CITATION: Hillman v. Letchford, 2015 ONSC 3670

COURT FILE NO.: FC-11-2055

DATE: 2015-06-30

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

DAWN HILLMAN

Dawn Hillman, Self-Represented

Applicant

Applicant

• and -

IAN LETCHFORD

Ian Letchford, Self-Represented

Respondent

Respondent

HEARD: May 11, 12, 13, 14, 15, 19, 20, 21, 25, 26, 27, 28, 29, 2015

The Honourable Justice C.D. Braid

REASONS FOR JUDGMENT

INTRODUCTION

[1] The parties lived in a common-law relationship for approximately 14 years and formally separated in 1999. During their relationship, they resided in Canada, England and Ireland. Between 1999 and 2006, the parties were involved in protracted litigation in Ireland and Canada. In February of 2006, the parties entered into Minutes of Settlement which were incorporated into a final court Order (“the agreement”). The wife now seeks to set aside the agreement. If she is successful in setting aside the agreement, the wife wishes to have a new trial on all issues.

FACTS

[2] Based on the evidence presented at trial, I make the factual findings that are set out in the paragraphs below.

A. Background

[3] The background of the parties and their relationship is as follows:

a) The Applicant wife (“the wife”) was born on May 3, 1956 and is 59 years of age.

b) The Respondent husband (“the husband”) was born on December 11, 1945 and is 69 years of age.

c) There are two adult children, born in 1989 (Jeffery) and 1991 (Kristie).

d) The parties commenced cohabitating in Ontario, Canada in 1985. They never married.

e) The husband was employed by CIBC since 1963 and worked as a banker. The parties moved to England in 1991 and then to Ireland in 1997 to pursue work opportunities for the husband. The wife worked part-time while they lived in Canada but did not work outside the home when the parties lived in England and Ireland. The wife stayed at home with the children, helped advance the husband’s career and accompanied him on some bank functions.

f) While residing in Canada, the parties initially lived in a townhouse that the husband owned. In 1987, the townhouse was sold and the parties purchased a condominium in Etobicoke, Ontario as joint tenants. In 1989, the parties sold the townhouse and purchased a house in Oakville, Ontario, which was also held by them as joint tenants. When the parties moved from Canada to England in 1991, the equity from the sale of the house was approximately $90,000 Canadian. Much of it was used to pay off debts. The balance of $34,000 was deposited offshore and was later invested in their residence in Ireland.

g) The parties purchased a house when they moved to Ireland in 1997, which was owned by them as joint tenants (“the Irish property”). The equity in the Irish property, as at the date of separation, was worth approximately $350,000 Canadian.

h) Although the husband suggested that their relationship changed earlier, he agrees that the formal separation occurred in February 1999. No evidence was provided at this trial as to whether they stopped communicating as spouses, having sexual relations, discussing family problems, eating meals together or being involved in social activities together prior to 1999. Documents were filed showing that, up until 1998, the husband represented to others that the Applicant was his wife. I find that their cohabitation as spouses continued until 1999 and that the date of separation was February 1999. The parties therefore cohabitated for approximately 14 years.

i) After separation, the wife moved to Canada with the children and the husband remained in Ireland (where he still resides). The wife used the money from the Irish settlement to purchase her own house.

B. Employment

[4] At the time that the parties were together, the wife had a grade 12 education. She worked at various jobs while the parties lived in Canada. After the family left Canada in 1991, the wife did not work outside the home.

[5] At the time of separation, the husband worked full time as the Managing Director for CIBC World Markets Ireland. His income was paid in British pounds, Irish pounds and later in Euros. The husband’s remuneration from CIBC from 1999 to 2002 included a base salary (50% of which was paid offshore in Guernsey and was therefore untaxed); bonus at the discretion of the employer; expatriate (housing) allowance (which ceased September 30, 2001); car allowance; children’s private school while they lived in Ireland; golf club membership; Restricted Share Awards and Employee Stock Options.

[6] In December of 2002, the husband’s employment with CIBC was terminated. CIBC provided a lump sum severance payment equivalent to two years’ salary. In January of 2005, the husband began receiving his pension pay from CIBC of $110,038.08 Canadian per year.

[7] In 2004, the husband also began working as a director of another bank and received $31,200 Canadian per annum for that position.

C. History of Legal Proceedings

[8] The following is the history of legal proceedings between the parties:

a) In February 1999, the husband commenced proceedings in Ireland concerning guardianship, ownership and disposition of the Irish property. In response, the wife made a claim for custody, child support and made a claim that she be provided for as the caregiver of the children. The parties agree that Irish law did not recognize common-law relationships at that time; that the wife was not entitled to spousal support in Ireland; and that, regardless of the fact that the Irish property was registered jointly, the wife was only entitled to the share of the property for which she had made a direct financial contribution.

b) On August 6, 1999, the parties were involved in settlement negotiations. The wife’s counsel sent “Draft Heads of Agreement” to the husband’s counsel for their consideration. The “Draft” stated that the wife would receive the equivalent of $350,000 Canadian for her 50% interest in the Irish property; however, the “Draft” was never formally accepted by the husband.

c) On August 25, 1999, all of the proceedings in the Irish courts were resolved. The parties entered into a Consent that included terms for custody and access. The Consent stated that the wife was granted temporary child support (until an action could be brought in Canada for child support) and payment of one year of private school fees; a 30% beneficial ownership in the Irish property (this share was valued at approximately $210,000 Canadian); $49,947.50 Canadian for relocation expenses for the wife and children to move to Canada; $89,905.50 Canadian “in settlement of the Irish proceedings”; and an investment worth $16,200. The court adopted portions of the Consent into a court Order.

d) In September of 1999, the wife moved to Canada with the children.

e) On February 16, 2000, the wife commenced a Statement of Claim in the Superior Court of Justice in Milton, Ontario, seeking the following:

i. An Order that the husband held a portion of the Irish Property for the wife in constructive trust, or that he convey a half interest in the Irish Property to the wife;

ii. Child support and payment for private school fees;

iii. Spousal support of $10,000 per month;

iv. An order that the husband held half his pension in trust for the wife;

v. An order setting aside the Irish settlement based on duress and coercion; and

vi. Orders for life insurance and health benefits.

The husband refused to accept service of the Statement of Claim because he challenged the wife’s right to advance the property claims. He then moved to stay or set aside these claims based on the fact that the assets were outside of Canada. In response, the wife discontinued the property claim and proceeded with the support claims only. On August 28, 2000, the wife served a Notice of Discontinuance of the action.

f) On June 13, 2000, the wife commenced a second Statement of Claim in the Superior Court of Justice in Milton, Ontario, seeking the following:

i. Custody, child support and payment of private school fees;

ii. Spousal support of $10,000 per month; and

iii. Orders for life insurance and health benefits.

g) The second Statement of Claim was amended on July 20, 2000 and February 8, 2002 to include claims to the husband’s property based on unjust enrichment, implied trust and/or constructive trust. (Note: if the settlement is set aside at this trial, this is the claim that will be litigated at a new trial).

h) On August 31, 2000, Justice Herold ordered the husband to pay the first installment of private school fees for the children.

i) On October 3, 2000, Justice Walters ordered the husband to continue paying private school fees and ordered interim child support in the amount of $5,181.00 per month, pursuant to the Guidelines based on an annual income of $478,892.00, commencing October 1, 2000. The court declined to make an interim order for spousal support, without prejudice to the wife advancing her claim at trial. Justice Walters found that the date of separation, the effect of the Irish court decision and the wife’s attempts to be self-sufficient were all triable issues. Two years had passed since separation and the wife had received a $330,000 settlement in the Irish court proceeding. Until the conflicting material could be flushed out at trial, the court declined to make an order.

j) In 2002, the husband brought an application to vary support because he had lost his housing allowance. He then discontinued that motion.

k) On June 28, 2002, the husband was cross-examined by telephone.

