CITATION: Laye v. Laye, 2011 ONSC 7231

DIVISIONAL COURT FILE NO.: DC-10-00001855-0000

DATE: 2011/12/23

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT - LONDON

RE: Tamara Ruth Laye, Applicant (Respondent in Appeal)

AND:

Larry Laye, Respondent (Appellant)

BEFORE: Pardu, Whalen, Harvison Young JJ.

COUNSEL: Erin Reid, for the Applicant (Respondent in Appeal)

Keith Ian McLean, for the Respondent (Appellant)

HEARD: November 23, 2011

REASONS FOR DECISION

harvison young j.

A. Introduction

[1] The Appellant husband appeals from a judgment of Tausenfreund J. rendered following a trial.

[2] The central facts may be summarized as follows. Tammy and Larry Laye separated in March 2008 following a 34 year traditional marriage. Hoping to avoid incurring legal expenses, and having agreed to sell the matrimonial home, they prepared and signed a document dated May 8, 2008 (the “Agreement”) which addressed a number of issues, such as the payment of household expenses, mortgage payments, and Visa bills. For ease of reference, I have included a typed version of the Agreement as an appendix to these reasons.

[3] Section 7 of the Agreement provided that the wife was to receive three quarters or 75% of the “money made” on the sale of the house. At trial, the Respondent wife alleged that the Agreement also contemplated that the husband’s RRSPs, which were worth $417,458.34 on the Valuation Date, were to be divided equally. The Appellant husband disagreed on the basis that the RRSPs were not mentioned in the Agreement and took the position that he was to retain his RRSPs without any obligation to share them, or include them in the calculation of his net family property. In the alternative, the Appellant husband argued that the Agreement did not cover equalization at all, and that the family property should be equalized according to the provisions of the Family Law Act, R.S.O. 1990, chapter S.33.

[4] The Agreement provided for the husband to continue to “keep up all payments on the home as he has always done until the house is sold including taxes”. It is common ground that he did so. It is also common ground that, at the time that the parties entered into the Agreement, they expected that the house would sell within months. In fact, it did not sell until August, 2010, shortly before the trial in September, 2010. By the beginning of the trial, the parties had agreed on “go-forward” spousal support. The wife claimed retroactive support. The trial judge concluded:

(i) that the Agreement was binding and enforceable;

(ii) that it did contemplate that the husband’s RRSPs be divided equally; and

(iii) he awarded retroactive spousal support in the amount of $1,000 per month beginning April 1, 2008 up to and including September 1, 2010, for a total of $30,000.

B. The Decision at Trial

[5] The trial judge’s reasons are very brief and it will be helpful to set them out in full here:

At the start of trial, counsel advised that parties had reached an agreement, re: a number of issues, including spousal support, health and dental coverage, and life insurance. Parties will sign minutes of settlement, re: those issues, an order will go based on those minutes.

Parties signed a document May 8, 2008. Both agree that they did so voluntarily intending to resolve issues flowing from their recent separation, March 22, ‘08.

I find that parties understood terms and intended to be bound by it. Respondent is now challenging agreement based largely on sale price of home which was lower than expected. I find document to be a binding agreement. Although I have some concern that paragraph nine of the agreement was vague and unenforceable, it might for that reason contaminate the rest of the document. I have referenced to the agreement between the parties at the start of trial which included spousal support.

Respondent states his RRSPs not specifically mentioned, it should therefore be excluded from the document. I disagree as I find that paragraph 11 of the document includes RRSPs. Therefore, net balance of the sale proceeds of the house to be divided 75 to the applicant and 25 to the respondent. Taking into account expenses respondent paid in the interim which addressed applicant’s accommodation expenses, she having remained in the house until its sale on August 30, 2010. Respondent to pay retroactive support of $1000 a month on the first of each month starting April 1, ‘08, to and including September 1, 2010, for a total of $30,000, to be deducted from respondent’s share of the sale proceeds of the house. Equalization of the Net Family Property to be based on applicant’s NFP statement of September 20, ‘08 at tab five of the trial record, subject to these changes:

1. Gross value of the respondent’s RRSP value to be reduced by 25 percent for tax liability;

2. Respondent to be credited for the full amount of the $6090 of Visa payments made by him. No adjustment with respect to golf clubs.

C. The Legal Issues

[6] The Appellant submits that the trial judge made a number of reviewable errors:

(i) First, he argues that the trial judge erred in concluding that the document prepared and signed by the parties dated May 8, 2008 was a valid and enforceable contract;

(ii) Second, he argues that the trial judge erred in finding that the document contemplated that the husband’s RRSPs were to be equalized; and

(iii) Third, he argues that the trial judge erred in awarding retroactive spousal support in the circumstances.

