COURT OF APPEAL FOR ONTARIO

CITATION: Gallacher v. Friesen, 2014 ONCA 399

DATE: 20140515

DOCKET: C57663

Goudge, Cronk and Strathy JJ.A.

BETWEEN

Alex Stewart Gallacher

Applicant (Appellant)

and

Anne Kathy Friesen

Respondent (Respondent)

Kevin D. Zaldin, for the appellant

Eva Iacobelli, for the respondent

Heard: April 16, 2014

On appeal from the order of Justice Lorna-Lee Snowie of the Superior Court of Justice, dated August 22, 2013.

BY THE COURT:

[1] The appellant, Alex Gallacher, brought an application seeking, among other relief, a constructive trust in a house owned by the respondent, Anne Friesen, or in the alternative, payment for labour and supplies he claimed to have contributed towards improving the property. The motion judge dismissed his claims on summary judgment and ordered that he pay the respondent’s costs of the motion. The appellant appeals from the dismissal of his claims and seeks leave to appeal the costs award.

[2] At the hearing of the appeal, we did not find it necessary to call on the respondent. We dismissed the appeal, with reasons to follow. These are our reasons.

Background

[3] The parties cohabited from September 14, 2007, when the appellant moved into the respondent’s home, until November 20, 2012, when he moved out. They have one child, born in October 2008. The respondent had substantially greater assets and income than the appellant. She owned the home in which they resided.

[4] In 2008, the respondent asked the appellant to sign a domestic contract. She gave him a copy of the contract and he took it to a lawyer for legal advice. The appellant claims he signed the contract in his car on his way home from the lawyer’s office, and his signature was not witnessed. Under the terms of the contract, he certified he had obtained independent legal advice. Further, in a schedule attached to the contract, he confirmed he understood his obligations under the contract and its nature and effect.

[5] The respondent also signed the contract and certified she had received ILA. A woman named Debbie McKnight signed the contract as a witness. The appellant claims the respondent signed the contract in the presence of Ms. McKnight several weeks after he had signed it. The contract is dated May 17, 2008.

[6] After the parties separated, the appellant brought an application asserting the respondent had been unjustly enriched as a result of his contributions to her home and claiming a constructive trust in the property, or in the alternative, seeking to be paid for his work.

[7] The appellant claims he improved the home by maintaining, repairing and renovating the interior, the exterior and the surroundings. He paid rent to the respondent of $1,500 per month, and claims that these payments enabled the respondent to pay off the mortgage.

[8] The respondent brought a summary judgment motion to dismiss the appellant’s claims.

The motion judge’s reasons

[9] The motion judge found there was no genuine issue requiring a trial and dismissed the appellant’s claims. She found the parties had contracted for a separate property regime and had made full financial disclosure. The respondent was sophisticated and educated. He executed the agreement without fear, threats, compulsion or influence, and Ms. McKnight signed the document as a witness. The only factual issue in dispute was whether Ms. McKnight was present when the appellant signed, and the absence of a witness to his signature was not fatal to the agreement in any event.

[10] The appellant’s blanket statements about his contributions to the property, which consisted of helping with the grounds, the pool and the respondent’s vehicles, did not go beyond the usual division of day-to-day labour that might be expected. His monthly contribution of $1,500 in rent was fair and modest for a home with a pool in the countryside.

[11] The motion judge found there was no genuine issue requiring a trial. The domestic contract was clear and unambiguous and the material facts were not in dispute. The claims made by the appellant were prohibited by the contract.

Issues

[12] The appellant raises five issues:

(a) whether the motion judge erred in granting summary judgment under the Family Law Rules, O. Reg. 114/99 when it was necessary to make findings of credibility to resolve the issues;

(b) whether the domestic contract was unenforceable because it was not witnessed in accordance with s. 55(1) of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”);

(c) whether the domestic contract was ambiguous and did not, properly construed, bar the appellant’s constructive trust claim;

(d) whether the respondent repudiated the contract and, if so, whether this precluded her from relying on it; and

(e) whether the motion judge erred in awarding the respondent full recovery costs.

analysis

Summary Judgment

[13] The appellant contends that the motion judge exceeded her jurisdiction on a summary judgment motion under the Family Law Rules.

[14] The appellant says that, unlike Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 16 of the Family Law Rules has not been amended to allow the motion judge to weigh evidence, evaluate credibility, or draw reasonable inferences. There is competing case law on whether the amendments to Rule 20 apply to Rule 16: see Steine v. Steine, 2010 ONSC 4289, holding that the amendments do apply; and McCash v. McCash, 2012 ONCJ 503, Bruxer v. Bruxer, 2013 ONSC 5656, and Starr v. Gordon, 2010 ONSC 4167, holding that the amendments do not apply.

[15] The appellant submits the motion judge made implicit findings of credibility when she concluded that Ms. McKnight signed the contract as a witness, and that the appellant’s contribution to the household was “only $1,500/month”.

