ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: FS-11-366480
DATE: 2012/02/16

B E T W E E N:

Dana Stupka Applicant - and - Vit Stupka Respondent

Jacqueline M. Mills, for the Applicant In Person

HEARD: February 13, 14 and 16, 2012

Moore J.

REASONS FOR JUDGMENT

[ 1 ] By Order of Aston J [1] the issue of the marriage contract in this matter and the extent to which it determines the rights and obligations of the parties, if at all, was bifurcated from all other issues in the matter and directed to a trial of the issue of whether the marriage contract dated April 9, 1998 is valid and enforceable as a domestic contract. This decision determines that issue.

Background

[ 2 ] Dana Stupka seeks to set aside the marriage contract pursuant to the provisions of Section 56(4) of the Family Law Act [2] for failure on the part of her husband, Vit Stupka, to disclose significant assets and liabilities before the execution of the contract and because she did not understand the consequences of the agreement.

[ 3 ] In the alternative, Ms Stupka relies on section 33(4) of the Family Law Act to set aside the agreement on the basis that the waiver of her right to support contemplated by the agreement has produced unconscionable circumstances for her and the two children of the marriage.

[ 4 ] Ms. Stupka was born in the Czech Republic on 24 May 1966; she is now 45 years old. Her marriage to Mr. Stupka was her first and his second marriage. Together they had two children: Olivia, born on 7 January 1999 and now grade 7 student and Tiffany, born on 20 November 2003.

[ 5 ] Ms. Stupka received a basic education through grade 9 and then studied hairstyling for 3 1/2 years. She had no schooling in the English language and no one in her home spoke English growing up.

[ 6 ] She worked as a hairdresser for eight years before coming to Canada in January of 1992. Upon arrival in Canada, she worked as a nanny for a young family in Palgrave, Ontario. With the assistance of a friend who lived nearby and who spoke both the Czech language and English, she began to slowly learn English. She described her ability in English as about zero during the nine months she worked with that family. She then went to work with another family, in Whitby. She worked with that family as a nanny for about two years. She slowly improved her English on the job.

[ 7 ] After she became a landed immigrant, Ms Stupka worked in hair salons, including one where she worked with a Czech speaking woman. Mr. Stupka was the landlord. There were some clients who spoke in the Czech language but she had very little communication with English-speaking clients.

[ 8 ] She met Mr. Stupka in 1995 and they communicated in the Czech language. Although he did not recall whether or when they co-habited before their marriage in 1998, I accept Ms Stupka’s evidence that they lived together for almost three years, from the fall of 1995 until 14 April 1998, when they married in Las Vegas, Nevada.

[ 9 ] Ms. Stupka described her English now as 110% better than it was in 1998 but she still has some limitations in her ability to understand and express herself in English. I found Ms Stupka to be bright, responsive and balanced; an impressive witness on her own behalf.

[ 10 ] She testified that the marriage contract was Mr. Stupka's idea. He told her that when he left his first marriage, he left with nothing, not even a spoon to stir his coffee with. She added that because she loved him and because he insisted that the contract must be signed or he would not marry her, she agreed to sign the marriage contract, even though she did not understand it.

[ 11 ] In cross examination, Mr. Stupka asked Ms. Stupka to agree that he had verbally explained to her about his assets and liabilities. She answered “yes but not all, obviously".

[ 12 ] She added that he did not ever show her any papers. He responded that if she couldn't understand the English language, seeing papers would not have affected her understanding of the marriage contract. She agreed that she would not have understood the papers by just looking at them but added that she trusted Mr. Stupka; it was his wish that the agreement be signed. He pressured her to do it. She repeated that she signed the agreement out of trust. She added that he knew that she did not understand the language and he took advantage of her.

[ 13 ] She first saw the document on the day he presented it to her in an envelope and directed her to see Mr. Douglas Phillips, a lawyer, about it. She did not open the envelope or read the agreement before seeing Mr. Phillips about it. She had never met Mr. Phillips before .

