COURT FILE NO.: F-734-05
DATE: 2013-11-14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Patricia DiLeonardo
Applicant
- and –
Luciano DiLeonardo
Respondent
Jerry J. Chaimovitz, for the Applicant
Jerome J. Bergart, for the Respondent
HEARD: May 6, 7, 8, 10, 16, 17, 21, June 10, and August 8, 2013
the honourable justice j. w. Scott
J U D G M E N T
[1] Patricia DiLeonardo and Luciano DiLeonardo married on October 30, 1999, after having lived common-law from September of 1997. Four days later, on November 3, 1999, they executed a marriage contract that provided for a regime of separate property and no spousal support unless they remained married for at least ten years. They separated on May 6, 2003, three and one-half years later.
[2] The issue at this point in the litigation is the validity of their marriage contract. If the Court determines that it is valid, apparently that will end the litigation. If it is determined not to be valid, then this case will continue in order to address spousal support and the equalization payment (following a settlement conference on those issues).
Background
[3] The parties met when the applicant commenced working for McArthur’s Janitorial, a company owned by the respondent. This was in or about 1991 when she was 31 years of age and the respondent was about 28. At that time, both parties were married and living with their then spouses.
[4] Prior to that job, the applicant had been a waitress at the Cayuga Hotel and through that employment she had come to know Larry Thibideau (as he then was) and Brian Gallagher, two local lawyers, who attended the hotel regularly for lunch together.
[5] According to the testimony of the applicant, she and the respondent commenced an intimate relationship with one another in 1992 or 1993, although at the time they were still with their spouses. While the applicant’s separation and divorce from her first husband appears to have gone smoothly, the respondent’s situation was much more acrimonious. As a result, the applicant suggested to the respondent that he use her lawyer, Larry Thibideau. The respondent took that advice. Larry Thibideau confirmed in his testimony that resolution of the respondent’s first marriage was difficult. He also advised the Court that while addressing the issues that seemed to flow from that litigation, the applicant attended with the respondent on many occasions. While the primary instructions came from the respondent, Mr. Thibideau indicated that at the meetings there would be conversation between the parties and at times the applicant would correct what the respondent was saying.
[6] While the respondent was inconsistent in his testimony concerning his feelings about the resolution of the issues from his first marriage, I was left with the impression that he felt that he had been, perhaps, overly generous. Clearly he and the applicant had discussions about his views at the time and appeared to agree that when they married there would be a marriage contract to avoid any potential for this type of strife if they should separate. The applicant confirmed in her testimony that she was not interested in any claim to the businesses owned by the respondent at the time of marriage, or their growth, following marriage.
[7] Prior to their wedding, the parties did attend at the offices of Mr. Thibideau for the purpose of providing to him instructions for preparation of a marriage contract. Each party provided evidence as to their recollection of what occurred at this meeting and, additionally, Mr. Thibideau and Brian Gallagher, the lawyer who was to provide independent legal advice to the applicant, also testified.
[8] According to the applicant, the respondent mentioned that they should have a “marriage agreement” and she too felt the respondent should be entitled to protect what he had before the marriage, and any growth in those assets. She testified that she and the respondent attended at Mr. Thibideau’s office and had some “off the record discussions” about what would go into the contract. She was firm in her testimony that there were no discussions concerning spousal support. According to the applicant, Mr. Thibideau made it clear that he was counsel for the respondent and that she would require independent legal advice with respect to signing the contract, when drafted. The applicant testified that the next attendance with respect to the contract she had was at Brian Gallagher’s office for independent legal advice. Ms. DiLeonardo indicated that he stated to her that they needed to go over the contract, to which she responded “we don’t need to, I know what’s in it. I’ll just sign it.” Again according to the applicant, that was exactly what occurred, following which Mr. Gallagher put the contract into a sealed envelope that she then immediately took back to Mr. Thibideau’s office. Once there, the respondent went in to see Mr. Thibideau, alone, and, after about ten minutes, the parties left that office together. Her testimony was that she never read the agreement, or even looked at it, until February of 2003 and that when she reviewed it then, she was surprised by the whole document, particularly by the fact that the respondent would be keeping whatever assets were in his name. Under cross-examination the applicant agreed that she did know what assets the respondent had at the time they married, even assets not specifically listed on the schedule in the contract such as DiLeonardo Construction, Millennium Renovations, Alpha Cleaning and McArthur Janitorial. While she indicated that she did not know what the respondent had in the bank, she acknowledged that she was aware that he had investments with Kevin O’Brien. When asked why she would not have read the agreement, she indicated, “I didn’t read it because I trusted Lou to do what we discussed.” She also stated, “I did sign it voluntarily but I wasn’t aware what was in it.” When questioned concerning Schedule “A”, the impression she gave the Court was that it really had not mattered to her what was in it, as from her perspective the purpose of the agreement was to make it clear that whatever the respondent had at that time was his alone.