l) On July 23, 2002, the husband brought a motion to oppose the property claims on jurisdictional grounds and on the basis that they were res judicata. Justice Langdon issued a ruling stating that the wife’s property claims had been settled in the Irish Consent Order. That decision was overturned by the Ontario Court of Appeal in 2003.

m) On April 11, 2005, Justice Clarke made a disclosure order. The husband was directed to provide Notices of Assessment and tax returns for 2000 to 2004; a letter from CIBC setting out all sources of monetary and non-monetary remuneration from 2001 to 2004; information from Irish lawyers regarding severance; confirmation of the husband’s mortgage expense; and a letter from CIBC regarding the husband’s stock options.

n) In response to the disclosure order, the husband provided a letter from CIBC regarding the husband’s compensation package. The wife knew that the letter was missing the car allowance and expatriate allowance, and suspected that it was missing more. Regarding the order to produce the Irish lawyers’ file, CIBC said it had been lost. With respect to the CIBC stock options, the letter did not show stock options he cashed in 2000-2001 because the husband’s lawyer had asked for stock options as of date of termination. The wife did not receive the customer account summary from CIBC.

o) On September 19, 2005, there was a telephonic disposition of the husband (questioning).

p) In December of 2005, the husband brought a motion for an order varying the amount of child support. The husband’s employment had been terminated in December of 2002 and he had received a lump sum severance pay of two year’s salary. Commencing in 2005, he began receiving a pension. This resulted in a substantial reduction in his income.

q) On January 9, 2006, the husband provided a report from PricewaterhouseCoopers (“the PWC Report”). The report set out the husband’s grossed-up income (to account for the portion that was untaxed). The report noted that the Irish Pension was specifically excluded from the calculation, at the direction of the husband’s lawyer. The husband states that the housing allowance was correctly stated in the report, and that these amounts were actually taxed. The husband acknowledges that the sale of stock options were not included in the report, as he did not provide that information to his lawyer or to PWC.

r) The wife brought a motion for further financial disclosure. On January 10, 2006, Justice Coats made an order granting leave to the wife to question a representative of CIBC regarding the husband’s “severance and remuneration packages overseas for the years 1999-2005 including stock options, share purchases, bonuses, offshore payments, trust accounts and any other monetary or non-monetary past, present or future compensation in or outside Canada.” The order also directed the husband to file documentary confirmation concerning his Irish pension and an accounting as to disposition of the funds from his severance payment in the Guernsey Islands.

s) Despite obtaining this order, the wife did not conduct questioning of CIBC. In an affidavit dated April 16, 2015, the wife stated the following: “I acknowledge an order was issued allowing me to examine CIBC prior to the execution of Minutes of Settlement and I did not do so. CIBC had previously produced deficient disclosure and I was of the view that an examination of them would not be fruitful.”

t) The matter was scheduled for trial commencing January 29, 2007.

u) On February 6, 2006, the parties entered into final Minutes of Settlement, which was incorporated into the final Order of Justice Coats. The Order stated the following:

i. The wife was granted custody of the two children, with access to the husband.

ii. The husband estimated that child support for the children to the end of post-secondary education would be in the sum of $113,000. The husband agreed to increase the amount and pay $201,814 to the wife for child support.

iii. The husband agreed to pay $200,000 to the wife for all claims other than child support, including spousal support and the constructive trust claim.

v) On December 19, 2011, an Application to set aside the Minutes of Settlement and Order was issued. The Application was amended on August 31, 2012 and September 14, 2012. The Application was brought pursuant to the following:

i. Family Law Act s.56(4)(a) failure to disclose assets, debts or other liabilities existing when the agreement was made;

ii. Family Law Act s.56(4)(c) otherwise in accordance with the law of contracts.

The wife also sought, through the application, disclosure from the husband and CIBC and other non-parties regarding various assets, income and liabilities of the husband.

w) On February 19, 2014, Justice Henderson made various disclosure orders as follows:

i. CIBC was ordered to search for and produce documentation relating to the husband’s severance package and stock options;

ii. The husband was to facilitate disclosure of Irish tax returns for 2003 to 2006, to provide addresses of the Spanish properties, and facilitate disclosure from a real estate company in Spain.

x) During the course of litigation in Canada, the wife hired two accountants. One of them was Mr. Mastroluisi, a forensic accountant who appears to have made several errors. The wife believed that the husband’s offshore income was taxed and Mr. Mastroluisi did not correct that belief. The wife also retained Mr. Arvantis in 2002. The husband retained PWC.

y) Both parties were represented by at least one counsel during the Irish and Canadian proceedings at all times until the settlement and court Order were finalized in 2006.

z) By the time this matter came to trial, the parties had been involved in litigation for 9 out of the 16 years since separation.

D. The Husband’s Disclosure of his Remuneration

[9] The following chart summarizes the husband’s disclosure of his remuneration:

Date

Document

Income

Tax

Shares

Comments

Mar 20, 1999

Finan Stmt in Irish Proceeding

Base Salary 100,000 British pounds (50% paid in Ireland) & 50,000 bonus paid offshore; Car 10,000 & Expat 59,867 British Pounds & Irish private school & golf membership – also notes there is CIBC pension and CIBC Irish pension

94,055 Irish Pounds in stock options (vested)

• Bonus is discretionary

Aug 28, 2000

Finan Stmt before Walters J.

39,908/mo Cdn including base salary, bonus, expat & car allowances

19,742/mo (husband stated at trial that this was an error, too high)

216 CIBC ESPP shares worth $8,640; 1,500 CIBC shares worth $60,000 & 10,000 CIBC Options worth $106,400

Dec 10, 2001

CIBC ltr to husband’s counsel & disclosed in affidavit

In Irish pounds: 119,389 annual salary & discretionary bonus & 12,317 car allowance

• Letter confirmed that expat/housing allowance ceased Sept 30, 2001

Mar 13, 2002

Finan Stmt before Langdon J.

32,905/mo Cdn including base salary, bonus & car allowance (no longer getting expat allowance)

7,861/mo (husband says that tax amount was corrected on this finan stmt)

640 CIBC ESPP shares worth $32,160

• Expat/housing allowance ceased Sept 30, 2001

Apr 23, 2002

CIBC ltr to Letchford re Pension

CIBC to pay 13,400 Cdn pension adjustment to the husband

Dec 10, 2003

CIBC Pension Services ltr to husband

Pension amount is $110,038.08/yr

• This letter was in husband’s Nov 05 affidavit; it may have been disclosed earlier

Mar 8, 2005

Finan Stmt before Clarke J.

11,919.84/mo Cdn including pension, etc.

4,700/mo

162 CIBC ESPP shares worth $10,530

• Husband had lost his job & was drawing on his pension • Attached copies of 2001 & 2002 Irish tax returns & 2003 Notice of Assessment

May 17, 2005

CIBC (Orr) letter to husband’s counsel & included in Nov 2005 affidavit

All in British Pounds: 2001: Base Salary 100,000; Bonus 72,000; SPP & SPP Premium 100,263. 2002: Base Salary 100,000; bonus 56,285; ESOP 1,600 units with value of 12,675 13,400 Cdn received for pension adjustment Severance payment was 336,000

1,600 options granted on Dec 11/01 and will vest on Dec 11, 2005

Dec 8, 2005

Last Finan Stmt before settlement

11,619.82/mo Cdn including pension, etc.

3,220/mo

Aff of Jan 31, 2006

Stmt of Acct re Deposit of severance into Bank of Butterfield

341,955.56 British Pounds deposited into husband’s account in Guernsey on June 2, 2003

Affidavit included letter re encashment of Irish Pension and value received

Jan 9, 2006

PWC Report

This accounting report set out the husband’s income and taxes for the relevant years

This report set out the portions of income that were taxed and untaxed; and grossed up the income accordingly

E. Employee Stock Options and Restricted Share Awards

[10] The following chart summarizes the husband’s employee stock options:

Date Granted

Date Disposed

Number of Units

Value/Gain

Disclosed?

