COURT FILE NO.: FC-12-40496-00

DATE: 20140912

SUPERIOR COURT OF JUSTICE – ONTARIO – FAMILY COURT

RE: Herbert Ralf Balsmeier, Applicant

and

Najla Yono Balsmeier, Respondent

BEFORE: The Honourable Mr. Justice R.P. Kaufman

COUNSEL: Brahm D. Siegel, for the Applicant
Michael Stangarone, for the Respondent

HEARD: March 5, 2014

ruling on motions

[1] It is noted that extensive materials were filed by both parties on a motion scheduled for one hour. Counsel for both parties is to familiarize themselves with the process within this jurisdiction regarding the scheduling of long motions, a process designed out of respect for other parties expecting their one hour motions to be heard, as contemplated and out of respect for the judiciary responsible for the hearing of such motions.

[2] The applicant husband seeks the following relief:

(a) under Rule 2 of the Family Law Rules, an order placing this matter on the trial list for the May 2014 trial sittings and adjourning this matter to a combined settlement conference/trial management conference in April 2014;

(b) in the alternative, or in the event the matter is placed on the trial list for the May 2014 trial sittings but does not proceed, under Rule 2 of the Family Law Rules and section 24 of the Family Law Act, an order for the following:

(i) exclusive possession of the matrimonial home, municipally known as 17 Hawkridge Avenue, Markham, Ontario, L3P 1V8;

(ii) exclusive possession of the matrimonial home in Florida, 1600 South Ocean Boulevard, Suite 1202, Lauderdale by the Sea, to the respondent wife provided she not bring a motion for temporary spousal support pending the trial; and,

(iii) the husband to continue to pay the condo fees and property taxes on the Florida home and the wife to continue to pay the utilities.

(c) under rule 13(11)(b) of the Family Law Rules, an order requiring the wife to produce the disclosure set out in the husband’s request for information, dated February 9, 2014, within twenty days;

(d) under the common law, an order bifurcating the issue of the validity of the parties’ marriage contract from all other claims;

(e) under Rule 20 of the Family Law Rules, an order that both parties be questioned, such questioning to take place no later than one month prior to the start of the trial sittings; and,

(f) costs.

[3] The respondent wife seeks the following relief:

(a) an order that the husband pay to the wife temporary, without prejudice spousal support of $6,000 per month, commencing November 1, 2013;

(b) an order that the husband pay for the wife’s past and ongoing medical costs not covered by a health benefits plan;

(c) an order that the wife have interim exclusive possession of the matrimonial homes referred to in paragraph 1(i) and 1(ii) of the relief sought by the husband and their contents;

(d) an order that the husband maintain the carrying costs on the Markham and Florida homes pending trial;

(e) an order compelling the husband to produce the outstanding disclosure set out at Schedule “A” to the wife’s motion, being a five-page letter dated February 20, 2014 from Marmer Penner Inc. consisting of 19 paragraphs of requested information and documentation;

(f) an order compelling the husband to produce a complete copy of his former counsel, Lawrence Sutton’s, file; or in the alternative, an order compelling the husband to produce any and all communications relating to the issue of the wife’s former counsel, Mr. Starzynski, striking out “voluntarily” from the marriage contract, dated September 1, 2010;

(g) an order setting this matter down for trial during the November 2014 trial sittings and scheduling a settlement conference and questioning of both parties on mutually available dates;

(h) an order that the husband pay to the wife, interim disbursements in the amount of $40,000 so that she may continue to pursue this litigation and obtain expert evidence with respect to the husband’s business interests and income for support purposes; and,

(i) an order for costs on a full recovery basis plus disbursements and applicable HST.

Background

[4] The parties started dating in 2008, became engaged in July 2010 and were married on September 11, 2010. The husband is 55 years old and is a Canadian citizen. The wife is 46 years old and is a landed immigrant. It was the third marriage for the husband and first for the wife. At the time of marriage the husband resided in Markham, Ontario and the wife in the State of Michigan. The parties separated in 2013; however, the husband maintains the date of separation was in June and the wife alleges it was in November. On the return of this motion, the husband was residing in his home in Markham and the wife was residing in Florida in the husband’s winter home.

[5] At issue is the validity of a marriage contract signed by the parties on September 1, 2010, ten days prior to their wedding.

Husband’s Submissions

[6] The husband maintains that he first indicated a desire to have a marriage contract on July 23, 2010, being the day he proposed to the wife. He recalls that she understood and consented. As a result, he contacted a family law lawyer who prepared a marriage contract for his review. The contract provided inter alia that:

(a) there would be no property rights arising from the relationship, other than that the wife could occupy the Markham residence for a period of twelve months if the husband predeceased her;

(b) the wife was to receive spousal support in the sum of $5,000 per month for twelve months in the event the marriage was of a duration under two years and $5,000 per month for thirty-six months in the event the marriage was of a duration under five years; and,

(c) there were no restrictions on the wife's ability to seek spousal support if the marriage was of a duration beyond five years, with the only caveat being that only periodic support, as opposed to lump-sum support, could be requested.

[7] It is the husband’s position that his lawyer, upon the indirect request of the wife, arranged for her to consult and be represented by a senior family law lawyer. Thereafter, counsel for the wife indicated that she would not be signing the contract as it was too one-sided. Negotiations ensued, in which the wife requested 25% interest in the Markham property from the outset, if the marriage was of duration under five years, and after five years, the provisions of the Family Law Act would apply. In addition there would be no restrictions on spousal support, assets accruing during marriage would be shared equally and the wife would be a beneficiary of a life insurance policy in the amount of $1 million, in the event that the husband predeceased her.

[8] In response, a revised contract was prepared. It differed from the original version in that it provided that if the marriage was of duration more than five years, the wife would receive a 10% interest in the Markham property. Further, spousal support was increased to $6,000 per month for twelve months in the event the marriage was of duration under two years, and for thirty-six months in the event the marriage was of duration under five years. The husband also agreed to make a valid will prior to marriage, naming the wife as beneficiary of an RRSP to the extent of $1 million, provided they were still cohabiting at the time of his death.