[9] Brian Gallagher, a lawyer called in 1978 and practicing in Cayuga, was called to testify concerning his involvement with the applicant’s signing of the marriage contract. In giving his evidence, he noted that as the file was 14 years ago and was simply for independent legal advice, he no longer had it in his possession. He confirmed that he had no independent recollection and as such his responses were based on his usual protocols and patterns. Initially during his evidence, he indicated that if he were told by a person who was there for independent legal advice that he or she knew what was in the agreement and that they did not need to read it, he would accept that. During cross-examination however, he explained to the court what his usual protocol was and when referred to specific paragraphs within the agreement (8, 9, 10, 11, 12 and 17), he clearly was of the view that he likely would have discussed these clauses with the applicant. He testified that when he receives a document such as this one, he reviews it in advance and identifies the salient features so that when the client comes in he is able to ensure that he or she has an understanding of what is included. I infer from that response of Mr. Gallagher that while he might not read out each individual paragraph, his practice was, at the very least, to discuss the issues reflected in the contract. Under cross-examination, the testimony of the applicant was put to him, specifically that she had told him that there was no need to review anything and that she had simply signed it without any advice or discussion with him. Mr. Gallagher firmly asserted that “would be unacceptable to me, it would not have happened.”
[10] The respondent testified that it was the applicant who suggested the marriage contract. He stated that he and the applicant met with Mr. Thibideau with respect to providing instructions for the contract. While imprecise as to the number of times they saw him, he thought it was about twice. He specifically recalled Mr. Thibideau going over some of the “conditions” in the contract. He described that as a “draft” but stated there was not a physical copy provided. More likely, what he was referring to would have been a precedent or discussion of potential clauses. He testified that spousal support and a regime of separate property were both discussed. According to the respondent, inclusion of the spousal support term was something the applicant was adamant about, particularly after having been involved with the respondent and his negotiations with his first wife on this issue. In the end, it was his view that the marriage contract was drafted in accordance with the instructions the parties had provided.
[11] Finally, Larry Thibideau gave evidence concerning the marriage contract. Mr. Thibideau was called to the bar in 1972 and practiced law in Hamilton and then Cayuga until his appointment to the bench in 2000. Upon his appointment, his files were transferred to another lawyer. With respect to this specific file there was a copy of the marriage contract and the bill remaining in it. There were no notes, if they ever existed, in the file.
[12] Prior to involvement with the parties concerning the marriage contract, he had represented each of them with respect to their prior marriages. Concerning the respondent, Mr. Thibideau indicated that resolution of his first marriage had been both contentious and volatile. He indicated that the applicant often attended at some of the appointments with the respondent and that she was very supportive of the respondent during the process. He described them as being “an emotional unit”.
[13] Mr. Thibideau testified that both parties attended at his office and requested that he prepare a marriage contract for them. He stated, “The general instruction was pretty clear. I mean, … they intended that the marriage not trigger any financial consequences. I suppose that’s the easiest way of summarizing it.” He suggested that “Pat did not want to be seen as another first Mrs. DiLeonardo… she made it clear that she wasn’t going to be the kind of person that his [the respondent’s] first wife was….”
[14] While he had no notes with respect to the instructions he received, Mr. Thibideau indicated that he did have some memory of the consultation and he knew that they had both been present with him on at least two occasions, including the day the respondent signed. In his view, their instructions and the contract were unusual in two ways. First, it said nothing about children and secondly the monetary arrangements and asset provisions were different. He described both parties as actively involved in providing directions to him. When asked whether the agreement signed reflected the instructions he had received, Mr. Thibideau responded that it matched the final instructions, not the initial ones. By way of example, he pointed to the support clause. With respect to that, he noted, “This is the one where I mentioned earlier where the initial instructions may not have been the same as the final instructions. My best recollection is that the initial instructions were no support and I was concerned about whether or not that would be a contract that would stand a litmus test at least, if nothing else. So I believe I had discussions with them about some term, some length of time, that would after that time trigger support and that’s why it ended up the way it was.”
[15] Under cross-examination, Mr. Thibideau reiterated that the agreement did match the instructions he received. He noted:
Pat and Lou came in together. They sat down together in my office. They said, “This is what we want to do.” And they explained, “I don’t want any part of what he’s got now or in the future.” I questioned them about that. For instance, I questioned them about the support provision because they also said there’s going to be no support payable, as best as I can recollect. And I, I pointed out to them that perhaps that was not a good idea and therefore, the support arrangement, I believe, got changed at my instigation. The rest of it they seemed to understand, they seemed to know the purpose so it wasn’t a question – it wasn’t me questioning them and giving them examples and see how they reacted to those examples, they seemed to have it set in their mind what they wanted on the property angle.
