Court of Appeal for Ontario
Date: November 2, 2017 Docket: C61561
Judges: Laskin, Feldman and Juriansz JJ.A.
Between
Faranak Bakhshi Applicant (Respondent)
and
Masoud Hosseinzadeh Respondent (Appellant)
Counsel
Patrick Di Monte, for the appellant Frances M. Wood, for the respondent
Heard: August 22, 2017
On appeal from: The order of Justice J. Scott McLeod of the Superior Court of Justice, dated December 7, 2015, with reasons reported at 2015 ONSC 7407.
Reasons for Decision
Juriansz J.A.:
[1] Main Issue
[1] The main issue in this appeal is whether the property conveyed under an Islamic marriage contract, or Maher (sometimes also written as Mahr in the case law), is excluded from the definition of net family property ("NFP") under s. 4(2) of the Family Law Act, R.S.O. 1990, c. F.3 ("FLA") and excluded from equalization.
[2] The Maher
[2] The parties entered into the Maher upon marrying in Iran on May 18, 1995.[1] The parties immigrated to Canada after they married. Among other things, the Maher contained a clause requiring the husband to pay his wife 230 gold coins upon her prompt request.
[3] On October 29, 2013, the wife issued an application in Ontario claiming a divorce, custody of their children, child support, equalization of NFP, and other relief. An order dated September 23, 2014 granted a divorce and another order dated February 18, 2015 resolved other substantive matters leaving equalization, post-separation adjustments, and the treatment of the Maher for trial.
[4] A one-day trial took place on November 20, 2015. It proceeded on an uncontested basis because the husband did not respond and disregarded several court orders. He was present at the trial but not permitted to participate.
A. The Decision of the Trial Judge
[5] The trial judge determined the value of properties owned by each spouse and equalized those values pursuant to s. 5(1) of the FLA. He also made a valuation of the post-separation adjustments claimed by the wife.
[6] The trial judge ordered the husband to pay the wife an equalization payment of $187,075 and post-separation adjustments of $44,449.93. The trial judge stated the equalization payment was "inclusive of the Maher". The trial judge found the value of the 230 gold coins was $79,580. The trial judge's description of his order as an equalization payment of $187,075, "inclusive of the Maher", is misleading. As will be explained further below, the trial judge actually treated the Maher obligation as separate from, or, in the terms of the FLA, as "excluded" from the equalization calculation. Having calculated the equalization payment owing as $107,495, he then added the $79,580 Maher payment value to the amount owing by the husband to the wife to arrive at the total of $187,075. The trial judge also ordered the husband to apply for an Islamic Iranian divorce at an approved agency and to register the divorce with the Iranian government within 30 days.
[7] The trial judge then went on to consider the Islamic marriage contract. He concluded that the Maher, including the payment of the gold coins, was a valid and binding marriage contract under s. 55 of the FLA. On this point, he adopted the reasoning in Khanis v. Noor Mohamed, [2009] O.J. No. 2245 (S.C.), affirmed 2011 ONCA 127. He noted the Maher in this case, as in Khanis, satisfies the requirements of s. 55(1) of the FLA since it was in writing, signed by both parties, and witnessed.
[8] The trial judge considered s. 56(4) of the FLA, which gives the court the discretion to set aside a marriage contract. However, he stated that there was no reason to exercise that discretion in this case as the terms of the contract were simple, and the husband understood the contract and its binding nature.
[9] The trial judge concluded that the value of the Maher was to be excluded from the calculation of NFP. In making this conclusion he relied on s. 4(2)6 of the FLA. Section 4(2)6 excludes from NFP, "[p]roperty that the spouses have agreed by a domestic contract is not to be included in the spouse's net family property."
[10] Having excluded the Maher payment from the calculation of the NFP and equalization payment, the trial judge treated it as an additional amount owing to the wife and added it to the equalization payment.
B. Issues on Appeal
[11] The primary ground of appeal, and the only one advanced in oral argument, is that the trial judge erred in his exclusion of the Maher payment from NFP. The secondary ground of appeal, as advanced in the husband's factum, disputes the trial judge's valuation of other property and post-separation adjustments.
C. The Husband's Argument
[12] Counsel for the husband submitted the trial judge was wrong to interpret the Maher as imposing on the husband an unequivocal obligation to pay his wife 230 gold coins upon her prompt request. He pointed out that the second clause of the Maher listed a number of requirements for the husband's behaviour during the marriage. He submitted that, properly construed, the Maher entitled the wife to payment of 230 gold coins only upon proving the husband's default of one of the listed behavioural requirements. He argued that, as a policy matter, a fault-based agreement of this nature should not be enforced since it would be contrary to Ontario's no-fault family law regime.