Feb 3/94

June 26/00

1,500

36,881.25

• 1999 Finan Stmt refers to stock options, but it is not clear whether it is in reference to these options • Described in CIBC letter of Feb 21/94 which the wife had in 1999

Feb 2/95

June 26/00

3,000

78,075.00

Described in CIBC letter of Feb 15/95 which the wife had in 1999

Feb 1/96

June 26/00

7,500

159,562.50

Feb 1/96

Aug 21/00

2,500

57,437.50

Disclosed in August 2000 Finan Stmt

Feb 6/97

Aug 21/00

7,500

93,000.00

Disclosed in August 2000 Finan Stmt

Feb 6/97

Dec 4/01

2,500

55,380.00

Dec 11/01

Feb 8/06

1,600

38,017.76

Disclosed May 17, 2005 (by CIBC letter); confirmed at subsequent discovery

[11] The wife was in possession of letters from the CIBC dated June 7, 1993, February 21, 1994 and February 15, 1995, which confirmed the granting of stock options to the husband. The wife took copies of these letters from the residence when she left in 1999 but the husband was never asked about these letters in the prior proceedings.

[12] Up to August 1, 2002, the husband had acquired 704 common shares through his Employee Share Purchase Plan. He was also granted 1,245 restricted shares which were sold on November 22, 2004 for approximately $89,266.50. The common shares were disclosed on his financial statements but the restricted shares were not.

F. Settlements and Orders

[13] The following is a summary of the settlements reached and orders obtained in the proceedings:

a) In the Irish settlement in 1999, the wife received $350,000 Canadian plus an investment with Empire Life in Canada ($16,200 value). Trust accounts for the children were also transferred to her.

b) The Irish settlement included a term that the husband pay child support of $2,163.73 per month, until the Canadian proceedings were commenced. The husband paid from September 1999 to September 2000 (13 months) for a total of $28,128.00.

c) The husband paid private school fees for the children for the first two years in Canada, for a total of $50,000 in school fees.

d) On October 3, 2000, Justice Walters ordered the husband to pay child support in the amount of $5,181.00 per month. This was paid until the matter settled in February of 2006. The total amount of child support paid over five and a half years was approximately $330,000.

e) In the Canadian settlement in 2006, the husband paid the wife $201,814.00 lump sum child support plus $200,000 for all claims other than child support. The Order stated that the husband calculated child support to the end of post-secondary school to be the equivalent of $113,000, but the total was rounded up.

f) Kristie moved back to Ireland in early 2009 when she was 17 years old, and the wife repaid approximately $40,000 in child support to the husband or directly to the school for her fees.

g) The payout by the husband from the settlement in the two proceedings (less the amount repaid by the wife) totals approximately $1.14 million Canadian dollars.

h) The husband has honoured his obligations in full under the 2006 agreement.

ORDER SOUGHT IN THIS TRIAL

[14] The wife seeks an order setting aside the agreement based on non-disclosure or misrepresentation. She also claims that the agreement was not in accordance with the law of contracts.

[15] The wife states that the husband provided incorrect information with respect to his restricted share awards and stock options, which would have been taken into account in determining the husband’s proper income. The wife also argues that the husband failed to disclose his interest in the Spanish property. The wife says that she relied on the disclosure provided by the husband, and his representations regarding his income and assets, when she settled the case in 2006.

[16] The wife also argues that the agreement was not fair, and that she was unfairly pressured to settle.

[17] The wife states that, if she is successful in setting aside the agreement, the wife wishes to have a new trial on all issues as set out in her Further Amended Statement of Claim dated February 8, 2002.

THE EVIDENCE

[18] This trial took three weeks to complete. During the course of the trial, I heard testimony from four witnesses and received 26 exhibits. Eight of those exhibits were bound briefs containing multiple documents.

[19] The evidence noted below is intended to be a synopsis of some of the more relevant aspects of the testimony tendered during trial and is not intended to be a summary of all of the evidence.

[20] While I have not detailed all of the evidence heard during the course of the trial, I have very carefully considered the entirety of the evidence in my determination of the issues.

[21] The order of evidence noted below is not necessarily the order in which the witnesses testified.

A. The Wife’s Case

Dawn Hillman

[22] Dawn Hillman is the Applicant wife in this proceeding.

[23] The wife described, at length, the legal proceedings in Ireland and in Canada.

1. Allegations of Non-disclosure and/or Misrepresentation

[24] She testified that the husband failed to disclose or deliberately misrepresented income and/or assets. She raised the following concerns:

a) Spanish Property

[25] The wife stated that, at the time of settlement, she had strong suspicions that the husband owned a property in Spain. The husband took their daughter to Spain for a holiday. Based on a photo that the daughter had taken, the wife noted the distinctive features of the residence and narrowed down the location. The wife attempted to find out further details of the residence in 2005 but was unsuccessful.

[26] When the wife’s lawyer questioned the husband, he denied having an interest in a property in Spain. He said that he did not own property, and that they stayed at a family residence owned by his wife’s parents. His financial statements did not reflect ownership in the property.

[27] In 2011, the wife hired a private investigator, who discovered a company called Casey Properties. The husband and his new spouse, Una Slevin, were the co-shareholders of the company and each contributed $105,500 Euros at the time the company was created in 2001. The company was created for the purpose of holding Spanish real estate and ceased operating in 2007.

[28] In 2013, the wife hired a lawyer in Spain who provided the title documents to property in Spain. These records demonstrate that an apartment in Spain was initially put in the name of the husband and his new spouse in 2000, and then transferred into the name of Casey Properties soon after. The apartment was sold in 2004. A townhouse in Spain was purchased in 2004 and registered in the name of Casey Properties. It was sold in 2007.

[29] The wife is of the view that the failure to disclose the Spanish property was the most significant non-disclosure. The husband stated that he only vacationed there twice in 2004, and she does not believe that the property was sitting vacant 50 weeks of the year. She was unable to find any proof that the husband was earning a rental income on the property, but she asks the court to draw an adverse inference. An internet posting for a similar property is asking between 840 and 1,680 pounds per week to rent the property.

b) Tax-Free Income

[30] The wife says that, during most of the litigation, she was not aware that part of the husband’s income was untaxed. The problem was aggravated by the fact that Mr. Mastroluisi, the accountant who was retained by the wife, did not properly review the husband’s tax returns or advise the wife regarding the untaxed income.

[31] In the summer of 2005, the wife was reviewing the husband’s 1998/99 tax return and realized that some of his income was not reported on the return.

[32] By the end of the husband’s questioning in September of 2005, the wife had confirmed that part of his income was not taxed. This was further confirmed in the PWC report in January 2006, in which the non-taxed income was “grossed up” in the calculations.

[33] Up until this trial, the wife believed that the husband’s housing and car allowance were untaxed. Based on evidence from the husband and a review of his tax returns, this assumption was not true.

c) Employee Stock Options and Restricted Share Awards

[34] Stock options were granted when the parties were living together in England. The wife knew that the husband was granted stock options; but did not know what they were worth. The wife took copies of three letters from the house at the time of separation which detailed the stock options that the husband was receiving on an annual basis from CIBC. Unfortunately, the wife’s lawyer never asked the husband about these letters. The wife says that there was approximately one banker’s box of the husband’s records that she provided to the lawyer, and she does not know why the lawyer never asked about these letters. She says that she made efforts to find the value of the stock options prior to settlement.

[35] In 2012, the wife conducted a Google search and found Insider Trading Reports on the Alberta Security Commission website. These reports provided information about the husband’s CIBC Employee Stock Options and Restricted Share Awards.

[36] The chart above sets out the stock options and the extent to which they were disclosed. It is clear that at least some of the stock options were disclosed, but the wife did not have all of the information until she received the CIBC responses to the disclosure order from Justice Henderson in 2014.

