Kelly v. Kelly [Indexed as: Kelly v. Kelly]
72 O.R. (3d) 108
[2004] O.J. No. 3108
Docket No. C40779
Court of Appeal for Ontario,
Doherty, Laskin and Feldman JJ.A.
July 23, 2004
Family law -- Property -- Equalization of net family property -- Extension of time -- Wife signing separation agreement in 1991 in which she waived claim to spousal support after long- term traditional marriage -- Wife having independent legal advice but suffering from ongoing depression and mental illness -- Wife commencing proceedings seeking spousal support and further equalization payment in 2001 -- Motions judge erring in granting summary judgment under Rule 20 dismissing wife's claim for equalization payment and for order under s. 2(8) of Family Law Act extending time to claim further equalization payment from husband -- Wife's evidence raising genuine issues for trial -- Family Law Act, R.S.O. 1990, c. F.3, s. 2(8) -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20.
Family law -- Support -- Spousal support -- Wife signing separation agreement in 1991 in which she waived claim to spousal support after long-term traditional marriage -- Wife having independent legal advice but suffering from ongoing depression and mental illness -- Wife having meagre income and no prospects of obtaining job when agreement signed -- Wife commencing proceedings seeking spousal support in 2001 -- Motions judge erring in granting summary judgment under Rule 20 dismissing wife's claim for spousal support -- Wife's evidence raising genuine issues for trial -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20. [page109]
The parties separated in 1991 following a 16-year traditional marriage. The wife signed a separation agreement releasing her interest in the matrimonial home and in the husband's company in exchange for an equalization payment of $125,000 and agreeing to waive her right to spousal support. The agreement contained a general release under which each party accepted the terms of the agreement in full satisfaction of all claims. The wife had independent legal advice, but suffered from depression and "cognitive distortions", including submissiveness and deeply-rooted approval seeking behaviour. From 1995 onwards, she received intermittent psychiatric care and counselling. She tried to re-enter the workplace after the separation, but with little success.
In 1997, the wife retained a lawyer who initiated negotiations to amend the separation agreement. The wife signed an addendum to the original agreement providing for the payment to her of $19,000 for the equalization of assets not considered in the 1991 equalization calculation and the payment of a lump sum of $36,500, described as "spousal support", given to her as "absolute compensation" for being required to encroach on her capital. She again waived any claim to ongoing spousal support.
By 1998, the wife's mental health had deteriorated to the point that she began receiving a full Canada disability pension, which amounted to approximately $7,300 a year. The husband's income and assets had risen steadily since the separation, and by 2001 his net worth exceeded $1 million. In 2001, the wife began proceedings for spousal support and for a further equalization payment. She sought an order under s. 2(8) of the Family Law Act extending the time to claim the further equalization payment. On a motion by the husband for summary judgment under Rule 20 of the Rules of Civil Procedure, the motions judge dismissed the wife's claims. The wife appealed.
Held, the appeal should be allowed.
The motions judge erred in applying Rule 20 to the analysis required by the Supreme Court of Canada's decision in Miglin v. Miglin, the case that sets out the tests for determining when spousal support can be ordered in the face of an agreement waiving support. While no case is immune from an order for summary judgment, Rule 20 is poorly suited to dispose of claims that must be resolved by applying the detailed analysis in Miglin. That analysis typically requires the court to draw inferences, determine credibility and find facts in the face of disputed evidence. These determinations lie in the domain of the trial judge, not the motions judge.
In this case, in finding that the wife "knowingly" signed two agreements having had independent legal advice before signing and that her claims raised no genuine issues of credibility, the motions judge failed to come to grips with the wife's mental illnesses. Legal advice is not an automatic antidote for a party's vulnerability. The wife's evidence raised genuine issues for trial with respect to the question whether there was any reason to discount the agreements because of the circumstances under which they were negotiated and executed. The motions judge also failed to specifically consider the substance of the agreement and the addendum and whether they substantially complied with the objectives of the Divorce Act. Even if it could be said that the original agreement and the addendum were executed under unimpeachable circumstances, whether their substance complied with the overall objectives of the Divorce Act raised a triable issue.
