CITATION: R.C. v. J.B, 2015 ONSC 2589

COURT FILE NO.: FS-12-118-00

DATE: 20150420

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

R.C.

Mr. Timothy Flannery, for the Applicant

Applicant

• and -

J.B.

Mr. Stephen Arnold and Mr. Neil Arnold, for the Respondent

Respondent

HEARD: April 9, 10, 13, 14, 15 and 16, 2015

REASONS FOR JUDGMENT

Conlan J.

[1] Whoso walketh uprightly shall be saved: but he that is perverse in his ways shall fall at once.

[2] That passage is from the Old Testament of the Holy Bible, King James Version. It can be found at Proverbs 28:18.

[3] R.C. says that his former “Pastor”, Mr. Kennedy, is in fact the crooked one.

[4] I make no comment as to whether Mr. Kennedy is a crook. I make no comment as to whether his organization is on the “straight and narrow”. It would be inappropriate for me to do so. Those issues do not need to be decided. And the evidence at trial has not established that Mr. Kennedy is perverse in his ways. What I will say is that he had no business being the principal orchestrator of these parties’ “separation agreement”. Of that I am convinced.

[5] The separation agreement, drafted by and witnessed by Mr. Kennedy, all while he owed a large amount of money to the parties, is set aside.

Introduction

[6] It took this case way too long to get to trial. More than two years ago, on January 25, 2013, in a handwritten Endorsement, I wrote the following: “[i]t is time to move to a trial. It is time to end the motions”.

[7] Although a Trial Management Conference was scheduled at that time for April 5, 2013, the case only arrived at trial two years later.

[8] In any event, here we are.

The Parties

[9] The Applicant (“R.C.” or “husband”) is in his mid-fifties. The Respondent (“J.B.” or “wife”) is in her late forties. There is one child, in her twenties, independent and not the subject of the litigation.

[10] The parties married in June 1987 and separated in January 2008. They were divorced in April 2009.

[11] Unfortunately, the Trial Record does not include updated Financial Statements. What it does contain, for the most part, is a wealth of improperly filed materials which have no place in a proper Trial Record. Other than the pleadings and prior Court orders, I have ignored the contents of the Trial Record (which, I should add, was not prepared by any of the counsel at trial).

The Pleadings

[12] In his originating process issued in April 2012, the husband requested the following relief: an order extending the time for making a claim under section 5 of the Family Law Act, an order equalizing the net family properties, an order that assets be transferred or liquidated to effect whatever equalization payment is required, interest and costs.

[13] In her Answer dated May 2012, the wife, self-represented at the time, requested what amounts to a restraining order against R.C., costs and “[t]hat this matter be resolved in a short order”. The latter was certainly not achieved.

[14] In her Answer, J.B. opposed the claims advanced by the husband and asked that his Application be dismissed with costs in her favour.

The Litigation History

[15] On January 25, 2013, my handwritten Endorsement included the following. I set this out because it is relevant to the first item of relief sought by R.C. in his Application: “The Respondent [the wife] moves to dismiss the Application as being commenced after the expiration of the 2-year limitation period in section 5(7)(3) Family Law Act. The Applicant [the husband] moves for an Order extending that prescribed time, pursuant to section 2(8) Family Law Act. The Respondent’s Motion is dismissed. The Applicant’s Motion is granted”. I then went on to provide reasons.

[16] There have been other Orders made over the last three years, however, none of them substantive, except the following. The parties owned jointly a property on 2nd Avenue East in Owen Sound. The wife brought an Application for partition and sale of that property. The property was sold, and the net proceeds are currently being held in trust by R.C.’s lawyer. R.C.’s Application for equalization of net family properties was commenced after J.B.’s Application for partition and sale was issued. In December 2012, I ordered that the two actions be consolidated.

[17] The case was tried in Owen Sound on April 9 (very briefly), 10, 13, 14, 15 and 16, 2015. For the Applicant, I heard testimony from R.C., his family physician – Dr. McArthur, and three of R.C.’s sisters. For the Respondent, I heard from J.B. and Mr. Kennedy.

[18] At the conclusion of the trial, I reserved my Judgment.

The Issue and Analysis

The Positions of the Parties

[19] In a written opening statement filed with the Court prior to the commencement of the trial, R.C. submitted that the first issue to determine is the validity of the agreement signed by the parties after separation, on August 25, 2008 (the “Agreement” – Exhibit 1 at trial).

[20] This approach is entirely consistent with what was ordered by Thompson J. at a combined Settlement/Trial Management Conference in December 2013. At that time, His Honour directed that the trial be bifurcated, with the preliminary stage devoted to a determination of whether the Agreement is valid and enforceable.

[21] The husband challenges the validity of the Agreement. He says that, in signing the document, he relied upon inadequate and misleading disclosure provided by the wife. Further, R.C. argues that the Agreement was mediated by a man (Mr. Kennedy) who had a conflict of interest. Also, R.C. submits that the Agreement led to a grossly unfair result in that the wife kept the matrimonial home, exclusively, while the husband remained liable on the mortgage, as a co-borrower. Finally, it is alleged that R.C., for medical reasons, was incapable of understanding the Agreement at the time that he signed it.