[37] The wife stated that she did not examine CIBC in 2006, even when granted the opportunity to do so, because she believed that the husband or his counsel had instructed CIBC to withhold disclosure of the husband’s full remuneration. The wife did not have any evidence of collusion but this unfounded belief led her to settle the case without fully examining CIBC.

2. Allegations of Unfair Behaviour

[38] The wife stated that there was a power imbalance between the parties during the prior litigation and up to the date of the agreement. She states that there was non-disclosure, misrepresentation and other unfair behaviour by the husband, as follows:

a) The wife testified about the relationship breakdown in early 1999. There was a significant argument that led to police involvement. She stated that the husband cancelled all the credit cards, removed her name from the bank accounts, and left her with very little money to pay for expenses.

b) In the Irish proceedings, the payment of the settlement was separated into three payments. This meant that some of the payments were made from an offshore bank account that was never taxed, and the wife did not know the money was not taxed. The wife says that this was not the verbal agreement reached at court (which was never signed). She felt it was unfair for the husband to change the agreement structure to three payments, although it was not clear as to how the payment in three different portions was harmful to her.

c) During the earlier litigation, the husband swore an affidavit stating that the date of separation was 1994. Justice Walters declined to make an order for interim spousal support, in part because of the dispute regarding the date of separation. While testifying before me, the wife admitted that she was “probably on shaky ground”, but says that the husband filed the affidavit to mislead the court.

d) The husband challenged the property claims because they had previously been settled in Irish proceedings and/or the Irish court was the proper jurisdiction to deal with the issue because the property was not in Canada.

e) When the wife brought proceedings for support, the husband took the position that spousal support had been dealt with in Ireland. The wife says that this was a material misrepresentation to the court. She believed that the Irish proceedings gave her $350,000 Canadian for her 50% share of the equity in the house.

f) The wife also took the view that the husband had changed his position in court. He had initially argued that the Irish settlement was dealing with property issues but later argued that it had settled spousal support.

g) In 2002 and 2005, the husband refused to answer certain questions at discoveries. However, she admitted that she did not bring a motion to compel answers to those questions.

h) The wife received the bank statement showing the deposit of the severance payment into an account in Guernsey. She believed that “this raises more questions.” However, she did not seek to question him about it and did not follow up to pursue the amount of money remaining from the payment.

i) The wife was of the view that the husband was not being forthright about his remuneration. On January 9, 2006 she received the PWC Report. She stated that she “loves this report” as it confirmed her suspicions that there was more money.

j) The wife believed that the husband did not comply with Justice Coats’ disclosure order to provide information regarding the severance in Guernsey Islands. However, she was concerned about the cost of getting yet another court order so she settled without pursuing this further.

3. Settlement

[39] With respect to the agreement, the wife disagrees that the appropriate amount of child support was $113,000 (as set out in the order). In fact, she believed that the husband had underpaid $200,000, so the settlement just covered the underpayment.

[40] The wife stated that the husband repeatedly drove up the litigation costs, which created an imbalance of negotiating power. She said that she had spent $80,000 trying to advance her claims, and her lawyer wanted another $50,000 retainer to go to trial. The wife did not have a lot of faith in the courts and she felt “beaten down.” She was concerned that he could move assets out of Canada and she needed the money to raise the children. At the time of the agreement, the children were approximately 14 and 17 years old.

[41] The husband challenged the wife’s description of herself as being vulnerable. The wife admitted that, while in Ireland, she contacted a Canadian lawyer to get legal advice. She agreed that her actions of contacting the lawyer and then making copies of his personal papers were not the actions of a vulnerable and naïve woman. She states that she was more proactive than vulnerable. However, she later described herself as a “victim” in the proceedings.

4. The Wife’s Work Since Separation

[42] From 1999 to 2006, the wife worked in bookkeeping. After the settlement in 2006, she began working for her lawyer. She has done various other jobs, including working at a Crown attorney’s office, the Children’s Aid Society, and Access Mediation at the courthouse. She now works as a court reporter.

Credibility of Ms. Hillman

[43] The wife generally gave her evidence in straightforward manner. She was meticulous and extremely well-versed with the case. Although Ms. Hillman testified that she has gained most of her legal ability in the years following the separation, it is clear that she is intelligent and articulate, and likely has always been that way.

[44] Ms. Hillman complains of poor treatment by courts and by her legal representatives and accountants. Although she tries to do this diplomatically, it is clear that she blames others for what she perceives as a poor result in her prior court proceedings. That said, I do not perceive her as being treated any differently than most other litigants. This is a factually complex case and there were several unpredictable steps along the way. The outcome of the trial, set to take place in 2007, was never guaranteed.

[45] Ms. Hillman remains highly suspicious of CIBC, a view that is unreasonable in the circumstances. There is no evidence that CIBC somehow colluded with the husband. This suspicion unfortunately steered her down the wrong path in 2006, when she neglected to question CIBC prior to settlement.

[46] Ms. Hillman’s suspicions and general mistrust of the court system colours her evidence. I find that she was prone to exaggeration in articulating the unfairness of the settlements.

CIBC Representative John Bodley

[47] John Bodley is the CIBC representative who testified as part of the wife’s case. He has been the Vice-President of Work Force Compensation at CIBC since October 2004.

[48] Mr. Bodley confirmed that the husband was employed by CIBC from 1963 to 2002. Mr. Bodley stated that there is no one currently employed at CIBC who was involved with the negotiation of the husband’s compensation and his severance payments.

[49] CIBC records retention policies state that personnel records are destroyed seven years after the date of termination. Since the husband’s employment with CIBC was terminated in December of 2002, the records relating to his employment were likely destroyed sometime after December 2009. Mr. Bodley was able to locate some information on base salary for 2000 to 2002.

[50] Mr. Bodley is familiar with remuneration packages at CIBC and was able to provide information regarding stock options and restricted share awards. He reviewed the documentation regarding the husband’s Employee Stock Option Plan. He commented that “exercise & hold shares” means a share certificate was issued but there is no way to see when cash was received by the husband. When shares are taken, they are generally moved to a brokerage.

[51] Mr. Bodley was unable to say whether a stock option is property or income, although he agreed that the share that is issued resulting from a stock option is an asset. He believed that an individual can pay tax when options are exercised or defer the payment of tax until a later date.

[52] An employee stock option is an option to purchase a share at a specified price in the future. They vest one quarter each year starting on the first anniversary of the grant date. The employee has the right not to exercise the option, and may decline to exercise the option if the share price falls below the grant price. The option itself has zero value; they only gain value as the share price appreciates.

[53] Restricted share awards are shares that are awarded to the employee with a restriction on the ownership of the shares. They stay with the administrator until they vest and there is no individual ownership until they vest. Upon vesting, the employee has a choice of taking cash for the shares and settling the tax independently; taking cash less tax; or taking the shares and transferring the shares to a brokerage. The shares are valued at the point of vesting.

[54] Stock options and restricted shares do not have value until they vest. They are deferred compensation.

[55] The Employee Share Purchase Plan at CIBC permitted the employee to designate a portion of salary to buy stock and CIBC will match the employee’s contribution at a 50% rate to a maximum $2,250 CIBC contribution. Employees can contribute up to 10% of their salary.

[56] Mr. Bodley confirmed that the husband’s CIBC pension is Canadian and cannot be moved from Canada as it is federally regulated.

Credibility of Mr. Bodley

[57] Mr. Bodley gave his evidence in a credible and straightforward manner. None of the evidence that he gave was particularly controversial to either of the parties.

Financial Expert Michael Carnegie

[58] Michael Carnegie is a forensic accountant at Taylor Leibow. Mr. Carnegie was qualified as an expert to provide financial calculations of the husband’s remuneration. Mr. Carnegie was called as a witness by the wife.

[59] Mr. Carnegie stated that he is not a tax practitioner but he is familiar with tax concepts because he deals with them in his work. A substantial portion of his practice has involved testifying about income in family law proceedings.