The wife had a long-term marriage in which she had the major responsibility for raising the children. When she and the husband separated, she had no job and no work skills. When she signed the addendum in 1997, she had no income and was well on her way to becoming destitute. Yet, neither the agreement nor the [page110] addendum provided for spousal support. Whether the waiver of support sat comfortably with the objectives of s. 15.2(6) of the Divorce Act -- especially the objective of recognizing any hardship arising from the breakdown of the marriage and the objective of relieving any economic disadvantage from the breakdown of the marriage -- raised, at the very least, a genuine issue for trial. Moreover, even if it could be said that, when signed, the agreement and the addendum substantially complied with the objectives of the Divorce Act, the question of whether they did now raised genuine issues for trial. The wife's claim for support should not have been dismissed by summary judgment.
In granting summary judgment dismissing the wife's claim for a further equalization payment and for an order under s. 2(8) of the Family Law Act extending the time for asserting a claim for an equalization payment, the motions judge stated that the wife's explanation that she did not pursue the action earlier because of her illness, fragile state of mind and fear for her safety did not offer a good faith explanation when considered in the light of all the evidence, and that she had not shown that no person would suffer prejudice by reason of delay. The motions judge answered the wrong question. The question he had to answer was whether the husband had shown that the wife's request for an extension raised no genuine issue for trial. Instead, the motions judge decided the question of an extension. In doing so, he reversed the onus of proof and determined that the wife had not met the test in s. 2(8). The motions judge also decided the question of the wife's credibility, a matter reserved for the tri al judge. The motions judge could only conclude that the wife had not shown good faith by disbelieving her explanation why she did not assert a claim earlier. But the wife gave evidence on all three prongs of the s. 2(8) test which, if accepted by a trier of fact, would entitle her to an extension. The order for summary judgment dismissing the claim for an equalization payment should be set aside.
APPEAL from a summary judgment of Kozak J., 2003 2344 (ON SC), [2003] O.J. No. 3611 (S.C.J.) dismissing a claim for spousal support and equalization payment.
Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, 66 O.R. (3d) 736n, 224 D.L.R. (4th) 193, 302 N.R. 201, 34 R.F.L. (5th) 255, 2003 SCC 24, [2003] S.C.J. No. 21, consd Other cases referred to Bedard v. Huard, 2000 22563 (ON SC), [2000] O.J. No. 969, 5 R.F.L. (5th) 282 (S.C.J.); Menzinger v. Menzinger (1998), 1998 14849 (ON SC), 40 O.R. (3d) 205, [1998] O.J. No. 3567 (Gen. Div.); T.S. v. E.J.S., [2002] O.J. No. 4937 (S.C.J.) Statutes referred to Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), s. 15.2 Family Law Act, R.S.O. 1990, c. F.3, ss. 2(8), 7(3) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20
Philip M. Epstein, Q.C., and Lene Madsen, for appellant. Barbara Morland Wellard, for respondent.
The judgment of the court was delivered by [page111]
LASKIN J.A.: --
A. INTRODUCTION
1The issue on this appeal is whether the motions judge erred in granting summary judgment dismissing a wife's claim for spousal support and for an order extending the time to claim a further equalization payment from her former husband.