[13] Alternatively, even if the Maher created a demand obligation, counsel for the husband submitted that the payment to the wife under the Maher should not be excluded from the NFP calculation. He pointed out that while the Maher in Khanis stated that it "shall be in addition and without prejudice to and not in substitution of all my obligations provided for by the laws of the land", there was no such language in this case. Without an equivalent provision, he submitted that there was no basis to exclude the Maher payment from NFP.
[14] In addition, counsel for the husband argued the wife's Form 13B Financial Statement erroneously listed the Maher payment as both the husband's existing debt at the date of marriage and an excluded asset. He submitted this error double-counted the Maher payment to the husband's detriment by inflating his NFP in the Financial Statement.
D. The Wife's Argument
[15] Counsel for the wife submitted that the trial judge's treatment of the Maher payment is entitled to deference. She submitted that this court could not interfere with the trial judgment absent a palpable and overriding error.
[16] Counsel for the wife contended the trial judge's construction of the Maher obligation as a promissory note was reasonable because the two clauses of the Maher were independent. Each of the two clauses had separate sets of signatures. She argued the first clause created the payment obligation and the second clause created a "side binding" agreement by which the husband granted the wife a power of attorney to seek a divorce if he breached one of the listed behavioural requirements.
[17] Counsel for the wife submitted that the result in the Khanis case did not depend on the express term in its Maher that provided the payment was in addition to the husband's other legal obligations. She asserted the Maher payment would have been excluded from NFP in that case even without that clause. She said the wife had testified that the Maher was akin to a dowry and Mahers have been treated "by the courts [as] more of a dowry". She submitted it was for that reason "that the courts have accepted it as a contract separate and apart from equalization."
[18] Finally, counsel for the wife argued that the Maher payment would have to be made even if the Maher payment were included in the wife's NFP, irrespective of the equalization calculation.
[19] Therefore, counsel for the wife submitted the trial judge was correct in excluding the Maher payment from the NFP calculation.
E. Analysis
(1) Enforcing a Domestic Contract with Religious Aspects
[20] Ontario courts have dealt with obligations under a Maher on a number of occasions: Ghaznavi v. Kashif-Ul-Haque, 2011 ONSC 4062; Yar v. Yar, 2015 ONSC 151; Bari v. Nassr, 2015 ONSC 4318; Boustanji v. Barazi, 2017 ONSC 4261; Mohammadi v. Safari, 2017 ONSC 4696; and Khanis, supra.
[21] Courts have proceeded on the basis that agreements that satisfy the elements of a valid civil contract may be legally enforceable even where they have a religious aspect since the Supreme Court's decision in Marcovitz v. Bruker, 2007 SCC 54, [2007] 3 S.C.R. 607. At para. 123 of Marcovitz, the Supreme Court held that "if a spouse can show that the religious marriage contract meets all the requirements for a civil contract under provincial legislation, then the courts may order the fulfilment of undertakings to pay the amounts provided for in the contract." Ontario courts have followed Marcovitz and enforced Mahers that satisfy the FLA's domestic contract requirements in cases such as Khanis, Bari, and Boustanji.
[22] These cases treat Mahers like any other contract that may impose a variety of different legal obligations. The outcome of each case depends, just as in any other case of contractual interpretation, on the objective intentions of the parties as ascertained through the particular wording of the Maher when read as a whole and considered in light of its factual matrix. As such, evidence about the religious and/or cultural significance of the Maher to the parties could conceivably be relevant to the factual matrix in determining their objective contractual intentions. In the final analysis, however, the court's role is confined to enforcing only those undertakings that fulfil the requirements of a civil domestic contract under provincial legislation.
(2) The Standard of Review
[23] The trial judge's conclusion as to the effect of the Maher on the husband's obligations to the wife was two-fold. First, he determined that the Maher payment was enforceable as a demand obligation. Second, he determined that the Maher payment was not included in the NFP.
[24] The Supreme Court set out the guiding principles concerning the standard of review on appeals from judicial decisions in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. Questions of law are reviewable for correctness, and questions of fact or questions of mixed fact and law are reviewable for palpable and overriding error, unless there is an extricable question of law: Housen, at paras. 8, 10, and 36.
[25] The interpretation of non-standard form contracts is a question of mixed fact and law: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50; and Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 4. As such, the trial judge's interpretation of the Maher as creating a demand obligation that was enforceable under the FLA is reviewable for palpable and overriding error: Housen, at para. 36. There was no such error in the trial judge's reasons on this issue.