[ 14 ] Mr. Stupka told her that the document had to be signed in the presence of a lawyer or notary or they would not be married.

[ 15 ] By 9 April 1998, some hotel and flight arrangements for the wedding had been made but not yet finalized. Mr. Stupka made the appointment for Ms. Stupka to see Mr. Phillips and she saw him within a day or two. She was not aware then that Mr. Phillips had done legal work for Mr. Stupka in the past.

[ 16 ] Ms. Stupka met with Mr. Phillips for about 30 minutes at most, she testified. He did not explain to her how the Family Law Act worked. He did not explain equalization payments. He did not explain the concept of sharing in the growth of assets. He did not explain spousal support to her or that by signing the agreement she was giving up rights to spousal support. He read the paragraphs in the agreement to her and told her that she would be waving "this or that" as he did so, she testified, but he did not explain her rights and any alternatives that might be open to her.

[ 17 ] Ms. Stupka did not ask Mr. Phillips questions about the agreement because, she said, she did not understand the agreement. Ms. Stupka did not pay Mr. Phillips. He said that he would straighten that out with Mr. Stupka through payment or barter. Mr Phillips did not testify at this trial. Not only was Ms Stupka’s recollection of her inter-action with Mr Phillips described clearly and concisely in her testimony, it was uncontroverted evidence and I accept it. She did not see the agreement again until after this litigation had been commenced.

[ 18 ] Only five days separated the date of the agreement and the date of the wedding.

[ 19 ] Ms. Stupka was shown the financial documents contained within the documents brief [3] . At no time before she signed the marriage contract on 9 April 1998 had she seen any of the financial statements, balance sheets, shareholder loan accounts, income tax returns or other documents confirming of Mr Stupka’s assets, liabilities, income or expenses.

[ 20 ] Mr. Stupka did not tell her, for example, that the company he ran owed him $381,000 at that time. He told her that he owned the property on Kingston Road but she did not know what that property was worth. He told her that he owed a mortgage upon the property of $571,000.

[ 21 ] She knew that he bought a cottage property from his first wife after the marriage contract was signed. She did not know if he had any ownership interest in that property at the time of the marriage contract.

[ 22 ] The parties separated in January of 2010 but they continued to live in apartments in the same building on Kingston Road where Mr. Stupka's business was located. Ms. Stupka and the two children did not pay rent. They moved out on 30 May 2011, after the building was sold.

[ 23 ] Mr. Stupka paid $200 per week to cover the cost of food, school supplies, clothing, transportation and all activities. It was not enough. Ms. Stupka went into debt. Her father assisted in selling an apartment she inherited from her grandmother in the Czech Republic. She realized $55,500 but there is nothing left from that money now. Again she is in debt, she testified.

[ 24 ] Ms. Stupka did not work in 2010. She attended a nine month course in finance at Everest College. After graduation, she looked for jobs at banks but she lacked business experience and did not obtain a job. As well, she was concerned that banks require entry-level staff to work weekends and evenings and with her child care responsibilities, she could not do that. Instead, she found a job with Merry Maids doing housecleaning five days a week. She is not yet working full time and earns minimum wages of about $250-$300 per week. She has held this job since 26 November 2011.

[ 25 ] Robert Smith testified that he has known Ms Stupka since the year that she immigrated to Canada. His wife and Ms Stupka each came from the Czech Republic. They became good friends and saw one another frequently.

[ 26 ] Mr Smith is not of Czech heritage; he described his Czech language skills as rudimentary. He spoke to Ms Stupka only in English and described her facility with English before April of 1998 as being quite limited. She could carry on a simple conversation in English, order meals and ask for directions but there were big gaps in her conversations, he recalled. In the months and years before the marriage she would become lost in the course of conversations. She did not have a large vocabulary in English.

[ 27 ] He testified that Ms Stupka had difficulty with the written word at that time. So, for example, he taught her to drive a car but had to explain the content of the driving manual to her repeatedly and by making drawings for her to learn from. She did not understand explanations in written form in the manual or in cook books either.

