Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20230907 DOCKET: COA-23-CV-0107

Feldman, Benotto and Roberts JJ.A.

BETWEEN

Kirsten Torgersrud Applicant (Respondent)

and

Albert Maxwell Lightstone Respondent (Appellant)

Counsel: Shawn Duguay, for the appellant Michael Rankin and Marie-Eve Jean, for the respondent

Heard: July 5, 2023

On appeal from the judgment of Justice Adriana Doyle of the Superior Court of Justice, dated December 16, 2022, with reasons reported at 2022 ONSC 7084.

Reasons for Decision

[1] Two marriage contracts, signed in Quebec, provided that the parties were separate as to property. The wife successfully applied for the contracts to be set aside pursuant to s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), permitting her to proceed with her equalization claim. The husband appeals.

A. BACKGROUND

[2] The parties met at university in Montreal and were married on March 31, 1987. Following the marriage, the husband’s uncle advised him to enter into a marriage contract with his wife in order to protect his family’s business interests. This contract, dated 1988, is titled “Modification of Matrimonial Property regime” and provides that the parties renounce their property rights to a “partition of acquests”, declare that they are “separate as to property”, and acknowledge they would not be liable for each other’s debts. Under Quebec law, this meant that there would be no division of assets of any nature upon marriage breakdown.

[3] In 1990, the parties signed a second Quebec instrument where they agreed to opt out of the family patrimony regime that had recently been legislated. This regime provides that the net value of family patrimony is divided equally upon marriage dissolution. The family patrimony regime excludes from sharing inheritances, property existing at the date of marriage, and gifts.

[4] The parties lived in Montreal until 1993, when they moved to Ottawa. The wife had worked during the early portion of the marriage, but after their first child was born, she was a full-time caregiver for the children. They lived in Ottawa until their separation in 2015, after which time the wife claimed equalization under Part I of the FLA. The husband asserted that the Quebec marriage contracts ousted the provisions of the FLA.

[5] A focused hearing was ordered and subsequently conducted to determine whether the Quebec instruments ousted the wife’s claim for equalization of net family property, and if they did, whether the instruments should be set aside under s. 56(4) of the FLA.

B. DECISION BELOW

[6] The application judge concluded that the documents were marriage contracts, but they did not oust the application of the FLA. The expert evidence from Quebec legal practitioners was that the contracts would be recognized in Quebec. However, there is a high threshold for finding an out-of-jurisdiction marriage contract prevails over the FLA’s equalization provisions: Webster v. Webster (2006), 28 R.F.L. (6th) 79 (Ont. S.C.). The contracts did not include any renunciation, releases, or waivers; they did not “deal with” or release equalization claims. The application judge did not consider the statement that the parties were “separate as to property” to be enough. Accordingly, she held that the instruments did not bar the wife’s equalization claim.

[7] The application judge added that, if she was in error, she would exercise her discretion to set aside the contracts based on s. 56(4) of the FLA, because the husband had failed to disclose significant assets and the wife did not appreciate the instruments’ nature and consequences. The husband’s parents had both died before the marriage, and he was their sole heir. The wife did not know the extent of the husband’s financial position at the time the instruments were executed. She knew his family had interests in shopping malls in Montreal but was not made aware of the details of the ownership, including the value of the ownership interests. The husband also did not make the necessary inquiries to enable him to fulfil his duty of full financial disclosure. He did not know the value of his future inheritances until several years later. His disclosure in this proceeding indicates his net worth at the date of the marriage was approximately $4 million. This amount was the value of the first tranche of his inheritance from his mother’s estate, which came to him at age 25, a few months after the marriage. He did not make his wife aware of this.

[8] The application judge decided to exercise her discretion to set aside the contract. This was a long marriage and if the Quebec contracts were upheld, the wife would not be entitled to an equalization of net family properties under Ontario law. She signed the contracts without discussion of the parties’ financial circumstances and without receiving an inventory of the husband’s assets. She was trying to keep the peace and appease the husband. She was hurt that the husband was putting his family above her but also trusted him when he said they needed to execute the contracts to protect his family’s business. Referring to the factors in Dochuk v. Dochuk (1999), 44 R.F.L. (4th) 97 (Ont. Gen. Div.) and Demchuk v. Demchuk (1986), 1 R.F.L. (3d) 176 (Ont. H.C.), the application judge held that this was a proper case to set aside the marriage contracts.

