Turk v. Turk

Ontario Reports Court of Appeal for Ontario Watt, B.W. Miller and Nordheimer JJ.A. December 6, 2018

143 O.R. (3d) 661 | 2018 ONCA 993

Case Summary

Family law — Domestic contracts — Setting aside — Trial judge finding that respondent failed to declare certain assets before parties executed separation agreement but that those assets were not "significant" for purposes of s. 56(4) of Family Law Act as non-disclosure had no bearing on equalization or support provisions of agreement — Trial judge not erring in declining to set aside agreement under s. 56(4) — Family Law Act, R.S.O. 1990, c. F.3, s. 56(4).

Following their separation, the parties resolved their financial issues through mediation, resulting in the execution of a separation agreement. Four years later, the appellant sought to set aside the separation agreement under s. 56(4) of the Family Law Act on the basis that the respondent had failed to disclose significant assets. The trial judge found that the respondent had failed to disclose certain assets but dismissed the application. She found that, although the value of the non-disclosed assets may have been considerable, they were not "significant" for the purposes of s. 56(4) in the context of the negotiation of the settlement agreement. The appellant appealed.

Held: The appeal should be dismissed.

Determining the significance of non-disclosed assets is not a purely mathematical exercise of comparing the value of the non-disclosed assets against the value of the disclosed assets. Rather, as the trial judge recognized, the term "significant" must be measured in the context of the relationship between the parties and the surrounding circumstances. The trial judge found that the non-disclosed assets had no bearing on equalization and that they were irrelevant to support as the parties had agreed to a level of support that was not based on actual income, but on an amount much higher than actual income. It was open to the trial judge to find that more disclosure would not have changed the outcome of the mediation for the appellant and that the undisclosed assets were not significant.

Cases Referred To

Statutes Referred To

Family Law Act, R.S.O. 1990, c. F.3, s. 56(4)(a)

Rules and Regulations Referred To

Federal Child Support Guidelines, SOR/97-175, s. 7

Counsel

Lorne H. Wolfson, for appellant.

Heather Hansen, Stephen Grant and Jenna Beaton, for respondent.

Decision

APPEAL from the order of Horkins J., 2017 ONSC 6889 (S.C.J.) dismissing an application to set aside a separation agreement.

Reasons for Decision

[1] BY THE COURT: -- The parties were married for nearly 19 years and had two children. Following their separation in 2008, they resolved all financial issues through a lengthy course of mediation in which both parties were represented. The resulting separation agreement was executed in April 2010, and the parties divorced approximately six months thereafter.

[2] The terms of the separation agreement included provisions that the respondent, Stuart Turk, pay the appellant, Jennifer Turk, $10,000 per month in child and spousal support, and pay all of the children's s. 7 of the Federal Child Support Guidelines, SOR/97-175 expenses. The appellant agreed to pay the respondent an equalization payment of $181,578.

[3] Four years later, the appellant sought an order setting aside the separation agreement under s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3, on the basis that the respondent failed to disclose significant assets. Section 56(4)(a) states that 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 . . . existing when the domestic contract was made".

[4] In place of the separation agreement, the appellant sought various orders equalizing net family property ("NFP"), imputing income to the respondent, and fixing increased spousal and child support.

[5] The trial judge agreed that the respondent had failed to disclose interests in certain family businesses that he had acquired during the marriage. She found that he had also failed to disclose payments that he received on a shareholder loan and capital income he received from the sale of shares by a corporation he controlled. The trial judge concluded that the non-disclosure was blameworthy -- part of the respondent's ongoing indifference to his obligations. Nevertheless, the trial judge dismissed the application. She found that although the value of the non-disclosed assets may have been considerable, they were not "significant" in the sense required by s. 56(4) in the context of the negotiation of the settlement agreement. The trial judge relied on two reasons in coming to this conclusion.

[6] First, the trial judge accepted the evidence of the lawyer who negotiated the separation agreement on behalf of the appellant that the appellant had obtained a very favourable settlement: the respondent had agreed to provide spousal and child support far in excess of what the appellant could likely have achieved at trial based on the respondent's actual income. Although the respondent's annual income had averaged $421,000 over the three years prior to separation, by the time the marriage ended his business had failed and he was no longer earning any income. Although the parties agreed to support based on an income of $421,000, by that time the respondent was effectively living off of a $180,000 payment that his father gifted to him annually.