[ 28 ] I found Mr Smith’s evidence to be detailed, fair and balanced and I accept it without reservation.

[ 29 ] Mr Stupka represented himself at this trial and he testified. It must be noted that Mr Stupka comported himself throughout this trial in a composed, respectful, dignified and reasonably efficient manner. Advocacy in a courtroom setting is a complicated art that challenges even trained and experienced lawyers. Nevertheless, Mr Stupka came well prepared and accomplished the presentation of his case effectively.

[ 30 ] He explained that he had been married in 1970 and lived with his wife and three children in Switzerland. They immigrated to Canada in 1986.

[ 31 ] Mr. Stupka had been in business and Switzerland in heating and air-conditioning but in Canada he felt that that business would be difficult for him given his limited command of English then. He also considered and rejected a retail hardware business and opted for his third choice, repairing and selling small machines.

[ 32 ] He bought Highland Creek Small Engines. It had 80 years of tradition, he said, and he bought it for $86,000. He then sent his wife over to Canada to purchase a home near the business location. He explained that he put the house in his wife's name and the business and property in his own name. Later they bought a cottage for $23,000 and the wife owned it.

[ 33 ] Mr. Stupka bought the property at 297 Old Kingston Rd. in 1992. The property had been listed for sale at $1,300,000 but because of market conditions, he managed to purchase it for $550,000. He then had an architect draft plans for 1500 ft.² addition and moved his business into the new premises in 1992. He incorporated the business as Vitag Initiative Inc. He was the only shareholder.

[ 34 ] He explained that he bought high quality product lines and thereby increased the value of his business by $200,000 to $250,000. The stress of the business produced problems in the marriage and he explained that he and his wife decided to separate and to distribute their assets between them. She chose the house and the cottage. He kept the business and property, subject to a mortgage of $132,000. He also had a shareholders loan from the business at the time worth close to $500,000, he said.

[ 35 ] After his marriage to Ms. Stupka in 1998, they lived in a 900 ft.² apartment on the property. At his encouragement and request, Ms. Stupka stayed home to raise the children. He felt that that was a privilege and a benefit for the children. He described their lifestyle as modest. Until the fall of 2009, he described the marriage as great and he said that he felt like the happiest man in the world.

[ 36 ] Mr. Stupka testified that it is his belief, in his heart and soul as he put it, that the marriage contract was entered into in good faith and that it should be accepted by the court as having been signed by two people authorized to sign it.

[ 37 ] Mr. Stupka expressed great difficulty in accepting that Ms. Stupka had difficulty understanding the English language at the time the contract was entered into. He does not see that as a reason for the contract not to be considered to be valid and enforceable.

[ 38 ] Mr. Stupka also testified that the concept of spousal support is gender neutral; as such, with Ms. Stupka's potential, health and the age difference between them, she should be supporting him.

[ 39 ] Mr. Stupka confirmed in cross examination that he did not provide his income tax returns to Ms. Stupka before the marriage contract was drawn and executed. He did not provide business financial statements to her at any time. He provided her with verbal information only about what he said he owed and owned.

[ 40 ] He told her that he bought the commercial property in 1992, that it was worth between $700,000 and $800,000 in about 1997 and it was then subject to a mortgage with “small numbers”. He told her the cottage was worth $40,000 several years before the time of the marriage contract.

[ 41 ] Mr. Stupka identified the transfer deed and charge or mortgage document for the cottage, dated in November of 1997. Specifically, he identified reference to Mr. Phillips as his lawyer on the transaction. This transaction was completed only months before the marriage contract, he agreed.

[ 42 ] Mr. Stupka agreed that Mr. Phillips also represented him in the purchase of a property in Campbelford, Ontario. He sold the cottage in 2000 for $76,000 and together with money he realized from fixtures purchased in Europe, he purchased a house in Campbelford. His plan was to retire to that house.

[ 43 ] With respect to the marriage contract itself, Mr. Stupka testified that he first went to a lawyer across the street to draft the agreement. That lawyer wanted $25,000 and so Mr. Stupka did not hire him. He testified that he did not even think of hiring Mr Phillips at that time, or at any time, to represent him on the marriage contract matter.