[26] The two main clauses of the agreement were separately executed and the second clause listing the husband's behavioural requirements is better related to the wife's right to exercise a power of attorney to seek a divorce. Moreover, the trial judge's finding that the agreement was a valid domestic contract under s. 55(1) of the FLA and his decision not to exercise his discretion under s. 56(4) was amply supported by the evidence. There is no basis to interfere with these conclusions.
[27] On the other hand, the applicability of a statutory provision to a contract is a matter of statutory interpretation that is reviewable for correctness: Collett v. Reliance Home Comfort Limited Partnership, 2012 ONCA 821, at para. 45. As such, the trial judge's application of ss. 4(1) and 4(2) of the FLA to conclude that the Maher payment was excluded from NFP is reviewable for correctness. The trial judge erred in applying these provisions.
(3) The Maher in This Case
[28] After following the Khanis case to conclude the Maher payment was enforceable, the trial judge found that the Maher payment was excluded from NFP pursuant to s. 4(2)6 of the FLA. In so doing, the trial judge erred in applying s. 4(2)6.
[29] In Khanis, this court made clear that the outcome in that case rested squarely upon the express language in the domestic contract, which excluded the Maher payment from NFP. In dismissing the husband's appeal at paras. 9-10, this court reaffirmed the trial judge's reasoning that:
By necessary implication of the words "in addition and without prejudice to and not in substitution of all my obligations provided for by the laws of the land", the maher amount is excluded from net family property. Otherwise it would undermine the express intention of the agreement and the contract would have no meaning.
[Emphasis in original.]
[30] There is no equivalent provision in the Maher in this case.
[31] The trial judge states at para. 10 of his reasons that "[t]he contract does not specify that the Maher payment is in substitution of the husband's obligations arising out of marriage." But that is not the issue. The relevant parts of ss. 4(1) and 4(2) of the FLA state:
4(1) In this Part,
"net family property" means the value of all the property, except property described in subsection (2), that a spouse owns on the valuation date…
4(2) 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:
Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of marriage.
Property that the spouses have agreed by a domestic contract is not to be included in the spouse's net family property.
[Emphasis added.]
[32] As such, s. 4(2)6 of the FLA operates as an exception to the general rule and allows spouses to agree to exclude certain property from the NFP calculation. The issue in this case is whether the parties agreed to exclude the Maher payment from the wife's NFP, as they had in Khanis. The trial judge erred in law by not reviewing the Maher to determine whether the spouses had actually made such an agreement.
[33] As noted, the Maher in this case contains no express agreement that the Maher payment is to be excluded from the wife's NFP. Moreover, there is no basis for inferring the parties intended to exclude it. The objective contractual intentions of the parties are to be determined at the time when the contract is made: Davidson v. Allelix Inc. (1991), 86 D.L.R. (4th) 542 at 547 (C.A.), [1991] O.J. No. 2230, at para. 16; Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, at para. 54; Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, [2002] 2 S.C.R. 695, at para. 36; and Dumbrell v. Regional Group of Cos., 2007 ONCA 59, at paras. 48 and 53. Here, at the time they executed the Maher in Iran, the parties evidently contemplated their continued life in Iran. The Maher, for example, contemplated that the husband could take a second wife. It also required the husband to grant the wife a power of attorney so she could initiate a divorce if he defaulted on any of the prescribed behavioural requirements. There is no basis in this case to infer that the parties contemplated their mutual obligations under Ontario's FLA.
[34] Absent any evidence of an objective intention at the time of contract to treat the Maher differently, the Maher payment must be treated under the FLA like any other payment obligation between the spouses.
[35] Counsel for the wife submitted that all transactions between spouses, irrespective of any domestic contract, should be excluded from NFP. Counsel submitted it is pointless to include transactions between spouses because they have no net effect on equalization. I reject this submission for three reasons. First, there is simply no provision in the FLA that excludes transactions between spouses. On the contrary, bona fide inter-spousal debts must be included in NFP: Burke (Public Trustee of) v. Burke Estate, [1994] O.J. No. 1342 (Gen. Div.), at paras. 37-40, at paras. 38-41; and Long v. Long, 1989 CarswellOnt 2687 (H.C.), at paras. 15-17. Second, because of the effect of the deeming provision in s. 4(5), transactions between spouses may affect the equalization payment where a spouse's net assets would otherwise be negative. Transferred assets that fluctuate in value could also make a difference. Third, excluding transactions between spouses would be inconsistent with the separate property regime under the FLA, which continues during a marriage and terminates only on the triggering of the valuation date. As Feldman J.A. said in Stone v. Stone (2001), 55 O.R. (3d) 491 (C.A.), at para. 26:
The nature of the property regime established as between spouses under the Family Law Act was clearly described by Cory J. in Rawluk v. Rawluk … Spouses each own their separate property throughout the marriage. However, upon the happening of one of the five triggering events, there is a valuation date.