2The appellant, Suzanne Kelly, separated from the respondent, Brian Kelly, in 1991 after a 16-year marriage. She signed a separation agreement and, in 1997, shortly before she and her husband divorced, signed an addendum to the original agreement. In each case before she signed she had legal advice. Under each agreement she received an equalization payment but waived her claim to spousal support. She did so even though she suffered from ongoing depression and mental illness, had a meagre income and no prospects of obtaining a job. Now on a disability pension, Mrs. Kelly seeks spousal support under the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) ("DA") and an extension of the limitation period under s. 2(8) of the Family Law Act, R.S.O. 1990, c. F.3 ("FLA") for making a further equalization claim. Her appeal raises these two questions:
Did the motions judge err in applying Rule 20 (the summary judgment rule) [Rules of Civil Procedure, R.R.O. 1990, Reg. 194] to the analysis required by the Supreme Court of Canada's decision in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, 224 D.L.R. (4th) 193, the case that sets out the tests for determining when spousal support can be ordered in the face of an agreement waiving support?
Did the motions judge err in his application of Rule 20 to s. 2(8) of the FLA?
3I would answer each question affirmatively. Mrs. Kelly's claims for support and an extension of time raise genuine issues for trial. They should not have been dismissed by summary judgment.
B. BACKGROUND FACTS
(a) Marriage, Children, Business and Separation
4Mr. and Mrs. Kelly married in 1975, when each was 20 years old. They had four children; one died in infancy. Mrs. Kelly took on most of the responsibility for raising the children. By the time she brought this action, the two older children, Ryan and Maranda, were in their 20s, and the youngest, Krystle, was a teenager. [page112]
5During the marriage, the couple built a successful busline, Kelly Bus Lines Ltd. ("KBL"), which transported children to and from school. They started in 1980 with one bus. By the time they separated in 1991, the company owned three buses and a van, and had expanded routes.
6The marriage underwent ongoing problems, which eventually proved irreconcilable. According to Mrs. Kelly, her husband's infidelities and "sexual addiction" punctuated the relationship and led to its breakup. According to Mr. Kelly, his wife's two- year relationship with his employer caused the couple's estrangement. On January 15, 1991, Mr. Kelly told his wife that he intended to separate.
(b) The First Agreement
7Within three days of announcing his intention to leave the marriage, Mr. Kelly hired a lawyer, had a separation agreement drawn up and presented it to Mrs. Kelly for her signature. She retained a lawyer, who signed a certificate of independent legal advice. The lawyer advised her to have KBL appraised and to insist on better financial disclosure from her husband. Mrs. Kelly did neither. Instead, within two weeks she signed the agreement. These are its material terms:
-- Mrs. Kelly released her interest in the matrimonial home and in KBL in exchange for an equalization payment of $125,000. This payment reflected a value of $100,000 for KBL, which Mr. Kelly claimed was a "true value".
-- Mrs. Kelly kept her RRSPs and mutual funds, totalling about $68,000.
-- Mr. Kelly agreed to pay child support of $400 per month for each child, on the understanding that all three children would live with Mrs. Kelly.
-- Mrs. Kelly waived her right to spousal support. She acknowledged her financial independence and that she did not need financial assistance from her husband. In doing so, she also acknowledged her financial circumstances could change because of the cost of living, her health, her employment or otherwise.
-- The agreement contained a release of future property claims under which both parties acknowledged that their assets and property had been satisfactorily divided between them. The agreement also contained a general release under which each party accepted the terms of the agreement in full satisfaction of all claims. [page113]
(c) Mrs. Kelly's Vulnerability
8From as far back as 1990, Mrs. Kelly suffered from a series of mental illnesses. According to her health professionals she has undergone major depressions; she suffers from "hysteroid dysphoria" -- repeated episodes of a depressed mood, usually caused by romantic rejection; and she has many other "cognitive distortions", including submissiveness and deeply-rooted approval-seeking behaviour. From 1995 onwards, she has received intermittent psychiatric care and counselling.
9After the separation, Mrs. Kelly tried to re-enter the workforce, but with little success. She did obtain a real estate licence but earned very little.
(d) The 1997 Addendum
10In 1997, during what her counsel described as a "moment of strength", Mrs. Kelly retained a lawyer who initiated negotiations to amend the separation agreement. In August 1997 she signed an "Amendment and Addendum" to the original agreement. Under the addendum:
-- Mr. Kelly paid Mrs. Kelly $19,000 for the equalization of assets not considered in the 1991 equalization calculation.