[16] With respect to Ms. McKnight’s role in witnessing the contract, the appellant focusses on the following statement in the motion judge’s reasons:

I accept that Debbie McKnight signed the document as a witness. Her presence at the time the Father signed is the only fact that is disputed however it is not fatal to the Agreement in any event.

[17] The appellant suggests this is a finding that Ms. McKnight witnessed the signature of both parties – a finding that required the acceptance of Ms. McKnight’s evidence and the rejection of the appellant’s evidence. We do not read the statement that way. The motion judge simply meant that Ms. McKnight’s signature appears on the document under the heading “Witness” and that she had signed in that capacity. This was not in dispute. The appellant himself admitted that Ms. McKnight witnessed the respondent’s signature. Moreover, the motion judge expressly acknowledged the dispute about whether Ms. McKnight was present when the appellant signed.

[18] The motion judge added, however, that the outcome of the dispute on this issue was not fatal to the validity of the domestic contract.

[19] For the reasons set out below, we agree with the motion judge that, in the circumstances of this case, it was unnecessary to resolve the issue whether Ms. McKnight witnessed the appellant’s signature. Even assuming the appellant’s signature was not witnessed, we agree that the domestic contract is enforceable.

[20] For similar reasons, it is unnecessary to decide whether the motion judge exceeded her jurisdiction under Rule 16 when she found the appellant’s monthly contribution to the household was only $1,500 per month. The domestic contract is enforceable and represents a complete bar to the appellant’s claims.

Section 55(1) of FLA

[21] Part IV of the FLA is intended to permit couples to formalize their financial and familial relationships in order to resolve differences and avoid disputes. This court has previously observed that, far from exhibiting a bias against domestic contracts, the legislation encourages parties to a marriage or a similar relationship to make their own arrangements as to the treatment of property: Bosch v. Bosch (1991), 1991 7177 (ON CA), 6 O.R. (3d) 168 (C.A.), at p. 174.

[22] Section 53(1) of the FLA provides that two unmarried persons who are cohabiting or intend to cohabit may enter into a cohabitation agreement concerning their respective rights and obligations, including ownership in or division of property, support obligations, the education and moral training of their children and any other matter in the settlement of their affairs. Their agreement may govern their rights and obligations during cohabitation, on ceasing cohabitation or on death.

[23] Section 55(1), at issue here, provides:

A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.

[24] The purpose of this provision is to ensure a measure of formality in the execution of a domestic contract, to provide proof that it was in fact signed by the parties, and to ensure that it is free from undue influence, coercion or duress. At least two cases have suggested that the purpose of the provision is to avoid “kitchen table” agreements: Sagl v. Sagl (1997), 1997 12248 (ON SC), 31 R.F.L. (4th) 405 (Gen. Div.), at para. 16; Zheng v. Jiang, 2012 ONSC 6043, at para. 35. See also Angela Swan and Jakub Adamski, Canadian Contract Law, 3rd ed. (Markham, Ont.: LexisNexis, 2012), at §5.40; Campbell v. Campbell (1985), 1985 2237 (ON SC), 52 O.R. (2d) 206 (H.C.).

[25] The appellant submits that the syntax of s. 55(1) supports a strict reading of the provision. He asserts that the general premise of the provision is that all domestic contracts are unenforceable, with an exception for domestic contracts that comply with the necessary formalities of execution.

[26] The appellant’s approach to s. 55(1) of the FLA is inconsistent with this court’s observation in Bosch v. Bosch that the legislature intended to encourage rather than discourage domestic contracts. A strict reading of s. 55(1) would also be inconsistent with this court’s recent judgment in Virc v. Blair, 2014 ONCA 392. There, Pepall J.A. came to the conclusion that in comparison with s. 4(1) of the Succession Law Reform Act, R.S.O. 1990, c. S.26, the language of s. 55(1) of the FLA allows for a less strict application of the witnessing requirement.

[27] Justice Pepall’s decision in Virc v. Blair is consistent with a substantial body of case law in Ontario, and in other provinces with similar legislation, holding that the strict requirements of s. 55(1) may be relaxed where the court is satisfied that the contract was in fact executed by the parties, where the terms are reasonable and where there was no oppression or unfairness in the circumstances surrounding the negotiation and execution of the contract: see Geropoulos v. Geropoulos (1982), 1982 2020 (ON CA), 35 O.R. (2d) 763 (C.A.); Campbell v. Campbell; Hyldtoft v. Hyldtoft (1991), 1991 12868 (ON SC), 33 R.F.L. (3d) 99 (Ont. Gen. Div.); Harris v. Harris (1996), 7 O.T.C. 265 (Gen. Div.); Pastoor v. Pastoor (2007), 2007 28331 (ON SC), 48 R.F.L. (6th) 94 (Ont. S.C.); Robinson v. Robinson, 2006 BCSC 663; Waters v. Conrod, 2007 BCCA 230; Judson v. Judson (1995), 1995 17988 (PE SCTD), 129 Nfld. & P.E.I.R. 302 (S.C.); Ngeruka v. Bruce, 2010 YKSC 51.