[60] In preparation for testifying in this case, he was asked to complete three tasks. The wife provided preliminary figures that he was asked to verify, and gave him various source documents. The tasks that he was asked to do are as follows:

1. Task 1: Determine the husband’s after tax disposable income for support purposes in Canada for 2000-2003 (both with and without stock options).

2. Task 2: Take the results of Task 1 and convert it into an Ontario-based pre-tax income, ie. gross up the numbers to show how much an Ontario resident would have to make to have the equivalent after-tax amount.

3. Task 3: Compare his report with the PWC report.

[61] Mr. Carnegie provided his calculations for all three tasks. He noted that having both taxed and untaxed compensation is common when expatriates earn income in a foreign jurisdiction. He also stated that, in 2000, the top marginal tax rates were similar in Canada and Ireland, but there were fewer tax brackets in Ireland. He used a software package to calculate after-tax equivalent income.

[62] Mr. Carnegie noted the following differences between his report and the PWC report:

1. PWC did not include stock options as income in their calculations; Mr. Carnegie did calculations with and without stock options.

2. Mr. Carnegie corrected for a fairly minor calculation error in the PWC calculations.

3. Mr. Carnegie applied exchange rates per month in some situations, while PWC applied the average exchange rate by year.

4. PWC allocated the severance pay as income over two years (2003 and 2004); Mr. Carnegie attributed it all to income for 2003. This significantly impacted the difference in the calculation of income for 2003. However, the ultimate impact likely would have been minimal. The practical difference would mean two options: larger support payments in 2003 and then none in 2004; or payments spread out equally over the two years.

5. PWC did not include the collapse of the Irish pension as income. The exclusion of the pension was clearly noted on the PWC report. Mr. Carnegie acknowledged that the issue of whether the pension is property or income is a legal question.

6. PWC treated the expatriate allowance and the car allowance as taxed amounts; Mr. Carnegie treated them as untaxed and grossed them up.

7. Mr. Carnegie applied different amounts for expatriate allowance as he was not provided with additional letters from CIBC showing a lesser amount for the allowance.

[63] Because of all of these differences between Mr. Carnegie’s report and PWC report, it is difficult to compare the calculations. Mr. Carnegie agreed that the figures are confusing, because it is a confusing factual scenario.

Credibility of Mr. Carnegie

[64] I found Mr. Carnegie to be a straightforward and credible witness.

[65] The husband challenges Mr. Carnegie’s independence as a witness. Mr. Carnegie started with calculations that the wife had prepared, and applied the wife’s assumptions and source documents to his own calculations.

[66] Mr. Carnegie acknowledged the limitations of his opinion evidence, especially when it came to factual and legal points that are in dispute between the parties. While I do not find Mr. Carnegie to be biased, the persuasiveness of his evidence is dependent upon the quality of the information provided to him. I am concerned that Mr. Carnegie was not given information about the reduction in the husband’s housing allowance; the taxation of the housing and car allowance; and did not consider which stock options were actually disclosed to the wife during the prior proceedings. His evidence must be considered in light of these limitations.

B. The Husband’s Case

Ian Letchford

[67] Ian Letchford is the Respondent husband in this proceeding. He did not call any witnesses other than himself.

1. Allegations of Non-disclosure and/or Misrepresentation

[68] The husband stated that he did not deliberately misrepresent his income and/or assets. He responded to the wife’s concerns as follows:

a) Spanish Property

[69] The wife was extremely suspicious that the husband owned property in Spain. The following questions were put to the husband at his questioning by telephonic disposition on September 19, 2005:

Q: Do you own any other property?

A: No.

Q: Do you have a trust interest in any other property?

A: No.

Q: Do you own property in Spain?

A: No.

[70] Later in the questioning, there was discussion about vacations in Spain:

Q: Where did you stay in Spain?

A: At my wife’s family’s home on one occasion, and in a hotel on another occasion…

Q: When you say family residence, is it owned by her parents?

A: Yes.

Q: Do they own it absolutely or are they holding it in trust for anyone?

A: I have no idea.

[71] The husband did not disclose the Spanish property on any of his financial statements.

[72] At the trial before me, the husband admitted that he did not disclose the Spanish property in the prior proceedings. He stated that he never held an “actual beneficial interest” in the Spanish property, and that he was only on title out of convenience and at the bank’s request.

[73] The husband testified that his new spouse, Una Slevin, purchased a condominium apartment in Spain as a holiday home for her parents and the rest of her family. The husband gifted some money to her toward the purchase and the bank required him to go on title and on the mortgage. Shortly after purchase, Casey Properties was incorporated and the property was transferred to the corporation for tax purposes. The husband was named as a co-shareholder of the company with Ms. Slevin in order to maintain his status on the mortgage and avoid transfer tax.

[74] In 2003, the apartment was sold and a townhouse was purchased by the corporation. In 2007, the townhouse was sold and Ms. Slevin received the entirety of the proceeds.

[75] The townhouse was occasionally rented out, but the mortgage and maintenance costs far exceeded the rental income. The husband stated that he received none of the rental income.

[76] The husband says that, since he never had a beneficial interest in Casey Properties or the two Spanish properties, he did not feel the need to disclose them. Similarly, he did not disclose that he had liabilities to a Spanish bank regarding that property (he was registered on the mortgage) because he did not have a beneficial interest and did not consider it a personal debt. The properties were purchased well after separation and any property claim by the wife could not have been affected by the property purchases and sales.

b) Husband’s Remuneration (Including Tax-free Income)

[77] The husband worked in Ireland from November 1, 1997 to December 31, 2002. During that time, his income received in Ireland annually from CIBC was 50,000 British pounds, 10,000 British pounds car allowance & 67,073 Irish pounds housing allowance (which was terminated September 30, 2001).

[78] The husband also received an additional 50,000 pounds base salary and a discretionary bonus which were paid offshore in Guernsey. The money earned offshore was untaxed until it was remitted to Ireland. The husband set up loans to bring money into Ireland. The loans were secured against the money in Guernsey and were not taxable because they were not treated as income.

[79] The husband stated that his housing and car allowance were taxed. He pointed out the tax return, which showed that the allowances were declared on the return. The wife appears to have misunderstood the difference between a “benefit in kind” and allowance, and thought that he had not claimed the allowances on his return.

[80] The husband also states that his housing allowance was correctly reflected in the letters from CIBC, including the later letters that showed a reduction in the amount paid.

[81] The husband was a member of CIBC Canadian pension plan and had a contributory pension plan with the bank in Ireland.

[82] The husband’s employment with CIBC was terminated in December of 2002. He stated that this came as a terrible shock. At that time, he was paying more than $5,000 a month in child support plus a large mortgage. He faced a massive reduction in income at age 58 at a time when his responsibilities were extensive.

[83] The wife was in possession of all documents regarding the husband’s income tax obligations prior to the settlement in February 2006.

[84] The husband acknowledged that the tax figure in his Financial Statement of August 28, 2000 was in error. The husband provided his actual income tax return. Apart from the error in the August 2000 financial statement, his tax figure was not disguised or misrepresented.

[85] The husband stated that all of the information regarding his remuneration was provided to Ms. Hillman’s advisors (except for some information about stock options and restricted shares). He was puzzled about her suspicions. The husband said that, only by listening to her testify at this trial, did he gain some understanding of the reasons for her underlying suspicion.

c) Employee Stock Options, Restricted Share Awards and Pension

[86] The husband stated that the majority of the stock options and shares were disclosed in the prior proceedings. He did not tell his lawyer about some of the stock options as he regarded the money as capital not income. In his financial statements, the husband only reported the portion of the options that had vested and that were in his possession at the time of swearing the financial statement. The CIBC representative who testified at this trial said that the restricted shares and options had little or no value until they vested, which was also the husband’s view.

