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Rick v Brandsema (2009 SCC 10)

Case at a glance
CaseRick v Brandsema
Citation2009 SCC 10
CourtSupreme Court of Canada
Year2009
TopicAgreements
Central questionCan a separation agreement be set aside for hiding assets?

Key takeaways {#takeaways}

  • Separating spouses owe each other full and honest disclosure of all relevant financial information when negotiating a separation agreement.
  • Hiding or undervaluing assets can make an agreement unconscionable and unenforceable, even where lawyers and mediators were available.
  • In Rick v Brandsema, the Supreme Court restored a $649,680 award after a husband concealed about $233,000 and undervalued assets.

Rick v Brandsema at a glance {#summary}

Yes — a separation agreement can be set aside for hiding assets. In Rick v Brandsema, 2009 SCC 10, the Supreme Court of Canada held that separating spouses owe each other full and honest disclosure of all relevant financial information. Where one spouse conceals or misstates assets and the deal falls well short of what the law intends, a court may refuse to enforce it.

A signed separation agreement is supposed to be final. Nancy Rick signed one in December 2001 after two rounds of mediation, with lawyers in the background — a process most people would assume was safe. It wasn't. A week before she left the family home, her husband wrote himself a cheque for $79,954.36 from their joint account. He had also parked $154,000 with her own brother. None of it appeared in his sworn financial statement. The deal shorted her $649,680 — and the Supreme Court made him pay it back.

The facts {#facts}

Nancy Rick and Berend Brandsema married in 1973, when she was 18 and he was 19. Over 29 years together they raised five children (one died in early childhood) and built a dairy farm, Brandy Farms Inc., in which they were equal shareholders. They also owned other real property, vehicles and RRSPs. The wife was primarily a homemaker but also worked on the farm.

They separated in February 2000. Both said, without dispute, that they intended to divide their assets equally.

The negotiations went through two mediations, both conducted without lawyers in the room:

  • In February 2001, the husband provided a schedule of the company's assets and liabilities. The resulting memorandum of understanding gave him the farm businesses; the wife kept a house she had bought for $188,000 (with company funds, on condition she resign as a director and officer) and was to receive $750,000 "in order to equalize the parties' net family property and assets".
  • His sworn financial statement (then called a Form 89) arrived only in late September 2001 — and listed the company's net asset value at roughly $300,000 more than the figures he had used in the February mediation. The equalization figure was not adjusted. A second memorandum, signed October 10, 2001, kept the $750,000.

The separation agreement was signed December 13, 2001. The $750,000 payment was left out of the written agreement — the trial judge found this was most likely to protect a tax plan the husband's accountants had designed. The wife received the $750,000 less $19,000 for her half of the accountants' fees. The parties divorced in January 2002.

What the wife did not know: the $79,954.36 cheque the husband had written to himself from the joint account, and the $154,000 he had routed through her brother and redeemed into his own bank account in November 2001 — nearly a quarter of a million dollars in total, never disclosed in the sworn statement or at any point in the negotiations. The husband had also significantly underrepresented the value of two other properties the couple half-owned.

In March 2003, the wife applied to set the agreement aside. After a 17-day trial, the judge found she had been a "deeply troubled person" with a long-standing psychiatric disorder at the time of the negotiations — something her husband knew well. He had described her to his own lawyer as "paranoid and delusional". The trial judge found the agreement unconscionable — a legal term meaning the bargain offends the court's conscience — and awarded her $649,680, the gap between what she got and her entitlement under BC's then-governing Family Relations Act. The BC Court of Appeal reversed. The Supreme Court of Canada took the case.

The legal issues {#issues}

  1. Do separating spouses owe each other a duty of full and honest financial disclosure when negotiating a separation agreement dividing property?
  2. Was this agreement unconscionable, given the husband's misleading disclosure and the wife's mental instability?
  3. Does access to lawyers and mediators automatically cure one spouse's vulnerability?
  4. Was an appeal court entitled to redo the trial judge's findings of fact?
  5. If the agreement fails, what is the remedy — undoing the deal, or money compensation?