[Underlining added. Citations omitted.]
[36] The wife's submission that the Maher payment should be considered akin to a dowry also does not assist her. A dowry from the husband would be included as part of NFP since only gifts given by third parties after the date of marriage are excluded: FLA, s. 4(2)1.[2]
F. The Husband's Other Arguments
[37] The husband also advanced other attacks on the trial judge's equalization calculations.
[38] First, he argued that certain assets, particularly some real property in Iran, were not appraised. He submits that this resulted in inaccurate determinations of the parties' respective obligations. The trial judge found that these assets belonged to the husband. As such, it was his responsibility to provide appraisals for those assets: Family Law Rules, O. Reg. 114/99, r. 13(3.3) (as they appeared from June 10, 2015 to June 22, 2016). Though there were no appraisals, the trial judge's valuation of the assets was not arbitrary. He used what he found to be their purchase price for their value, which was substantially less than what the wife claimed in her evidence. As such, the husband benefitted from this determination since it reduced his NFP.
[39] Second, the husband submitted the trial judge double-counted the effect of the Maher payment on the husband's NFP as the Form 13B Financial Statement in the trial record shows the Maher payment both as an excluded asset and a debt existing on the date of marriage. While this is so, the resulting numbers indicate the trial judge treated the Maher payment solely as excluded property.
[40] Third, he submits there was an inadequate evidentiary base for the post-separation adjustments. I do not agree. The trial judge was entitled to accept the testimony and documentary evidence of the wife. There is no basis for interfering with these factual determinations by the trial judge.
G. The Equalization Payment in This Case
[41] The Maher payment must be included in NFP and the equalization order varied as a result. The wife's Form 13B Financial Statement in the record was not calculated correctly. However, based on the data in the statement as varied by the trial judge, and before considering the Maher obligation, the husband and wife had net assets of $214,990 and -$17,210, respectively. Since the trial judge treated the Maher obligation as "excluded property", he deemed the wife's NFP to be zero pursuant to s. 4(5) of the FLA. As a result, the trial judge calculated the equalization payment to be $107,495.
[42] Properly including the Maher obligation as part of NFP reduces the husband's net assets by $79,580 and increases the wife's net assets by $79,580. Accordingly, the parties' NFPs are $135,410 and $62,370, respectively. This obviates the need to rely on the deeming provision as the wife has a positive NFP. The resulting equalization payment is $36,520.
[43] Counsel for the wife pointed out that the Maher payment needs to be actually paid even if it is included in equalization. I agree. The Maher payment included in the equalization calculation is a demand obligation with a paper value. Collection of the demand obligation is not an equalization issue but a debt collection issue. This can be seen clearly by considering the situation where, during the marriage, the husband endorses over to the wife a third party's promissory note. The third party's promissory note would be included in equalization, and afterwards the wife could collect the debt from the third party. The same reasoning applies to the husband's own promissory Maher obligation in this case. The wife is entitled to collect the debt owed to her. Thus the wife is entitled to an equalization payment of $36,520 plus post-separation adjustments of $44,449.93 plus realization of the Maher obligation of $79,580 for a grand total of $160,549.93.
H. Conclusion
[44] I would allow the appeal and vary paragraph one of the judgment below to order a payment of $116,100 composed of an equalization payment of $36,520 and $79,580 in realization of the promissory Maher obligation included in the equalization calculation.
[45] The husband was successful on the family law issue of whether the Maher obligation should have been included in equalization. However, the wife was successful on the collection issue and obtained an order allowing her debt collection claim. As success is divided, I would not make an order as to costs of the appeal.
Released: November 2, 2017
R.G. Juriansz J.A.
"I agree John Laskin J.A."
"I agree K. Feldman J.A."
Appendix A: The Maher dated May 18, 1995
[1] A copy of a translation of the Maher, as filed in Tab 11 of the Appellant's Exhibit Book, is attached in the appendix to these reasons.
[2] See also Berta v. Berta, 2015 ONSC 1493, at para. 21, reversed on other grounds 2015 ONCA 918, where the trial judge held that the wife's position that gifts from her husband during marriage were excluded from NFP "had no chance of success in law." This court reversed the costs award on other grounds, but agreed at paras. 95-96 with the trial judge that the wife's "untenable positions regarding the parties' NFPs" was "amply supported by the evidentiary record."