C. ANALYSIS

[9] The appellant submits that the application judge erred by concluding that the contracts do not oust the FLA’s equalization provisions. The contracts, construed in accordance with Quebec law, would result in no division of assets or transfer of value on separation. This is enough, he submits, to oust Ontario’s equalization scheme.

[10] We do not need to decide this issue. The application judge’s alternative analysis involves discretionary decisions, which are entitled to deference and disclose no error. Accordingly, regardless of the result on the first issue, the appellant cannot succeed.

[11] The application judge determined that s. 56(4) of the FLA was engaged and exercised her discretion under that section to set aside the contracts.

[12] Section 56(4) provides:

Setting aside domestic contract

(4) A court may, on application, set aside a domestic contract or a provision in it,

(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;

(b) if a party did not understand the nature or consequences of the domestic contract; or

(c) otherwise in accordance with the law of contract. R.S.O. 1990, c. F.3, s. 56 (4).

[13] With respect to s. 56(4)(a), the application judge found, at para. 246, that

the husband failed to disclose the value of assets as of the date of the marriage contract, specifically that he was about to receive 1/3 of his mother’s estate (as declared in his financial statement and NFP statement, for a total of approximately $4M). This is not a paltry sum.

[14] The application judge found that the wife “met her onus” under s. 56(4)(b), because she did not understand her entitlements under the law and therefore did not understand what rights she was renouncing in signing the contract. The meetings with the notary were short with little time to reflect, and the instruments did not contain details of her legal entitlements at the marriage breakdown and did not provide detailed waivers and releases which would have directed her to understand what wealth she might otherwise be entitled to share under the governing legislation.

[15] The application judge concluded, at para. 260:

I find that the wife would have rethought her position and what she was giving up if she knew she was renouncing her future rights to a division of property of that magnitude.

[16] It is unclear on the record whether the application judge was referring to the total value of the inheritance (which would be excluded from sharing) or the income from the inheritance. Under both Ontario and Quebec law, inheritances are excluded from what is shared between spouses. At the same time, again under both regimes, income or “fruits” of inherited property are not excluded from sharing unless specifically excluded by the donor or testator.

[17] Section 4(2) 2 of the FLA provides:

The value of the following property that a spouse owns on the valuation date does not form part of the spouse’s net family property:

1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.

2. Income from property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property. [Emphasis added.]

[18] Similarly, the Civil Code of Québec, S.Q. 1991, c. 64, art. 450(2) provides:

The private property of each spouse consists of

(1) property owned or possessed by that spouse when the regime comes into effect;

(2) property which devolves to that spouse during the regime by succession or gift, and the fruits and income derived from it if the testator or donor has so provided; [Emphasis added.]

[19] In this case, there was no evidence that the husband’s family had specified such an additional exclusion. Absent such evidence, while the inherited property is in any case excluded from sharing pursuant to the legislation, the contracts deprive the wife of her entitlement to share in the income or fruits of that property. The application judge’s finding that the wife did not understand this consequence at the time that she signed the contract is entitled to deference and supported by the evidence.

[20] The appellant further submits that the application judge misapplied the factors from the case law, leading her to wrongfully exercise her discretion to set aside the contracts. The application judge cited Dochuk and Demchuk for authority as to the factors the court must consider to decide whether it is appropriate in the circumstances to set aside the contract. She then referred to factors from those cases that do not apply to her findings. For example, at para. 268:

(a) whether there had been concealment of the asset or material misrepresentation;

(b) whether there had been duress, or unconscionable circumstances;

(c) whether the petitioning party neglected to pursue full legal disclosures;

(d) whether he/she moved expeditiously to have the agreement set aside;

(e) whether he/she received substantial benefits under the agreement; and

(f) whether the other party had fulfilled his/her obligations under the agreement.

[21] While we agree that these factors do not arise on the application judge’s findings, she clearly articulated the facts that led her to conclude, at para. 296, that “fairness dictates that the instruments be set aside. In the circumstances of this case, the court exercises its discretion to set aside the instruments.” We see no error in the application judge’s conclusion that given the potential magnitude of the husband’s earnings from his inheritances over time and the lack of disclosure regarding the extent of those inheritances, “fairness dictates that the instruments be set aside.”

[22] We see no basis to interfere with the application judge’s exercise of discretion.

[23] The appeal is dismissed with costs in the agreed upon amount of $25,000, inclusive of HST and disbursements.

“K. Feldman J.A.” “M.L. Benotto J.A.” “L.B. Roberts J.A.”