[16] He acknowledged that Schedule “A”, being a list of the significant assets of the respondent at the time of the agreement, appeared to be incomplete when compared to a financial statement signed by the respondent around that same time in his matrimonial litigation with his former wife. As well, he noted that liabilities, in general, and specifically related to the assets listed, were not identified. He seemed to suggest that he believed the parties were aware of each other’s situation and that they were very clear in their instructions, in any event, of not wanting any interest in the other’s property. Specifically, in re-examination when asked why he did not include a detailed list of assets and liabilities, he responded:
I guess there were three reasons in total. First would be the approach that each were taking by agreement, total non-interest in the other’s assets. Second was that I had a working knowledge of his assets and I believed from what I was told by Pat that she had very little and that’s why there’s really only one entry for her. And number three was that I thought they had, over the course of two or more years, they had at least a working knowledge of what the other was doing and had by way of assets because those things were commonly talked about. The cleaning business, they were, you know, they talked about that from time to time. She appeared to be aware that he had a construction business building houses. That kind of thing.”
Consideration of the Law on the Facts
[17] When the Court is determining whether to set aside a domestic contract entered into between two parties and impose a different result than what was reflected when the agreement was executed, various considerations come into play. Ricchetti, J. commented on this in Aly v. Halal Meat Inc. [2013] O.J. No. 1329, at paragraph 353, when he noted:
There are two competing principles: First, the public interest to oversee compliance with the legislative scheme that, upon dissolution of a marriage, prima facie, the parties should have an equal division of the family assets accumulated during the marriage. Secondly, the public interest to ensure parties are encouraged and free to negotiate a final settlement of their family law entitlements.
[18] The starting point when considering a marriage contract entered into between two parties is the Family Law Act R.S.O. 1990 c. F.3, as amended. Section 52 of this legislation permits two persons who are married or who intend to be married to one another to enter into a contract defining their rights and obligations to one another upon separation, such as the parties to this litigation have done. Amongst other things, the section provides that they may define what will happen in the area of division of property and in the area of support.
[19] Section 56(4) addresses the possibility of setting aside the agreement. Specifically, it provides:
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 domestic 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.
[20] Section 33 (4) of the legislation also provides for the further possibility of the court setting aside the waiver of spousal support only within the agreement. Section 33 (4) (a) states:
The court may set aside a provision for support or a waiver of the right to support in a domestic contract and may determine and order support in an application under subsection (1) although the contract contains an express provision excluding the application of this section,
(a) if the provision for support or the waiver of the right to support results in unconscionable circumstances;
[21] With respect to section 56(4), the Court has been directed by both counsel to Levan v. Levan 2008 ONCA 388, [2008] O.J. 1905. It is clear from paragraph 51 of that decision that in determining whether to set aside a marriage contract the court must follow a two-step process.
- The analysis undertaken under s. 56(4) is essentially comprised of a two-part process: Demchuk v. Demchuk (1986), 1 R.F.L. (3d) 176 (Ont. H.C.J.). First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.
[22] Consequently, the mere fact that one of criteria set out in section 56 (4) has been proven in and of itself is not sufficient to automatically set aside the provisions of the contract. At paragraph 33 in Levan v. Levan, supra, the court wrote:
It is now well established that a finding that a party has violated a provision of s. 56(4) of the FLA does not automatically render the contract a nullity. Rather, a trial judge must determine whether it is appropriate, in the circumstances, to order that the contract be set aside. This is a discretionary exercise. See Dochuk v. Dochuk (1999), 44 R.F.L. (4th) 97 (Ont. Gen. Div.). Here, the trial judge determined that it was appropriate to set aside the marriage contract. She recognized that it was appropriate to exercise that discretion not simply because of the failure to disclose, but also because of other factors relevant to s. 56(4), such as the wife's failure to understand the nature and consequences of the contract in accordance with s. 56(4)(b).
[23] With respect to section 56(4)(a) and lack of disclosure, the case law seems to support the position that the disclosure required is not simply a listing of assets and liabilities but that some quantification or valuation should be reflected.
[24] In the DiLeonardo marriage contract, as has been mentioned earlier, Schedule “A” is problematic. The list of the respondent’s assets is incomplete. It fails to include as part of that schedule approximately $60,000.00 in RRSPs and a bank account balance of approximately $5,000.00. It also does not list the respondent’s business interests, although paragraph 2 (5) within the agreement does reference the respondent having “interests in a cleaning company and a contracting company.” No values are attributed to those businesses. Similarly, no list of significant liabilities has been inserted into the contract. I note, in passing, that even the applicant’s list is somewhat cryptic, referring only to “Miscellaneous personal effects and non-realty assets totaling $3,000.00”.
