Court File and Parties

COURT FILE NO.: 327/17 DATE: 20190211 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Arend John Van Eck, Applicant – and – Tuyen Ngoc Thi Pham, Respondent

COUNSEL: Patrick Morris, for Mr. Van Eck Ryan Baker, for Ms. Pham

HEARD: February 7, 2019

RULING ON MOTION

PETERSEN J.

INTRODUCTION

[1] This is a motion for bifurcation brought by Mr. Van Eck in a matrimonial proceeding.

[2] Mr. Van Eck filed an Application seeking the release to him of proceeds of sale of the parties’ matrimonial home, which are currently held in trust by a real estate solicitor. In her Answer, Ms. Pham claimed entitlement to 50% of the funds held in trust, spousal support pursuant to the Divorce Act, R.S.C. 1985, c.3 and an equalization payment pursuant to the Family Law Act, R.S.O. 1990, c.F.3. She also asserted a beneficial interest in property owned by Mr. Van Eck by virtue of a constructive trust. She pleaded that three domestic contracts entered into by the parties should be set aside.

[3] The parties do not agree on their date of separation. Mr. Van Eck argues that they separated on June 22, 2014. Ms. Pham maintains that the separation occurred on January 11, 2015.

[4] In this motion, Mr. Van Eck submits that an initial trial should be conducted solely on the issue of the validity of the domestic contracts signed by the parties. He argues that, if the contracts are upheld, they would preclude all of Ms. Pham’s claims in the proceeding and would obviate the need to ascertain the correct date of separation. He submits that a second trial would only be required in the event that the domestic contracts were set aside at the first trial. Bifurcation would therefore potentially save the parties significant time and costs and would make the most efficient use of the Court’s resources.

[5] Ms. Pham opposes the motion. She argues that bifurcation would cause her serious prejudice and would not be in the interest of justice.

CONTRACTS AT ISSUE

[6] There are three domestic contracts at issue. The first is a marriage contract executed on May 13, 2004, prior to the parties’ wedding.

[7] At the time that this contract was executed, Ms. Pham was living in Vietnam and Mr. Van Eck was living in Guelph, Ontario. They had been introduced to each other on line through a mutual friend in 2002. They corresponded by email and eventually met in person when Mr. Van Eck travelled to Vietnam for two weeks in 2003. They both wanted to pursue a relationship. After several unsuccessful attempts to obtain a visa for Ms. Pham to visit Canada, they decided to marry. The marriage facilitated Ms. Pham’s immigration to Canada via sponsorship by Mr. Van Eck.

[8] The wedding took place in Vietnam on July 28, 2004. Mr. Van Eck returned to Guelph and Ms. Pham eventually joined him in April 2005. This was Mr. Van Eck’s second marriage. He had financial commitments with respect to three children from his previous relationship. Because of those commitments and also because of the short duration of the parties’ courtship, Mr. Van Eck requested a marriage contract to define their respective rights and obligations in the event of a breakdown in the relationship.

[9] The May 2004 contract includes a mutual waiver of spousal support in the event of separation (with the exception of time-limited support for Ms. Pham required by Immigration Canada pursuant to Mr. Van Eck’s sponsorship obligations). It also includes a mutual waiver of all rights under Part I of the Family Law Act regarding equalization of net family property. It stipulates that neither party will be entitled to a share of any property or of the value of any property owned by the other, including any equitable interest in property by way of constructive or resulting trust. It contains comprehensive mutual releases, including a release of each other’s estates from claims pursuant to the Succession Law Reform Act, R.S.O. 1990, c.S.26.

[10] The second contract was executed more than seven years into the marriage, on November 11, 2011. It rescinded and replaced the first marriage contract. The property provisions are substantially similar to those of the first contract, mutually releasing each other from any claims to an interest in the other’s property or in the value of the other’s property, either in law or in equity. The contract provides for contributions to Ms. Pham’s Tax Free Savings Account by Mr. Van Eck during the marriage. It also provides for spousal support payable by Mr. Van Eck upon separation, in the amount of $1,000/month for a fixed period of twelve months, provided that Ms. Pham remains in Canada and lives in rental accommodation. An additional lump sum payment of $1,500 per year for each year of marriage is payable as spousal support upon a divorce order being granted.

[11] The June 2011 marriage contract references money advanced by Mr. Van Eck to Ms. Pham’s family in Vietnam for the purpose of purchasing property there. It explains that the property is registered in the name of Ms. Pham’s father because foreigners cannot own vacant land in Vietnam. The contract specifies the parties’ intention to construct a house on the land in Vietnam and eventually transfer title to the property into both of their names jointly. It also notes the parties’ intention to enter into a separate agreement that deals with the disposition of the Vietnam property in the event of the breakdown of their relationship.

