Lay v. Lay

47 O.R. (3d) 779

[2000] O.J. No. 985

No. C30782

Court of Appeal for Ontario

Morden, Abella JJ.A. and O'Driscoll J. (ad hoc)

March 29, 2000

*Application for leave to appeal to the Supreme Court of Canada was dismissed November 9, 2000. (Gonthier, Binnie and Arbour JJ.). S.C.C. Bulletin, 2000, p. 2013.

Family law -- Equalization of net family property -- Effect of marriage contract -- Parties entering into marriage contract under Family Law Reform Act in 1985 -- Under terms of contract wife to retain sole ownership of certain property free from any claims by husband -- Contract containing provision stating that agreement to prevail over all provisions of Family Law Reform Act or any successor -- Contract sufficiently clear to exempt property from equalization provisions of Family Law Act -- Family Law Act, R.S.O. 1990, c. F.3 -- Family Law Reform Act, R.S.O. 1980, c. 152.

The parties entered into a marriage contract in 1985 which provided that the wife was to retain sole ownership of certain property "free from any claims by the husband". The contract, which was made under the Family Law Reform Act, stated that the agreement was to prevail over all provisions of that Act or any successor. Thirteen years later, the wife brought a motion under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for an order to determine whether the marriage contract exempted the property in question from the equalization provisions in the Family Law Act.

Held, the question should be answered in the affirmative.

Under s. 70(3) of the Family Law Act, the terms of a valid marriage contract made before March 1, 1986 may, under certain circumstances, prevail over the equalization provisions in s. 5 of the Family Law Act. The terms of the marriage contract in this case reflected a clear intention to remove the wife's designated property from the legislative grasp of the Family Law Reform Act or any successor legislation, and satisfied the requirements of s. 70(3) of the Family Law Act.

MOTION to determine issue before trial.

Bosch v. Bosch (1991), 1991 7177 (ON CA), 6 O.R. (3d) 168, 84 D.L.R. (4th) 626, 36 R.F.L. (3d) 302 (C.A.); Calvert (Litigation guardian of) v. Calvert (1998), 1998 3001 (ON CA), 37 O.R. (3d) 221, 36 R.F.L. (4th) 169 (C.A.), distd Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, ss. 5, 70(3) Family Law Reform Act, R.S.O. 1980, c. 152, ss. 4, 8, 70(4)

Donald S. Baker, for appellant. John M. Freeman, for respondent.

The judgment of the court was delivered by

[1] ABELLA J.A.: -- The parties entered into a marriage contract on May 24, 1985, the day before their marriage. Under the terms of that contract, the wife was to retain sole ownership of certain property "free from any claims by the husband." Thirteen years later, the wife, as petitioner in a divorce proceeding, brought a motion under Rule 21 of the Rules of Civil Procedure for an order to determine an issue before trial. That issue was the validity of the marriage contract and, in particular, whether it exempted the property from the equalization provisions in the Family Law Act, R.S.O. 1990, c. F.3.

[2] The motions judge, Speigel J., ruled that the contract did not exempt the property. She held that it was "obvious that the intention of the contract was to give the wife sole ownership, control and enjoyment of the property after the dissolution of the marriage." Notwithstanding this finding, she stated that in her view this intention was "not adequate to displace the provisions of the Act regarding equalization of net family property."

[3] Additionally, despite her finding that the parties' intention was that the wife own, control and keep the property, she relied on Bosch v. Bosch (1991), 1991 7177 (ON CA), 6 O.R. (3d) 168, 84 D.L.R. (4th) 626 (C.A.) to conclude that the "parties did not turn their minds to the division of their assets, or to some other form of economic redress, upon the dissolution of their marriage."

[4] This is an appeal by the wife from that determination.

[5] With respect, it is my view that the terms of the contract are sufficiently clear to oust the application of the Family Law Act. Moreover, this case turns not on the application of Bosch but on s. 70(3) of the Family Law Act, a provision to which the motions judge made no reference.

[6] Only the first five paragraphs of the brief contract are relevant to this appeal. They read:

1. Definitions

In this agreement, "Property" means whatever shares the wife shall from time to time beneficially own in the capital of 240556 Investments Limited and in the capital of Michael I. Pitman Holdings Limited whether held directly or through an interest in a trust or trusts or otherwise and whether held at the date hereof or subsequently acquired.

2. Background

(a) The parties are to become husband and wife by being married on the 25th day of May, 1985, and throughout this agreement are called the "husband" and the "wife", respectively;

(b) Each desires to determine by agreement his or her rights and obligations with reference to the ownership of the Property during marriage, and if cohabitation ceases, his or her rights and obligations with reference to the ownership of the Property upon separation, or upon the annulment or dissolution of the marriage, or upon death.

3. Agreement

The husband and the wife each agree to be bound by the provisions of this agreement from the time of their marriage.

4. Separate Property

The wife will retain sole ownership, control and enjoyment of the Property free from any claim by the husband.