[28] The authorities relied upon by the appellant are distinguishable. In Duguay v. Thompson-Duguay (2000), 2000 22515 (ON SC), 7 R.F.L. (5th) 301 (Ont. S.C. (Fam. Ct.)), the agreement had not been witnessed at all. In concluding that the agreement was not binding, the court relied, in addition to other factors, on its parens patriae jurisdiction to intervene in relation to the best interests of children affected by the agreement. In Zheng v. Jiang, the agreement was signed but not witnessed, the parties received no legal advice, there was no financial disclosure and the appellant was under a misunderstanding as to her legal rights.

[29] Here, it was not disputed that:

• both parties signed the domestic contract;

• the respondent’s signature was witnessed by Ms. McKnight;

• both parties certified they had received ILA before signing the domestic contract;

• there was full financial disclosure before execution of the domestic contract;

• both parties are sophisticated and educated; and

• there was no duress, lack of capacity, vulnerability or any other circumstance that would vitiate the domestic contract.

[30] In these circumstances, the motion judge was entitled to conclude that the absence of a witness to the appellant’s signature did not preclude the respondent from relying on the domestic contract as a defence to the appellant’s claims.

Ambiguity

[31] The appellant submits that the domestic contract is either ambiguous as to claims of constructive trust in the respondent’s home, or that, properly construed, it does not bar the appellant from asserting a constructive trust claim in the home.

[32] The following clauses are relevant:

MATRIMONIAL HOME

7. The parties acknowledge that the matrimonial home is owned by Anne and each agrees with the other that the residence or any home purchased in substitution shall remain the separate property of Anne and shall not be included in any net family property calculation for equalization purposes.

8. Alex shall have no responsibility or liability of any kind whatsoever for the mortgage on [the respondent’s residence].

9. In the event the parties are not married but living in a common-law relationship, then as provided for elsewhere in this contract, the division of all property between them shall be on the basis of ownership only.

SEPARATE PROPERTY

15. The parties agree that any property maintained in their own name shall be separated and free and clear of any claim of any kind whatsoever from the other party. It shall not form any part of the net family property and shall not be subject to equalization. The parties acknowledge that their current assets and liabilities are approximately [as set out in schedules to the agreement].

OTHER PROPERTY

18. The parties shall make no claims against property owned by the other by way of constructive or resulting trust or any other type of [trust] or rule of equity or law, or make claim for compensation from any property owned by the other for work, money or monies worth contributed to the acquisition, management, maintenance or improvement of property owned by the other.

RELEASE AND AMENDMENT

33. The parties intend this agreement to be final with regard to matters dealt with in this contract and release each other from any such claims that may arise out of their marriage. This shall not bar either of them from enforcing the terms of this contract on the dissolution of the marriage.

[33] The appellant argues that clause 18 clearly conveys the parties’ intention to exclude constructive trust claims against “other property”. He compares this language to that of clause 10, which does not refer to constructive trust claims. He submits that, had the parties wanted to exclude claims of constructive trust against the respondent’s residence, they would have done so unequivocally in clause 10.

[34] However, this submission is inconsistent with clause 15, which states that property maintained in either party’s name shall be “separated and free and clear of any claim of any kind whatsoever from the other party”. The sentence that follows is meant to exclude, for greater certainty, any claim for equalization. It does not signify that clause 15 has no application unless the parties were married.

[35] Read as a whole, the contract is plain and unambiguous. We agree with the motion judge that the parties contracted for a separate property regime. They agreed to keep their property separate and free from any claim by the other.

Repudiation

[36] Clause 8 of the domestic contract states that the appellant would have “no responsibility or liability of any kind whatsoever for the mortgage” on the home. The appellant submits that the respondent repudiated clause 8 by requiring him to pay $1,500 per month in rent after the execution of the domestic contract. His argument is that by using the rent money to pay down the mortgage, the respondent repudiated the contract, with the result that he is no longer bound by it.

[37] The respondent had no liability under the mortgage and he never made mortgage payments. The fact that he continued to pay rent is consistent with the recognition that the home was the respondent’s separate property and that his occupancy was as a tenant and no more. The respondent was entitled to do as she chose with the rent payments and her acceptance and use of them did not amount to a repudiation of the contract.

Costs

[38] We would not interfere with the costs award. The motion judge did not award full recovery costs. The costs award of $6,455.40 did not include any allowance for the costs of a full-day attendance at the hearing. When those costs are taken into account, the amount is fair and reasonable on a partial indemnity basis.

disposition

[39] The appeal is dismissed with costs to the respondent fixed at $5,000, inclusive of disbursements and all applicable taxes.

Released: May 15, 2014 (“S.T.G.”)

“S.T. Goudge J.A.”

“E.A. Cronk J.A.”

“G.R. Strathy J.A.”