[9] The parties signed the revised contract. In the certificate and affidavit of solicitor, the wife’s counsel struck out the word “voluntarily”. It is alleged by the husband that the explanation for this deletion was that it was counsel’s normal practice to do so when the marriage was in close proximity to the date of marriage. It is noted that within the body of the marriage contract, the wife indicated that she was signing the agreement voluntarily and that she was not subject to coercion or undue influence.

[10] The husband maintains that financial disclosure was not an issue during negotiations. The husband made full disclosure and attached a schedule to the first and final drafts of the contract. The husband indicated that he had an annual income of $800,000 and a net worth of $14.2 million. He was not asked to provide any supporting documentation or valuations nor was his income questioned.

[11] The husband is prepared to honour the terms of the contract and commence payment of the spousal support of $6,000 for thirty-six months, upon the wife vacating both of his properties. He wishes the trial of this action to be expedited and, in the interim, requires temporary exclusive possession of the Markham property, giving specifics of mischief attributed to the wife together with police involvement. He is prepared to allow the wife to remain in the Florida home until trial and he will continue to pay the property taxes and condo fees until her departure. He reminds the court that the wife still maintains her own residence in Michigan and could reside there if so inclined.

[12] The husband argues that he has a very strong case and that it would be unfair to require him to provide even more financial disclosure than already provided. He indicates that he has provided a sworn financial statement, together with his 2012 income tax return and that his assets and income at marriage are as disclosed on the marriage contract. He wishes to abide by the contract, notwithstanding his admission that he can afford more than $6,000 per month in spousal support, and that his net worth has increased since the date of marriage and, apart from the fact that notwithstanding his suggestion that the wife is more than capable of securing meaningful employment. He concedes that he has accumulated substantial wealth and that is the very reason why he insisted upon a marriage contract.

[13] With respect to the date of separation, the husband maintains the parties separated in June 2013. With respect to the wife’s assertion of the separation date of November 2, 2013, he states that, at most, they cohabited for three weeks between June 2013 and November 2013 in a failed effort to reconcile. He relies upon two e-mails received from the wife, one dated June 10, 2013 and the other July 2, 2013, as proof of the wife’s acceptance that the relationship was at an end. He also alleges a number of earlier separations with the first being October 31, 2010 with reconciliation in February 2011, the second separation on March 18, 2012, followed by another attempted reconciliation between July and August 2012, when he discovered her alleged infidelity. He concedes a further reconciliation until June 2013 when, following another argument, he moved into the guest bedroom. In total, he maintains that as a couple they were together less than 27 months.

Wife’s Submissions

[14] The wife states that the husband insisted that she sign the marriage contract, otherwise he would cancel the wedding. She notes that although the schedule to the marriage contract purports to list the husband’s assets and liabilities, she was not provided with adequate financial disclosure related to his varied business interests and personal assets, or with respect to his income.

[15] The wife maintains that she is unemployed and remains financially dependent upon the husband. She states that she has been a permanent Canadian resident since April 2013 and that as part of a sponsorship agreement with the Canadian government, the husband undertook to financially support her, to provide her shelter, clothing, food and the financial means to receive medical attention not covered by health benefits for at least three years.

[16] The wife claims to suffer from a series of physical and mental health ailments, including but not limited to hip dysplasia, severe anxiety and depression and that, as a result, she is unable to take steps to become self-sufficient at this time. She indicates her only source of income is nominal rental income of $56.65 per month (net). It is noted that at the time of entering into the marriage contract, the wife indicated that she was unemployed. She has provided a medical report from the University of Michigan Medical School, under the signature of Dr. James A. Goulet, indicating that she has undergone bilateral hip replacements, most recently in May 2002 and that she was seen in 2013 reporting pain that has been increasing over the past month. The medical report indicates that the wife is a project manager, and the doctor recommended a formal functional capacity evaluation by a rehabilitation facility in order to ascertain the limits the wife may have in her position.

[17] The wife claims that the parties have two matrimonial homes, one in Markham and the other in Florida. She alleges that she made significant contributions to both properties. She claims that the husband has extraordinary means and that they enjoyed a lavish lifestyle throughout their marriage, travelling, entertaining and dining out. She alleges that the husband has access to millions of dollars from his corporations and that he has a direct and/or indirect interest in at least seventeen separate corporate entities. His management company alone has over $5.4 million in retained earnings. The wife claims that the husband earns income by way of dividends and has control over how many dividends he issues himself on an annual basis. She maintains that his financial circumstances are complex and that he has substantial means to pay support, the full extent of which remains unknown in light of his refusal to produce full disclosure.

[18] The wife maintains that she felt she had no choice but to sign the marriage contract. She alleges that the husband sprung the contract on her for the first time on August 27, 2010 and that, in no way, did it represent the oral promises that he had made to her. Given the timing, she did not have sufficient time to fully appreciate its terms or make changes to it. She states that she immigrated to Canada at the behest of the husband in July 2010. She states that she was convinced to relocate Canada upon the promise of marriage and that she would be provided for and sponsored to be a Canadian resident. She confirms that she received a marriage proposal on July 23, 2010 and that her main concern was giving up everything to marry him. There were allegedly discussions about having a child together after marriage.

[19] At the time of the proposal, throughout the discussions of the marriage contract, she was assured that she had nothing to worry about as the contract would protect her. She knew that the husband lived comfortably but he had never elaborated about his finances. She maintains that she was promised that property would be purchased in Florida, in which she would hold a one-half interest. She further maintains that they had been looking for a Florida condominium the year before entering into the contract, on which property she would be placed on title so that she would have the security of knowing that she had a home to live in in the event of separation or his death.