5. The Family Law Reform Act (Ontario)

All rights and obligations of the husband and the wife, whether arising during marriage either before or after separation, or upon and after divorce or annulment, including the rights and obligations of each of them with respect to:

(a) possession of the Property; and

(b) ownership in or division of the Property,

are governed by this agreement which prevails over all provisions of the Family Law Reform Act (Ontario) or any successor.

[7] This contract was made under the Family Law Reform Act, R.S.O. 1980, c. 152, the legislative ancestor of the 1986 Family Law Act, S.O. 1986, c. 4. Under s. 70(4) of this Act (s. 70(3) in the current Family Law Act), the terms of a valid marriage contract made before March 1, 1986, may, under certain circumstances, prevail over the equalization provisions in s. 5 of the Family Law Act. There were no provisions for the equalization of family property in the Family Law Reform Act.

[8] Sections 70(3) and 5(1) of the Family Law Act provide:

70(3) A separation agreement or marriage contract that was validly made before the 1st day of March, 1986 and that excludes a spouse's property from the application of sections 4 and 8 of the Family Law Reform Act, being chapter 152 of the Revised Statutes of Ontario, 1980,

(a) shall be deemed to exclude that property from the application of section 5 of this Act; and

(b) shall be read with necessary modifications.

5(1) When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.

[9] The issue in this appeal is whether this marriage contract satisfies the requirements of s. 70(3). There is no dispute that the contract was validly made and pre-dated March 1, 1986. The argument centres on whether the contract excluded the application of ss. 4 and 8 of the Family Law Reform Act, the governing statute when the contract was signed. Section 4 of that Act dealt with the division of family assets. Section 8 permitted the awarding of compensatory payments or shares in non-family assets where the property had been obtained or enhanced by the contributions of a spouse.

[10] The husband relied on this court's judgments in Bosch, supra and Calvert (Litigation guardian of) v. Calvert (1998), 1998 3001 (ON CA), 37 O.R. (3d) 221, 36 R.F.L. (4th) 169 (C.A.). In both cases, the terms of the marriage contract were held not to exclude the property from the equalization provisions of the Family Law Act. In my view, the contractual provisions and circumstances in Bosch and Calvert were sufficiently different from those in this case to make those cases distinguishable.

[11] The husband also urged the court to treat the terms of para. 2 of the contract as determinative. This paragraph refers to the parties' desire to "determine by agreement his or her rights and obligations with reference to the ownership of the Property." Since the reference in this paragraph is only to "ownership" of the property, the husband argues, it cannot be said that the parties intended also to deal with the "division" of the property. At the very least, the language is said to be ambiguous and, as such, should not be permitted to oust the application of the equalization provisions.

[12] It is noteworthy that para. 2 is under the heading "Background". There is no doubt that an introduction or a preamble can provide interpretative assistance, but I see no basis for accepting the novel proposition that its terms can triumph over those in the body of the contract. And in this case, those core terms reflect a clear intention to remove the wife's designated property from the legislative grasp of the Family Law Reform Act or any successor legislation.

[13] In the contract before us, property was defined as the wife's shares and capital in two corporations. The parties agreed in para. 4 of the contract that the wife would retain sole ownership of this property "free from any claim by the husband." In my view, this unambiguous provision, along with para. 5 of the contract, make the parties' intentions irrefutably clear and satisfy the requirements in s. 70(3) of the Family Law Act.

[14] Under para. 5, "all rights and obligations" of the husband and wife in connection with the possession, ownership, or division of the designated property are to be governed by the terms of the agreement. The agreement is to prevail over "all provisions of the Family Law Reform Act (Ontario) or any successor", necessarily including ss. 4 and 8.

[15] The husband argued that since ss. 4 and 8 of the Family Law Reform Act were not directly referred to in the contract, the parties cannot be said to have intended to exempt the property from their application. At the time the parties entered into their marriage contract, s. 70(3) of the Family Law Act, which referred to ss. 4 and 8 of the Family Law Reform Act, did not exist. They could not have been expected to know -- or even anticipate -- that their contract's applicability would one day depend on whether these two sections were specifically mentioned. The issue, then, is not the absence of a reference to these sections, but whether, based on the terms of the contract, the parties can be said to have directed their minds to whether the property would be subject to -- or exempt from -- the governing statutory regime. Since the essence of this regime was set out in ss. 4 and 8, it is a necessary inference that the parties directed their minds to the content of thos e sections.

[16] The essence of this contract is that the defined property was to be the wife's alone for all purposes, regardless of any provisions of the Family Law Reform Act or any successor legislation. The husband contracted out of any claim to a share in this property. It is difficult to see how the parties could have made their intentions clearer that the property was to be exempt from any otherwise applicable matrimonial property regimes, including the one set out under ss. 4 and 8 of the Family Law Reform Act.

[17] I would, therefore, allow the appeal with costs throughout, set aside the order of Speigel J., and declare that the marriage contract dated May 24, 1985, is valid and binding, and exempts the designated property from the application of the equalization calculations in s. 5 of the Family Law Act.

Order accordingly.