[22] On the other hand, in her written opening statement filed with the Court prior to the commencement of the trial, J.B. asserts that the Agreement is a valid separation agreement under section 54 of the Family Law Act. She asks that it be enforced. According to the wife, “[b]oth parties entered into the Separation Agreement of their own free will, and understood the nature and consequences of the Separation Agreement” (paragraph 10 of J.B.’s written opening statement).

[23] In his closing argument, counsel for R.C. put forward numerous arguments in favour of setting aside the Agreement, including (as those most strenuously advanced) (i) Mr. Kennedy's alleged conflict of interest and undue influence on R.C., (ii) the husband's inability to properly appreciate what he was signing, and (iii) the fundamental unfairness of the Agreement and its incongruity to the legislative objectives.

[24] In his final submissions, counsel for J.B. very ably argued that there is no legitimate reason to throw out this Agreement. R.C.'s evidence was self-serving and not credible or reliable. The Agreement, though crude in some respects, was a reasonable effort to achieve a fair and equitable division of property between the spouses. There was no oppression, coercion, undue influence, duress or anything of that sort. The values contained in the Agreement were reasonably accurate. The methodology used, though not perfect, was generally consistent with what the law requires. R.C., a smart and experienced businessman, knew full well what he was signing and was a big part of its creation. He was not vulnerable. He was not taken advantage of. The Agreement was intended to be and is in fact fair. The sanctity of this domestic contract ought to be respected by the Court. In the alternative, if the Court is concerned about enforcing an Agreement that would not give R.C. any credit against the $250,000.00 cash payment that he owes for the approximate $88,000.00 to $90,000.00 that he already paid to the wife between January 2008 and August 2011, the Court could apply the principle of rectification and correct that mutual mistake while upholding the remainder of the Agreement's property provisions. It appears to be conceded by the wife that the part of the Agreement which trades-off property for child support is invalid.

[25] Both counsel were helpful in their submissions. Frankly, Mr. Arnold appealed to what many Judges want to do in most cases - give effect to what the parties bargained for. Unfortunately for J.B., this is an exceptional case.

The Sole Issue to be Decided - The Validity of the Agreement

The Evidence at Trial on Behalf of the Husband, R.C.

[26] R.C. is currently 54 years old. He lives with his parents in Owen Sound. He has a grade 13 education and completed one year of a civil engineering program at college. He is a long-time landlord and the owner and operator of a retail store in Owen Sound.

[27] A summary of the evidence of the husband most germane to the issue of the validity of the Agreement is as follows.

[28] In 2000, R.C. met Randy Kennedy and started attending Mr. Kennedy’s “church” (I have placed quotation marks around that word because I am not sure whether Mr. Kennedy’s Victorious Living Centre is actually a place for public, usually Christian, worship). R.C. left the Victorious Living Centre (“VLC”) in 2011. He now refers to it as a “cult”.

[29] R.C. testified that he and J.B. loaned thousands and thousands of dollars to Mr. Kennedy, at the latter’s request, including sizeable advances of $25,000.00 (October 2003), $90,000.00 (November 2004) and $20,000.00 (August 2005). They gave Mr. Kennedy the money because they trusted him. They did what he asked them to do. They did not question him. They did not obtain security for the loans. They did not even know the details of what the money was for. To come up with the money, they cashed in RRSPs and took out a line of credit against their matrimonial home.

[30] In any event, when one considers the interest rates on those loans and what the prevailing market conditions were at the time, as R.C. admitted in cross-examination, the loans were, on their face, “good deals” for R.C.

[31] R.C.’s marriage deteriorated. He separated from J.B. in early 2008. Mr. Kennedy, referred to by R.C. in his testimony as “Randy”, “Mr. Kennedy” and, at times, “Pastor Kennedy”, instructed R.C. to leave the matrimonial home, which he did.

[32] Several months later, on August 25, 2008, the parties signed the Agreement (Exhibit 1). Mr. Kennedy prepared the Agreement. Mr. Kennedy presented the Agreement to R.C. Mr. Kennedy witnessed the parties’ signatures. R.C. did not obtain any legal or financial advice from anyone before signing the Agreement. He signed it because of the instructions and influence of Mr. Kennedy.

[33] The evidence of the husband leaves me with many unanswered questions. It is unclear to what degree R.C. read the Agreement before signing it. It is unclear to what degree R.C. disagreed with the contents of the Agreement at the time that he signed it. It is unclear to what degree R.C. discussed the contents of the Agreement with Mr. Kennedy in advance of signing it. It is unclear to what degree R.C. had input in to the values of the assets and debts listed in the Agreement. It is unclear to what degree R.C. gave financial documentation and/or information to Mr. Kennedy prior to August 25, 2008. On all of those issues, as examples only, the evidence of R.C. was vague and uncertain. His memory of the events, generally, was poor.

[34] I know one thing. R.C. is not the shrewd businessman that J.B. wants the Court to believe he is. This business that he runs is about as unsophisticated as one could get. It sells paper products. Until recently, it accepted only cash or cheques as payment.

[35] R.C. did testify that he did not understand at the time of signing the Agreement, and still does not today, some of the contents of the document. One example is the reference to “4 cash investments”.

[36] R.C. also stated at trial that some of the values contained in the Agreement are clearly wrong. For example, the Mazda motor vehicle is listed at an amount nearly $7000.00 more than its 2006 cash price (compare Exhibits 1 and 8). There is no doubt that R.C. is correct – some of the values are clearly wrong.

