DATE: 20040615

DOCKET: C39458

COURT OF APPEAL FOR ONTARIO

BORINS, SHARPE and JURIANSZ JJ.A.

B E T W E E N:

WILLIAM CHARLES SIMPKINS

Leonard Levencrown for the appellant

Respondent (Appellant)

• and -

MARY EILEEN SIMPKINS

A. Sean Jones for the respondent

Applicant (Respondent)

Heard: May 10, 2004

On appeal from a judgment of Justice V. Jennifer MacKinnon of the Superior Court of Justice dated January 27, 2003.

SHARPE J.A.:

[1] The issue on this appeal is whether the respondent, Mary Simpkins, is entitled to an order for support under the Divorce Act, R.S.C. 1985, c. 3, despite minutes of settlement and a general release terminating her right to claim support in return for a lump sum payment. The trial judge set aside the minutes of settlement on the ground that, at the time of their execution, the respondent was in a vulnerable position and the appellant, William Simpkins took advantage of her vulnerability by failing to disclose material facts relating to his income. In my view, there was evidence to support these findings and they provide a legal justification for setting aside the minutes of settlement and making a support order. Accordingly, I would dismiss the appeal.

FACTS

[2] The parties were married in 1970 and they separated in 1993. The appellant adopted the respondent’s daughter and the parties had two children of their own born in 1970 and 1972. The respondent devoted herself to the care of the children until they were all in school and thereafter held various jobs offering modest remuneration. The appellant had well-paying jobs and was a supportive father and husband. At the time of separation, he was employed by Petro Canada and earning $100,000 per year.

[3] The parties resided in Newfoundland at the time of separation. The Supreme Court of Newfoundland granted a judgment of divorce in December 1994, but the issue of the respondent’s entitlement to support was reserved. The parties sold their homes in Ontario and Newfoundland, and divided the proceeds. The respondent also transferred a jointly held GIC into her own name. She moved back to Ontario and found employment through a temporary agency. In 1995, she moved to British Columbia where she worked as a live-in nanny. By this time, her mental health was poor. She suffered from severe depression and was suicidal. In 1996, she initiated court proceedings for support in British Columbia against the appellant who, by then, was living and working in Alberta. She was awarded interim support of $2,000 per month in June and July 1996 and then $3,500 as of August 1996.

[4] In April 1997, the matter came on for trial before Fraser J. He ordered the appellant to pay the respondent $3,500 monthly support, but imposed as a condition that the respondent should continue her retraining efforts and maintain a specified average in the course she was taking. The order provided that if the respondent failed to maintain the average or ceased to attend the course, the support payments would be reduced after two months to $1,500 per month plus an amount equal to what the respondent earned up to $1,000. Fraser J. remained seized of the matter until December 31, 1998. The order provided that the support payments would expire on December 31, 1998. Thereafter, any support would be at the discretion of the court. This maintained the respondent’s entitlement to support and left open the possibility that support could be reviewed after December 31, 1998.

[5] In June 1997, the appellant lost his job with Petro Canada. He did not inform the respondent of this development, but she learned of it through friends. When she asked him about it, he confirmed that it was true, but told her that he would keep up the support payments and he lived up to his word. He did not, however, inform the respondent of the details of his lump sum severance payment of $150,000. Nor did he inform her that after his termination, he was earning an additional $95,000 on short-term contracts.

[6] The respondent’s mental health remained precarious and she withdrew from her retraining course. The appellant moved for reduction of support, in part, on the ground that he was unemployed and unable to afford to make the support payments. The respondent, in turn, brought her own application for a lump sum payment, partly on the advice of her psychiatrist, who advised her that she should resolve the litigation in order to get on with her life. Settlement discussions ensued and the appellant accepted the terms proposed by the respondent. The parties entered minutes of settlement in June 1998 in the following terms:

1. a) The Defendant [William Simpkins] shall pay to the Plaintiff [Mary Simpkins] the sum of $15,000.00 as lump sum spousal support (the “Lump Sum”) on or before June 19, 1998.

b) The Defendant shall forthwith transfer the sum of $30,000.00 from his RRSP to an RRSP in the name of the Plaintiff (the “RRSP”) by way of a spousal rollover.

c) There shall be no review of the order for spousal support contained herein in December, 1998, as prescribed by the Order or at all.

d) The Defendant shall be free to designate a beneficiary of his choosing with respect to any life insurance policies held by him and shall not be required to provide security for spousal support as prescribed by the Order or at all.

e) The Defendants estate shall not be bound by the terms of the Order.