[25] I do not attribute any fault to the respondent for these deficiencies, nor would I conclude that he was intentionally attempting to avoid the disclosure required. Counsel who prepared the contract indicated that he simply took the respondent’s assets from the information he had in the other matrimonial file involving Mr. DiLeonardo and his first wife. It would appear when comparing Exhibit #36 to the contract that unfortunately only one page of assets was copied into the marriage contract from that document. Additionally, there is no evidence that any further inquiries were made of the respondent by Mr. Thibideau concerning Mr. DiLeonardo’s financial situation for purposes of preparing Schedule “A” of the marriage contract.
[26] While it may not be surprising to see an incomplete schedule when two people attend at a lawyer’s office and indicate that they do not want any financial ties to one another in the event their marriage does not work out, and are, therefore, indirectly reflecting that they do not require a list of things they do not want, that does not appear to be the direction the case law has taken.
[27] In Dubin v. Dubin [2003] O.J. No. 547, at paragraphs 32 and 33, Mesbur, J. noted:
.... 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 contract. It is in this context that financial disclosure is critical, in that knowing assets and liabilities at the date of the agreement is fundamental to an eventual calculation of net family property. A party needs to know what asset base might potentially grow, in order to determine what he or she is being asked to give up in the agreement….
… Paragraph (a) contains no requirement that the failure to disclose be either material, deliberate, or relied upon. The legislation places a positive duty on every party to make complete, fair and frank financial disclosure before the contract is entered into, whether or not the other party requests it. The court has discretion to set aside an agreement for failure to disclose, simpliciter.
[28] Another factor within section 56(4)(a) is that the lack of disclosure should relate to significant assets or liabilities in existence at the time the contract is formulated. With respect to the applicant, it is somewhat obvious that the assets listed as being owned by her, even without any liabilities being identified, would not be viewed as significant. Consequently, her lack of complete disclosure is not a factor. With respect to the respondent however, I would conclude that “significant” assets were not identified and certainly no liabilities were listed. Following the ratio in Dubin, supra, it matters not whether this was a deliberate act on the part of the respondent. Consequently, with respect to the first of the two-prong considerations that must be undertaken by the Court, I am satisfied that section 56(4)(a) is applicable to the facts of this case. Whether this should result in setting aside the contract will be addressed later.
[29] Section 56(4)(b) requires the Court to consider whether the applicant understood the nature and consequences of this contract. The applicant’s position is that she did not, that it had not been drafted in accordance with the discussions the parties had with Mr. Thibideau during their joint attendance at his office and finally that she did not really receive any independent legal advice.
[30] The real problem that the applicant has with her position in this area relates to her meeting with Mr. Gallagher. Knowing that independent legal advice would be required for the execution of this contract, the applicant chose Mr. Gallagher for this service and, according to the evidence, paid him for his advice. While Mr. Gallagher had no specific independent memory of her attendance, he was firm in his assertion that because of the content of many of the paragraphs in this agreement, he would not have simply had the applicant sign without discussing with her what they represented and meant. I find on the evidence that even in situations where a client came in for independent legal advice and said they did not need to read, or wish to read, the contract, Mr. Gallagher would discuss what was in the agreement prior to witnessing the signature. In this case, this conclusion is supported by the affidavit attached to the agreement, signed by Mr. Gallagher declaring:
I have advised the said Patricia DiLeonardo with respect to the within Contract and I believe that she is fully aware of the nature and consequences of the contract on and in light of her present and future circumstances and is signing it voluntarily.
[31] The suggestion by the applicant that she attended at Mr. Gallagher’s office and that he let her sign the agreement without any discussion at all about it is simply not credible. Her memory, I might add, has been faulty in respect to her attendance with another lawyer. I am referring to her involvement with Mr. Roger Campbell on December 31, 2002, concerning the litigation with Canada Trust. According to the applicant, “right after” the meeting with him she phoned him to advise that what she had told him had not been true or accurate. When Mr. Campbell testified, he indicated that his dockets revealed that this phone call when the applicant suggested that she had “perjured” herself had come about a year and a half later on July 30, 2004. At that point she expressed to Mr. Campbell that the respondent was an “asshole” and that she wanted to put a lien on his Ridge Rd. property. She provided no details as to in what way her information concerning the Canada Trust litigation was inaccurate. This call, in my view, can hardly be described as fitting the applicant’s described timeline of “right after”.
[32] I am not suggesting that the applicant is intentionally misleading the court. Rather, I am only pointing out that there may well be lapses in her memory that should result in the court preferring the testimony of Mr. Gallagher with respect to what occurred at his office when the marriage contract was signed.
[33] Similarly, with respect to the instructions provided to Mr. Thibideau for preparation of the agreement, I accept his description of what occurred at the initial meeting. He was clear in his recollection of how the parties presented and what they were attempting to achieve. He was detailed in his testimony in explaining how, in essence, he had rejected their plan for no spousal support ever by inclusion of the ten year term.