-- Mr. Kelly also paid Mrs. Kelly a further lump sum of $36,500, described as "spousal support", and given to her as "absolute compensation" for being required to encroach on her capital.
-- Mr. Kelly agreed to pay child support of $1,200 per month for each of the two younger children, who were still living with Mrs. Kelly.
-- The parties again released any claim in each other's property.
-- Mrs. Kelly again waived any claim to ongoing spousal support. She signed a general release in which she acknowledged her income, assets and debts could change and that she may be required to use her capital for her support. She agreed to do so "without recourse to the Husband".
-- Mrs. Kelly also acknowledged that she was "satisfied with the information furnished and disclosure made", that the terms of the addendum were fair and that she was signing it voluntarily. Her lawyer signed a certificate of independent legal advice in which he acknowledged that Mrs. Kelly [page114] understood the nature and effect of the addendum and was signing it voluntarily.
(e) Events after Signing the Addendum
11Just over three weeks after the parties signed the addendum, both younger children left their mother's home. Maranda never returned. Krystle did return, but by January 2000, at the age of 16, she moved out permanently.
12In October 1997, the parties divorced. Meanwhile Mrs. Kelly's health continued to deteriorate. By 1998 her illnesses became so severe that she began receiving a full Canada disability pension, which amounted to approximately $7,300 yearly. She claimed that her debts were mounting and that she had to deplete her retirement income to survive.
13By contrast, Mr. Kelly's income and assets rose steadily. He agreed that by 2001 his net worth exceeded $1 million.
14In June 2001, Mrs. Kelly began these proceedings for support and for a further equalization payment. On September 18, 2003, the motions judge granted summary judgment dismissing her claims. He concluded that the two agreements she signed -- each after having received legal advice -- barred her claims.
C. ANALYSIS
First Issue: Did the Motions Judge Err in Applying Rule 20 to the Tests in Miglin?
(a) Support under the Divorce Act
15Section 15.2 of the DA governs Mrs. Kelly's claim for spousal support. Section 15.2(1) states:
15.2(1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.
16Section 15.2(4) of the DA spells out the factors a court must consider in ordering support:
15.2(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including
(a) the length of time the spouses cohabitated;
(b) the functions performed by each spouse during cohabitation; and
(c) any order, agreement or arrangement relating to support of either spouse.
(Emphasis added) [page115]
(b) The analysis in Miglin
17Miglin focuses on the third of the factors in s. 15.2(4): "any order, agreement or arrangement relating to support". The judgment discusses how courts should exercise their discretion under s. 15.2(1) of the DA when a party initially applying for support has already signed an agreement waiving any claim to support. The majority judgment of Bastarache and Arbour JJ. prescribes a two-stage analysis.
(1) Stage one
18Stage one has two components: the circumstances of the execution of the agreement and the substance of the agreement.
(i) Circumstances of execution
19The court must assess whether there is any reason to discount the agreement because of the circumstances under which it was negotiated and executed. In doing so, the court must consider whether "there were any circumstances of oppression, pressure or other vulnerabilities" that flawed the negotiations (para. 81). Professional assistance -- the advice of a lawyer -- may compensate for or overcome any vulnerability or power imbalance but will not automatically do so. If the power imbalance vitiates the bargaining process, the court should give the agreement little weight.
(ii) Substance of the agreement
20If the conditions under which the agreement was negotiated cannot be impeached, the court must assess the substance of the agreement. It must decide whether the agreement substantially complies with the objectives of the DA. These objectives include those expressly listed in s. 15.2(6)2 as well as those of certainty, finality and autonomy. [page116]
(2) Stage two
21If the agreement satisfies both components of stage one, the court should give it great weight. Still, stage two of the analysis recognizes that because of "the vicissitudes of life" the parties may find themselves in circumstances that they did not contemplate at the time they signed their agreement. Some change is inevitably foreseeable. The court must assess whether the new circumstances of the parties could not reasonably have been anticipated at the time of execution of the agreement; and whether in the light of these new circumstances the agreement no longer reflects the parties' intentions or substantially complies with the DA, thus producing a situation that the court cannot condone.