[20] In July 2010, after the engagement, the wife alleges that she moved her belongings from her home in Michigan to Canada and arranged the wedding, with an expected guest list of 250 people. After the date was set, the husband provided her with a copy of the draft marriage contract. By mid-August 2010, after the wedding date was set, the draft contract still not been provided but she was not concerned, given the husband’s representations to her. It was finally provided to her on August 27, 2010, after the wedding was booked, invitations sent out and considerable expense incurred in moving her belongings to Canada. She refutes any suggestion that she had asked the husband to find her a lawyer. She maintains that she was not afforded a proper amount of time to consider the consequences of the provisions of the contract before signing it, nor had any of the terms been discussed prior to it being provided to her in draft form.

[21] The wife maintains that upon advising the husband of her displeasure with the draft contract, he threatened to call off the wedding. After calming down, they had discussions in which he allegedly agreed to increase the spousal support amount to $8,000 per month; to provide her a 10% interest in the Markham property, if separation occurred after five years of cohabitation; that they would share equally in property acquired during the marriage; and that they would jointly purchase a condominium in Florida. She alleges that these promises were made to coerce her into signing the contract given the rushed atmosphere and limited time before the wedding. When she met again with her counsel, on short notice, the revisions that had allegedly been agreed upon were not included and, in particular, that they would share assets accumulated together. In view of the forthcoming wedding and the imminent departure of her counsel on vacation, she felt cornered, having to either accept the revisions or cancel the wedding. She maintains that she was unfamiliar with Ontario support and property laws and did not understand the legal effect or meaning of the marriage contract, and that she was misled by the husband, thereby resulting in him extracting an unfair bargain from her.

[22] The wife maintains that it was November 2, 2013 and not June (as alleged by the husband), that she and her husband separated on a final basis with no reasonable prospect of reconciliation. She suggests an initial separation date of March 18, 2012, followed by reconciliation. She notes that the husband issued a court application on April 11, 2012 and that they attended a case conference on July 5, 2012, but reconciled shortly after that appearance. After July 2012, they remained in the marriage together past June 2013, until November 2, 2013. She provides proof of traveling together to Montréal in August, 2013 and that during that month he agreed to take a European cruise from September 28 until October 13, 2013. On September 11, 2013 they celebrated their anniversary together and he gave her flowers. The day after he gifted to her, a Lincoln automobile. On September 23, 2013 he sent her an e-mail indicating that the final attempt at reconciliation was over and asked that she cancel his flight for the European cruise. She responded four days later agreeing that the marriage was over but that they would reside together in their respective homes because she had nowhere else to go. Notwithstanding the contents of these e-mails, she maintains that they remained in the marriage. On October 26, 2013, he purchased flight tickets for her to travel from Florida to see him in Toronto on October 28, 2013. Problems ensued and on November 2, 2013, he refused to fly back with her to Florida but gave her his credit card to pay for her airline ticket to Florida, although he later alleged credit card fraud.

[23] The wife claims to be entitled to spousal support. Although the marriage contract indicates that she was unemployed at the time of its execution, she alleges that she has relinquished employment opportunities by virtue of the marriage. She states that she was discouraged from working throughout the marriage and that she assumed the burden of all domestic functions, such as decorating both homes, gardening, cleaning, cooking and preparing meals for the husband on a daily basis. She alleges that she is in therapy for the anxiety, fear and oppression that she's experiencing due to the marriage and that her physical limitations were exacerbated by the role she assumed during the marriage, including overseeing and assisting with substantial renovations completed on the Markham property. She states that she only recently became a permanent Canadian resident and was unable to work before that time, seemingly refuting her own testimony that she was discouraged from working throughout the marriage. She is seeking the sum of $6,000 per month, as provided for in the marriage contract.

Claims for Exclusive Possession

[24] In their respective notices of motion, both parties claimed exclusive possession of the Markham and Florida properties. Following the argument of the motions, both counsel communicated with the court concerning this issue. As a result of that communication, the parties consented to an order whereby the husband shall have temporary exclusive possession of the Markham property and the wife shall have temporary exclusive possession of the Florida property. Each party was to preserve all household contents and personal belongings contained within the respective residences and should not dispose of any such contents or personal belongings without further court order or written agreement between the parties. The issue of the retrieval of the contents was to be dealt with at the next conference and the costs associated with this order are to be determined in conjunction with the delivery of the Ruling contained herein. In that regard, the court will entertain submissions, together with the submissions associated with the argument of both motions.

[25] This court is mindful of the decision in Potter v. Boston[1], a decision which discusses whether or not an Ontario court has authority to grant exclusive possession over property alleged to be a matrimonial home and located in a foreign jurisdiction. The consent order is of a temporary nature and, as both parties are seeking an early trial date, at this stage no further comment by this court is required.

Analysis

[26] With respect to the extensive issues placed before the court, due to time constraints, not all issues were fully explored in argument. Relying upon the written materials and the aforesaid consent of the parties’, no further order will be made with respect to exclusive possession of either property. As requested, the husband shall continue to pay the condo fees and property taxes on the Florida residence and the wife shall pay the utilities. I do not believe that an order is necessary to require the husband to maintain the carrying costs of the Markham property.

Questioning and Waiver of Privilege

[27] Questioning was ordered on March 5, 2014, following the conclusion of the oral argument. Contrary to the Family Court Rules (the “Rules”) of this court, both counsel corresponded directly to the court in early June regarding the scheduling of questioning. Following my endorsement released on June 6, 2014, I have heard nothing further and thus presume that the questioning proceeded. It is anticipated that there may be outstanding undertakings dependent upon this Ruling regarding the disclosure required of both parties. If so, counsel have remedies under the Rules in that regard.