[34] Even if I am incorrect with what occurred at the applicant’s meeting with Mr. Gallagher and the applicant’s description is accurate, I would have great difficulty in concluding this willful behaviour on the part of the applicant to reject any discussion of the terms after having been sent for independent legal advice could be used to later reject the contract on the basis of being unaware of or not understanding what she signed. To accept that as a potential basis for setting aside a marriage contract would encourage mischief on the part of signatories to any contract. There is no evidence that anyone, including the respondent, suggested to the applicant that she should not read or get advice about this document.
[35] For the foregoing reasons, I would not find that section 56(4)(b) is applicable to the facts of this case.
[36] Section 56(4)(c) provides that the Court may also set aside the agreement, or a term within it, “in accordance with the law of contract.” In this area, one would expect to address unconscionability and duress, but from a family law perspective.
[37] In Aly v. Halal Meat Inc., supra, Ricchetti, J., relying on Miglin v. Miglin 2003 SCC 24, [2003] 1 S.C.R. 303 points out that the legal requirements for unconscionability in a commercial context are not directly applicable in a family law context.
[38] In Miglin v. Miglin, supra, at paragraphs 81- 85 of the summary, it is noted:
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) [of the Divorce Act] and the conditions under which the negotiations were held, such as their duration and whether there was professional assistance.
We pause here to note three important points. First, we are not suggesting that courts must necessarily look for “unconscionability” as it is understood in the common law of contract. There is a danger in borrowing terminology rooted in other branches of the law and transposing it into what all agree is a unique legal context. There may be persuasive evidence brought before the court that one party took advantage of the vulnerability of the other party in separation or divorce negotiations that would fall short of evidence of power imbalance necessary to demonstrate unconscionability in a commercial context between say, a consumer and a large financial institution. Next, the court should not presume an imbalance of power in the relationship or a vulnerability on the part of one party, nor should it presume that the apparently stronger party took advantage of any vulnerability on the part of the other. Rather, there must be evidence to warrant the court’s finding that the agreement should not stand on the basis of a fundamental flaw in the negotiation process. Recognition of the emotional stress of separation or divorce should not be taken as giving rise to a presumption that parties in such circumstances are incapable of assenting to a binding agreement. If separating or divorcing parties were generally incapable of making agreements it would be fair to enforce, it would be difficult to see why Parliament included “agreement or arrangement” in s. 15.2(4)(c). Finally, we stress that 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.
Where vulnerabilities are not present, or are effectively compensated by the presence of counsel or other professionals or both, or have not been taken advantage of, the court should consider the agreement as a genuine mutual desire to finalize the terms of the parties’ separation and as indicative of their substantive intentions. Accordingly, the court should be loathe to interfere. In contrast, where the power imbalance did vitiate the bargaining process, the agreement should not be read as expressing the parties’ notion of equitable sharing in their circumstances and the agreement will merit little weight.
Where the court is satisfied that the conditions under which the agreement was negotiated are satisfactory, it must then turn its attention to the substance of the agreement. The court must determine the extent to which the agreement takes into account the factors and objectives listed in the Act, thereby reflecting an equitable sharing of the economic consequences of marriage and its breakdown. Only a significant departure from the general objectives of the Act will warrant the court’s intervention on the basis that there is not substantial compliance with the Act….
…this “substantial compliance” should be determined by considering whether the agreement represents a significant departure from the general objectives of the Act, which necessarily include, as well as the spousal support considerations…finality, certainty and the invitation in the Act for parties to determine their own affairs. The greater the vulnerabilities present at the time of formation, the more searching the court’s review at this stage.
[39] Although Miglin specifically referred to the Divorce Act and separation, these comments are equally applicable to this proceeding when considering the “law of contract.” Applying the above principles to the evidence introduced in this case, I am not satisfied that section 56(4)(c) is applicable. There was no duress. There was nothing concerning the drafting instructions or execution of the agreement of concern. There is no evidence of power imbalance or the respondent taking advantage of the applicant, such that the Court could say unconscionability existed. The “first prong” does not exist in section 56(4)(c) for this case.
[40] Based on the Court’s findings then with respect to section 56(4), it is only sub-subsection (a) that will lead us into a consideration of the second prong of the test to determine whether the contract should be set aside. For a number of reasons, I conclude that it should not.
[41] There is a view by the courts that parties should be permitted to organize their own affairs. In Butty v. Butty 2009 ONCA 852, [2009] O.J. No. 5176 at paragraph 50, the Ontario Court of Appeal commented:
For the purposes of the following analysis, it is important to keep in mind that courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship, particularly where the agreement in question was negotiated with independent legal advice: see Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550 at para. 9.
