Court of Appeal for Ontario

Date: 20200309 Docket: C66946

Before: Feldman, Brown and Zarnett JJ.A.

Between:

Richard Miaskowski Applicant (Respondent)

And

Jacqueline MacIntyre Respondent (Appellant)

Counsel: Michael Stangarone and Stephen Kirby, for the appellant Anita Kania, for the respondent

Heard: January 21, 2020

On appeal from the order of Justice Gordon D. Lemon of the Superior Court of Justice, dated April 9, 2019, with reasons reported at 2019 ONSC 1872, 24 R.F.L. (8th) 112.

Feldman J.A.:

I. Introduction

[1] During their marriage, the parties separated twice.

[2] Two and a half years after the first separation, they entered into a separation agreement that contained a reconciliation clause that preserved the separation agreement if the reconciliation lasted fewer than 90 days, but voided the separation agreement if they reconciled for more than 90 days. As an exception to the voiding provision, “any payment, conveyance or act” done under the agreement would not be invalidated.

[3] The parties remained married and eventually reconciled four years after they signed the separation agreement. They then remained together for almost nine more years.

[4] The issue on the second separation is the extent of the wife’s entitlement to share the value of the husband’s Canada Post pension, based on the effect of the reconciliation provision of the separation agreement and the interpretation of two clauses in that agreement: the waiver by the wife of her rights to share in the husband’s pension, and the payment exception to the clause that makes the separation agreement void on reconciliation for more than 90 days.

II. Facts

[5] The parties married on October 16, 1997 and separated for the first time on July 22, 1999. They entered into a separation agreement dated January 18, 2002.

[6] The separation agreement contains a number of releases including a release by the wife of her rights in the husband’s Canada Post pension:

19.3 The wife specifically releases any rights or claims she may have to a share of the husband’s Canada Post pension.

[7] The separation agreement also has a provision that preserves the agreement in the event of reconciliation and cohabitation for less than 90 days and voids it if the parties reconcile for a longer period. This reconciliation clause provides:

25.1 If at any future time the parties, with their mutual consent, cohabit as husband and wife for a period of or periods totalling not more than ninety days with reconciliation as the primary purpose of the cohabitation, the provisions contained in this agreement will not be affected except as provided in this paragraph. If the parties, with their mutual consent, cohabit as husband and wife for a period or periods totalling more than ninety days with reconciliation as the primary purpose of the cohabitation, the provisions contained in this agreement will become void, except that nothing in this paragraph will affect or invalidate any payment, conveyance or act made or done pursuant to the provisions in this agreement.

[8] Following the first separation, both parties had relationships with new partners, but they never divorced each other. After the new relationships ended, the parties reconciled as of March 1, 2006 and remained together until they separated for the second time on December 7, 2014.

[9] The main issue at trial and the only issue on this appeal is the extent of the appellant wife’s entitlement to share in the value of the respondent husband’s Canada Post pension. The respondent does not take the position that the appellant has no claim to any share in that pension. Rather, the parties placed two options before the court at trial for the commencement date from which to value the pension: either the appellant is entitled to an equalization payment based on the value of the respondent’s pension from the date of their marriage in 1997 to the date of the second separation ($272,161.55), or her entitlement is based on the value of the pension from the date of reconciliation in 2006 until the second separation ($139,356.14).

[10] The issue turns on the proper interpretation of the separation agreement and whether the release of the pension rights was voided when the parties reconciled. If the appellant’s release of any claim to the respondent’s pension was voided when the parties reconciled and cohabited for more than 90 days, then the value of the respondent’s pension should be calculated using the date of marriage as the starting date. If, on the other hand, the appellant’s release of any claim to the respondent’s pension survived the parties’ reconciliation and cohabitation for more than 90 days, then in light of the two options put forward, the value of his pension would be calculated using the date of reconciliation as the starting date. [1]

[11] The trial judge held that the specific pension release clause was not voided by the parties’ reconciliation. He referred to this court’s decision in Sydor v. Sydor (2003), 178 O.A.C. 155 (C.A.), in which the court explained, at para. 22, the common law rule that a separation agreement is void upon reconciliation “subject to a specific clause in the agreement that would override the common law or a clause that would be implied from the agreement that the intent of the parties was that transactions carried out under the agreement will remain in place”. Relying on para. 24 of Sydor, which states that “a specific release of all rights to a particular property can be viewed as evidence that the parties considered the disposition of that property final and binding, regardless of what may occur in the future”, the trial judge found that the appellant’s release of any claim or right to the respondent’s pension was the kind of “specific release” referred to in Sydor and survived her reconciliation with the respondent: at para. 24. He also found there was no evidence of the parties’ conduct that would set aside the clear terms of the agreement, and those terms were therefore a bar to the appellant’s claim to share in the respondent’s pension prior to their reconciliation: at para. 43.