[ 44 ] He then consulted Mr. Charles Dolman. He attended upon him with Ms. Stupka and they spoke about the contract. Mr. Dolman appeared interested but shortly thereafter he called on the phone to say that he would not take the retainer. He agreed that Mr. Dolman did not provide Ms. Stupka with any legal advice in connection with the proposed agreement.

[ 45 ] Mr Stupka then retained Ms Esme Christine Lall. He told Ms. Lall that he needed his assets protected and asked her to draw a marriage contract. He agreed that Ms Lall did not provide Ms. Stupka with any legal advice in connection with the contract.

[ 46 ] Mr. Stupka denied that he applied any pressure on Ms. Stupka to sign the agreement but he did agree that he told her that if she wanted to go to Las Vegas and become married she must sign the marriage contract first.

Positions of the Parties

The Applicant’s Position

[ 47 ] Ms. Stupka submits that the law is clear that a marriage contract may be set aside on a number of grounds including that it will produce unconscionable circumstances as a result and that a situation in which Ms. Stupka would receive the modest support payments proposed by a man with assets of over $1 million, whereas she has little or no income and has had to spend her inheritance in order to support herself and the children, produces an unconscionable outcome. Indeed, Ms. Mills points to the endorsement of Greer J [4] confirming the unconscionability of the situation prevailing four months ago.

[ 48 ] In addition, Ms Stupka relies upon the provisions of section 56(4) of the Family Law Act which provide 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, or significant debts or other liabilities, existing when the 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.

[ 49 ] The applicant submits that the dispute here revolves around what disclosure was made and what did Ms. Stupka understand?

[ 50 ] Ms. Stupka asserts that she did not understand the contract and did not receive full disclosure of Mr. Stupka's financial situation; he argues the contrary. Ms. Stupka submits that it is precisely to avoid these disputes that parties normally append financial disclosure documents to domestic contracts.

[ 51 ] Here, Mr. Stupka did not provide financial disclosure documents at any time to his lawyer, Ms. Lall, or to Ms. Stupka or to Mr. Phillips. Ms. Stupka submits that it is not sufficient for Mr. Stupka to say that he told her about his financial situation. She submits that she did not know the value of Mr. Stupka's business or properties. Because Ms. Stupka did not know the particulars of significant assets, she was unable to discuss such matters with Mr. Phillips in the short time that she spent with him.

[ 52 ] Ms Stupka submits that the importance of financial disclosure is precisely in order that a party can get proper and effective legal advice upon rights and obligations before signing a domestic contract. Here, Mr. Phillips had incomplete information. Having acted on the purchase of the cottage, Mr. Phillips may have known about it but there is no suggestion that he spoke to Ms. Stupka about that property or any others.

[ 53 ] In fact, Ms. Stupka submits that Mr. Phillips must have found himself in a very difficult position indeed in purporting to provide independent legal advice to Ms. Stupka in 1998, only months after having acted for Mr. Stupka on one transaction and having acted for him on other business transactions in the past. Ms. Stupka submits that Mr. Phillips could not possibly have given independent legal advice of value to Ms. Stupka. On top of which, the evidence establishes that Ms. Stupka and Mr. Phillips spent only about 30 minutes together in reviewing the contract, hardly enough time in order to understand it and the applicable law.

[ 54 ] In addition, Ms. Stupka submits that it is incredible that Mr. Stupka tried three times to find a lawyer to prepare this contract without ever thinking of retaining Mr. Phillips. It is submitted that Mr. Stupka wanted Mr. Phillips to meet with Ms. Stupka in the hope and expectation that his advice would favour her executing the agreement.

[ 55 ] Ms. Stupka points out that she was given the contract within only 24 hours of its execution. She gave the executed copies of the agreement to Mr. Stupka and has had no chance to refer to it afterwards, until these proceedings were brought.