[42] As Ricchetti, J. pointed out in Aly v. Halal Meat Inc., supra, paragraph 370:
The fact that the property division is not consistent with the FLA is, by itself, not sufficient reason to set aside the separation agreement. See Armstrong v. Armstrong [2006] O.J. No. 3823 (Ont. C.A.). Simply put, the parties are entitled to enter into a bad deal, if they choose to do so, provided that the integrity of the negotiation and execution process is respected by both parties.
[43] Although the applicant disputes obtaining independent legal advice, I have previously commented on that aspect of the case and do not propose to repeat it again at this juncture.
[44] The applicant testified that she believed the marriage contract would relate only to property that the parties owned at the time of marriage; or put another, way she was unaware that a regime of separate property would apply to all assets of the parties whether owned before or after the date of marriage. This is not dissimilar to the argument presented in Dougherty v. Dougherty 2008 ONCA 302, [2008] O.J. No. 1502 where the court concluded that the misunderstanding flowed from the applicant’s failure to read the contract or to read it carefully. Although I have previously determined that Mr. Gallagher did review the terms of the contract with the applicant, if that were found to be incorrect, this principle, reflected in the Dougherty decision, would be equally applicable to this case.
[45] Fairness of the contract has been described as a relevant factor when the Court is considering whether to exercise its discretion to set aside an agreement. See: Rick v. Brandsema 2009 SCC 10; Levan v. Levan, supra; Hartshorne v. Hartshorne, supra; Aly v. Halal Meat Inc., supra.
[46] “Fairness” should include consideration of a number of factors, including whether what appeared to be fair at the time of execution continues to be fair at the time of distribution. Undoubtedly “fairness” is different from “unconscionable.” When considering the issue of fairness, it is appropriate to take into account that the parties were only married for three and one-half years and consequently, even in an equalization calculation under the legislation, there might well be an unequal division of post-marriage assets.
[47] In the DiLeonardo family unit, following marriage, it appears that there were a number of properties purchased. The properties were never registered to them jointly, although with respect to the property at 1010 Barton St. in Hamilton the applicant held title jointly with the respondent’s brother.
[48] One property that the applicant has raised was initially registered to the respondent’s parents. That property was a vacant lot located at 823 Ridge Road in Stoney Creek. According to the reporting letter found in Exhibit #7 at Tab 1 (c), originally this property was to be registered in the respondent’s name with a mortgage to his parents. That did not occur and it was not until 2001 that his parents transferred title to him alone. The applicant suggests that this property was always intended to be for the parties together, that they were going to build a home on this land and consequently her mother advanced funds towards this transaction. The respondent denies that those monies from the applicant’s mother were anything more than a payment to him for work he had done at her home. While I find it unusual that a person like the respondent, who describes himself as someone committed to supporting family, would accept these funds for work done for his mother-in-law, with the applicant’s mother now deceased there is no clear conclusion that can be drawn as to why the monies were provided to the respondent by her for this purchase. Although since separation the respondent has built a home on this land, my understanding is that when it was transferred to him in 2001, the property was still a vacant parcel.
[49] With respect to the property at 5241 Marcel, it appears to me that this was a scheme that both parties determined to become part of in order to help their then friends Steve and Sandra Mirco. As Mr. Mirco was facing serious financial problems, the parties attempted to protect the Marcel property, where the Mircos lived, from creditors by having Sandra Mirco transfer title to the applicant in 2000. Mr. and Mrs. Mirco then rented the property from the applicant at a sufficient amount to cover the mortgage and taxes. According to the applicant, the plan was that when the property eventually sold, the Mircos would be paid any profit. The respondent denies that was ever the agreement. When the property did sell in 2003, no monies went to the Mircos. It is not clear to me whether the applicant personally paid the initial $9,500.00 towards the purchase of this property, although the trust ledger from the lawyer involved does reflect monies coming from her. On the sale, in 2003, the trust ledger from the same lawyer reflects $8,719.55 going to the applicant by way of cheque after the balance of the funds were distributed pursuant to the applicant’s “written instructions.” The applicant testified that she had no recollection of whether she received those monies.
[50] In July of 2001, 1010 Barton St. in Hamilton was purchased and, at the suggestion of the respondent, placed in the names of the applicant and the respondent’s brother John. The evidence from the applicant is that the transaction was financed by way of a mortgage back to the vendor and $10,000.00 from John. She testified that she did not know where the rest of the funds came from but, in any event, she never provided any cash personally. The respondent suggested that he had put in the balance, but there was a possibility that some of the monies may have come from the applicant. I conclude from the conflicting evidence that any financial contribution by the applicant to the purchase was minimal at best. The plan was that the rental income would be sufficient to carry the monthly mortgage payments. Eventually, the respondent’s brother wanted off title, likely because of the matrimonial problems between the parties. On or about June 9, 2003, a date after separation, both the applicant and the respondent’s brother signed a direction that this property be transferred to the respondent. The deed itself was not registered until March 24, 2004. According to the lawyer involved, Mr. DiPietro, there were difficulties with financing, including getting approval to have the mortgage transferred. Apparently, at the time the direction was signed, Mr. DiPietro was unaware that the parties had separated the month prior. No monies were received by the applicant from the respondent for this transfer.