[87] The husband stated that he now understands that the stock options that vested in 2000 and 2001 should have been taken into account in determining income. He also accepts that the amounts should be grossed up because he did not pay tax on them. He says, however, that the maximum total sum (subject to the discretion of the court) referable to sale of stock options, was a $42,140.00 underpayment of child support. He believes that the wife would have still settled if she had known about this extra income.

[88] With respect to the Irish pension, he said that the trustees of the pension plan called it a capital payment not an income payment. He also believed it should not be treated as income.

2. Settlement

[89] With respect to the Irish settlement, the husband knew that the wife was not entitled to spousal support in Ireland. The Irish lawyers told the parties that the wife was only entitled to her direct contribution into the Irish property, which the husband estimated to be $50,000 Canadian. In his own mind, he believed that the Irish settlement for $350,000 was effectively dealing with division of property and lump sum payment in lieu of spousal support. He thought that the settlement represented a significant premium compared to her entitlement at Irish law, and that it was in full satisfaction of everything except child support. He said that he was shocked when he found out that the wife had advanced a new claim in Canada for spousal support and property, including against the Irish property.

[90] The husband says that, for the Irish settlement, he was unable to secure 175,000 pounds to pay the settlement in one payment. The structure was changed so that he could pay part of the settlement out of the funds that he had deposited in Guernsey.

[91] In January of 2005, the husband’s income dropped to $155,000/year because of his job loss and receipt of his pension. He was receiving $110,000 on his CIBC pension which was a fixed income. He was also receiving 20,000 Euros for his work as a director. He was 60 years old at the time of settlement in 2006 and had no prospects of re-employment.

[92] The husband had made an application to reduce child support and the application had met with further demands for discovery. He was concerned that it looked like there would be a lot more litigation before the case was heard and that the further costs (including trial costs) would be very high. He stated that the proceedings to that date had cost a lot of money. By then, he was retired, was on a limited income, was under a lot of stress, and had a lot of costs that he would not be able to meet. He stated that it was not easy dealing with a Canadian family law case while living in Ireland. He was anxious to bring the case to a conclusion.

[93] The husband believed that the outcome of the settlement was fair to the wife and children.

Credibility of Mr. Letchford

[94] For most of his evidence, Mr. Letchford gave his evidence in a fairly straightforward manner.

[95] He deserves credit for owning up to the non-disclosure of the stock options and restricted share awards. He is also willing to concede that the court could have treated them as income.

[96] On the other hand, I find that he has taken an unreasonable position with respect to the Spanish property. Although he may believe that he only held a non-beneficial interest in the Spanish property, the wife was still entitled to know about the fact that the husband was registered on title on a property. Counsel could have made their own determination whether the property was relevant to the analysis. Knowing about the purchase of the property may have led to questions about the source of the gift money for the purchase, which may have revealed the stock options that were not disclosed.

[97] Mr. Letchford was extremely defensive of his position regarding the Spanish property. He lied during questioning, deliberately withheld information about the property, and then sought to justify that position. However, in all other respects, he seemed to be fairly reasonable at this trial. He agreed that he had failed to disclose some of the stock options. He even went so far as to concede that they should have been considered as income. Overall, I found his evidence to be credible.

ISSUES

[98] The following is a list of the issues that arose during this trial:

A. Test to set aside the agreement.

B. Was there non-disclosure or material misrepresentation?

C. Was there a breach of contract law?

D. Fairness.

E. Should the court exercise its discretion to set aside the agreement?

ANALYSIS

A. Test to Set Aside the Agreement

[99] The jurisdiction of the court to set aside a separation agreement is found in s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3, as amended:

56 (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.

[100] In the case before the court, the wife seeks to set aside the contract on the basis of 56(4)(a) and (c). The wife bears the burden of proof on this application.

[101] There is a two-stage analysis that must be applied when a party seeks to set aside a domestic agreement, which was summarized in LeVan v. LeVan, 2008 ONCA 388, leave to appeal refused [2008] S.C.C.A. No.331:

[51] The analysis undertaken under s. 56(4) is essentially comprised of a two-part process: Demchuk v. Demchuk (1986), 1986 6295 (ON SC), 1 R.F.L. (3d) 176 (Ont. H.C.J.). First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.

[102] LeVan confirms that a finding that s. 56(4) is engaged does not automatically render the contract a nullity. Instead, a trial judge must determine whether it is appropriate in the circumstances to order that the contract be set aside, and exercise discretion accordingly. The Court cited with approval Dochuk v. Dochuk (1999), 1999 14971 (ON SC), 44 R.F.L. (4th) 97 (Ont. Ct. (Gen. Div.)), in which Lack J. set out some of the factors to be taken into account in the exercise of the court's discretion when considering whether to set aside a separation agreement, including:

1. Whether there had been concealment of assets or material misrepresentation;

2. Whether there had been duress, or unconscionable circumstances;

3. Whether the petitioning party neglected to pursue full legal disclosures;

4. Whether the petitioning party moved expeditiously to have the agreement set aside;

5. Whether the petitioning party received substantial benefits under the agreement;

6. Whether the other party had fulfilled his or her obligations under the agreement; and

7. Whether the non-disclosure was a material inducement to entering the agreement, in other words, how important was the non-disclosed information to the negotiations.

[103] In Rick v. Brandsema 2009 SCC 10, [2009] 1 S.C.R. 295, and in the earlier case of Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, the Supreme Court of Canada focused on the integrity of the bargaining process surrounding the creation of domestic contracts. Both cases make clear that where an agreement is based upon incorrect information, it is more vulnerable to being set aside. Such a fundamental flaw in the bargaining process vitiates informed consent to the terms of the final agreement:

[47] In my view, it flows from the observations and principles set out in Miglin that a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the results of negotiations undertaken in these uniquely vulnerable circumstances. The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation.

[104] However, Rick v. Brandsema also makes clear that not all cases in which misinformation has been given will result in the agreement being set aside:

[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 bargaining 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.

[105] The decision as to whether to set aside an agreement under s. 56(4) is ultimately a discretionary decision based on many factors.

a. Section 56(4)(a) - Failure to disclose financial information

[106] Rick v. Brandsema addresses the issue of the parties' obligations to disclose assets, debts, and liabilities when a domestic contract is made. In that case, the parties each had lawyers and reached a mediated agreement. The trial judge found that the husband knowingly presented misleading financial information to the wife during the negotiations by placing values on assets that were not based on independent valuations, misstating values, and failing to disclose other assets. The husband was an astute and experienced businessman who was aware of the wife's psychiatric disorder, which the trial judge found to have rendered her vulnerable during the negotiations. The husband knowingly took advantage of her vulnerabilities, and that resulted in the equalizing payment being $649,680.00 short of what the wife was entitled under the British Columbia matrimonial property legislation. The Supreme Court of Canada reinstated the trial judge's finding that the separation agreement was unconscionable and the agreement was set aside.

[107] In Quinn v. Epstein Cole LLP, 2008 ONCA 662, 92 O.R. (3d) 1, the Court of Appeal denied the appeal of a summary judgment motion decided in favour of the moving party husband. The court recognized the positive duty on both parties to disclose information:

[4] Contrary to the appellant's submission, nothing in s. 56 of the Family Law Act R.S.O. 1990, c.F.3 precludes a litigant from entering into a final and binding settlement in the circumstances above-described, i.e. where financial disclosure is not provided. Having chosen to do so without seeking to compel further financial disclosure from Keiper, the appellant could not resile from the consequences of that decision unless she demonstrated that Keiper's financial disclosure was inaccurate, misleading or false.

[108] There is a policy rationale articulated repeatedly by the higher courts: the desirability of the finality of domestic agreements and the incentive for people to settle their own matrimonial affairs on marriage breakdown: Miglin, at para. 4. Again, this assumes that a situation such as that which existed in Rick v. Brandsema is absent, where the inaccurate disclosure became significant because of the vulnerability wrought by the wife's psychiatric condition, or other situations involving duress or undue influence.