The Respondent’s Position

[ 56 ] Mr. Stupka acknowledged that the marriage contract was prepared on his behalf. He explained that his reasons included his concern about financial setbacks that he experienced following his first marriage. He was also concerned about the age difference between Ms Stupka and himself and for the preservation of his assets for his future. As he put it, this document was like an insurance policy for him.

[ 57 ] He acknowledged that the marriage contract was a one-sided agreement but insists that he explained his significant assets and liabilities to Ms. Stupka verbally before the agreement was drawn and signed.

[ 58 ] He insists that production of financial records or disclosure documents is not required in a situation where a general awareness of the financial situations of the parties is known. In addition, he submits that if Ms. Stupka had asked for information or documents, he would have provided them. She did not do that at the time the agreement was signed and she did not do that at any time during the 11 years of marriage. He denied exerting pressure to sign the agreement.

[ 59 ] Mr. Stupka argued that each case should be weighed individually and considered at the time the marriage contract was signed, not 14 years later. In his submission, two people who are old enough to vote and to sign an agreement should have the agreement upheld by the court. This, he submits was an agreement entered into through free will.

The Law

[ 60 ] The leading case in this area of the law is LeVan. [5] In that case, a wife consulted two lawyers before signing a marriage contract. The first lawyer advised her not to sign the agreement. The court said this of her inter-action with the second lawyer:

Ms. Heakes met alone with the wife for approximately one hour two days before the wedding. During this meeting the wife's disclosure statement was prepared and a change was made to the contract to reflect that the house deal had fallen through. As such, the trial judge found that it was unlikely that the contract was reviewed in detail. Ms. Heakes relied entirely on documents provided by Ms. Bales, which consisted of the same documents provided to Ms. Ross, as well as correspondence between counsel…..

The marriage contract was signed on the day the wife met with Ms. Heakes. The husband testified that up to the day the contract was signed, he was continuing to tell the wife that if the contract was not signed, there would be no marriage. As the trial judge found, in the contract that was signed, the wife's ability to claim spousal support, contrary to the model marriage contracts, was significantly compromised. She gave up her right to share in the increase in value of virtually all the husband's assets without knowing the husband's income from all sources and without having any idea of his net worth. Moreover, Ms. Heakes also did not possess this information at the time she provided legal advice to the wife for the purpose of signing the marriage contract. Even though she testified that she would not advise a client without financial disclosure, she failed to request financial disclosure from Ms. Bales. Consequently, Ms. Heakes was in no position to advise the wife in a meaningful way about the marriage contract. [6]

[ 61 ] I also accept the statement of Mesbur J regarding the essential element of marriage contracts:

Marriage contracts are a device by which parties can opt out of most or part of the Family Law Act , its property provisions, its support provisions, or both. Fundamental to a choice to opt out of the legislative scheme is a clear understanding of what one's rights and obligations might be if there were no marriage contract. It is in this context that financial disclosure is critical. [7]

[ 62 ] And this too is apt:

Another concern about the contract is the extent of Elena’s actual understanding of it. She could not speak English and although Mr. Wengle arranged for the agreement and his advice to be translated [8] to her, there is no evidence of the adequacy of the translation or of Elena’s actual understanding of what was being translated. [9]

[ 63 ] This too is important to consider in any case of this type involving the negotiation, execution and application of contracts that purport to limit or eliminate rights that parties would otherwise acquire by operation of law in the event of marriage breakdown:

…a fairly negotiated agreement that represents the intentions and expectations of the parties and that complies substantially with the objectives of the Divorce Act as a whole should receive considerable weight. In an originating application for spousal support, where the parties have executed a pre-existing agreement, the court should look first to the circumstances of negotiation and execution to determine whether the applicant has established a reason to discount the agreement. [10]

Discussion

[ 64 ] For the reasons articulated in his evidence at trial, Mr. Stupka was anxious to protect and preserve his income and assets from any obligation that might otherwise apply to share them with Ms. Stupka in the event that their marriage might not survive his lifetime. Toward this end, he sought and obtained a marriage contract and insisted that there would be no marriage if Ms. Stupka refused to sign it.