[51] In July of 2001, around the same time as the Barton St. purchase, 1087 Cannon St. E. in Hamilton was bought and went into the respondent’s name, with the applicant’s agreement. This transaction was financed by a vendor take back mortgage and approximately $12,500.00 in cash from the respondent. At the time of separation this property was still in his name. Apparently he sold it in 2007.
[52] On October 3, 2001, the property at 384 Talbot was purchased. It was placed into the applicant’s name “for rental income and equity” according to her testimony. The funds for this purchase came from a TD mortgage of approximately $64,000.00. The balance came from Alpha Cleaning (approximately $22,500.00), the applicant ($5,000.00) and the respondent’s mother. In July of 2003, the applicant signed a mortgage in favour of the respondent for $22,500.00. Mr. Paul Settimi, a Hamilton lawyer, provided independent legal advice to her with respect to that document. Although the applicant indicated in her evidence that was to enable her to pay off her line of credit, I do not believe she was suggesting that the respondent gave her $22,500.00. The respondent’s testimony was that he wanted some security on the property for the renovations that he would be doing. Subsequent to that, in November of 2003, the applicant transferred the property to herself and the respondent as tenants in common. The expectation was that the rental income would cover the mortgage. Her explanation for the transfer was that the separation was still “fresh” and she was hopeful of a reconciliation. Still having difficulty making the mortgage payments due to rental difficulties, the applicant herself moved into the property in May of 2004. The evidence suggests that she did not pay the mortgage even then. The respondent contacted the applicant about the mortgage arrears that were accumulating but there was no resolution of the issue between the parties. In April of 2005, TD Bank wrote to the parties concerning the arrears and demanded payment in full. The respondent immediately contacted his lawyer to arrange for the mortgage to be assigned to his parents, which in fact was what occurred. Around this same time his lawyer also wrote to a law firm that had been representing the applicant indicating that the respondent was willing to purchase her interest in the property. That firm advised that they were not representing the applicant. When non-payment on the mortgage continued, the respondent’s parents initiated power of sale proceedings. Again in October of 2005, by way of correspondence sent directly by Mr. DiLeonardo to the applicant, he offered to buy out her interest in the property at fair market value or alternatively to consent to her purchasing his interest. When the applicant still did not make payments on the mortgage, the respondent’s parents proceeded with their claim for possession. This was issued in March of 2006, followed by judgment in July of that year. The Writ of Possession was executed in September of 2006. Although the applicant did send a letter to the respondent, through counsel in June of 2006, that appeared to be an attempt to resolve not only the 384 Talbot disagreement but all property issues, nothing apparently came of that proposal. Eventually, the applicant moved out to different accommodations and in 2007 the respondent purchased the property from his parents, primarily with a vendor back mortgage.
[53] The final property purchased during the parties’ marriage was located at 22 Clinton St. in Hamilton. This property was purchased in the respondent’s name in January of 2003. Little in the way of evidence has been offered concerning this property and its acquisition, although we do know that some of the funds from the sale of Marcel went towards that and there was likely a vendor back mortgage.
[54] Generally speaking with respect to the acquisition of the various properties, the bulk of the money came from the respondent, his family or his companies. While counsel for the applicant suggests that the Court should infer from that the parties were not operating in a separate property regime, I am not prepared to make that leap. The marriage contract addressed title issues, not financing. Either party was free to contribute to any property whether registered to him or her personally or not, on the understanding that in the event of a separation the property would belong to the person who held legal title to it. Never did any realty prior to separation go into their names jointly. I recognize that the applicant did add the respondent’s name to her bank account, but that one account does not lead me to conclude that the parties intended not to follow the provisions in the marriage contract when their entire financial lifestyle is considered.
[55] The applicant testified that she went to Mr. DiPietro’s office every time there was a purchase and that there was always a discussion concerning every property, presumably with respect to title and whether it would be the same as in the Offer to Purchase. (It was not always.)
[56] Technically on the date of separation, two properties were still registered to the applicant, 384 Talbot and a one-half interest in 1010 Barton St. By that point, even on her own testimony, the applicant was aware of the separate property regime that was set out in the marriage contract. Nonetheless, she determined to transfer her interest in 1010 Barton St. to the respondent and soon after a one-half interest in 384 Talbot St. Having an interest in two out of the five properties that the parties held at the time of separation does not equate to unfairness. Her subsequent actions are what created her problem.