[7] Second, the trial judge found that the respondent made substantial concessions in the mediation, such that it would not be reasonable to simply input the value of the non-disclosed assets and assess the impact on the equalization payment or support. In the trial judge's words, "too many monetary compromises were made during mediation" for this to be a realistic approach. The trial judge relied, for example, on the respondent not claiming deductions for the value of assets he brought into the marriage, not listing outstanding business loans from his father among his liabilities, and not requiring the appellant to include jewelry worth between $300,000 and $400,000 among her assets. Additionally, the trial judge was unwilling to assume that if the parties had introduced other assets into the negotiation, all other parts of the separation agreement would have remained unchanged. For example, the respondent may have been unwilling to agree to pay 100 per cent of the substantial s. 7 expenses, may have insisted on imputing income to the appellant, and may not have continued the substantial gratuitous payments he made to the appellant even after the separation agreement was concluded.

[8] The appellant argues the trial judge made multiple errors in her analysis under s. 56(4). We do not agree and, for the reasons set out below, dismiss the appeal.

[9] The appellant argues that the trial judge erred by placing an onus on her to inquire as to the existence and value of the respondent's assets. While incomplete disclosure rightfully attracts the risk that an agreement might be set aside, s. 56(4) makes it clear that failure to disclose even a significant asset does not necessarily attract that consequence.

[10] The appellant also argues that the trial judge erred in determining whether the non-disclosed assets were "significant".

[11] The trial judge is said to have answered the wrong question -- whether the non-disclosure was significant -- instead of whether the non-disclosed assets were themselves significant. But this seems to be a purely semantic distinction. It is the significance of the non-disclosed assets that makes the non-disclosure itself significant. Determining the significance of non-disclosed assets is not, as the appellant argued, the purely mathematical exercise of comparing the value of the non-disclosed assets against the value of the disclosed assets. Rather, the trial judge appropriately relied on case law finding that "the term significant must refer and be measured in the context of the entire relationship between the parties" (see Currey v. Currey, 26 R.F.L. (5th) 28), and that significance "should not be considered in isolation of all of the surrounding circumstances" (see Bruni v. Bruni (2010), 104 O.R. (3d) 254, 2010 ONSC 6568).

[12] The most important circumstance, for the trial judge, was that more disclosure would not have "changed the outcome" for the appellant. The trial judge found that the assets in question had no bearing on equalization. The non-disclosed assets were also irrelevant to support because the parties had agreed to a level of support that was not based on actual income, but on an amount much higher than what would be warranted by actual income.

[13] These findings also provide a complete answer to the appellant's other complaints: that the trial judge erred by considering each excluded asset in isolation rather than considering their collective value, and by failing to compare the value of the non-disclosed assets as against the value of the respondent's total assets.

[14] In short, the trial judge correctly stated and applied the law. She made no error in assessing the significance of the assets within the context of the surrounding circumstances that she detailed. She concluded that more disclosure would not have changed the outcome of the mediation for the appellant, and that the assets that the respondent did not disclose were not significant. That finding was available on the record before us, and there is no basis for us to interfere with it.

[15] Furthermore, the finding of significance, as the trial judge correctly stated, is only the first step in a s. 56(4) analysis: Virc v. Blair (2014), 119 O.R. (3d) 721, 2014 ONCA 392. Once a party seeking to set aside a separation agreement has established that s. 56(4) applies, the court must still determine whether it should exercise its discretion to set aside the agreement. The criteria set out in Dochuk v. Dochuk, 44 R.F.L. (4th) 97, provide a useful guide for this exercise of discretion. Although the trial judge did not proceed to this further step, and did not need to given her finding that s. 56(4) was not engaged, her conclusion on that question would be obvious from her treatment of the various Dochuk factors. In particular, her findings concerning the absence of duress and the substantial benefits that the appellant received under the separation agreement indicate that the trial judge would not have exercised her discretion to set aside the agreement.