[ 65 ] There is no suggestion in the evidence that Mr. Stupka’s intentions were malevolent or in any way designed to intentionally harm Ms. Stupka financially, or at all. While his position is understandable, it is selfish and clearly at odds with the provisions and purpose of Sections 33 or 56 of The Family Law Act .

[ 66 ] The agreement is entirely one-sided, benefiting only Mr. Stupka, without reference to the best interests of Ms. Stupka or the two children of the marriage.

[ 67 ] By its terms and, in any event, in accordance with the applicable law, the agreement required that each party completely disclose to the other in advance of the execution of the agreement the nature, extent and probable value of all significant assets and all significant debts or other liabilities existing at the date of the contract.

[ 68 ] While I accept that Mr. Stupka made some oral disclosure in this regard, I find that his disclosure was neither complete nor entirely accurate.

[ 69 ] He did not provide information about his financial well being, his income or the almost $400,000 that he was owed by his company.

[ 70 ] It is no answer for Mr. Stupka to say that he did not provide information or documentation to Ms. Stupka because she did not ask.

[ 71 ] Mr. Stupka was a successful businessman who benefited from a clear knowledge and power imbalance at the time that he insisted this contract be made and throughout the marriage.

[ 72 ] Furthermore, I find that Mr. Stupka impeded the process by which Ms. Stupka might have obtained independent legal advice on this agreement.

[ 73 ] That Mr. Phillips accepted at least two retainers from Mr. Stupka before April of 1998 and one afterwards, without disclosing the fact to Ms. Stupka, clearly taints his ability to provide independent advice.

[ 74 ] Regardless, Ms. Stupka's evidence is clear and convincing; she simply did not come away from her one half hour spent with Mr. Phillips with an understanding of her legal rights absent or under the marriage contract.

[ 75 ] I accept that her decision to sign the agreement was driven by Mr. Stupka’s insistence that there would be no marriage if she refused and by the trust that her love and affection moved her to invest in him.

[ 76 ] Ms Stupka has satisfied the burden upon her to establish that she did not understand the nature and consequences of the agreement.

[ 77 ] Words and concepts in this agreement such as equalization of net family properties and spousal support are by no means simple; a meaningful understanding of this agreement was beyond Ms Stupka’s ability in April of 1998.

Disposition

[ 78 ] Ms Stupka’s application succeeds. The marriage contract of 9 April 1998 is hereby declared invalid and unenforceable as a domestic contract within the meaning of Section 56 of the Family Law Act . The agreement in question is set aside specifically because Mr Stupka failed to disclose to Ms Stupka his significant assets and significant debts and other liabilities existing when the domestic contract was made and because Ms Stupka did not understand the nature and consequences of the domestic contract when she executed it.

[ 79 ] In light of my decision, it is unnecessary to make a finding on whether the domestic contract here should be set aside under Section 33(4) of the Family Law Act .

[ 80 ] Ms Stupka shall recover costs of this application in an amount to be agreed upon or fixed.

Moore J.

Released: 16 February 2012

COURT FILE NO.: FS-11-366480
DATE: 2012/02/16

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N:

Dana Stupka Applicant - and - Vit Stupka Respondent

REASONS FOR JUDGMENT MOORE J.

Released: February 16, 2012

[1] Dated 17 August 2011
[2] R.S.O. 1990, c. F.3
[3] Trial Exhibit 1
[4] Dated 27 October 2011
[5] LeVan v. LeVan , 2008 ONCA 388 , 2008 CarswellOnt 2738 (O.C.A)
[6] Ibid, at paras 27 & 28.
[7] Patrick v. Patrick, 2002 CarswellOnt 593 (S.C.J.), at para 52 .
[8] At no time was Ms Stupak shown a Czech language translation of the marriage contract in the instant case.
[9] Ibid, at para 55
[10] Miglin v. Miglin , 2003 SCC 24 , 2003 CarswellOnt 1374 (S.C.C.)