[37] Further, the husband testified that his health was “not that great” at the time that he signed the Agreement. He had undergone a double lung transplant in 2000. He had suffered multiple strokes after that operation. He was not always taking his anti-rejection drugs because of the “Jesus heals” philosophy of the VLC (R.C.’s words). In cross-examination, R.C. used the word “delusional” to describe his condition around the time of signing the Agreement.

[38] The bottom line is that, according to the husband, “you did what he (Mr. Kennedy) told you”. That is why R.C. advanced the loans. That is why he moved out of the matrimonial home. That is why he signed the Agreement. There were very few exceptions – very few occasions when R.C. said “no” to Mr. Kennedy. One example is when the husband refused to loan an additional $200,000.00 to Mr. Kennedy, not long before separation.

[39] R.C.’s family physician since June 2000, Dr. Anne-Louise Andrea McArthur, testified as part of the case for the husband. On consent, she was qualified as an expert witness in the field of family medicine.

[40] Dr. McArthur confirmed that R.C. has had some serious medical issues. In 2000, he had a double lung transplant. In 2001, he had a stroke. To help his body deal with the transplant, R.C. was prescribed prednisone, a steroid. According to the doctor, that drug could impact one’s thought process, although she could not say that she has actually seen that effect on R.C.

[41] The doctor testified that she has, many times, spoken to R.C. about the need to take his medications. She has experienced numerous incidents where the husband seemed not to understand basic things related to his medical treatment including, for example, the need to take his medications. At times, he appeared confused. Those difficulties with R.C. have persisted for many years since 2000, on an intermittent basis. He has been on and off his medications.

[42] Exhibit 16 is the doctor’s professional opinion, dated March 10, 2014. In that letter, the doctor concludes by saying “[i]t is clear that there is something significantly wrong with Mr. [C.]’s decision making process, I just do not know what is at the root of this behaviour”. Earlier in the report, the doctor states the following:

“From my interactions with Mr. [C.] over the last 14 years, it is clear that he has either a cognitive issue or a significant personality/psychiatric issue that interferes with his understanding of situations and their implications and appropriate follow through. Without ever having (as far as I am aware at least since he has been my patient) any testing or consultations regarding his cognitive functioning, or consultation with a psychiatrist regarding an underlying psychiatric diagnosis, I cannot say which one applies.”

[43] There is no diagnosis which explains why R.C. has had persistent troubles following through with medical advice. But the doctor was clear in her testimony that she had more than “some concerns” about the issue. The husband’s situation went “above and beyond” the normal issue of patients not always following doctors’ orders.

[44] Dr. McArthur did not refer R.C. to a psychiatrist, psychologist or for cognitive testing because he seemed to have no insight in to his difficulties with his lack of follow through with medical advice, and such insight is a necessary prerequisite to successful counselling or therapy.

[45] Dr. McArthur did not have any appointments with R.C. in 2006, 2007 or 2008. She did see the husband in late December 2009, about 16 months after the Agreement was signed. At that time, her conclusion was that the husband was “chronically unwell”.

[46] K.R., one of the husband’s sisters, testified at trial. She has little knowledge about her brother’s mental state between 2004 and 2010 because he had effectively isolated himself from the family in order to devote himself to Mr. Kennedy and the VLC. R.C. was quiet, secretive and vague.

[47] By the Fall of 2011, now away from Mr. Kennedy and the VLC, R.C. was in a very bad mental state, according to K.R. And he was not taking his medications.

[48] S.L., another one of the husband’s sisters, also testified at trial. She is a retired registered nurse. In 2008, she saw her brother daily, at his store. He was very religious. He was obsessed with the VLC. Medically, he was doing “really well” and taking his medications regularly.

[49] In the eyes of S.L., the VLC was not good for her brother. At some point after his separation from J.B., the husband told S.L. that he felt brainwashed by the VLC.

[50] I pause here to say, unequivocally, that (without attributing fault to anyone, including Mr. Kennedy) the VLC was indeed not good for R.C. He went from a sick man, physically, in 2000 to a broken man, mentally, by 2008. And his finances took a major hit, at least his debt load.

[51] K.C., also one of the husband’s sisters, testified at trial as well. She has an extensive employment history overseas and in the fields of child welfare and health. She is the Director of a sexual assault and trauma centre at a hospital in Kitchener.

[52] According to K.C., after his double lung transplant, R.C. became reclusive, private and very religious. By 2009, he was “really, really, really depressed”. He seemed unable to make basic decisions – it was “whatever the Pastor [Mr. Kennedy] says”. By 2011, R.C. was “profoundly depressed” and had memory problems. At one point, K.C. found Exhibit 1 among her brother’s papers. She showed it to him. He seemed puzzled. It was as if he was seeing it for the first time. He did not appear to know that the family assets and debts had already been divided.

[53] I found K.C. to be a remarkably clear, articulate and thoughtful witness. She painted a shocking portrait of her brother’s downward spiral while involved with the VLC, yet she did so in a measured way, without hyperbole or personal attacks against J.B. or Mr. Kennedy.

[54] K.C. relayed to the Court a comment from her brother which would send chills down the spine of any reasonable person. R.C. once told her that the teachings of the VLC included the notion that only persons involved with the organization were to be trusted. Others were labelled as “wolves”.

The Evidence at Trial on Behalf of the Wife, J.B.