What the court decided {#decision}

The Supreme Court was unanimous. Justice Abella, writing for all seven judges, allowed the appeal and restored the trial judge's $649,680 award, with costs throughout (paras 69–70).

The core holding is at paragraph 47: it flows from Miglin v Miglin, 2003 SCC 24, that "a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances." Separation negotiations happen at an emotionally charged moment, so they are not treated like ordinary commercial contracts (paras 40–43). People are free to make their own bargains — but that freedom "depends on the integrity of the bargaining process," and you can only genuinely decide what concessions to accept if you have the real numbers (paras 45–46).

Not every disclosure failure sinks an agreement. Whether a court intervenes depends on the extent of the defective disclosure, how deliberate it was, and how far the resulting deal strays from the goals of the legislation (para 49).

On professional help: the Court of Appeal had reasoned that the availability of lawyers and mediators compensated for the wife's vulnerability. The Supreme Court rejected that as an automatic rule. Professional assistance can offset vulnerability — but "exploitation is not rendered anodyne merely because a spouse has access to professional advice. It is a question of fact in each case" (para 61). Here, the trial judge had found the wife's mental state left her unable to use the help available, and the husband knew it (para 62).

On appellate review: trial findings of fact stand unless there is "palpable and overriding error" — the Court of Appeal was wrong to substitute its own theory of events (paras 30–34).

On remedy: rather than tearing up the whole transaction, courts may award "equitable compensation" — money that puts the wronged spouse where the honest bargain would have put her — where unwinding the deal is impractical (paras 66–69). The Court also noted that a consent order can be set aside on the same grounds as the agreement behind it (para 64).

Where the law stands now. Rick was decided under BC's Family Relations Act, which bclaws now lists as [Repealed]. Property agreements for spouses separating today fall under the Family Law Act, SBC 2011, c. 25. Section 93(3) lets the court set aside a property agreement where, among other grounds, "a spouse failed to disclose significant property or debts, or other information relevant to the negotiation" (s. 93(3)(a)) or "took improper advantage of the other spouse's vulnerability" (s. 93(3)(b)) — grounds that track Rick closely. Section 5 now also imposes a statutory duty on parties to a family law dispute to provide "full and true information". The disclosure principle in Rick remains the leading Supreme Court statement on the point; in BC it now operates alongside this statutory scheme.

Can a separation agreement be set aside for hiding assets? {#the-test}

Yes, but not automatically. After Rick v Brandsema, a court looks at two things together:

1. Was the process flawed? Did one spouse fail to make full and honest disclosure of relevant financial information — hiding accounts, lowballing valuations, omitting assets from a sworn statement? Did one spouse exploit the other's vulnerability (emotional distress, mental health struggles, financial dependence)? Either kind of flaw counts; in Rick, both were present (para 63).

2. Was the result out of line with the law? A flawed process matters most when the deal it produced deviates substantially from what the legislation would have provided (paras 47, 49). In Rick, the parties intended a 50/50 split, and the concealment produced a payment $649,680 below the wife's statutory entitlement.

Three practical points follow. First, deliberateness matters: the more the misinformation was intentionally generated, the greater the risk to the agreement (para 49). Second, having had a lawyer or mediator does not by itself save the agreement — the question is whether the help actually offset the vulnerability (paras 60–62). Third, an agreement built on honest disclosure and free of exploitative tactics is one that "courts are more likely to respect" — the duty protects finality as much as fairness (para 48).

The numbers {#numbers}

All figures below are taken from the judgment.