[7] I will consider these grounds in turn.

D. Standard of Review

[8] The Supreme Court of Canada addressed the standard of review for an appeal from a judge’s decision in Housen v Nikolaisen, [2002] 2 S.C.R. at paras. 8, 10, 36. On a pure question of law, the basic rule with respect to the review of a trial judge’s findings on questions of law is one of correctness, while the standard of review on findings of fact is that they are not to be reversed unless it can be established that the trial judge has made a “palpable and overriding error” (para. 10). Matters of mixed fact and law lie along a spectrum. The standard of review to be applied in this case is somewhat different as between the contractual interpretation and the retroactive support issue and for this reason will be addressed in relation to each issue in turn.

E. Law and Analysis

(i) Did the trial judge err in finding that the Agreement was valid and enforceable?

[9] In Bell Canada v. The Plan (2009), 2009 ONCA 548, 96 O.R. (3d) 81 (C.A.) at paras. 24-25, the Ontario Court of Appeal held that contractual interpretation will usually be reviewed on a standard of correctness as it is essentially a legal exercise. In the family law context, the fact that the Family Law Act forms a backdrop or default regime to contracts negotiated by the party further supports correctness as a standard of review for contractual interpretation in family law.

[10] I am not satisfied that the judge erred in concluding that the parties intended to be bound by this document, although his reasons say little as to why he reached this conclusion. There was evidence to support this conclusion before him in the sense that the parties did abide by many if not all the express terms of the Agreement up until the sale of the house, despite the fact that this period was much longer than originally anticipated.

[11] Finding that the parties intended to be bound, however, begs the question as to precisely what they were agreeing to, and how the Agreement should be interpreted. For the reasons which follow, I conclude that the Agreement was focused on a concern to make transitional financial arrangements pending the sale of the matrimonial home and the resolution of other issues.

[12] This raises the issue of whether he erred in finding that the document contemplated the inclusion and division of the husband’s RRSPs equally between the parties.

(ii) Did the trial judge err in finding that the Agreement included the RRSPs?

[13] In my view, the trial judge erred in concluding that the Agreement included the husband’s RRSPs and required that they be divided equally between the parties.

[14] The trial judge appears to have grounded his interpretation that the parties intended to divide the RRSPs equally on clause 11 which provides:

When home is sold Larry will agree to pay Tammy according to the Family Law Act whatever is deemed fair which as she understands is one half of everything he earns and this has nothing to do with the sale of home.

[15] It is evident from the wording that RRSPs are not mentioned at all in Clause 11. In fact, it does not refer to equalization or division of property at all. The reference to “…one half of everything he earns” [emphasis added] suggests that the parties were considering issues of income and support.

[16] There is nothing else in the Agreement that supports the wife’s position that the Agreement was intended to provide for the equal division of the husband’s RRSPs. Accordingly, I find that the contract did not provide for the equal division of the RRSPs.

(iii) Did the trial judge err in failing to apply the provisions of Part I of the Family Law Act concerning the equalization of family property?

[17] The husband argues that the trial judge erred in his interpretation of the Agreement and that, rather than awarding the wife 75% of the net value of the matrimonial home as well as half of the value of the RRSPs, the trial judge should have applied the equalization provisions of the Family Law Act. On the facts of this case, where the family assets consisted of the matrimonial home, the RRSPs as well as approximately $20,000 held by the wife, this would have resulted in roughly equal division of the value of the matrimonial home and the RRSPs (taking the wife’s $20,000 into account).

[18] Having carefully considered the materials filed and the submissions of the parties, I conclude that the trial judge erred in failing to apply the equalization provisions of the Family Law Act to all the family property in this case. The Agreement, properly interpreted, cannot be construed to apply to the final resolution of their respective rights in relation to their family property, or to oust the application of Part I of the Family Law Act. There are a number of factors that lead me to this conclusion.

[19] A reading of all the provisions in the Agreement indicates that the parties were preoccupied at the time they drafted the Agreement with providing for interim arrangements pending the sale of the matrimonial home. It provides significant detail in this regard. It provides, for example, that “Larry agrees to keep the lawn mower, leave blower and pond pump power washer + Tammy’s car in good working order” (clause 6). Clause 3 provides that “Larry agrees to stay married for now and keep Tammy on his drug plan and benefits.”

[20] The Agreement contemplated that further details would need to be settled. For example, Clause 8 provided that the parties would discuss and divide the contents of the house. Clause 9 provided that Larry would pay, in addition to the expenses set out in the Agreement, half of “whatever is left over at the end of the month after payments of a minimum of $100 a week”. It provided (clause 12) that the husband would pay the wife half of his bonuses or other income (including “his package if he is fired”).