[55] Born in 1967 and a high school graduate, one of the first things that the Court heard from the wife is that the daughter that she and R.C. had adopted has recently changed her name to A.J.B. It used to be A.M.C. (the C. being the surname of the husband). Now she has changed her middle name to be the exact same as the wife’s first name. And she has changed her last name to be the same as the wife’s.

[56] J.B. quickly added that this was all the choice of the young lady, now 23 years old. I doubt that.

[57] The wife, to this day, remains very much a part of the VLC and close with Mr. Kennedy.

[58] J.B., over the years, has received counselling from Mr. Kennedy. In essence, he has been her Pastor, her friend, her counsellor, her confidante, her employer and her family law mediator.

[59] In many material respects, J.B.'s evidence differs from that of her former husband. First, she disagrees that the VLC and/or Mr. Kennedy force anyone to do anything. The organization is no "cult". Specifically, Mr. Kennedy never unduly influenced or coerced either her or R.C. to loan him money or to sign the Agreement in August 2008. Second, she paints a very unflattering picture of R.C. as being selfish, abusive, emotionless, unloving, cold, cheap and generally distasteful. Although the husband uttered hardly a single negative thing about his former wife when he testified, J.B. had no hesitation attacking R.C. Third, J.B. denies any assertion by the husband that the Agreement was sprung on him. She claims that R.C., although not the drafter of Exhibit 1, was largely responsible for its content - that information was relayed to her by Mr. Kennedy. There was no material non-disclosure. The values in Exhibit 1 were fairly accurate estimates at the time. Fourth, she disputes the argument that the Agreement is somehow unfair to the husband, although it is clear from the two Net Family Property Statements entered as Exhibits 21 and 22 that, if the Agreement is enforced now (as J.B. wants), the husband will end up paying several tens of thousands of dollars more than he would otherwise owe. Fifth, she disputes the notion that R.C. was too unhealthy or unfit to appreciate what was happening in August 2008; in fact, when the Agreement was signed, he seemed to be content with it and understood it.

[60] What was clear from J.B.'s evidence is that she does not really know the bases for the values contained in Exhibit 1. She had very little if anything to do with its creation. She trusted Mr. Kennedy. She trusted that the figures that R.C. had allegedly supplied were accurate. She did not know much about the family's finances. She was shocked that they had that much wealth. She never thought that she would receive any of the payments due to her under the Agreement anyways (in fact, however, R.C. paid to her two thousand dollars per month for about 45 months between January 2008 and either July or August 2011). She, even today, does not have a complete understanding of all aspects of the Agreement.

[61] For J.B., the separation in January 2008 was the culmination of many years of misery. Thoughts of divorce started coming to her before the ink was dry on the marriage certificate. Actually, she testified that she had doubts about marrying R.C.

[62] Although not expressed this way by the wife herself, my impression is that she found salvation, peace and meaning in her life through the VLC, Mr. Kennedy and the child that she and R.C. adopted. R.C. added very little to the equation.

[63] In terms of the Agreement, J.B. wants it strictly enforced. Although R.C. paid to her about ninety thousand dollars after separation, and although, post-separation, she received (i) the matrimonial home, (ii) RRSP money that she cashed in for investments that had been purchased for her by R.C. and (iii) the Mazda motor vehicle, she wants the $250,000.00 outlined in the Agreement. A deal is a deal (my words).

[64] Randy Kennedy testified at trial, on behalf of the wife. He corroborated much of J.B.'s evidence and contradicted much of R.C.'s testimony.

[65] Of course, Mr. Kennedy is not an independent witness. As the drafter of the Agreement and a pivotal part of its creation, he has a vested interest in it being upheld. Further, he, being human, could not help feeling some allegiance to J.B. who, unlike the deserter R.C., is still a strong supporter of, member of, financial contributor to and administrator of the VLC.

[66] In saying the above, I intend no criticism of Mr. Kennedy. But those things need to be said as they impact upon my ultimate assessment of the credibility and reliability of the evidence.

[67] Mr. Kennedy acknowledged that he, for many years since 2000, was to each of the parties a Pastor and a counsellor, among other things. As of August 2008, he was to each party those things and the author and principal negotiator of their domestic contract for separation purposes. In fact, the parties had no negotiations directly with each other. At the same time, Mr. Kennedy owed them a lot of money.

[68] Mr. Kennedy admits that he borrowed massive amounts of money from the parties. He borrowed $25,000.00 to buy himself a truck. He then borrowed another $20,000.00 to buy another truck to be used for VLC purposes. He also borrowed $90,000.00 to buy a house as an investment.

[69] Mr. Kennedy agrees with J.B. that he never forces anyone to do anything. To be specific, he never unduly influenced or coerced either R.C. or J.B. to loan him money or to sign the Agreement in August 2008. In fact, he never even asked either party to loan him money. He simply "presented opportunities" to them.

[70] Of course, there are ways to ask for money other than to say ”give me money”. One could imagine Mr. Kennedy taking R.C. to the car lot, pointing out the truck that he wants and saying something like “I would buy that if I had the money”. Perhaps that is what Mr. Kennedy means when he says that he “presented opportunities” to R.C.

[71] Unlike the wife, Mr. Kennedy did not attack R.C. during his testimony, however, it was clear from his evidence that he believes that R.C. was the person most responsible for the breakdown of the marriage and the one who delayed and hindered the separation and divorce. The totality of Mr. Kennedy's testimony at trial leads to the inescapable conclusion that, post-January 2008, he was more sympathetic to the plight of J.B. than to R.C.