[12] The third contract is a Jointly Acquired Asset Agreement executed on June 13, 2013. It was signed after the completed construction of a house on the land in Vietnam. It sets out the parties’ respective contributions (50% each) to the purchase of the property and construction costs. It provides for equal sharing of net proceeds of sale of the Vietnam property in the event of their separation, unless Ms. Pham elects to buy out Mr. Van Eck’s interest at fair market value within 12 months of the date of separation.

[13] Ms. Pham’s contribution to the Vietnam property was financed with a loan from Mr. Van Eck. Mr. Van Eck asserts that there is an outstanding balance owing to him on that loan in an amount of approximately $150,000.

[14] Although Ms. Pham worked in the banking industry, Mr. Van Eck was the primary bread-winner for the couple throughout the marriage. He also advanced substantial sums of money to members of Mr. Pham’s family who reside in Vietnam. Ms. Pham takes the position that those gifts and loans to third parties are not relevant in their matrimonial proceeding.

[15] Ms. Pham is challenging the validity of all three contracts entered into by the parties. She relies on s.56(4) of the Family Law Act, which permits the Court to set aside a domestic contract: (a) if a party has failed to disclose significant assets or liabilities that existed when the contract was made, (b) if either party did not understand the nature and consequences of the contract at the time it was made, or (c) otherwise in accordance with the law of contract.

ANALYTICAL FRAMEWORK

[16] I have the authority pursuant to Rule 12(5) of the Family Law Rules, O.Reg.114/99 to order bifurcation of this proceeding. Rule 12(5) states: “If it would be more convenient to hear two or more cases, claims or issues together or to split a case into two or more separate cases, claims or issues, the court may, on motion, order accordingly.”

[17] Pursuant to Rule 2, I am required to apply Rule 12(5) in a manner that promotes the primary objective of the Family Law Rules, namely to enable the Court to deal with cases justly. Dealing with cases justly includes ensuring that the procedure is fair to all parties, saving expense and time, dealing with the case in ways that are appropriate to its importance and complexity and giving appropriate court resources to the case while taking account of the need to give resources to other cases.

[18] Substantial amounts of money are in dispute in this case. Mr. Van Eck operates his own business. He owns a holding company, an operating company and a family trust. He also owns several real estate properties in Canada. He has amassed significant retirement savings. The Continuing Record does not contain Financial Statement sworn by him, but a schedule to the June 2011 marriage contract indicates that his net worth was estimated to be almost $3 million at that time. That schedule shows his income in the early years of the marriage ranging from $394,000 to $555,000 annually, with the exception of 2008, when he declared a taxable income of only $92,361. In 2009, his declared taxable income was $394,618. In 2010, it was $1,577,526. He claims that his income has decreased substantially in recent years because he is semi-retired. In his Reply to Ms. Pham’s Answer to his Application, he claimed taxable income in the amounts of $136,099 in 2014, $108,843 in 2015 and $46,281 in 2016.

[19] Ms. Pham is employed by a bank and has been earning a modest but steadily increasing income since 2006. In the early years of the marriage, her taxable income ranged from $27,000 to $38,000 annually. In her Financial Statement sworn September 26, 2017, she declared employment income in the amount of $69,522 and total income in the amount of $74,390. She filed an updated Financial Statement sworn on May 17, 2018 in which she claims net family property valued at $127,879.

[20] Clearly, the claims to be decided in this case do not involve trivial sums of money. The issues of are significant importance to both parties. These factors are relevant to a determination of the appropriate allocation of Court resources to the resolution of the issues: Rule 2 of the Family Law Rules.

[21] The Court’s power to split a case pursuant to Rule 12(5) is discretionary. There are cases in which that discretion has been exercised because bifurcation provided an expeditious, cost-effective and fair process for arriving at a just resolution of the merits: Baudanza v. Nicoletti, 2011 ONSC 352, [2011] O.J. No.457 (Ont. Sup. Ct.), at para.40; Grossman v. Grossman, 2014 ONSC 2090, [2014] O.J. No.6450 (Ont. Sup. Ct.), at paras.16-43; Shulman v. Ganz, 2015 ONCA 361, [2015] O.J. no.2655 (Ont. Sup. Ct.) at paras.32-45.

[22] However, multiplicity of proceedings are generally to be avoided, so the power to bifurcate is narrowly circumscribed and is exercised only in the clearest of cases. The moving party bears the onus of satisfying the Court, on a balance of probabilities, that there would be clear time and expense benefits to be gained from the bifurcation and determination of the threshold issue and that no meaningful prejudice would be caused to either party: Simioni v. Simioni (2009), 74 R.F.L (6th) 202 (Ont. Sup. Ct.) at paras.15-16.