4. The Plaintiff shall be permanently enjoined from commencing proceedings under the Divorce Act or the Family Relations Act or any other related statute as against the Defendant for spousal support, or a variation of spousal support, without first obtaining leave of this Court.

[7] The respondent also executed a general release of all claims against the appellant. The parties presented the minutes of settlement to Fraser J. and asked for a consent order to implement the terms. Fraser J. refused to grant the order without a hearing. When the parties appeared before him, counsel for the respondent explained the reasons for the settlement in the following terms:

Basically, where we were a year ago is each party, having brought an application, Mrs. Simpkins seeking lump sum spousal maintenance; Mr. Simpkins seeking a reduction. At the same time … Mr. Simpkins was out of work. He was unable to meet the ongoing maintenance payments.

The parties subsequently reached a settlement … . And in support of the order that the parties have agreed to, really, what the parties were seeking here was absolute finality.

And the reason from Mr. Simpkins’ perspective, of course is that he’s having to dig into his capital assets at a time when he’s out of work, and to pay amounts of money which ordinarily he wouldn’t be ordered to pay. A lump sum, which is precisely what Mrs. Simpkins sought… .

[8] Counsel for the appellant did not dispute that submission and at the trial under appeal, counsel for the appellant accepted the accuracy of these statements.

[9] Fraser J. refused to grant the consent order for the following reasons:

Here’s a wild guess, as to the future: Sometime within the next year, Mr. Simpkins will obtain very handsome employment; and notwithstanding that, he will have no obligations toward Mrs. Simpkins.

And between [the] three of you and me, I think that’s wrong. I can well understand Mrs. Simpkins’ reasons, and I am entirely in sympathy with them. And she has my best wishes.

I’m not criticizing her at all for having regard to the advice of her doctors and having regard for her own peace of mind. I just think the deal stinks, and I’m not going to approve it.

[10] Fraser J.’s observation proved to be prophetic. In March 1999, the appellant obtained a senior position with the Canadian Petroleum Products Institute and, at the time of trial, he was earning $155,000 in the final year of a contract that he hoped would be renewed. The respondent was employed by the federal government at an annual salary of approximately $37,000.

[11] In addition to the payments already mentioned, the respondent has received a share of the appellant’s pension. She has a net worth of $61,625 without discount for taxes payable on her RRSP. The appellant’s net worth is $140,000 without discount for taxes on his RRSP.

[12] In her evidence at trial, the respondent conceded that her lawyer had advised her not to sign the minutes of settlement and that she would be better advised to proceed with her claim. However, her psychiatrist advised her that it was important for her mental health to put an end to the legal proceedings and settle her claim for a lump sum. The respondent offered the following explanation of her decision to propose the financial terms of the minutes of settlement:

I was very concerned in starting school again for the second year when I found out at the very beginning of the year that Bill had lost his job. I went into the first month wondering what was going to be happening, and the second month, and so on. When he still didn’t have a job by Christmas, I was more concerned that I wasn’t going to be able to complete the program.

I was also very depressed at the time and I just - I just felt that I – I wasn’t going to get through anything, or on with anything, the way things were at that time. I wanted to be sure that before I had to go back to court again, which I really didn’t want to do, I could address any debts that I had and find a job and I wanted to end this. It had already been going on for a couple of years without any real closure to the court. I felt we were going back to court again and I wanted to be done with that aspect of it. I couldn’t afford to go back to court.

[13] The respondent also led evidence with respect to the state of her mental health at the time of the minutes of settlement. According to her psychiatrist, the respondent was struggling with significant emotional issues, and exhibiting symptoms of anxiety and depression. Her responses and choices were more in line with the short-term protection of herself from these factors, rather than a clearly articulated plan for her long-term financial well being.