[72] Mr. Kennedy shares the wife's denial that the Agreement was sprung on R.C. According to Mr. Kennedy, the husband had significant input in to the Agreement by providing values for the figures therein, by providing information about family assets and debts and by meeting with Mr. Kennedy multiple times to review draft agreements (including one signed by the parties in April 2008).

[73] I pause here to state that I could have taken the easy way out and set aside the Agreement solely on the basis that it is void for vagueness. There was already an agreement signed by the parties in April 2008 (Exhibit 13). That earlier agreement does not state anywhere that it is subject to something further to come. Exhibit 1 does not refer to Exhibit 13. Exhibit 1 does not state that it supplements or replaces or terminates or nullifies or does anything to Exhibit 13. Are the documents supposed to be read together? Was Exhibit 1 even necessary? It is all very vague as the only evidence at trial on this point comes from Mr. Kennedy, in answer to the Court’s own question, that the parties intended for Exhibit 1 to be the final and only agreement.

[74] Mr. Kennedy also shares the wife's denial that there was any material non-disclosure, although it is clear that the Agreement did not mention at all some of the family's assets and debts as of August 25, 2008, such as the two properties in Owen Sound owned by a numbered corporation that the parties were shareholders of.

[75] Further, Mr. Kennedy agrees with J.B. that the values in Exhibit 1 were fairly accurate estimates at the time (it should be noted, however, that some numbers were "rounded" up or down, in one case, by more than $40,000.00). Although Mr. Kennedy had nothing "concrete" (his word) in terms of documentation or evidence to verify those numbers, he trusted the information supplied to him by R.C.

[76] In addition, Mr. Kennedy concurs with J.B. in her dispute of any notion that the Agreement is somehow unfair to the husband. Everyone intended to equally divide the assets and debts, and the Agreement achieved that (of course, I hasten to add that, even on its face, Exhibit 1 did not achieve an equitable property division).

[77] Also, Mr. Kennedy agrees with J.B. that R.C. was "normal" and could very well appreciate what was happening in August 2008. He appeared to read over the full document on the date that it was signed. And although there was no discussion about its contents, he appeared to understand it and support it - why else would he have signed Exhibit 1?

[78] This was the first time that Mr. Kennedy had ever assisted persons in dividing up their marital assets and liabilities. I suspect this was and will continue to be the last.

The Law

[79] The parties, through counsel, agree on the law, including the legislative authority to set aside the Agreement, the jurisprudential test for doing so and the discretionary nature of that remedy.

[80] They disagree on the facts and on the application of the law to those facts.

[81] This Court’s authority to set aside the Agreement is found at subsection 56(4) of the Family Law Act. That provision states:

Section 56: Setting aside domestic contract

(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. R.S.O. 1990, c. F.3, s. 56 (4).

[82] There is a two-stage analysis that I must undertake in determining whether the Agreement ought to be set aside. Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, at page 348.

[83] First, I should look to the circumstances in which the Agreement was negotiated and executed to determine whether there is any reason to discount it. There is no exhaustive list of factors that can be considered, however, they include oppression, pressure or other vulnerabilities. The totality of the circumstances must govern the analysis. The context and duration of the negotiations and whether professional assistance was obtained are also relevant. In the family law context, unconscionability is not necessarily required to set aside an agreement. Miglin, supra, at page 348.

[84] If it is decided that the conditions under which the Agreement was negotiated are satisfactory, I must then turn my attention to the substance of the contract. I must assess the extent to which the Agreement takes into account the factors and objectives listed in the legislation, thereby reflecting an equitable sharing of the economic consequences of marriage and its breakdown. Does this Agreement achieve the goal of a fair and equitable distribution of net family property? Only a significant departure from the legislative objectives will warrant the Court’s intervention. The entire Agreement needs to be analyzed. Miglin, supra, at page 350.

[85] It must be remembered that it is possible to set aside part of an agreement. Miglin, supra, at page 350.

[86] Where it is alleged by the party asking that the agreement be nullified that the other side failed to make full financial disclosure, it should be considered whether the petitioning party had just as much ability to value the assets in question as the opposing party. Further, the fact that the agreement does not match what would have resulted from a straight equalization calculation is no ground to set aside the contract. It is a matter of degree. Armstrong v. Armstrong, 2006 CanLII 32899 (ON CA), [2006] O.J. No. 3823 (C.A.).

[87] Generally speaking, Courts are loathe to set aside domestic contracts. It is desirable that parties settle their own affairs. And there is a need for certainty, otherwise, nobody would enter into such agreements. Clayton v. Clayton, 1998 CanLII 14840 (ON SC), [1998] O.J. No. 2028 (Gen. Div.), at paragraph 27.

[88] Further, parties have to be diligent. A party cannot fail to ask reasonable questions, for example, and then complain about a lack of disclosure from the other side. Clayton, supra, at paragraph 28.

[89] At stage two of the analysis, where the parties find themselves down the road in circumstances not contemplated at the time that the Agreement was executed, upon an application being brought, the Court should assess the extent to which the agreement still reflects the original intention of the parties and the degree to which it is still in substantial compliance with the legislative objectives. Miglin, supra, at page 351.