[23] The analytical framework for determining whether bifurcation serves the interest of justice is well established in the jurisprudence. Relevant factors for consideration include the following:

(i) whether the issues in the proposed first trial are straightforward; (ii) the extent to which resources have already been devoted to all issues; (iii) whether the first trial will likely put an end to the action, significantly narrow the remaining issues, or significantly increase the likelihood of settlement; (iv) whether bifurcation could result in duplicative proceedings – in other words, whether the issue(s) to be addressed in the first trial are discrete and clearly divisible from the issue(s) in the second trial; (v) whether bifurcation could cause undue delay; and (vi) any advantages or prejudice the parties are likely to experience if the trial is bifurcated.

Simioni, at para.17; Grossman, at paras.18-43; Dove v. Dove, 2016 ONSC 4091, at para.12; Balsmeier v. Balsmeier, 2014 ONSC 5305, at para48.

[24] I will address each of these factors in turn.

APPLICATION TO THE FACTS

i) Complexity of the Issues to be Tried First

[25] Mr. Van Eck argues that there is a straightforward threshold issue to be determined at the first trial, namely whether the November 2011 marriage contract should be set aside pursuant to s.56(4) of the Family Law Act.

[26] I disagree that this is the sole issue to be resolved at the proposed first trial. If Ms. Pham succeeds in having the November 2011 marriage contract set aside, Mr. Van Eck will then rely on the earlier May 2004 marriage contract, the validity of which would also need to be determined. Moreover, Ms. Pham is contesting the validity of the third June 2013 contract as well.

[27] Ms. Pham’s challenges to the validity of the contracts are not based on a single alleged deficiency, such as material non-disclosure of a particular asset. Rather, she argues that the agreements should be set aside based on all the grounds enumerated in s.56(4) of the Family Law Act. She submits that significant assets were not disclosed to her prior to the execution of the agreements, that she did not understand the nature and consequences of the contracts when she signed them, that she was under duress, and that the terms of the contracts are unconscionable.

[28] Given the multiplicity of issues raised and the fact that the Court may need to determine the validity of up to three separate contracts executed at three different points in time, I find that the issues to be determined in the proposed first trial are not simple and straightforward. The first trial alone would require a significant dedication of resources and time.

ii) Resources Already Expended

[29] Mr. Van Eck brought this motion before the parties devoted significant resources to the claims made by Ms. Pham for spousal support and equalization. She has filed two sworn Financial Statements, but the focus of the proceeding to date has primarily been on the impugned validity of the domestic contracts. Few, if any, resources have been expended on trying to determine the valuation date for the purpose of equalization. Limited resources have been expended on assessing the parties’ respective incomes pursuant to the Spousal Support Advisory Guidelines. Ms. Pham was questioned on April 5, 2018 and Mr. Van Eck was questioned on October 16, 2018, but the scope of the questioning was restricted to issues pertaining to the validity of the impugned contracts. Mutual financial disclosure has been made, including disclosure by Mr. Van Eck of financial statements of his corporations. However, valuations of his assets on the date of marriage and on the separation date(s) have not been prepared.

[30] The anticipated cost of obtaining valuations of the corporations is the primary reason why Mr. Van Eck brought his motion. He obtained an estimate from a qualified business valuator, who projected that the cost of valuations would be in the range of $9,000 to $10,000, assuming that the parties could agree on the date of separation. The cost would be higher if valuations had to be completed using two different separation dates. Mr. Van Eck also anticipates incurring significant costs associated with having his real estate holdings appraised.

[31] Since the parties have not already devoted substantial resources to all of the issues, the potential cost savings of a split trial favours bifurcation.

iii) Potential Impact of First Trial

[32] The potential cost savings from bifurcation is, however, attenuated by the fact that, even if the contracts were upheld, the first trial would not put an end to the proceeding. The validity of the contracts would not oust this Court’s jurisdiction to adjudicate Ms. Pham’s spousal support claim. Any domestic contract found to be in effect would be an important consideration for the trial judge in determining spousal support, but it would be only one factor for consideration: Divorce Act, s.15.2(1) and s.15.2(4).