[12] On appeal, the appellant argues that the trial judge erred in three ways.

1. The trial judge failed to consider the Pension Benefits Act, R.S.O. 1990, c. P.8, and the applicable regulations, which indicate that the “starting date” for a pension valuation in the family law context is the date of marriage.
2. The trial judge failed to consider the principles of contractual interpretation, which indicate that the objective intention of the parties was to void the releases upon reconciliation. Specifically, the trial judge erred in relying on Sydor because the agreement at issue in that case contained no clause dealing expressly with reconciliation, and the agreement at issue in this case does.
3. The trial judge erred in relying on inadmissible parol evidence and evidence of the subsequent conduct of the parties to determine the subjective intention of the parties.

[13] The respondent’s position is that the decision below should stand, and that the general voiding provision following 90 days of cohabitation and reconciliation cannot be interpreted as applying to the specific pension release.

III. Analysis

[14] While the appellant sought to rely on the Pension Benefits Act on the appeal, the court was advised that no such argument was made at trial. As noted above, the parties put two alternative positions to the trial judge based on the proper interpretation of the provisions of the separation agreement. The issue on appeal is whether he made a palpable and overriding error in interpreting and applying those provisions.

(1) Reasons of the Trial Judge

[15] The trial judge made his determinative finding at para. 24, as follows:

In my view, the releases in the agreement executed by the parties in the 2002 agreement are in the nature of a “specific release” considered in Sydor. The parties had made specific transfers and acted on the basis of those releases. Pursuant to the terms of their agreement, Ms. MacIntyre had already received her share of the pension, or, at least, was satisfied with that amount. The equalization payment to her was the sort of “payment, conveyance or act” envisioned by the agreement. By the terms of the agreement, Ms. MacIntyre had released her interest in Mr. Miaskowski’s pension and that release survived the reconciliation.

[16] Without so stating explicitly, the trial judge clearly recognized that the parties had reconciled for more than 90 days, and that the provisions of the separation agreement were therefore voided unless the exception applied. I repeat the exception here:

except that nothing in this paragraph will affect or invalidate any payment, conveyance or act made or done pursuant to the provisions in this agreement.

[17] The trial judge found that the exception applied to the equalization payment to the wife because the payment either included her share of the value of the respondent’s Canada Post pension or an amount that she was satisfied with. He also found that the release of the pension entitlement in the separation agreement survived the reconciliation as it is the type of specific release referred to in Sydor.

(2) The Effect of the Reconciliation Clause

[18] With respect, the trial judge erred in his interpretation and application of the separation agreement by failing to give effect to the reconciliation clause that voids the agreement upon reconciliation for more than 90 days.

[19] As this court stated in Sydor, at common law, the effect of reconciliation of separated spouses is to void the separation agreement subject to (a) a clause in the agreement that provides to the contrary or (b) a clause that indicates the intent of the parties that transactions carried out under the agreement will remain in place: at para. 22.

[20] In this case, unlike in Sydor, the separation agreement provides for what will occur if the parties reconcile. By preserving the agreement if the reconciliation is very short-lived, it encourages the parties to attempt to reconcile without fear of the effect of the common law undoing the separation agreement. However, where the reconciliation is successful and lasts for more than 90 days, it essentially confirms the common law result. That is, in the event of a successful reconciliation, the separation agreement is void, except that payments, conveyances or acts that have been completed to carry out the agreement will not be invalidated.

[21] Here, the reconciliation lasted for almost nine years. Therefore, the separation agreement is void, except that “any payment, conveyance or act” completed under the agreement will not be invalidated.

(3) Two Errors

[22] In my view, the trial judge made two errors in his reasons. The first was that he misapprehended the evidence regarding whether there was any “payment” for the value of the pension to carry out the terms of the separation agreement. In fact, there was no such payment and therefore the exception to the voiding provision did not apply.

[23] The second error was that by finding that the pension release was not voided by the parties’ reconciliation, the trial judge failed to give effect to the express term of the reconciliation clause that provides that the separation agreement becomes void if the parties reconcile for more than 90 days.

(i) Misapprehension of the evidence

[24] The trial judge’s conclusion was based on his finding that the equalization payment made to the wife under the separation agreement included the value of her share of the pension up to the date of separation. However, the evidence was clear that no portion of the equalization payment that the appellant received related to the value of the husband’s Canada Post pension.