[90] Usually, a significant change in the parties’ circumstances would be required before a Court concludes that it is no longer appropriate to accord the Agreement binding weight. A radical change is not required, however – that is too high of a standard. Miglin, supra, at pages 351-352.

[91] A very neat summary of the law on the validity and enforceability of domestic contracts can be found in the recent decision of Justice Vogelsang in Hyatt v. Ralph, [2015] O.J. No. 553 (S.C.J.), at paragraph 42, wherein His Honour quotes from the decision of McGee J. in Harnett v. Harnett, 2014 ONSC 359, [2014] O.J. No. 237 (S.C.J.), at paragraph 87:

[42] McGee J. went on in Harnett to set out some of the other aspects of unconscionability, beginning at para. 87:

87 As a general rule, courts will uphold the terms of a valid enforceable domestic contract: Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550, 2004 CarswellBC 603 (SCC.)

88 It is desirable that parties settle their own affairs: Farquar v. Farquar (1983), 1983 CanLII 1946 (ON CA), 35 R.F.L. (2d) 287 (Ont. C.A.) and courts are generally loathe to set aside domestic contracts. See page 297:

"the settlement of matrimonial disputes can only be encouraged if the parties can expect that the terms of such settlement will be binding and will be recognized by the courts ... as a general rule ... courts should enforce the agreement arrived at between the parties ... The parties to the agreement need to be able to rely on [them] as final in the planning and arranging of their own future affairs"

89 Parties are expected to use due diligence in ascertaining the facts underlying their agreements. A party cannot fail to ask the correct questions and then rely on a lack of disclosure: Clayton v. Clayton, 1998 CanLII 14840 (ON SC), [1998] O.J. No. 2028, 1998 CarswellOnt 2088.

90 A domestic contract will be set aside when a party was unable to protect his or herself. Such cases are generally predicated upon a finding that one party has preyed upon the other, or acted in a manner to deprive the other of the ability to understand the circumstances of the agreement.

91 The court is less likely to interfere when the party seeking to set aside the agreement is not the victim of the other, but rather his or her own failure to self-protect. The Ontario Court of Appeal in Mundinger v. Mundinger (1968), 1968 CanLII 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.) says that the court will step in to "protect him, not against his own folly or carelessness, but against his being taken advantage of by those in a position to do so because of their position."

92 The court must look not at which party made the better bargain but rather, to whether one party took advantage of their ability to make a better bargain. In that taking of advantage is to be found the possibility of unconscionability. See Rosen v. Rosen (1994), 1994 CanLII 2769 (ON CA), 3 R.F.L. (4th) 267 (ONCA)

93 The test for unconscionability is not weighing the end result, but rather the taking advantage of any party due to the unequal positions of the parties. See Mundinger v. Mundinger (1968), 1968 CanLII 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.); Rosen v. Rosen (1994), 1994 CanLII 2769 (ON CA), 3 R.F.L. (4th) 267 (Ont. C.A.).

94 The onus is on the party seeking to set aside the domestic contract to demonstrate that at least one of the circumstances set out in subsection 56(4) has been met; then the court must determine whether the circumstances complained of justify the exercise of the court's discretion in favour of setting aside the contract. It is a discretionary exercise. See LeVan v. LeVan, 2008 ONCA 388, 2008 CarswellOnt 2738, ONCA.

95 A finding that a party 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. It is a discretionary exercise: LeVan paragraph 33.

96 The lack of independent legal advice is not by itself determinative. It is only one factor: Dougherty v. Dougherty, 2008 ONCA 302, 2008 CarswellOnt 2203 ONCA; Raaymakers v. Green, [2004] O.J. No. 2791, 2004 CarswellOnt 2712.

Findings

[92] This Agreement cannot stand. It must be set aside in its entirety. R.C. bore the burden of persuading the Court to discard the Agreement. On a balance of probabilities, he has met that burden.

[93] I have decided to use as a template the decisions in Hyatt, supra and Harnett, supra, authorities relied upon by the party whom I have determined to be unsuccessful, J.B.

[94] “A domestic contract will be set aside when a party was unable to protect his or herself” (paragraph 90 in Harnett, supra). That applies here.

[95] R.C. was unable to protect himself because of his medical issues and because the atmosphere was such that neither party felt the need to be careful due to the involvement of Mr. Kennedy.

[96] On the former (medical issues), I accept the evidence of Dr. McArthur. R.C. “has either a cognitive issue or a significant personality/psychiatric issue that interferes with his understanding of situations and their implications” (Exhibit 16). I think that it is more likely than not that the said “issue” interfered with R.C.’s ability to appreciate what he was signing on August 25, 2008. In December 2009, the time closest to the date that the Agreement was executed that the doctor saw the husband, she described him to be “chronically unwell”. K.C., whose evidence I accept, described R.C., in 2009, as “really, really, really depressed” and seemingly unable to make simple decisions. It is unlikely that R.C.’s mental health challenges suddenly appeared in 2009 but were not present in August 2008. I acknowledge that S.L. described her brother as doing fine, medically, in the summer of 2008. In my view, however, that evidence was addressed more to him taking his medications and his physical health than to his mental fitness.