(c) Miglin and Rule 20
22No case is immune from an order for summary judgment. Rule 20, however, is often poorly suited to dispose of claims that must be resolved by applying the detailed analysis in Miglin. That analysis typically requires the court to draw inferences, determine credibility and find facts in the face of disputed evidence. These determinations lie in the domain of the trial judge, not the motions judge. Because the Miglin analysis typically throws up material facts that are disputed, experienced family law judges in Ontario have been reluctant to grant summary judgment on a claim for spousal support under s. 15.2 of the DA even where the parties have signed an agreement waiving support. See Bedard v. Huard, 2000 22563 (ON SC), [2000] O.J. No. 969, 5 R.F.L. (5th) 282 (S.C.J.) at para. 14; T.S. v. E.J.S., [2002] O.J. No. 4937 (S.C.J.) at para. 43; and Menzinger v. Menzinger (1998), 1998 14849 (ON SC), 40 O.R. (3d) 205, [1998] O.J. No. 3567 (Gen. Div.) at para. 11. I share that reluctance in this case.
23Although in resisting support Mr. Kelly presents a strong case, Mrs. Kelly's affidavit evidence, especially her evidence of mental illness, raises genuine issues for trial at each step of the Miglin analysis.
(d) This case
24The motions judge accurately summarized both the principles applicable to summary judgment motions and the tests in Miglin. In my view, however, he did not properly apply either the Rule 20 principles or the Miglin tests to the factual record before him.
25I make these two preliminary observations. First, I consider the Miglin analysis relevant both to the 1991 agreement and the 1997 addendum. Although the addendum is obviously [page117] later in time, it has to be assessed in the context of the bargain Mrs. Kelly made in 1991. Second, the motions judge did not analyze all of the components of the Miglin analysis. He dealt with the first component of stage one, but not the second component, and he did not deal at all with stage two.
26The motions judge saw no reason to discount either the agreement or the addendum because of the circumstances under which each was executed. He considered Mrs. Kelly's claim that she did not receive full financial disclosure to be a "bald assertion". He said that she "knowingly" signed two agreements having had independent legal advice before signing. Therefore, he concluded that her claims raised no genuine issues of credibility.
27In so concluding, however, the motions judge failed to come to grips with Mrs. Kelly's mental illnesses. Legal advice is not an automatic antidote for a party's vulnerability. Mrs. Kelly gave evidence that even with the assistance of a lawyer, neither in 1991 nor in 1997 could she bring herself to insist on proper disclosure, including a valuation of KBL. Moreover, she said that in 1991 she signed the separation agreement because she believed her husband when he told her that it would secure her financial independence; and that in 1997 she signed the addendum because she accepted her husband's wish to pay more child support instead of spousal support, not ever contemplating that the children would leave her house less than a month later.
28Mrs. Kelly's evidence raises genuine issues for trial on the first component of the stage one Miglin analysis. A trial judge should decide whether the cursory legal advice that she received in 1991 and the more extensive legal advice that she received in 1997 sufficiently overcame her vulnerability on either or both occasions, a vulnerability brought on largely by her depression, her hysteroid dysphoria and her approval- seeking behaviour; or whether her vulnerability so flawed the negotiations that both the agreement and the addendum should be given little weight.