[28] With respect to the issue of waiver of privilege, I have carefully reviewed the affidavits relied upon by the parties in these motions. Both parties make reference to their interpretation of discussions between counsel. There have been references to specific issues relating to the negotiation and formation of the contract. Privilege will be deemed to have been waived where the interests of fairness and consistency so dictate, or when communication between the solicitor and client is legitimately brought into issue in an action[2]. The wife accuses the husband of cherry picking among privileged communications, such as the deletion of the word “voluntarily” by Mr. Starzynski in his certificate appended to the marriage contract. The wife implicitly indicates that Mr. Starzynski’s pending vacation precluded further negotiation of the agreement. The husband attempts to rely upon Mr. Sutton’s notations to the file concerning specific discussions with opposing counsel. These are but a few of the examples that enable me to determine that privilege has been waived by both parties and that their former counsel must provide full copies of the contents of their respective files.

[29] Finally, it has been held that a solicitor’s certificate and affidavit of independent legal advice is, in fact, a waiver of solicitor/client privilege as to the matters addressed in it. These certificates are an integral part of the contract. They are exchanged in order to protect the integrity of the agreement with the expectation that each party to the contract can, and will, rely on the other party’s solicitor’s affidavit and certificate in order to enhance the enforceability of the contract. Fairness and the intent of the parties at the time of the contract require a ruling that privilege is waived, as the matters addressed in the solicitor’s certificate and affidavit[3].

Support

[30] The principles in relation to interim spousal support are set out by Sherr J. in the case of Jones v. Hugo[4] where he quotes from Kowalski v. Grant[5]. The principles are:

(a) Interim support is to provide income for dependent spouses from the time of commencement of proceedings are instituted until trial.

(b) The Court need not conduct a complete inquiry into all aspects and details to determine to what extent either parties suffered economic advantage or disadvantage as a result of the relationship. That is to be left to the trial judge.

(c) Interim support is a holding order to maintain the accustomed lifestyle, if possible, pending final disposition as long as the claim is able to present a triable case for economic advantage.

(d) Interim support is to be based on the parties’ means and needs assuming that a triable issue exists. The merits of the case in its entirety must await a final hearing.

[31] On an interim support motion, the scope of these inquiries is definitely more limited than at trial. In particular, the court will not conduct an in depth analysis of standing or entitlement. The applicant is only required to make a reasonable case for standing and entitlement before the court will proceed to assess the party’s .means and needs[6].

[32] Interim spousal support may be awarded pending the determination of the validity of a domestic contract. The marriage contract is not a bar to interim spousal support. There is nothing in the legislation that precludes an award of interim support in the face of a waiver[7].

[33] The wife requests without prejudice spousal support of $6,000 per month, commencing November 1, 2013, which coincides with the date of separation relied upon by the husband. The husband agrees that $6,000 per month is the appropriate quantum of spousal support in accordance with the marriage contract, but his position is that the support should commence once the wife vacates any property owned by the husband. The husband wishes to maintain the validity of the marriage contract. Pursuant to paragraph 13(b) of the marriage contract the husband agrees to pay support payments of $6,000 per month for thirty-six months, with the wife undertaking to sign a separation agreement incorporating this provision so the periodic payments will be deductible from the income of the husband. The marriage contract agreement further states that if the wife does not sign the agreement, then the husband will have no obligation to make the payments.

[34] Paragraphs 11 and 12 of the marriage contract pertain to the matrimonial home. Paragraph 11 reflects the understanding that the Markham residence remains the husband’s separate property; he is solely responsible for the costs associated with it and, that in the event of the breakdown of their relationship, the property including the increase in value thereof, if any, shall remain his separate and sole property subject to the wife acquiring a 10% interest following the fifth anniversary date of their marriage. Lastly, the contract provides that in the event of the death of the husband, if there is no breakdown of the marriage prior to such death, the wife would have the right to occupy and use the Markham property as a home for a period of twelve months. Paragraph 12 states that nothing limits the rights that either party has, or may have in the future, under Part II of the Family Law Act with respect to any property found to be a matrimonial home.

[35] Part II of the Act deals with possessory rights; section 52(2) of the Act precludes a party from contracting away a possessory right to a matrimonial home. As the husband wishes to have the contract upheld, and the wife seeks temporary support in accordance with the contract, there can be no prejudice in awarding the wife spousal support in accordance with the marriage contract, retroactive to November 1, 2013 and a support deduction order shall issue accordingly. The order is without prejudice to an earlier commencement date, as may be determined at trial, and without prejudice to quantum if the contract is not upheld. It is also without prejudice to credits to which the husband may be entitled with respect to any additional payments made by the husband to, or on behalf of, the wife since separation which may include the expenses in maintaining the Florida property for the benefit of the wife (to the exclusion of the husband). As the support is being ordered, there is no need for the wife to sign a separation agreement to enable the husband to obtain the income tax credits associated with the support payment. The support is also being ordered, not as a reflection of the lifestyle enjoyed by the parties or as a determination that a triable issue exists on entitlement; rather, the support is being ordered in accordance with the terms of the marriage contract which is, at this stage, presumed to be valid.

Medical costs

[36] With respect to the relief requested that the husband pay for the wife’s past and ongoing medical costs not covered by a health benefits plan, the court has not been provided with any information as to whether or not the wife became entitled to coverage available to the husband following the marriage. If she was covered under a plan of health insurance available to the husband, which he unilaterally terminated upon separation, and under which the wife would continue to be eligible for coverage, then such coverage shall continue until trial and shall be reinstated. If she was not covered, then she will be required to provide her own coverage until trial, subject to any further order that might be made by a trial judge who will be in receipt of sufficient information to consider granting such relief.