[21] The only clause of the Agreement that appears to reference property is clause 7 which provides:

If house is sold Larry agrees to pay Tammy three quarters of the money made to purchase a new home. Tammy agrees that should she remarry she would demand a prenuptial agreement so all she owns goes to her three children.

[22] The trial judge appears to have interpreted this as a provision which effectively ousts the application of Part I under the Family Law Act to the matrimonial home. With respect, I find that he erred in this respect.

[23] As discussed above, the Agreement as a whole is preoccupied with interim arrangements, and particularly support. The fact that the Agreement makes no attempt to list or calculate the total value of the property supports the view that the parties were not intending to finally resolve all issues in this Agreement, which they signed only two months after their separation. In fact, it is clear that the Agreement was not even intended to finally resolve support issues, which were to be determined after the sale of the home “according to the Family Law Act”.

[24] Second, the Agreement contained no releases, which would be expected if the parties were intending final resolution of property issues.

[25] Third, while it is clear that parties may contract out of the equalization provisions of the Act, courts should be cautious of doing so too readily in cases where it is not clear that the parties are intending to do so. This is particularly so when, as in the case at bar, there are indications that the parties did not have a clear understanding of the legal provisions when they entered into the Agreement, or of their rights under those legal provisions. The fact that the Agreement makes no mention of the RRSPs, which was one of two significant family assets, gives rise to serious concern that they did not understand the regime and did not intend to effectively oust it. I also note that, to the extent that the Agreement referred to the Family Law Act, it expressed the intention that its provisions would govern, as in clause 7 itself.

[26] While it is certainly open to informed parties to provide that the Part I of the Act will apply with respect to some assets and not others, it is dangerous to rush to such conclusions when it is not clear that the parties intended to do so or that they understood what they were doing. The fact that the result is a significantly unequal division without any clear indication as to why this should be so, in the absence of legal advice, further underlines the concerns about concluding that they intended to oust the provisions of Part I of the Act, either in whole or in part.

[27] Against this backdrop, then, clause 7 of the Agreement cannot be interested as providing for a final allocation at 75% of the net value of the house to the wife in lieu of an equalization payment pursuant to the Family Law Act. In the context of the clear preoccupation of the Agreement with interim financial arrangements, the correct interpretation of this provision is that the wife would receive three quarters of the net proceeds of sale amounting as an advance on equalization and that the husband would get a credit of this amount against what he would ultimately owe, once all the family property had been taken into account pursuant to the Family Law Act. Had the house sold in 2008, as anticipated, the wife would have been able to access funds for the purchase of another house which would have otherwise been a problem for her. This interpretation, then, is consistent with the circumstances of the parties at the time they negotiated the Agreement.

[28] Read as a whole, the Agreement was an interim arrangement negotiated shortly after their separation which was intended to provide for the transitional period pending sale of the matrimonial home, especially in relation to continuing expenses of the matrimonial home and spousal support, but also addressing the wife’s concern about access to funds necessary for the purchase of a new home. There is no basis for concluding that the parties intended to oust the operation of the equalization of the Family Law Act.

F. Retroactive Support

[29] As indicated earlier in these reasons, the trial judge awarded the wife $1000 per month or $30,000 in total retroactive support to the date of separation. The husband argued that the trial judge erred in so doing because he had been paying most of her living expenses from the time of separation up until the time of trial. The wife argues that the trial judge was well within the ambit of his authority in awarding retroactive support, and that he committed no palpable or overriding error in doing so.

[30] In general, trial judges’ determinations of …”whether support will be awarded or varied, and if so, the amount of the order, involves the exercise of considerable discretion by trial judges” and, because of its fact-based and discretionary nature, should be accorded considerable deference by appellate courts: Hickey v. Hickey, [1999] 2 S.C.R. 518, at paras. 10-11; see also Van de Perre v. Edwards, [2001] 2.S.C.R. 1014. This case, however, involves retroactive support which requires the application of particular legal considerations, and therefore attracts a more stringent standard of review.

[31] The considerations which govern the award at retroactive spousal support were set out in the cases of Horner v. Horner, [2004] O.J. No. 4268 (C.A.); Marinangeli v. Marinangeli (2003), 66 O.R. (3d) 40 (C.A.) and Price v. Price, [2002] O.J. No. 2386 (C.A.). See also Bremer v. Bremer (2005) 13 R.F.L. (16th) 89. They include:

(i) the extent to which the claimant established past need (including any requirement to encroach on capital) and the payor’s ability to pay;

(ii) the underlying basis for the ongoing support obligation;

(iii) the requirement that there be a reason for awarding retroactive support;

(iv) the impact of a retroactive award on the payor and, in particular, whether a retroactive order will create an undue burden on the payor or effect a redistribution of capital;

(v) the presence of blameworthy conduct on the part of the payor such as incomplete or misleading financial disclosure;

(vi) notice of an intention to seek support and negotiations to that end;

(vii) delay in proceeding and any explanation for the delay; and

(viii) the appropriateness of a retroactive order pre-dating the date on which the application for divorce was issued.