29The motions judge did not specifically consider the second component of stage one of the Miglin analysis: the substance of the agreement and the addendum and whether they substantially complied with the objectives of the DA. It seems to me that even if it can be said that the original agreement and the addendum were executed under "unimpeachable" circumstances, whether their substance complies with the overall objectives of the DA raises a triable issue. Mrs. Kelly had a long term marriage in which she had the major responsibility for raising the children. When she and her husband separated in 1991 she had no job and no work skills. When she signed the addendum in 1997 she had no income and was well on the way to becoming [page118] destitute. Yet, neither the agreement nor the addendum provided for ongoing spousal support. Whether the waiver of support sits comfortably with the objectives in s. 15.2(6) of the DA -- especially the objective of recognizing any hardship arising from the breakdown of the marriage and the objective of relieving any economic disadvantage from the breakdown of the marriage -- raises, at the very least, a genuine issue for trial.
30Moreover, even if it could be said that, when signed, the agreement and the addendum substantially complied with the objectives of the DA, whether they now do -- stage two of the Miglin analysis -- also raises genuine issues for trial. Some change in Mrs. Kelly's financial circumstances might be considered inevitable and foreseeable. But whether her current circumstances -- on a full disability pension -- could reasonably have been contemplated even when the addendum was signed, and whether in the light of these new circumstances the addendum still substantially complies with the objectives of the DA, raise triable issues.
31For these reasons, Mrs. Kelly's claim for support should not have been dismissed by summary judgment.
Second Issue: Did the Motions Judge Err in His Application of Rule 20 to s. 2(8) of the Family Law Act?
32Under s. 7(3) of the FLA, the limitation period for asserting a claim to an equalization payment is six years from the date of separation or two years from the date of divorce. Mrs. Kelly brought her claim for a further equalization payment over ten years after her separation and nearly four years after her divorce. However, s. 2(8) of the FLA gives the court discretion to extend the limitation period if the party applying for an extension meets three conditions:
2(8) The court may, on motion, extend a time prescribed by this Act if it is satisfied that,
(a) there are apparent grounds for relief;
(b) relief is unavailable because of delay that has been incurred in good faith;
(c) no person will suffer substantial prejudice by reason of the delay.
The parties agree that the third prong of the test -- no "substantial prejudice" -- refers to prejudice arising from the delay in asserting a claim.
33Mrs. Kelly sought an extension under s. 2(8). In what appears to have been a preemptive strike, Mr. Kelly moved for summary judgment to cut off his former wife's claim for relief. In [page119] granting summary judgment on this issue, the motions judge gave these brief reasons (at para. 46):
The plaintiff's explanation that she did not pursue this action earlier because of her long standing illness, fragile state of mind and fear for her safety does not offer a good faith explanation when considered in the light of all the evidence including the explanation of the terms of the Family Law Act as provided to her by lawyer Florence Boody. Furthermore the plaintiff has not shown that no person would suffer prejudice by reason of delay. It is therefore ordered that there be no extension to the limitation period.
34In my respectful opinion, the motions judge's reasons reflect two errors warranting this court's intervention. The first error is that he answered the wrong question. The question he had to answer was whether Mr. Kelly had shown that Mrs. Kelly's request for an extension raised no genuine issue for trial. Instead, the motions judge decided the question of an extension. In doing so, he reversed the onus of proof and determined that Mrs. Kelly had not met the three-part test in s. 2(8).
35The motions judge's second error is that he decided the question of Mrs. Kelly's credibility, a matter reserved for a trial judge. The motions judge could only conclude that Mrs. Kelly had not shown good faith by disbelieving her explanation why she did not assert a claim earlier. But she gave evidence on all three prongs of the s. 2(8) test, which, if accepted by a trier of fact, would entitle her to an extension. For these reasons I would set aside the order for summary judgment dismissing the claim for an equalization payment.
D. CONCLUSION
36I would allow the appeal, set aside the order of the motions judge and dismiss Mr. Kelly's motion for summary judgment. Mrs. Kelly is entitled to the costs of the motion, which I would fix at $7,500 and the costs of the appeal, which I would fix at $9,000, each amount inclusive of disbursements and GST.
Appeal allowed.