Disbursements

[37] The court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees[8]. In Stuart v. Stuart[9], Rogers J. reviews the criteria the court should consider in granting relief under this rule. The wife seeks interim disbursements in the amount of $40,000 to enable her to continue to pursue this litigation and obtain expert evidence with respect to the husband’s business interests and income for support purposes. One of the criteria is that the claimant must demonstrate that she is incapable of funding the requested amounts. The claim being advanced must be meritorious, as far as can be determined on the balance of probabilities at the time of request for the disbursement. An order under this section should not be viewed as a license to litigate but is to enable the case to proceed fairly and, to some extent, to level the playing field. Without delving into the merits of the claim, by virtue of the support award rendered, the wife should now be in a position of securing a line of credit against the property which she owns in the state of Michigan. The wife indicates that the home is valued between $250,000 and $290,000 although Schedule B to the marriage contract reflects a value of $340,000. It is apparently subject to a mortgage of $140,000 and accordingly the wife is in a position of financing of the litigation, at least at this stage of the proceeding. The court recognizes that the husband is an extremely wealthy individual, but the court also recognizes that at this stage of the proceeding the marriage contract is deemed to be valid, until such time as the wife can persuade the court to the contrary. Accordingly, the request for interim disbursements is dismissed without prejudice to the wife requesting that the issue be revisited at a later stage of the proceeding.

Scheduling of trial

[38] In view of the extent of material placed before the court and the date on which this motion was initially argued, it was, at a minimum, unrealistic of the husband to request that this matter be placed on the trial list for the May 2014 trial sittings with a combined settlement conference/trial management conference scheduled for April 2014, merely one month later. Such a request trivializes the issues before the court. The court has already granted a temporary order that the parties contact the trial coordinator to schedule the combined conferences within the month of October, 2014 for two hours, with priority given to the matter for the trial sittings commencing November, 2014.

Request to Bifurcate

[39] The husband maintains that the issue of the trial should be whether or not the marriage contract is valid. He asserts that he has a strong case and it would be unfair, under the circumstances, to require him to provide more financial disclosure. He suggests that even if the entire marriage contract is set aside, the brief duration of marriage and cohabitation would suggest that the wife would be entitled to nominal spousal support. Furthermore, if the contract is set aside with respect to the property provisions, the husband indicates that he will be asserting unconscionability since the amount that the wife would otherwise receive is so grossly out of proportion to what is fair, considering the duration of their cohabitation. Not surprisingly, the wife suggests that, based on a without prejudice net family property statement, she is owed an equalization payment, at a minimum, in excess of $1.1 million or an unequal division in her favour and that her hard work and contributions to their properties during the marriage assisted in increasing the husband’s net family property. She is seeking to set aside the entire agreement and, even if unsuccessful in that regard, wishes to pursue her entitlement to support beyond that provided in the agreement. She is also seeking further and extensive disclosure beyond what has already been provided by the husband and wishes all issues to be tried together.

[40] The court may either combine or split a case if the court determines it to be more convenient[10].

[41] Current legislation provides the means for parties to enter into domestic contracts. Part IV of the Family Law Act[11] provides a mechanism for parties with respect to marriage contracts, cohabitation agreements and separation agreements. The common denominator is an intention to agree on one’s respective rights and obligations under marriage, cohabitation and separation. Section 58(4) stipulates:

58(4) 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.

[42] Notwithstanding that the legislation encourages parties to resolve their disputes in advance, the courts are frequently being asked to adjudicate upon the legitimacy of the domestic contract. With respect to cohabitation agreements and marriage contracts, one might assume that once signed, the document is filed away in a drawer with the expectation that it will never be required because of the optimism of the parties that they will reside together until “death do them part”. As the late professor James McLeod stated in his annotation to the case of Hartshorne[12],

Marriage contracts operate at two different levels. At one level, a marriage contract provides a road map for the parties' future life together, outlining their expectations and aspirations. It is difficult to have sympathy for someone who entered a relationship on a fixed set of underlying assumptions and now complains that she or he does not like the result under the agreement if their married life together followed that road map. A marriage contract may also operate as an anticipatory separation agreement. The contract deals not only with how the parties will live their lives together but also provides for support and property division if the relationship breaks down. These economic consequences should reflect the parties' vision of how their life together will unfold.

[43] A domestic contract and its intent remind the court of the old advertisement a deoderant soap, namely that it “takes the worry out of being close”. However, once the fragrance of the relationship dissipates, the emotional consequences of the breakdown of the relationship motivate parties to closely scrutinize the agreement that was made; rarely is it that both parties find fault with their agreement and frequently, one wishes to rely upon it and the other wishes to set it aside. Television and its fictional interpretation of reality (perhaps), provided us with attorney Arnold Becker who stated “I've never seen a prenup I couldn't break”[13].

[44] The foundation of the family law case in this province is governed by Rule 2 of the Family Law Rules. It states as follows:

PRIMARY OBJECTIVE

(2) The primary objective of these rules is to enable the court to deal with cases justly.

DEALING WITH CASES JUSTLY

(3) Dealing with a case justly includes,

(a) ensuring that the procedure is fair to all parties;

(b) saving expense and time;

(c) dealing with the case in ways that are appropriate to its importance and complexity; and

(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases. O. Reg. 114/99, r. 2 (3).

DUTY TO PROMOTE PRIMARY OBJECTIVE

(4) The court is required to apply these rules to promote the primary objective, and parties and their lawyers are required to help the court to promote the primary objective. O. Reg. 114/99, r. 2 (4).

DUTY TO MANAGE CASES

(5) The court shall promote the primary objective by active management of cases, which includes,

(a) at an early stage, identifying the issues, and separating and disposing of those that do not need full investigation and trial;

(b) encouraging and facilitating use of alternatives to the court process;

(c) helping the parties to settle all or part of the case;

(d) setting timetables or otherwise controlling the progress of the case;

(e) considering whether the likely benefits of taking a step justify the cost;

(f) dealing with as many aspects of the case as possible on the same occasion; and

(g) if appropriate, dealing with the case without parties and their lawyers needing to come to court, on the basis of written documents or by holding a telephone or video conference.