[25] The appellant testified that the respondent had only recently begun to contribute to his pension at Canada Post shortly before the original separation, and because there was so little in the plan, the amount of the potential division of that asset did not justify the cost of having it valued. The agreement recites in paras. 8.1 and 10.1 that the equalization payments were the amounts held in trust from the sale of the matrimonial home.

[26] It is clear from the terms of the agreement, substantiated by the undisputed evidence of the appellant, that no amount was paid to the appellant in respect of any pension entitlement as part of the equalization payment. Therefore, the trial judge’s statement, at para. 24, that “[t]he equalization payment to her was the sort of ‘payment, conveyance or act’ envisioned by the agreement” constitutes a palpable and overriding error in the apprehension of the evidence and the application of the terms of the agreement.

[27] While the appellant was satisfied to receive no share in the respondent’s pension and, as part of the overall bargain made on separation, to release all future rights to share the value of the respondent’s pension, voiding the release of the appellant’s future pension rights on reconciliation does not invalidate any conveyance, payment, or act that was made or done under the agreement. No money could be returned because no money was paid. Accordingly, on the facts, the voiding provision in the reconciliation clause, and not its exception, applied to the pension release.

(ii) Mistaken Interpretation of the Reconciliation Clause of the Agreement

[28] The trial judge’s second error involves the intent and effect of the provision that voids the separation agreement when the parties reconcile for more than 90 days.

[29] In interpreting the agreement, the court strives to discern the intention of the parties from the language of the separation agreement: Bebenek v. Bebenek (1979), 24 O.R. (2d) 385 (C.A.). The language of the voiding clause in the separation agreement in this appeal clearly demonstrates the intent on reconciliation to return the parties to the position they were in prior to separation. The bargain they made on separation, whereby they released each other from future rights and obligations, is set aside and becomes void. The parties are meant to regain all the rights they had as spouses that were bargained away in the separation agreement.

[30] But the clause also provides that it is not necessary, in order to give effect to that intent, to undo conveyances or transfers that have been completed. For example, it may not be in the spouses’ control to obtain a reconveyance of a property that has been sold or transferred to a third party. Nevertheless, the fact that such a conveyance cannot be set aside will not derogate from the parties’ intention that the separation agreement become void on reconciliation for more than 90 days.

[31] In this case, the parties focused on transfers between the spouses and the potential for unfairness under the terms of the agreement. In particular, is there potential unfairness if intra-spousal transfers and payments remain in place where the consideration for the transfer was not a payment but just a release of future rights, without also maintaining the release? The concern is that the spouse who receives the payment may ultimately be overcompensated if he or she does not release the other spouse from some corresponding obligation.

[32] This concern will arise only exceptionally. Under the equalization of net family property regime established by the Family Law Act, R.S.O. 1990, c. F.3, there will normally be no unfairness because the value of spouses’ net family property is equalized upon separation, subject to specifically identified exceptions. In this way, it will not ordinarily matter in whose name a particular asset is held. Subject to exclusions, all assets are valued on valuation day, and that value is equalized between the spouses so that each party will end up with half the value of the net family property: s. 4. If a one-sided transfer or payment remains in place under the agreement, its effect is neutralized so long as it is included in net family property for the purpose of equalization.

[33] Therefore, extrapolating from this case as an example, had the husband paid the wife an amount to represent her share of the value of his Canada Post pension as of the date of the first separation, for example, $10,000, then his funds would have been depleted by $10,000 and hers would have been increased by $10,000. After reconciling and separating again, leaving the transfer of $10,000 in place, the effect of equalization would be to put the parties in the same position as they would have been had the transfer never occurred. That is, absent the transfer, the husband would have had to pay the wife $5,000 by way of equalization. Leaving the transfer in place, the wife now owes the husband $5,000. Either way, the couple’s $10,000 is shared equally between them. The fact that the $10,000 was paid under the separation agreement to represent the value of the respondent’s pension on valuation day becomes irrelevant. On a subsequent separation of the parties, the value of the husband’s pension from the date of the marriage forms part of his net family property.

[34] Admittedly, unfairness could potentially arise in certain circumstances where completed transfers remain intact under the terms of the reconciliation clause. For example, by operation of either the defined exclusions from net family property, which are listed at s. 4(2) of the FLA, or the deeming of any otherwise negative net family property to be zero under s. 4(5), the equalization of net family property could fail to neutralize the effect of a completed transfer under the separation agreement.

[35] In my view, the solution to any potential unfairness that might arise under these exceptional circumstances will be determined on a case-by-case basis.