[97] In closing arguments, counsel for the wife submitted that I ought not to rely upon the evidence of R.C. The problem for J.B. is that, even if I accept that invitation (because I do have concerns about the vagueness and uncertainty of much of his testimony), I would have come to the same conclusion about his mental fitness or lack thereof based on the evidence that I do accept, particularly that of the doctor and K.C. I prefer that evidence over Mr. Kennedy’s assertions that the husband was “normal” and “not emotional” leading up to August 2008. Just as counsel for the wife argues that R.C.’s evidence is self-serving on his lack of understanding, it would have to be conceded that Mr. Kennedy’s evidence on that issue is self-serving as well. He has a vested interest in upholding the Agreement – he drafted it and was the principal driving force behind it.

[98] On the latter (atmosphere), this was a very strange set of circumstances. The parties never really discussed their separation – it simply happened when Mr. Kennedy advised R.C. to leave the home for a few days in January 2008. The parties never discussed their affairs leading up to Exhibit 1. Post-separation, the parties talked to Mr. Kennedy about a variety of things, however, they never talked with each other about their assets and debts or the divorce or the road ahead. Even on the penultimate day of August 25, 2008, the parties did not talk about the Agreement. In fact, according to Mr. Kennedy himself, the contents of the Agreement were not discussed on August 25, 2008. He gave copies to the parties. They read it. They signed it. Done. All of this goes to illustrate the enormity of the trust that these parties reposed in Mr. Kennedy. I accept Mr. Kennedy’s evidence that he met with R.C. at least twice prior to August 25, 2008. I also accept that R.C. provided some values for assets and liabilities. And it is clear that R.C. was presented drafts of what ultimately became Exhibit 1. But Mr. Kennedy was the driving force. He drove the bus. R.C. went along for the ride. I do not think that R.C. even wanted to separate. At least some of the values contained in Exhibit 1 and the entire framework/methodology were created by Mr. Kennedy alone. In this atmosphere, neither party would have been vigilant. Neither would have felt the need to ask questions, or investigate, or be critical, or scrutinize, or be self-protecting. Frankly, I think that the Agreement would have been signed by both parties on August 25, 2008 even if it had contained a couple of paragraphs in French. Flippancy is not my intent. This is a serious matter. But that is the best way that I can find to express my point.

[99] The Court will step in to protect a person against his or her being taken advantage of by someone in a position to do so (paragraph 91 in Harnett, supra). That applies here.

[100] It was a conflict of interest for Mr. Kennedy to be the principal orchestrator of the Agreement. He should have left that task to a professional with even a rudimentary knowledge of the law. It does not surprise me to hear that this was the first time that Mr. Kennedy had done anything like this. And I am sure that it was the last.

[101] The conflict is twofold. First, a religious or spiritual adviser and counsellor/therapist is generally not in a good position to give legal advice. The reason is that what may be sound advice for personal reasons could be plainly wrong and bad advice in law. That is exactly what happened here. For example, Exhibit 1 is completely silent about assets and debts on the date of marriage. Why? Because, as Mr. Kennedy explained in his testimony, his religious philosophy means that it does not matter. As another example, in his counselling role, he wanted this Agreement to get done so that both parties could move on and be healthy and fulfilled persons again. That is a laudable objective, however, it may not have been the same advice given by a lawyer.

[102] Second, Mr. Kennedy was in debt to these parties. And we are not talking about a few bucks. He owed them tens of thousands of dollars. To have a debtor draw up a financial agreement for his creditors is dangerous. There is an obvious incentive for the debtor to help himself. Here, it is clear that the value placed on the debt owing by VLC is understated in Exhibit 14 (one of the earlier drafts of the Agreement). Mr. Kennedy admitted in his testimony to rounding that figure down by several hundred dollars, to $18,000.00 even. Obviously, that benefitted VLC and Mr. Kennedy. Mr. Kennedy had access to the exact figure because he had prepared the amortization schedule. Further, Exhibit 1 does not mention at all that the parties own shares in a corporation that, in turn, owned two houses in Owen Sound as of August 2008. That corporation was created by Mr. Kennedy. Mr. Kennedy was also a shareholder. The dilution of the parties’ ownership interests would have the effect of increasing the interest of each of the other shareholders, including Mr. Kennedy himself. That benefitted Mr. Kennedy.

[103] It does not matter whether Mr. Kennedy did these things intentionally. He likely did not. But he was clearly in a conflict of interest.

[104] A key question is whether the party seeking to set aside the agreement was taken advantage of (paragraphs 92 and 93 in Harnett, supra). R.C. was taken advantage of. He was blinded by trust and by his medical issues. It is not necessary to find that R.C. was preyed upon by J.B. He was preyed upon by the circumstances, including the involvement of Mr. Kennedy.

[105] At least one of the circumstances in subsection 56(4) of the Family Law Act has been demonstrated by R.C., and the circumstances complained of justify the exercise of the Court’s discretion to set aside the Agreement (paragraphs 94 and 95 in Harnett, supra). As found above, the husband did not understand the nature or consequences of the Agreement – subsection 56(4)(b). And, as can be gleaned from these Reasons as a whole, subsection 56(4)(c) also applies – the Agreement must be set aside in accordance with the law of contract. The circumstances surrounding the Agreement’s execution are so suspect and the Agreement itself is so bad that the Court is justified in setting it aside.

[106] The lack of independent legal advice is a factor to consider, though not determinative (paragraph 96 in Harnett, supra). There was not a whiff of qualified legal advice obtained by or suggested to R.C. before he signed the Agreement.