[45] The goal of every judicial officer and the expectation of every litigant is that access to justice be provided in a manner which reflects the primary objective of the Rules. Trial sittings in this jurisdiction occur twice a year, each for three-week duration. The court is always mindful of the needs of the parties to achieve closure and the frustration of those parties whose cases are not reached. With an increasing population and systemic limitations placed upon the court’s resources, the duty to promote the primary objective takes on an even greater significance than that anticipated when the legislation was originally implemented. Recently, the Supreme Court of Canada[14] stated the following:

Ensuring access to justice is the greatest challenge to the rule of law in Canada today. Trials have become increasingly expensive and protracted. Most Canadians cannot afford to sue when they are wronged or defend themselves when they are sued, and cannot afford to go to trial. Without an effective and accessible means of enforcing rights, the rule of law is threatened. Without public adjudication of civil cases, the development of the common law is stunted. Increasingly, there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.

[46] In Hartshorne[15] the Supreme Court noted that the authorities generally agree that courts should respect private arrangements that spouses make for the division of their property on the breakdown of the relationship[16]. (Implicit within this decision is that the existence of duress, coercion or undue influence would, if proven, impact on the enforceability of the agreement). With respect to the deference to be afforded marriage contracts, the court notes that in interpreting whether or not a marriage agreement operates unfairly, a court must first apply the agreement. In the majority conclusion, it is stated[17]:

Once an agreement has been reached, albeit a marriage agreement, the parties thereto are expected to fulfill the obligations that they have undertaken. A party cannot simply later state that he or she did not intend to live up to his or her end of the bargain. It is true that, in some cases, agreements that appear to be fair at the time of execution may become unfair at the time of the triggering event, depending on how the lives of the parties have unfolded. It is also clear that the FRA permits a court, upon application, to find that an agreement or the statutory regime is unfair and to reapportion the assets. However, in a framework within which private parties are permitted to take personal responsibility for their financial well-being upon the dissolution of marriage, courts should be reluctant to second-guess their initiative and arrangement, particularly where independent legal advice has been obtained. They should not conclude that unfairness is proven simply by demonstrating that the marriage agreement deviates from the statutory matrimonial property regime. Fairness must first take into account what was within the realistic contemplation of the parties, what attention they gave to changes in circumstances or unrealized implications, then what are their true circumstances, and whether the discrepancy is such, given the s.65 factors, that a different apportionment should be made.

[47] The parties have provided the court with numerous decisions in support of and contrary to the bifurcation of an issue. As noted, the husband wishes the issue regarding the validity of the marriage contract to be determined first and only if the contract is set aside, that the issues of spousal support and property be considered by the court. The wife claims that a trial on the validity of contract alone will not put an end to the action and that even if the husband is successful, he will still need to produce disclosure of his income, assets and debts at the date of marriage and date of separation to enable the court to properly adjudicate the issues. She states that in order for the court to be able to determine if the terms of the contract were reasonable and fair, the court will need to know what the wife gave up in signing the contract and that issue cannot be properly determined without the husband providing further disclosure and without expert evidence. She maintains that she is entitled to pursue her support plan whether the contract is ruled valid or invalid.

[48] In Simioni[18], Quigley J. permitted bifurcation to determine the validity of a separation agreement prior to the corollary issues being tried. It is recognized that if the agreement was upheld, the matter would proceed to mediation and the court’s jurisdiction ousted. The court commented that there are a number of questions the court should consider in deciding whether the severance of the trial in this instance is just and expeditious. These include whether the issues for the first trial are relatively straightforward and the extent to which the issues proposed for the first trial are interwoven with those that will arise in the second. They include whether a decision from the first trial will likely put an end to the action, significantly narrow remaining issues, or significantly increase the likelihood of settlement. As stated[19]:

The reasoning that supports first having a trial on the validity of the Separation Agreement is simple and persuasive. If the Separation Agreement is valid, then it contractually ousts the jurisdiction of this Court to determine all disputed matters between these parties in favour instead of mandatory mediation. On the other hand, if the Agreement is invalid or unenforceable, either by reason of Silvana having been subjected to duress which led to her consent not being truly voluntary, or by reason of misrepresentation by Denis of his true financial circumstances at the time the Agreement was concluded, then the jurisdiction of this Court to determine all matters in dispute between these litigants is preserved.

In a case such as this with the factual background described above, the need to determine these threshold issues as elements in the process of moving to a comprehensive trial will inevitably result in increased cost, complexity and a prolonged litigation process. It seems impossible to imagine that a comprehensive trial, including the inevitable trial within a trial on the validity of the Agreement, would not be substantially lengthier then a bifurcated trial that focused first solely on the validity of the Separation Agreement and closely related accessory issues.

This economy and efficiency becomes evident when one considers the issues that fall away if the Separation Agreement is found to be valid. The actual date of separation of the parties will likely become irrelevant for all practical purposes or economic effects, there will likely be little need to determine whether Silvana held a trust interest of some kind in Ojon Corporation before it was sold to Estee Lauder, and any unhappiness experienced by Silvana arising out of the terms of the Agreement itself and the bargain she struck with Denis in the course of concluding the Agreement would likely fall to be determined at mediation. On the other hand, if the Agreement is invalid, all of these issues and the others previously outlined, and further issues that I have not specifically enumerated, will remain to be determined by this Court.

Should that be the result once the threshold question has been answered, the Court can then address itself in a focused manner to the practical and procedural exigencies that will then have to be addressed, but only to permit the remaining consequential issues to be dealt with efficiently at a second trial. However, if the Agreement is found to be valid following a focused and disciplined process leading to an expedited trial of that and the necessarily ancillary issues alone, then it seems inevitable that clear benefits will arise in the speed, cost and efficiency with which justice will be able to be provided to both of these parties. In my view, the first trial will speed up the resolution of issues between these parties by determining whether the Separation Agreement validly governs all aspects of their dispute resolution. If it is not and is declared invalid, I consider the prospects would be considerably enhanced that this case would settle between the parties consensually without the need for a further trial. If not settled, I am certain the second trial would be considerably shortened. If the trial is not severed, all of the evidence relating to the residual questions will be advanced as well as evidence respecting the Agreement's validity, and this must necessarily consume more time and effort and Court resources, not only in preparing for the trial, but in presenting a broader canvass of evidence, which may ultimately be determined not to have been necessary.