[36] For example, where it is clear that certain transfers completed under the terms of the agreement correspond to specific releases or payments, it may be appropriate to exclude these items from the net family property under s. 4(2)6.

[37] In Sydor, this court had to contend with the completed sale of a property and division of its proceeds under a separation agreement prior to reconciliation. The court held, at para. 27, that:

based on the terms of the separation agreement and corroborated by the subsequent conduct of the parties, the trial judge was entitled to find that they intended the disposition of the Edgemore home under the separation agreement, which divided the value between them as of the separation date, to be final and to survive reconciliation. However, there was no basis in the agreement or the evidence to go further and find that the entire agreement was intended to survive a reconciliation and continuation of the marriage.

[38] Similarly, in Emery v. Emery (2008), 51 R.F.L. (6th) 294 (Ont. S.C.), a case relied upon by the respondent, the court concluded that the general release in the separation agreement did not survive. However, the release of the husband’s pension that was given specifically as consideration for the wife’s receipt of the net proceeds of the sale of the matrimonial home, was held to remain intact so that on the parties’ subsequent separation, the pension was excluded from the calculation of net family property pursuant to s. 4(2)6 of the FLA. As the court held in that case, “[i]t would not be appropriate to equalize this asset [the pension] a second time”: at para. 64.

[39] The respondent submitted that the same result should apply in this case. However, while the pension release in the parties’ separation agreement is described and labelled as a “specific release”, as discussed above, it was not given in exchange for a payment of the wife’s share of the pension. It was instead in the nature of and part of the general release of rights given as part of the overall bargain between the parties.

[40] Conversely, where it is clear that a legal transfer of value was completed under the agreement with no corresponding consideration, the presumption of resulting trust may be invoked to allow the transferor to retain his beneficial interest.

[41] In other cases, unfairness may be addressed by invoking the unequal division of net family property provision under s. 5(6)(h) of the FLA, which provides:

5 (6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,

(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.

[42] There is no shortage of tools at the court’s disposal to give effect to the spouses’ intentions and address consequences that were clearly unintended. In most cases, the equalization of net family property will neutralize the effect of a voiding clause that nonetheless maintains completed payments and transfers. Where, however, it does not, the specifics of the parties’ bargain will have to be examined and appropriate exclusions defined.

[43] Importantly, there is no unfairness in this case. The husband’s position is that the wife should not be entitled to share in the value of his Canada Post pension for the roughly seven-year period during which they were living separate and apart and with other spouses. However, the alleged unfairness does not arise from any transfer completed under the agreement. Instead, it arises from the operation of the FLA, which entitles married spouses to share in net family property so long as they remain legally married.

[44] I note that the reconciliation clause used in the separation agreement in this case has been a precedent for over 30 years: see e.g., James C. MacDonald et al., “Precedents and Principles: A Comprehensive Review of Domestic Contracts”, Canadian Bar Association – Ontario, Continuing Legal Education Program, Family Law for the Specialist, February 7, 1986. In order to clarify the intent of the parties, it may be helpful in future for such reconciliation clauses to address what the parties intend will occur upon reconciliation with respect to specifically contemplated transfers. For example, if the parties intend any transferred property to be treated as property that is to be excluded from the net family property under s. 4(2)6 of the FLA, that should be explicitly provided.

(4) Parol Evidence

[45] As I have concluded that the trial judge erred in his interpretation and application of the provisions of the separation agreement, it is not necessary to address the parol evidence issue. However, I note that the trial judge concluded his analysis of that evidence by finding that nothing in the parties’ conduct after their reconciliation set aside the terms of the separation agreement: at para. 43. Therefore, any reference to that conduct did not affect the result.

IV. Disposition

[46] I would allow the appeal and find that no transfer or conveyance was made respecting any entitlement by the appellant to the value of the respondent’s Canada Post pension, the exception to the voiding clause in the separation agreement does not apply, and the release of the appellant’s right to share in the pension is void. As a result, of the two choices proposed by the parties, the appellant is entitled to receive a share of the respondent’s pension from the date of marriage to the date of the second separation.

[47] I would order the costs of the appeal to the appellant in the agreed amount of $18,000, inclusive of disbursements and HST, and the costs ordered on the application of $10,000 be paid to the appellant.

Released: “K.F.” March 9, 2020

“K. Feldman J.A.”

“I agree. David Brown J.A.”

“I agree. B. Zarnett J.A.”

[1] In oral argument, counsel for the respondent explained that he chose not to take the position that the specific release completely disentitled the appellant to the value of the pension, even though, in her view, that position was open to the respondent.