[107] Now I turn to the analysis outlined by the Supreme Court of Canada in Miglin, supra.

[108] In both the circumstances surrounding its execution and in its substance, this Agreement fails. In addition, enforcement of it now, more than seven years after separation, would be a far cry from the original intention of the parties.

[109] Dealing with those items in reverse order, to enforce the Agreement now would mean that R.C. would end up paying to J.B. about $340,000.00 (the $250,000.00 cash payment plus $88,000.00 to $90,000.00 already paid up to August 2011). Everyone agrees that the intention in August 2008 was to evenly divide the assets and debts. A total payment by R.C. to J.B. of about $340,000.00 would definitely not result in an equitable distribution; the wife would end up receiving at least $88,000.00 more than the husband.

[110] I cannot apply the principle of rectification, as suggested in the alternative by J.B.’s counsel, because there was no mutual mistake here (and there is no suggestion that the doctrine of unilateral mistake be resorted to). J.B. testified that she always intended to have the $250,000.00 payment be in addition to whatever total amount had already been paid by R.C. in the $2000.00 per month installments. There is no mutual mistake to rectify.

[111] To enforce the Agreement now would surely not come close to what the parties and Mr. Kennedy all testified was the original intention – to equally divide the couple’s assets and liabilities.

[112] Regarding the substance of the Agreement, it makes little sense. First, it does not reflect the legislative objectives. For example, it trades child support for property by implying that R.C.’s extra $40,732.00 in net property will arbitrarily become what he owes for child support. That is not the way the law works. As another example, the Agreement does not take in to account at all what property was brought in to the marriage by each spouse. In law, that is important. As another example, the Agreement, for some reason, excludes certain assets and liabilities at the time of separation, such as the real estate holdings through the corporation. Further, although the Agreement by title and substance deals only with financial issues, it also purports to resolve custody and access in favour of the wife. Why such an important thing was stuck in to the final page of the document is beyond me. Mr. Kennedy admitted that he did not even bring home to R.C. that the intention was to grant to the wife sole custody of the child. In terms of valuation, perfection is not required. But the numbers in Exhibit 1 are estimates only, and some of the calculations are rounded up or down by significant amounts of money, in one instance by about $40,000.00 (that was conceded by Mr. Kennedy when he attempted to explain, with difficulty, how the $250,000.00 cash payment owing by R.C. was calculated). I could give other examples, however, the point is that the Agreement, in substance, is significantly deficient and amounts to a sizeable departure from what the legislation contemplates, both in terms of methodology and result.

[113] We try to uphold contracts whenever possible. We do not go looking for ways to interfere with the rights of private individuals to make their own deals, even bad ones. There is enough “big brother” and armchair quarterbacking to go around; we do not need to condescend or give the impression that persons need to be babysat while settling their own affairs. At the same time, there are some basic notions of fairness that must be respected. There are too many problems here to overlook.

[114] The Agreement does not reflect an equitable sharing of the economic consequences of the marriage and its breakdown. It does not reflect an equitable distribution of net family property. The end result, whether at the time of execution of the Agreement or if it is enforced now, does not come within many thousands of dollars of what the equalization calculation would be under the wife’s own numbers (Exhibits 21 and 22). Neither one of the wife’s Net Family Property Statements comes within $10,000.00 of either $250,000.00 (then) or $340,000.00 (now) payable by the husband. In fact, the “total value retained” figures for each party are not even equal on the face of the contract itself. In terms of custody and access, I have no idea whether the best interests of the child were considered. With regard to the child support clause on the final page of Exhibit 1, it is nonsensical. It is not clear whether child support ends on the earlier of five years from the date of the Agreement or when the child moves away from the home. Further, the mere fact that the child moves away does not mean that she is not a dependant, thus, the Agreement could end up robbing her of support that she is entitled to in the normal course.

[115] Finally, in terms of the circumstances of the Agreement’s negotiation and execution, nearly everything suspect referred to by the Supreme Court of Canada in Miglin, supra existed here. First, there was no “negotiation” between the parties. None. Second, as already discussed at length above, the Agreement was precipitated by and executed at a time when R.C. was vulnerable. Third, there was absolutely no professional legal or financial assistance obtained. Fourth, Mr. Kennedy was in a conflict of interest. It was a recipe for trouble.

[116] In summary, at both stages of the Miglin, supra analysis (then and now), and on both prongs of the assessment at stage one (circumstances and substance), this Agreement fails. The Court’s discretion must be exercised in favour of setting it aside.

Equalization

[117] This issue cannot be determined at this stage. The parties, through counsel, shall contact the Trial Coordinator to schedule dates for a trial. Of course, a settlement would be preferable. If a trial is necessary, then we can shorten the proceeding by applying all or some of the evidence that I heard in April 2015 to that hearing.

Conclusion

[118] For all of the foregoing reasons, the Agreement is set aside in its entirety.

[119] Normally, R.C. would be entitled to his costs.

[120] If the parties are unable to settle the issue of costs, they may contact the Trial Coordinator in Owen Sound to schedule a further Court attendance of thirty minutes in length to hear submissions and consider filings in that regard. I shall consider the matter of costs resolved between the parties if the Trial Coordinator is not contacted within two weeks of the release of these Reasons for Judgment.

[121] I am indebted to all counsel. They presented this case well and argued it competently on both sides. The facts were against J.B.

Conlan J.

Released: April 20, 2015