[57] Aside from the above considerations, there are other factors that deter the Court from setting aside this agreement. These include:
(i) The applicant had full opportunity to consult counsel with respect to the agreement;
(ii) The applicant had worked for and with the respondent for a number of years before signing the contract and consequently could have requested further information concerning any asset;
(iii) The parties jointly participated in the discussion with Larry Thibideau concerning what they wanted addressed in the contract;
(iv) There was no duress surrounding either the preparation or signing of the contract;
(v) The acknowledgement by the applicant that the marriage was not contingent on the contract and in fact the parties were already married when the contract was signed.
[58] As indicated earlier, the request that the marriage contract be set aside under section 56(4) of the legislation is denied.
[59] Although counsel did not argue section 33(4) of the Family Law Act in great detail, I turn next to that section and the submission that it be utilized for the applicant with respect to the support provision within the marriage contract. That section, which authorizes the Court to set aside the support clause in the agreement, can only be employed if the clause results in unconscionable circumstances.
[60] When the marriage contract was signed the parties had been in a common-law relationship for about two years and at that point the applicant was approximately 39 years of age and the respondent 36 years. According to the evidence of Mr. Thibideau, the parties came to him seeking a marriage contract that would have no spousal support ramifications and it was only after his intervention that the ten year term was inserted. Should the Court now conclude that this term results in unconscionable circumstances for the applicant?
[61] At the outset, I would note that unlike section 56(4), this section is not directed at unconscionable agreements or terms but rather towards unconscionable circumstances that result at the time of the application for support. (Scheel v. Henkelman (2001) 52 O.R. (3d) 1)
[62] In looking at those circumstances one must remember that there is clearly a distinction between “unconscionable” and “unfair.” Generally “unconscionable” has been accepted as meaning circumstances that shock the conscience of the court. In Merklinger v. Merklinger [1992] O.J. No. 2201, the court was considering section 5(6) of the Family Law Act, but in so doing, Jennings, J. commented at paragraph 54 on unconscionability. He wrote:
… The result must be more than hardship, more than unfair, more than inequitable. There are not too many words left in common parlance that can be used to describe a result more severe than unconscionable…
[63] Around the time of separation the applicant continued her employment for the respondent until she was no longer comfortable in that setting, and so by 2004 she had commenced working part-time for U-Haul. While her tax information reflects a relatively low annual income for the initial years following separation, she did have some other income. Specifically, I note that in July of 2003 she received a cheque from Economical Insurance for over $26,000.00 on account of income replacement benefits for the period of February 2001 up to June of 2002. (Exhibit #6) This money was deposited into her account that same month. (Exhibit #14). In 2003 she also had gross rental income of $10,250.00 which netted down to $1,764.00. While this net figure may have been appropriate for her tax return, I suspect from a support perspective it resulted in more cash in her hand. At the time the application was filed in 2005, her income was around $17,000.00. Over the years since then her income has increased, based on the tax information before the Court. In 2008, the high point, it was $43,200.00. In 2012, the tax return reveals an income of approximately $27,200.00.
[64] The respondent’s income is more difficult to pinpoint. His tax returns reflect a line 150 income in 2003 of $26,395.00 and in 2004 $18,440.35. Over the years since, the line 150 income has continued in that range and lower, including in 2010 an income of $3,203.08. Obviously these returns are not the whole story as the respondent has interests in several companies that also provide monies and benefits to him.
[65] In spite of the foregoing, I am unable to conclude that the applicant has shown unconscionability with respect to the ten year waiver of support and its impact on her at the time of separation or when this application was filed. While I recognize that she may not think it fair that the respondent is in a better income bracket than herself, that is not the test in this section of the legislation. This was a relatively short term relationship, even including the two year common law relationship, with no children and an income situation that in reality was not much different for the applicant post separation compared to when they first began living with one another. (Her income then was around $15,000.00.)
[66] The request for relief pursuant to section 33(4) of the Family Law Act is denied.
Conclusion
[67] At the outset of this trial both counsel requested that this matter proceed on a bifurcated basis and asked that the Court determine the validity of the marriage contract first. My understanding is that counsel were of the view that if the contract was found to be valid that would complete the case. Having found the contract to be valid and having separately addressed section 33(4) of the Family Law Act, I assume that the only issue remaining is costs. If counsel are unable to resolve that issue, brief written submissions should be filed by the respondent no later than December 16, 2013, by the applicant no later than January 10, 2013 and any reply by the respondent no later than January 30, 2014. These written submissions should be filed with Tina Mignelli, the judges’ secretary in St. Catharines. If no submissions are received in accordance with this paragraph and no consent with respect to costs filed, there shall be no order on account of costs.
Justice J. W. Scott
DATE: November 14, 2013
COURT FILE NO.: F-734-05
DATE: 2013-11-14
SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN:
Patricia DiLeonardo
Applicant
- and –
Luciano DiLeonardo
Respondent
JUDGMENT
Scott, J.
DATE: November 14, 2013