[49] In Baudanza v Nicoletti[20], a case involving a period of cohabitation (including marriage) of thirty-four months, McDermot J. found it to be more appropriate for the case to be split and that certain issues be tried prior to the ultimate determination of entitlement to spousal support and property equalization. Although the issue of the validity or invalidity of the contract in that case was bifurcated, the court also ordered additional issues to be considered including the issue of whether or not the spousal support release was binding in light of the Miglin[21] decision.

[50] In Hall v Sabri[22], the parties separated after twenty-six years of marriage. The court found that the applicant would still maintain a support claim regardless of the validity or invalidity of the agreement, and that bifurcation in that case would result in increased costs. The court was also concerned that bifurcation may prejudice the applicant with respect to the issue of financial disclosure. The court also dismissed an application for interim spousal support as it could not conclude, based on the affidavits, that the applicant had a substantial likelihood of success or even a reasonable chance to have the agreement declared invalid and that as a result of contradictory evidence, the court could not conduct a Miglin analysis.

[51] In G. (C.M.) v G. (R)[24], the parties were married for fourteen years and had two children. The wife did not work outside of the home during the relationship and the husband was very wealthy with complex business interests. The parties had entered into a marriage contract under which the wife released her entitlement to spousal support and property division in consideration of which she would receive the payment of $1 million in the event of separation. The court found that if the issues were bifurcated to enable the validity of the marriage contract to be tried first, such a trial would not conclude the matter because of spousal support issues that could not properly be determined. The court concluded in that case, that it was not fair or efficient to proceed with the proposed first trial.

[52] In Dillon[25], the parties separated after a twenty-seven month marriage which had been preceded by a period of cohabitation. The court found that on the balance of probabilities, splitting the case would result in the just and least expensive determination of the proceeding on its merits. Similar to the decision in Baudanza[26], the court expedited the trial to proceed to the next sittings as it saw no benefit from the time and expense of either a settlement or trial management conference.

[53] In Lakhoo[27], the Court of Appeal of Alberta overturned a decision of the chambers judge in directing a bifurcated trial. Those parties were married in 1995 and entered into a prenuptial agreement. It appeared to the chambers judge that as the claim for disclosure rested on the validity of the agreement, it would be expeditious to proceed by first determining its validity as if it was found to be valid and it would obviate the need for disclosure of financial records. The agreement remained silent on the issue of spousal support and based on the facts of the case, there would be no saving of time or resources by splitting the trial, as the disclosure of financial information was required in any event.

[54] In reviewing the competing arguments, this court cannot assess credibility, weigh the evidence or draw factual conclusions other than as agreed upon by the parties, implicitly or otherwise[28]. The parties are unable to agree on the date of separation and, implicitly, the period of cohabitation. Compelling arguments are made by both parties in support of their respective positions. Without a consensus, financial disclosure is required for both dates. Clearly then, a determination of the valuation date would save considerable expense to the parties in providing financial disclosure. The parties may only be five months apart in their respective positions but a determination of the precise date could have an impact on any argument presented with respect to unconscionability in light of the provisions of section 5(6) of the Family Law Act. Furthermore, once the duration of cohabitation is determined, it may well assist both the parties and the court in their joint duty to manage the case with respect to the remaining issue.

[55] Based on the facts presented to me, and finding it difficult to ignore the relative brief period of cohabitation, I find that it is more convenient for the case to be split and that the issues of the validity of the marriage contract, together with the determination of the valuation date, be the subject matter of the initial trial prior to the determination of the issues regarding quantum and duration of spousal support. The issue regarding equalization of property is dependent upon the validity of the agreement and there is the potential of savings, both in time and expense to be achieved if the agreement is found to be valid. It is my belief that this determination accords with the primary objective set out in the Family Law Rules.

Disclosure

[56] I have reviewed the husband’s request for information, dated February 9, 2014. The requests of the husband are both reasonable and proportionate to the issues before the court and, as such, the wife shall comply with the balance of the information requested in this document.

[57] I have also reviewed Schedule A appended to the wife’s notice of motion, which is a five-page letter from Marmer Penner Inc. (entitled Initial Production Letter) to the wife’s counsel, together with a three page request for information. I find that the letter from Marmer Penner Inc. exceeds what is, at this stage, reasonable and necessary for the court to make a determination of the husband’s financial position. For instance, there was a request for the husband’s personal income tax returns for 2005 to 2013. In addition, financial statements are requested for all entities in which the husband has an interest, again from 2005 to 2013. If the wife legitimately believes that all of the information requested by Marmer Penner is necessary at this stage of the proceeding, then she can request the consent of the husband to enable her to obtain all of this information at her expense, subject to reapportionment by a trial judge if then deemed appropriate.

[58] The marriage contract in dispute contains a schedule reflecting the husband’s assets with an attributed value of $14.2 million, together with an approximate annual income of $800,000. The husband will be required to produce a sworn financial statement with supporting documentation with respect to all assets and liabilities reflected on his schedule, both on the date of marriage and the date of separation, which is being relied upon by the husband, together with proof of income as reflected in his income tax returns and notices of assessment for 2009 and 2013. One can assume that as the husband intended the wife to rely upon the schedule to the marriage contract, that the backup documentation should be readily available regardless of whether or not there were any requests made for further disclosure.