[109] Accordingly, the provision of misleading information has not and should not be the sole basis for a court's intervention when it comes to assessing whether there has been a failure pursuant to s. 56(4)(a). The court is required to take a more holistic approach, ultimately measuring the outcome against the degree to which the agreement departs from the objectives of the Family Law Act. The court should consider all of the circumstances surrounding disclosure of financial information, including the extent of the error or misrepresentation in relation to the overall outcome of the agreement.

b. Section 56(4)(c) - Otherwise in accordance with the law of contract

[110] The court in Berdette v. Berdette (1991), 1991 7061 (ON CA), 3 O.R. (3d) 513 (C.A.) at p. 521, defined duress as meaning a coercion of the will, such that it must place the party to whom the pressure is directed in such a position as to have no realistic alternative but to submit to it.

[111] Undue influence is intended to capture abuses of power that are more subtle than actual duress, but the focus is similarly on the sufficiency of consent. To establish undue influence in circumstances such as this case, the plaintiff must prove "the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power": Goodman Estate v. Geffen (1991), 1991 69 (SCC), 81 D.L.R. (4th) 211 (S.C.C.) per Wilson J. The past relationship of the parties must be examined for dominance that continues through the time the contract was signed.

[112] While Miglin did not involve the issue of setting aside a separation agreement under s. 56(4) of the Family Law Act, but instead examined the question of when it is appropriate to award spousal support contrary to the terms of a separation agreement, the Court's direction about how to examine the issues of undue influence and unconscionability is germane. At paras. 81-83 the majority wrote:

It is difficult to provide a definitive list of factors to consider in assessing the circumstances of negotiation and execution of an agreement. We simply state that the court should be alive to the conditions of the parties, including whether there were any circumstances of oppression, pressure, or other vulnerabilities, taking into account all of the circumstances, including those set out in s. 15.2(4)(a) and (b) and the conditions under which the negotiations were held, such as their duration and whether there was professional assistance…

The court should not presume an imbalance of power in the relationship or vulnerability on the part of one party, nor should it presume that the apparently stronger party took advantage of any vulnerability on the part of the other. Rather, there must be evidence to warrant the court's finding that the agreement should not stand on the basis of a fundamental flaw in the negotiation process. Recognition of the emotional stress of separation or divorce should not be taken as giving rise to a presumption that parties in such circumstances are incapable of assenting to a binding agreement. If separating or divorcing parties were generally incapable of making agreements it would be fair to enforce, it would be difficult to see why Parliament included "agreement or arrangement" in s. 15.2(4)(c). Finally, we stress that the mere presence of vulnerabilities will not, in and of itself, justify the court's intervention. The degree of professional assistance received by the parties will often overcome any systemic imbalances between the parties.

Where vulnerabilities are not present, or are effectively compensated by the presence of counsel or other professionals or both, or have not been taken advantage of, the court should consider the agreement as a genuine mutual desire to finalize the terms of the parties' separation and as indicative of their substantive intentions. Accordingly, the court should be loath to interfere.

B. Was There Non-disclosure or Material Misrepresentation?

a) Wife’s Entitlement as the Common Law Spouse

[113] In the companion cases of Kerr v. Baranow and Vanesse v. Seguin, 2011 SCC 10, [2011] 1 S.C.R. 269 the Supreme Court of Canada found that the common law spouses in those cases were involved in joint family ventures since the spouses worked collaboratively toward common goals. In those kinds of cases, a monetary award for unjust enrichment should be calculated according to the share of the accumulated wealth proportionate to the claimant’s contribution. Hallmarks of a joint family venture can include: one spouse taking on a greater proportion of the domestic labour in order to enable the other to pursue activities in the paid workforce; financial sacrifice made by the parties for the welfare of the family unit; reliance by a party on the success of the relationship for future economic security, to her own detriment; and relocating for the benefit of the other party’s career.

[114] In the case before the court, the wife claimed child support, spousal support, and a claim to the husband’s property based on unjust enrichment, implied trust and/or constructive trust. In these circumstances, it was particularly important that the husband provide accurate and fulsome financial disclosure.

b) Spanish Property

[115] Having considered all of the evidence, I find that the husband deliberately misled the wife about the Spanish property. When questioned by the wife’s counsel, he failed to answer questions truthfully. His statement during this trial, that he did not have a beneficial interest in the property, is an explanation that he could have provided during the previous litigation. The wife had strong suspicions that the husband owned property in Spain, and her frustration with the husband’s lack of information fed her suspicions about all of his income. Had he answered the questions about the Spanish property, the husband might have diffused some of that suspicion.

[116] The husband says that the property was purchased by his new wife for the benefit of her family. He denies earning any money from rent on the property. The wife argues that it is not reasonable to believe that the property remained vacant during most of the year. However, there is no evidence whatsoever that the property was rented or that the husband earned rental income. In the absence of any evidence, the court is not prepared to impute rental income.

c) Tax-Free Income

[117] I find that the husband did not lie or try to mislead the wife about his untaxed income. The fact that a portion of his income was paid offshore was always made clear to the wife. The husband made assumptions about what the wife knew, but those assumptions were reasonable based on the disclosure that he had been providing. He gave the wife his tax returns that disclosed the lower taxation amounts, and set out information in his financial statement. While there was an inaccurate tax amount in the 2000 financial statement, that amount was corrected on subsequent financial statements.

[118] I find that there was no non-disclosure or misrepresentation regarding the non-taxable income. In any event, any remaining confusion about the effect of the untaxed income was addressed with the delivery of the PWC report from the husband prior to the agreement.

d) Employee Stock Options and Restricted Shares

[119] The husband did not disclose all of his employee stock options and restricted share awards during the prior proceedings. He disclosed the existence of some of the CIBC shares and options in various financial statements. He testified about how each financial statement was a snapshot of his assets at the time of swearing the statement, and that he did not disclose assets that were no longer in his possession. The fact that he did disclose stock options in some of his financial statements lends credence to his position, and I accept this explanation.

[120] At the time he was preparing his financial statements, he believed that they should be treated as assets not income. Given that the shares were acquired long after parties separated, the husband believed that he did not have an obligation to disclose the shares that had been disposed of as this would not have affected her claim.

[121] At the trial before me, the husband fairly acknowledged that the stock options and restricted shares could be treated as income for support purposes. However, the husband states that this disclosure would not have impacted wife’s consideration of the amount for which her support claims should be settled. As with the Spanish property disclosure issue, the husband could have diffused suspicions and perhaps avoided this litigation if he had been forthright about the stock options and shares during the earlier litigation.

[122] It is unfortunate that the wife did not take the opportunity to examine CIBC in 2006. The questioning of CIBC likely would have revealed the full extent of the stock options and restricted shares that had been granted to the husband.

[123] It is notable that the treatment of stock options in the family law context is somewhat unsettled. In this case, the wife provided the court with the decision in Patterson v. Patterson 2006 53701 (ON SC), [2006] O.J. No. 5454 (Ont.S.C.J.), in which the court held that stock options should be treated as income. The court in Gibson v. Gibson [2011] O.J. No. 3380 (Ont.S.C.J.) followed the reasoning in Patterson. However, in Ross v. Ross 2006 41401 (ON CA), [2006] O.J. No.4916, the Ontario Court of Appeal treated stock options as property that should be considered in the equalization of net family property. Although the Court of Appeal decision did not specifically address the issue of whether the options are property rather than income, the decision appears to be binding authority for the proposition that stock options must be treated as property. It is therefore unclear what affect the disclosure of all stock options and restricted shares could have had on the settlement.

e) To What Extent Was the Wife Obligated to Pursue Disclosure?

[124] The husband argues that the wife was suspicious of his financial situation, and should not have settled without pursuing more disclosure. In particular, she should have examined CIBC before settlement.

[125] I am mindful of the decision in Virc v. Blair, 2014 ONCA 392, where it was held that the court should not shift the onus to the disclosure recipient to assess the veracity of disclosure. In cases where the court finds that there was material misrepresentation, the burden is on the disclosing party to show that the recipient actually knew the material was false.