Item Amount Where in the judgment
Negotiated equalization payment to the wife $750,000 (less $19,000 accounting fees) paras 12, 19
Cheque the husband wrote himself from the joint account $79,954.36 para 25
Funds routed through the wife's brother, then back to the husband $154,000 para 25
Total undisclosed funds ~$233,000 paras 26, 53
Undervaluation of two jointly held properties ~$195,000 para 57
Swing in the company's stated net value between mediation and sworn Form 89 ~$300,000 higher para 15
Shortfall from the wife's statutory entitlement — the amount awarded $649,680 paras 28, 53, 69

What this means if you're separating in Surrey {#bc-impact}

If you are negotiating a separation agreement in BC, Rick v Brandsema cuts both ways.

If you suspect your spouse is hiding something: the law is on your side. Your spouse owes you honest numbers — under Rick and now under section 5 of the Family Law Act. If you signed a deal built on concealed bank accounts, lowballed business valuations or missing assets, section 93 of the FLA gives the court power to set the agreement aside or replace it. And if the agreement was folded into a consent order after your divorce, that order can be challenged on the same grounds.

If you are the spouse with the business or the more complicated finances: disclose everything, in writing, before signing. Rick is clear that honest disclosure is what makes an agreement durable. A deal that looks like a win because the other side didn't know the real numbers is a deal with a shelf life.

One more local point: negotiating through mediation does not lower the disclosure standard. Both mediations in Rick happened without lawyers present, and the misleading figures were fed into that process. Mediation works well — but only on truthful financial information. It's also worth noting the case has a local connection: the solicitors who acted for Ms. Rick on her successful Supreme Court of Canada appeal practised in Surrey.

Timing matters too. Under section 93(5) of the FLA, the court considers how much time has passed and how much the spouses have relied on the agreement. If something feels wrong, get advice early rather than waiting.

How a lawyer uses Rick v Brandsema {#in-practice}

  • Before signing: insist on sworn financial statements and supporting documents — corporate financials, appraisals, account statements — before any agreement is finalized. Rick is the authority for refusing to close without them.
  • Testing valuations: the husband's self-generated company values, inflated debt figure and speculative tax deduction were central to the finding. A lawyer uses Rick to press for independent valuations and to challenge deductions for taxes that may never be paid (paras 27, 55–56).
  • Challenging an agreement: Rick supplies the framework — defective disclosure plus exploited vulnerability plus substantial deviation from the statute — and pairs with FLA s. 93(3) as the statutory route for post-2013 separations.
  • Defending an agreement: the same case protects clients who disclosed fully. A clean paper trail of disclosure is the best evidence an agreement should stand (para 48).
  • Vulnerability evidence: Rick shows what persuades courts — medical evidence, the other spouse's own knowledge of the instability, and conduct during negotiations. Access to a lawyer is not, on its own, an answer (paras 60–62).
  • Remedies: where unwinding a completed transaction is impractical, ask for equitable compensation measured by the shortfall, as the trial judge did here (paras 65–69).

See more of our case commentaries.

Frequently asked questions {#faq}

My spouse and I both had lawyers. Can the agreement still be challenged?

Yes. The Supreme Court rejected the idea that access to professional help automatically cures vulnerability or excuses exploitation. What matters is whether the help actually offset the problem in your specific circumstances. In Rick, the wife had lawyers and mediators available, but her mental state left her unable to use that help — and the agreement still fell (paras 60–62).

The agreement became a court order when we divorced. Is it too late?

Not necessarily. The Supreme Court confirmed that a consent order can be set aside on the same grounds as the agreement behind it, because a consent order reflects the parties' bargain, not a judge's ruling on the merits (para 64). In Rick, the wife's claims had been dismissed by consent order in January 2002, and she still succeeded.

What do I have to prove to set an agreement aside for hidden assets?

Broadly, two things: a flawed process (significant non-disclosure, or exploitation of vulnerability, or both) and a result substantially out of step with your entitlement under the legislation. The court also weighs how deliberate the concealment was and, under FLA s. 93(5), how much time has passed and how much both sides have relied on the deal. Every case turns on its own facts.

References {#references}

Read the decision itself: Rick v Brandsema, 2009 SCC 10