[59] This decision has attempted to focus on compliance with the Family Law Rules and the commentary from the Supreme Court of Canada referred to herein that requires a proportional focus to be placed on cases before the court. I have no doubt that if this court ordered compliance with the Initial Production Letter, following compliance there would be a secondary request followed, perhaps, by yet another. Although the wife alleges that she was not provided with adequate financial disclosure related to the husband’s varied business interests and personal assets, or with respect to his income, she nevertheless had a very good understanding that the husband was a man of considerable wealth and her affidavit describes the life of luxury he apparently led during her period of courtship[29]. This apparent understanding does not shift the onus upon the wife to make further inquiries, but it may well undermine the strength of her argument at trial on this issue. Similarly, the husband must appreciate that an agreement based on full and honest disclosure is an agreement that courts are more likely to respect. As stated by the Supreme Court of Canada in Rick v. Brandsema[30]:

[49] Whether a court will, in fact, intervene will clearly depend on the circumstances of each case, including the extent of the defective disclosure and the degree to which it is found to have been deliberately generated. It will also depend on the extent to which the resulting negotiated terms are at variance from the goals of the relevant legislation. As Miglin confirmed, the more an agreement complies with the statutory objectives, the less the risk that it will be interfered with. Imposing a duty on separating spouses to provide full and honest disclosure of all assets, therefore, helps ensure that each spouse is able to assess the extent to which his or her bargain is consistent with the equitable goals in modern matrimonial legislation, as well as the extent to which he or she may be genuinely prepared to deviate from them.

[50] In other words, the best way to protect the finality of any negotiated agreement in family law is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme.

[60] The husband, in his affidavit, states that his case is very strong and is simply unfair, under the circumstances, to require him to provide more financial disclosure than already given. He states that his assets and income at marriage are as disclosed on the marriage contract. As noted, the trial judge will be entitled and, in fact, would be expecting to receive the material ordered herein. It may be said that financial disclosure without backup documentation is not, in fact, financial disclosure. However, if the husband is correct in his assertion that even if the agreement is set aside, he is entitled to relief under section 5(6) of the Family Law Act, one cannot foresee how the husband will be able to succeed without the rather minimal disclosure ordered of him. If the result of the disclosure closely approximates the schedule appended to the marriage contract, one would expect the husband to have recourse in his costs submissions.

[61] On a final note, the parties should not ignore the possibility of receiving an opinion from the case management justice at the forthcoming conferences which may well assist in an earlier resolution of their dispute. If there are any further disclosure disputes, they can be addressed at the forthcoming conferences. The ordered disclosure will either be sufficient to enable the trial judge to conduct a full Miglin analysis or, if not, then direction can be provided on the more extensive disclosure that may assist on a second trial.

[62] In summary, the issues set out in paragraph [55] above shall be bifurcated and split from the action and tried separately from any other issues raised in the pleadings. The files from counsel involved in the negotiation of the marriage contract shall be produced and medical coverage for the wife, if previously in existence, shall be reinstated.

Costs

[63] I am of the initial opinion that success on these motions has been divided and that no costs be payable. The parties may wish to agree to fix the costs and have them payable in the cause. If not so inclined, then either party may deliver cost submissions within twenty days with a response twenty days thereafter and reply ten days thereafter. Submissions are limited to three pages, together with offers to settle and bills of costs. Included in the submissions will be each party’s position regarding responsibility for scheduling these motions with the extensive supporting material for a one hour motion, rather than a long motion and whether or not this constitutes unreasonable behaviour under Rule 24.

Justice Kaufman

Released: September 12, 2014

[1] Potter v. Boston, 2014 CarswellOnt 4855 (Ont. Div. Ct.) per Healey, J.

[2] Dymond v. Graham, 2010 CarswellOnt 103400; and, Mantella v. Mantella, 2008 727 (ON SC), 2008 CarswellOnt 117.

[3] Griffore v. Adsett, 2001 CarswellOnt 1635.

[4] Jones v. Hugo, 2012 ONCJ 211.

[5] Kowalski v. Grant, 2007 MBQB 235, (2007), 43 R.F.L. (6th) 344 (Man. Q.B.).

[6] See: Spence v. Sly, 2010 CarswellOnt 8359.

[7] See: McCain, 2012 CarswellOnt 16853; Divorce Act, RSC 1985, c.3, s. 15.2(2)(4)(c).

[8] Rule 24(12) of the Family Law Rules (Ontario), O Reg 114/99.

[9] Stuart v. Stuart, 2001 28261 (ON SC), 2001 CarswellOnt 4586.

[10] Rule 12(5), Family Law Rules.

[11] Family Law Act, R.S.O.1990, c. F.3.

[12] Hartshorne, 2004 SCC 22, 47 R.F.L. (5th) 5 (SCC).

[13] L.A. Law, NBC 1986–1994.

[14] Combined Air Mechanical Services Inc. v. Flesch, 2014 CarswellOnt 641.

[15] Ibid, see: footnote 12.

[16] Ibid, see: footnote 12, para. 9.

[17] Ibid, see footnote 12, para. 67.

[18] Simioni v Simioni, 2009 CarswellOnt 258.

[19] Ibid, paragraphs 17, 20 to 22.

[20] Baudanza v. Nicoletti, 2011 CarswellOnt 8927.

[21] Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 (SCC).

[22] Hall v Sabri, 2011 CarswellOnt 9749.

[23] Ibid, footnote 21, para. 63.

[24] G. (C.M.) v G. (R), 2013 Carswell Ont 1461.

[25] Dillon v. Dillon, 2013 CarswellOnt17537.

[26] Ibid, footnote 20.

[27] Lakhoo, 2014 ABCA 98, 2014 CarswellAlta 348 (CA).

[28] See: Ierullo v. Ierullo, 2006 CarswellOnt 5887 (OCA).

[29] Cuffe v. Desjardins, [2013] O.J. No. 2706 per MacKinnon J. for a similar approach, albeit, at trial.

[30] Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295 at paras. 49 & 50.