[14] The trial judge made the following findings with respect to the minutes of settlement:

Contrary to Ms. Simpkins understanding in the spring of 1998 and to the information that Mr. Simpkins' counsel provided the court on January 18, 1999 as to the facts leading up to the Minutes of Settlement, the facts as I heard them to be at this trial from Mr. Simpkins, are that when he lost his job in June 1997, he received 1.5 years salary in lieu of notice. This came to $150,000, some of which he placed in an RRSP. He had a three month contract with Mobil starting in October 1997 which paid him $45,000 in total. He had a six month contract with Inco starting in May 1998 which paid him a total of $50,000. From June 1997, then, to and including June 1998, Mr. Simpkins was in receipt of a total of $211,666.66 combined severance and earnings. Put another way, as of June 1998 when the final settlement was signed, he had six months of paid severance period remaining, had earned an additional $45,000 in 1997 and was in the second month of a six month contract which would pay him $50,000 in total.

While Mr. Simpkins' counsel argues that his client did nothing wrong in accepting Ms. Simpkins proposal of a final lump sum settlement, in fact, in allowing her to believe that his severance was running out, that he was out of work and unable to meet the ongoing support requirements, he clearly took advantage of her. These parties were not equal in their ability to protect their own interests and the agreement is improvident on its face. According to Mundinger, supra, the onus then is on Mr. Simpkins to show that he was scrupulously considerate of her interests.

The information placed by his counsel before Fraser J. as to Mr. Simpkins’ financial circumstances which gave rise to the agreement is in contrast to that which emerged in his testimony in this trial. The only conclusion I can reach, based on the record before me, is that Ms. Simpkins did not know that six months remained in his severance period, that he had earned an additional $45,000 since being laid off or that he was in the second month of a six month contract that was paying him an additional $50,000. Rather than being scrupulously considerate of her interests, Mr. Simpkins took the advantage to himself in accepting a settlement which gave him a final termination of his spousal support obligation that was clearly not warranted by the circumstances of the marriage or by the amount of the payment.

[15] The trial judge found that the minutes of settlement should be set aside as unconscionable, citing the common law test set out in Mundinger v. Mundinger, 1968 250 (ON CA), [1969] 1 O.R. 606 (C.A.) (aff’d. (1970), 14 D.L.R. (3d) 256 (S.C.C.)). The trial judge also found that the respondent was entitled to succeed on the basis of this court’s decision on Miglin v. Miglin (2001), 2001 8525 (ON CA), 53 O.R. (3d) 641 (subsequently varied by the Supreme Court of Canada: 2003 SCC 24, [2003] 1 S.C.R. 303). She awarded the respondent monthly support of $2,250 and required the appellant to designate the respondent as the irrevocable beneficiary of life insurance in the sum of $200,000. There is no appeal from the quantum or terms of this award.

ISSUE

[16] The sole issue on this appeal is whether the trial judged erred in setting aside the minutes of settlement and general release and ordering support.

ANALYSIS

[17] Settlement agreements in matrimonial proceedings should ordinarily be respected and the parties should not be entitled to go back on their agreement to resolve their differences. In their jointly authored judgment in Miglin v. Miglin, supra, Bastarache and Arbour JJ. state at para. 4:

[W]e believe that a fairly negotiated agreement that represents the intentions and expectations of the parties and that complies substantially with the objectives of the Divorce Act as a whole should receive considerable weight. … [T]hese general objectives include not only the equitable sharing of the consequences of the marriage breakdown under s. 15(2), but also certainty, finality and autonomy.

[18] At para. 54, Bastarache and Arbour JJ. refer to the importance of fostering settlements and state that if the policy of encouraging parties to resolve their matrimonial disputes is to be maintained, “more must be shown than mere deviation from what a trial judge would have awarded in an order before it is appropriate for the court to disregard the parties’ pre-existing agreement.” Miglin dealt with a separation agreement. We are concerned with minutes of settlement reached during the course of litigation where the promotion of certainty, autonomy and finality is especially important.