[33] Mr. Van Eck argues that a bifurcated trial would nevertheless serve the interest of justice by narrowing the remaining issues, assuming that at least one of the marriage contracts is not set aside and Ms. Pham’s equalization claim and trust claims are precluded. While I agree that the issues would be narrowed, I am not persuaded that there would be a significant impact on the scope of the issues to be tried. Many issues would remain to be adjudicated in the second trial, including issues that are intertwined with those that would be adjudicated in the first trial.

iv) Severability of the Issues

[34] Mr. Van Eck urges me to distinguish this case from other reported cases in which the Court has refused to bifurcate a trial in order to deal first with the validity of a domestic contract. He submits that a meaningful distinction lies in the fact that this case involves marriage contracts, rather than a separation agreement.

[35] The impugned domestic contracts in this case were not executed at or after the date of separation, which coincides with the valuation date for the purposes of calculating the parties’ net family properties under the Family Law Act. The inquiry under s.56(4) of the Family Law Act into the circumstances in existence when the contracts were entered into would therefore not require valuation of Mr. Van Eck’s assets on either the date of marriage or the date of separation. The valuation of a spouse’s assets on the date of separation will often be relevant to the validity of a separation agreement, but it is not relevant to the validity of the marriage contracts in this case, which were not executed at or around the date of separation. Mr. Van Eck submits that the issues to be determined in the proposed first trial are therefore discrete and severable from the issues to be determined in a second trial.

[36] This argument ignores that Ms. Pham’s claim for spousal support is not severable from the issue of the validity of the contracts. Even if the June 2011 or May 2004 marriage contract were found to be valid at a first trial, the ensuing second trial would necessarily involve consideration of evidence and issues that are inextricably linked to the issues that would have already been canvassed in the first trial. This duplication is the strongest factor militating against bifurcation.

[37] As the Supreme Court of Canada ruled in Miglin v. Miglin, 2003 SCC 24, 2003 S.C.C. 24, at para.64, a claim for spousal support that is inconsistent with the terms of a pre-existing agreement requires an investigation into all the circumstances surrounding that agreement, first, at the time of its formation, and second, at the time the claim is made. The Supreme Court stated, at paras.81-82:

81 It is difficult to provide a definitive list of factors to consider in assessing the circumstances of negotiation and execution of an agreement. We simply state that the court should be alive to the conditions of the parties, including whether there were any circumstances of oppression, pressure, or other vulnerabilities, taking into account all of the circumstances, including those set out in s. 15.2(4) (a) and (b) and the conditions under which the negotiations were held, such as their duration and whether there was professional assistance.

82 … the mere presence of vulnerabilities will not, in and of itself, justify the court's intervention. The degree of professional assistance received by the parties will often overcome any systemic imbalances between the parties.

[38] In this case, Ms. Pham maintains that she was vulnerable and that Mr. Van Eck took advantage of her vulnerability when each of the contracts was executed. She argues that: (1) there was no financial disclosure or no meaningful financial disclosure prior to executing the contracts; (2) the legal advice she obtained prior to signing the first contract was from a lawyer in Viet Nam who was not licenced to practice in Ontario and did not explain the particulars of the contract to her; (3) she did not have the benefit of independent legal advice prior to executing the third contract; (4) she did not understand the nature and consequences of the contracts when she signed them; (5) she lacked familiarity with Canadian law and custom; (6) she was financially dependent on Mr. Van Eck; (7) she was unduly pressured by Mr. Van Eck to sign the agreements; and (8) she ultimately executed the contracts out of fear that she would lose face in her community and that there would be economic consequences for her family.

[39] The evidence pertaining to these issues is interwoven with the evidence relevant to the issues raised by Ms. Pham’s reliance on s.56(4) of the Family Law Act. For example, Ms. Pham’s lack of familiarity with Canadian law and the allegedly inadequate legal advice that she received from a Vietnamese lawyer are both relevant to the issue of whether she understood the nature and consequences of the first contract that she signed. They are also relevant to the first step in the Miglin analysis set out above. In a bifurcated proceeding, evidence relating to these issues at the first trial would also need to be called at the second trial, even if Mr. Van Eck was successful in having the contracts upheld.

[40] Similarly, any inequities in the contracts would need to be assessed during the first trial in order to determine whether the contracts are invalid on the basis of unconscionability. Evidence of inequity in the bargains struck would also be evidence from which a court might infer exploitation of vulnerability relevant to the Miglin analysis in the second trial: Mantella v. Mantella (2006), 80 O.R. (3d) 270, at para.63 (S.C.J.). Once again, duplication would occur.