[32] The trial judge’s reasons do not refer to any of these considerations. In fact, the trial judge’s reasons as set out above do not give any reasons for his conclusion that retroactive spousal support should be awarded. It is not possible to know from the reasons given whether he addressed the considerations set out above or not. Accordingly, the order for retroactive support must be set aside.

G. Conclusion

[33] For the foregoing reasons, I conclude that the appeal must be allowed. With regret, we conclude that the matter must be remitted to trial on the basis of the principles set out in these reasons.

H. Costs

[34] If the parties are unable to agree as to costs, they may make submissions to the Court on the basis of a timetable to be agreed upon between themselves, or if necessary, upon the direction of the Court.

Pardu J.

Whalen J.

Harvison Young J.

Date: December 23, 2011

APPENDIX “A”

SEPARATION AGREEMENT BETWEEN

LARRY DOUGLAS LAYE AND TAMARA RUTH LAYE

1. Larry agrees to leave Visa in both names so Tammy can buy gas, do car repairs, buy pills, pay vet bills + whatever is necessary for the house.

2. Tammy agrees not to abuse the visa.

3. Larry agrees to stay married for now and keep Tammy on his drug plan and benefits.

4. Tammy agrees to do her best to keep up home + yard to the best of her ability.

5. Larry agrees to keep up all payments on the home as he has always done until the home is sold including taxes.

6. Larry agrees to keep the lawn mower, leave blower, pond pump power washer + Tammy’s car in working order.

7. If house is sold Larry agrees to pay Tammy three quarters of the money made to purchase a new home. Tammy agrees that should she remarry she would demand a prenuptial agreement so all she owns goes to her three children.

8. All contents of the home will be discussed by both Tammy + Larry + split using their own discretion i.e. Pool table is his and Luke’s bed + lrg T.V. in living room is hers.

9. Larry agrees to pay Tammy ½ of whatever is left over at the end of the month after payments of a minimum of $100.00 a week. She assumes he will be fair and not count what he spends on Karen. It is hard to buy dog food, birdseed, haircuts, clothes, cleaners etc so any extra he has is appreciated.

10. Larry and Tammy agree to not sell the home below 650,000 unless discussed.

11. When home is sold Larry will agree to pay Tammy according to the Family Law Act whatever is deemed fair which as she understands is one half of everything he earns + this has nothing to do with the sale of home.

12. Larry will pay ½ of his bonuses and any extra income from stock, sale of tractor etc. to Tammy and she wants ½ of his package if he is fired. In other words all money received by Larry is to be split evenly.

13. Larry agrees to keep a life insurance policy on himself of no less than $250,000 to be left in the names of Tammy and his three children.

14. Tammy understands that all existing debt on line of credit and mortgage will be deducted from the sale price of the home. Any debt incurred on the line of credit after February 14/08 will solely be the responsibility of Larry unless directly related will receipts to repair of their home. Florida trip this does not include Tammy’s weekly allowance.

15. Tammy + Larry both agree that whatever assets they may have of any value which were purchased or owned by them before Feb 14/08 will go upon their deaths to their children.

16. Larry agrees to keep furnace, fridge, septic appliances, washer, dryer etc in working order.

17. All debt incurred by Larry from this day forward is his own responsibility and cannot be used against the home.

18. Larry agrees that any money he receives back from income tax he will split with Tammy.

19. Larry agrees to pay all legal expenses from credit line takes it that for with “family mediation” which to Tammy’s understanding is cheaper than going directly through lawyers.

Dated May 8, 08

Signatures of Parties and Witnesses

In interim this is not final spousal support to Tammy as she is ignorant of laws. But serves as a guide line between them.

CITATION: Laye v. Laye, 2011 ONSC 7231

DIVISIONAL COURT FILE NO.: DC-10-00001855-0000

DATE: 2011/12/23

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT - LONDON

PARDU, WHALEN, HARVISON YOUNG JJ.

BETWEEN:

Tamara Ruth Laye, Applicant

(Respondent in Appeal)

AND:

Larry Laye

Respondent (Appellant)

REASONS FOR DECISION

Harvison Young J.

Released: December 23, 2011