[19] The appellant submits that as the respondent received appropriate legal advice and as she proposed the terms of the minutes of settlement, it cannot be said that he took advantage of her by accepting her proposal. Most agreements entered into with the benefit of a competent legal advice will be upheld, especially where the party seeking to avoid the settlement proposed the terms.

[20] However, the appellant’s argument fails to meet the central point of the trial judge’s findings, namely that the settlement was vitiated by that fact that the appellant took advantage of the respondent by failing to disclose the full extent of his income. There was ample evidence to support the trial judge’s findings in this regard. The record of the proceedings before Fraser J. indicates that the appellant had applied to reduce his interim support payments in part because he was unemployed. When the respondent proposed the terms of the settlement, she was concerned about her situation because she believed the appellant to be unemployed. She did not know the details of his substantial severance package, nor was she aware of the income he derived from his two short-term contracts. I see no basis to interfere with the trial judge’s finding that the appellant took unfair advantage of the respondent by accepting the terms of a settlement that was premised upon his non-disclosure resulting in her erroneous assumption about his income.

[21] The trial judge applied the common law test of unconscionability set out in Mundinger. In that case, this court adopted Professor Bradley E. Crawford’s description of the unconscionability principle ((1966) 44 Can. Bar Rev. 142 at 143):

If the bargain is fair the fact that the parties were not equally vigilant of their interest is immaterial. Likewise if one is not preyed upon by the other, an improvident or even grossly inadequate consideration is no ground upon which to set aside a contract freely entered into. It is the combination of inequality and improvidence which alone may invoke this jurisdiction. Then the onus is placed upon the party seeking to uphold the contract to show that his conduct throughout was scrupulously considerate of the other’s interests.

This test was reaffirmed more recently by this court in Rosen v. Rosen (1994), 1994 2769 (ON CA), 18 O.R. (3d) 641.

[22] In many family law settings, a more lenient test may pertain and the circumstances of vulnerability or oppression do not have to meet the higher threshold of unconscionability as the term is understood in the common law of contract: see Miglin at para. 82. As I would not interfere with the trial judge’s finding that the settlement fails even on the more stringent common law standard, it is unnecessary for me to consider whether or not the minutes of settlement should be assessed under a more lenient standard.

[23] The settlement was vitiated by the fact that the appellant’s conduct led the respondent to believe that he was unemployed and in financial difficulty and that he failed to reveal the full extent of his income. The respondent’s unstable mental health rendered her vulnerable and the terms of the settlement cannot be regarded as a genuine expression of the parties’ intentions. I agree with the trial judge’s conclusion that it should not stand in the way of an order that satisfies the objectives of the Divorce Act.

[24] When one turns to the substance of the minutes of settlement, there seems to be little doubt that whether considered at the time it was negotiated or at the time of this application, it was improvident from the respondent’s perspective. It failed to take into account the factors and objectives listed in the Divorce Act and it falls well short of reflecting an equitable sharing of the economic consequences of the marriage and its breakdown. Indeed, the appellant was put on early notice that the minutes of settlement were unlikely to survive judicial scrutiny when Fraser J. refused to grant a consent order implementing its terms.

[25] It is unnecessary to analyze this case in terms of the approach mandated by the Supreme Court in Miglin v. Miglin, which is applicable to original applications for support. Without the minutes of settlement, the parties revert to the terms of Fraser J.’s April 1997 judgment. It reserved the discretion to order support after December 31, 1998, a discretion that Fraser J. maintained when he refused to grant a consent order implementing the terms of the minutes of settlement. Although the trial judge did not base her decision on the April 1997 judgment, she did give full consideration to the situation of the parties and I see no basis to interfere with her determination that a support order is appropriate.

DISPOSITION

[26] For these reasons I would dismiss the appeal. The respondent is entitled to her costs of the appeal which I would fix at $12,000 inclusive of GST and disbursements.

“Robert J. Sharpe J.A.”

“I agree S. Borins J.A.”

“I agree R.G. Juriansz J.A.”

Released: June 15, 2004