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by Daniel Gloade on December 10, 2013

In the case of Zavarella v. Zavarella, 2013 ONCA 720, the Ontario Court of Appeal dealt with a novel issue.

In this case, the Wife filed for bankruptcy before she was married.  She was discharged from bankruptcy while she was married.  She did not have to pay any money to her creditors.  When calculating her income on the date of marriage, was she entitled to deduct her bankruptcy debt from her assets?

Ontario Court of Appeal Justice Eileen E. Gillese discussed how a party is to record a contingent asset or debt on his or her Financial Statement.  A contingent asset is a legal right to a chance at future wealth.  A successful lawsuit is an example.  A lottery ticket is another.  A contingent liability is a debt where there is only a chance that you pay it. One example is being an undischarged bankrupt.  Another example is a debt owing to a family member (There is a good chance that the family member may not ask for payment of it).

Gillese J.A. looked at precedents and decided that you take the dollar value of the (asset or debt) and multiply that number by the chance that value will be realized (receive money or pay creditor).

Gillies J.A. decided that the Wife should not deduct her debts on the date of marriage.  On the date of marriage, there was no chance that she would have to pay the debt. The court can look at past events to determine someone’s financial situation at a point further back in time.

The second issue arose from signed Minutes of Settlement.  The Wife said that she owned a car on the date of marriage.  The book value of the car was added as an asset on the Wife’s date of marriage assets on her Financial Statement.  Minutes of Settlement were signed based on the values contained on the parties’ Financial Statements.  After signing Minutes of Settlement, the Husband’s lawyer realized that the car was only leased.  The Husband’s lawyer sought to change the Minutes of Settlement to reflect this fact.

Court of Appeal Justice Gillies held that if the value of the car was changed, however, then the Wife might not have signed the Minutes of Settlement.  It was therefore unfair to change one value and enforce the remainder of the contract against the Wife.

The Husband argued that the Minutes of Settlement was “void by common mistake”.  Gillies J.A. held that the doctrine did not apply because the mistake did not go to the very heart of the agreement.  Also, the Husband had to prove that the mistake was not his fault.  The Father had the documents showing that the car was leased. Because the mistake was a mutual oversight, the Husband was equally at fault and the doctrine of “void by common mistake” does not apply.

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