[41] These are just two examples of the ways in which the issues are intertwined. As Kiteley, J. noted in Turk v. Turk, 2015 ONSC 5845 at paras.120, trials pursuant to s.56(4) of the Family Law Act and s.15.2 of the Divorce Act engage a number of overlapping factors. I agree with and adopt her conclusion that there is “no point in ordering a trial pursuant to s.56(4) when the issues are interwoven and some of the same witnesses and factors will be relevant in a trial pursuant to s.15.2. That would not meet the primary objective in terms of maximizing limited judicial resources and would not be in the interest of justice.” This is likely the reason why this Court has generally been reluctant to bifurcate proceedings whenever there is a spousal support claim to be determined regardless of whether or not a domestic contract is set aside: C.M.G. v. R.G., 2013 ONSC 961, at paras.12-13 and 20; Dove v. Dove, 2016 ONSC 4091, at paras.13-16.

v) Delay

[42] Mr. Van Eck argues that no delay would be engendered by bifurcation, even if Ms. Pham succeeds in having the domestic contracts set aside.

[43] I disagree. Given the inevitability of a second trial and the overlapping issues identified above, the duplication would invariably result in a lengthier proceeding in order to resolve Ms. Pham’s support claim. While the delay may not be “undue”, it is nevertheless a factor for consideration.

vi) Potential Prejudice

[44] Ms. Pham takes the position that she would be seriously prejudiced if the trial were bifurcated. She relies on cases in which a potential for prejudice informed the Court’s decision to deny a motion for bifurcation, such as C.M.G., at paras.12, 13, 17 and 19. The specific prejudice contemplated by the Court in C.M.G. does not arise in the circumstances of this case (e.g., the risk of reversing the correct order in which spousal support and property claims should be determined).

[45] Ms. Pham argues that she would be prejudiced in her argument on the unconscionability of the contracts if Mr. Van Eck’s financial disclosure relating to her equalization claim did not take place until after the first trial. She argues that she requires valuations of his companies and appraisals of his real estate holdings in order to advance her claim that the agreements should be set aside based on principles of contract law. Mr. Van Eck argues that the valuations required for the calculation of his net family property are not relevant to the issue of unconscionability because the relevant dates are different. He further argues that he has already provided full disclosure in the form of financial statements for his companies, which is sufficient to address whether the contracts are unconscionable.

[46] I disagree that the valuations for the purposes of net family property calculations would necessarily have no relevance to the issue of unconscionability of the impugned contracts. The first contract was signed just ten weeks prior to the parties’ wedding. The valuation of Mr. Van Eck’s assets on the date of marriage (required to determine Ms. Pham’s equalization claim) would therefore be relevant to the validity of the first contract. The third contract was signed in June 2013, one year prior to the separation date asserted by Mr. Van Eck. The valuation of his assets as of that separation date may also be relevant to the issue of the unconscionability of the third contract. There is therefore a risk that Ms. Pham would be prejudiced by the proposed bifurcation of the trial.

[47] Moreover, if the trial were bifurcated in the manner suggested by Mr. Van Eck, Ms. Pham would be required to advance her arguments about the unconscionability of the spousal support and property provisions in the contracts without a determination of the correct separation date. The separation date determines the length of the parties’ cohabitation, which is a relevant factor in assessing unconscionability. Although there is little difference in the two separation dates asserted by the parties, this is nevertheless a relevant consideration.

[48] In any event, even if there were no prejudice to Ms. Pham, I would deny the motion because this is not a clear case in which time and expense benefits would be gained from bifurcation. The issue to be determined at the first trial is not a discrete threshold issue, so a second trial would be inevitable. I recognize that Mr. Van Eck might save some costs by not having to obtain valuations of his assets if Ms. Pham’s equalization claim did not proceed after the first trial, but no significant savings in time or expense would be realized for the court system as a whole. A two-step process might bring a quicker resolution to Ms. Pham’s equalization claim, but her spousal support claim would take longer to resolve and would involve duplication of evidence, which is not the best use of judicial resources.

[49] The expense of obtaining valuations of Mr. Van Eck’s assets can be recovered through a costs award if Mr. Van Eck prevails at trial (subject to the trial judge’s discretion). Although he expressed concern about Ms. Pham’s ability to satisfy such a costs award, her financial disclosure reveals that she has savings in excess of $91,000.

CONCLUSION

[50] For the reasons set out above, the Applicant’s motion for bifurcation is dismissed.

[51] Ms. Pham is presumptively entitled to her costs of the motion based on her success. There may, however, be circumstances of which I am not aware that affect entitlement to costs.

[52] The parties are encouraged to negotiate an agreement on costs. If they are unable to do so, they may make brief (2 pages maximum) written submissions addressed to my attention. The Respondent’s submissions must be delivered (with a copy to the Applicant) no later than March 8, 2019. The Applicant’s responding submissions must be delivered (with a copy to the Respondent) within 10 days of receipt of the Respondent’s submissions.

Petersen J. Released: February 11, 2019