SC), 99 B.C.L.R. (2d) 93 (S.C.), at para. 9).

What If Financial Disclosure is Not Made?

Whether you failed to abide by the financial disclosure obligations in the Rules, or you failed to obey a clear court order that you make full disclosure, there can be consequences. 

These were listed in Baker v Baker, 2023 ONSC 4082, where the court was drawing from its power under Rule 19 of the Family Law Rules to enforce the disclosure duty.  It noted the available remedies include: 

• Requiring the non-disclosing party to give necessary additional information
• Ordering them to serve and file a new financial statement
• Awarding costs against them
• Dismissing their claim or denying them further relief
• Striking out their answer
• Making an order for contempt against them
• Making other orders as it considers necessary for a just determination. 

Note that from amongst this list, courts have discretion to choose the best remedy.  For example, once it’s clear you have disobeyed a disclosure order, the court will apply a decision-making framework to assess the repercussions. The factors were explained in a pair of cases called Studzinski v. Studzinski, 2020 ONSC 2540 and Mullin v. Sherlock, 2018 ONCA 1063; the court will consider: 

• The relevance of your non-disclosure, including its significance in hindering the resolution the issues you and your spouse have in dispute.
• The context and complexity of those issues.  Courts have little tolerance for non-disclosure in uncomplicated cases, but if your matter is complex, they will be a little more forgiving about delays. 
• The extensiveness of what you have disclosed so far.
• The seriousness of the efforts you made to make disclosure, and any explanations you have for why you have not completed it.
• Any other relevant factors.

 

Adverse Inference

But perhaps more importantly, if you do not make full financial disclosure as required, the court can draw an adverse inference about why you failed to do so – and can take its “best guess” at the proper mathematical figures for you.  

This is known as imputing income.   It is often seen in scenarios where the court makes a support order under the Child Support Guidelines, and where the support payor has not been forthcoming about his or her finances.

Forcing a court to impute income is not recommended.  Admittedly, the court cannot simply just choose an arbitrary amount (i.e. there must be a rational evidentiary basis for it), it stands to reason that the court’s “best guess” about your finances may not be in your favour. 

A case in point is the Ontario decision called Shipway v. Shipway, 2024 ONSC 4975, where the court commented at length about a father’s intentional failure to disclose his past income and recent land deals and investments, in support of the determination around how much child support he should pay.  After considering the evidence and making certain inferences, the court imputed to the father an income of $150,000, and calculated his child support obligations accordingly.

Tips for Navigating Your Financial Disclosure Duty

• Be Transparent: Provide all required information, even if it seems irrelevant. Full transparency is the best way to avoid legal complications.
• Keep Organized Records: Maintaining organized financial records can make your disclosure process more straightforward and less stressful.
• Work with Professionals: Consider hiring a lawyer, accountant, or financial advisor to help you compile and present your financial information accurately.
• Be Proactive: Don’t wait for your spouse to request disclosure. Providing it voluntarily demonstrates good faith and can speed up the resolution process.

If you are in the very early stages of divorce and are struggling with how to meet your financial disclosure obligations, give our offices a call.  Our specialized divorce lawyers in Toronto are here to help.