[126] In the case before me, I do not find that the wife was obligated to investigate her suspicions about misrepresentations before she settled. There is a positive obligation on both parties to accurately and truthfully report their financial information to ensure fairness in the process.

[127] While it is unfortunate that the wife did not examine CIBC prior to settlement, the fact that she failed to do so will not be held against her.

C. Was there a Breach of Contract Law?

[128] The wife relies on s.56(4)(c) and argues that the agreement should be set aside in accordance with the law of contract. Her argument appears to be based upon undue influence caused by the inequality in bargaining power, economic imbalance and duress.

[129] At the time of the settlement, a trial date had been set. The wife had received $350,000 from the Irish settlement and was still receiving child support in excess of $5,000/month (untaxed) even though the husband’s income had been significantly reduced two years earlier.

[130] I find that there was no behaviour on the part of the husband amounting to duress or undue influence. This is not a case where the agreement was presented to the wife as a fait accompli and she was denied an opportunity to consider it. There is no evidence that the husband pressured her to sign the agreement, or that he was in any rush to sign it, or that he presented her with circumstances that would cause her to feel pressured by time. The wife is intelligent and was represented by counsel at all times.

[131] There was no evidence that the parties were not equal bargaining partners or that one preyed on the other. Although the wife testified about the first few months after separation and how she was treated poorly in Ireland, circumstances had changed significantly by the time of the settlement. The wife had custody of the children and they were living in Canada. She had received a lump sum payout from the Irish proceedings and was receiving steady child support. Although she complains about the litigation tactics taken by the husband, I do not find that those tactics were egregious or otherwise caused an imbalance of power that unfairly led to the signing of the agreement.

[132] The wife testified that she had bad experiences in court and did not get judgments that she felt she was entitled to. She therefore had no faith that the court would render the correct judgment. She was also worried that the husband might move his assets out of Canada, leaving her unable to enforce a judgment against him.

[133] The wife’s feeling of being emotionally fragile and scared about the possible outcome of the case is not an unusual constellation of experiences for a person undergoing a separation and family law litigation. If settlements could be set aside on the basis of those common emotions and experiences, the courts would be clogged with such applications. As stated by the court in Miglin, "recognition of the emotional stress of separation or divorce should not be taken as giving rise to a presumption that parties in such circumstances are incapable of consenting to a binding agreement." Finally, even if I am incorrect and the wife was somehow rendered vulnerable as a result of the separation, as previously discussed, such vulnerabilities were not taken advantage of by the husband.

[134] In fact, at the time of signing the agreement, the husband was faced with similar pressures. The proceedings to that date had cost him a lot of money. He was retired and was receiving a fixed income. He stated that this caused significant stress, especially since he was dealing with a Canadian family law case while living in Ireland. He was anxious to bring the case to a conclusion as a result.

[135] Litigation fatigue clearly put pressure on both parties to settle this case. Although the wife points at positions that the husband took as being unfair, I find that none of his actions in the litigation rise to the level of being oppressive or extreme. In fact, the wife’s claim to re-open the Irish settlement set the tone for the proceedings between the parties and likely put the husband on the defensive.

[136] The real reason for the wife's application was revealed on her questioning when she admitted that it was only with time, and further investigation, that she began to reflect on the bargain that she had struck. There was nothing unconscionable about the negotiating process or its result.

[137] Taking into account all of the circumstances that existed during the period of the negotiation and surrounding the execution of this contract, there were no flaws in the negotiating process that could lead a trier of fact to conclude that the agreement should be set aside on that basis.

D. Fairness

[138] In LeVan, the Court of Appeal stated that fairness can be a consideration when exercising discretion in a case where the moving party establishes that a provision of 56(4) was violated:

60 […] In my view, once a judge has found one of statutory preconditions to exist, he or she should be entitled to consider the fairness of the contract together with other factors in the exercise of his or her discretion. It seems to me that a judge would be more inclined to set aside a clearly unfair contract than one that treated the parties fairly.

[139] Having found that there was material misrepresentation and non-disclosure, the court must consider the second stage of the test set out in LeVan. It is therefore important to determine the fairness of the agreement.

[140] Having observed the parties testify, I find that many of the disagreements between them arose out of a fundamental misunderstanding of each other’s intentions. The husband lived in Ireland where the common law wife was entitled to no rights. In his view, the settlements were extremely generous to the wife. The wife, on the other hand, lived in Canada and felt that she was entitled to half of his assets plus generous support. In her view, the husband earned significant sums of money and was required to generously support her. It was as if they were speaking a different language.

[141] The wife thought the settlement of $350,000 in the Irish proceeding was meant to credit her with 50% of the equity in the Irish property. The husband, on the other hand, started from the position that she was only entitled to $50,000 and he increased the settlement from there to account for all other claims except for child support. These starkly different views regarding the Irish settlement affected the litigation that followed.

[142] It was through this lens that the parties held to their tainted views of the litigation going forward. Both of the parties were so focused on protecting their own interests that they did not listen to (or failed to understand) what the other party was saying. The husband’s non-disclosure of the Spanish property and the shares significantly aggravated the problem.

[143] I have found that the husband misrepresented his ownership in the Spanish property. However, even if the property had been disclosed, it would have had no consequence to the resolution as the property was acquired after the date of separation. The non-disclosure could only affect the wife’s claim for support if it could be established that the husband earned rent from the Spanish property. However, there is no evidence of any rent being earned. Disclosure of the Spanish property would not have affected the settlement.

[144] With respect to the CIBC shares and options, the husband admits that he did not disclose a portion of his holdings of CIBC shares and says that the non-disclosure was inadvertent. He believed that they should be treated as assets and not as income, so he did not disclose them if he had already disposed of them before swearing a financial statement. Some of the shares and options were disclosed. The wife clearly believed that there were more shares and stock options, and obtained leave to examine a representative of CIBC. She then decided to settle without exploring that opportunity further. The husband had a positive obligation to disclose the stocks and shares, but the wife was also prepared to settle without seeking further information.

[145] In all of the circumstances, I find that the wife still would have settled even if the Spanish property, restricted shares and stock options had been disclosed.

[146] The parties were represented by at least one counsel at all time during the litigation. The wife received substantial benefits as a result of the litigation, which in total exceeds $1 million Canadian.

[147] Settlement takes into account the risks of litigating a case, and the possibility that the parties may be worse off after a trial. In the fairness analysis, it is helpful to examine what the result would have been if the parties had proceeded to trial. It is impossible to know what the ultimate result would have been at trial. There are many variables that created risk to the parties at trial and would have made the ultimate result unpredictable, including the following factors:

i. Cross-jurisdictional and possible conflict of laws issues. At the time the parties separated, they resided in a jurisdiction where spousal support was not available to the wife and she was not entitled to a 50% interest in the equity of the Irish property. The significance of the settlement in Ireland and how it affected the Canadian proceedings would have been a live issue.

ii. The wife was not entitled to spousal support in Ireland. It is not clear whether, by moving to a country in which she is entitled to spousal support, there are any issues regarding entitlement to spousal support.

iii. Change in taxation years in Ireland and different taxation rules, including different tax rates as between Ireland and Canada.

iv. The Child Support Guidelines state that child support is discretionary when the income is more than $150,000 per year. The husband earned significantly more than $150,000 when he was working at CIBC, so the child support amount was subject to the court’s discretion.

v. Whether the common-law wife would be entitled to a constructive trust in the husband’s pension, and if so what portion (he already worked for CIBC for 22 years before they began cohabitating).

vi. If she was entitled to a portion of the pension, to what extent would she be entitled to ongoing spousal support (to order both would be double-dipping).

vii. The husband would not be able to claim spousal support as a tax deduction in Ireland. It is not clear what impact this would have on the appropriate amount of spousal support.

viii. Whether the employee stock options and restricted share awards would be treated as income or property. There is conflicting caselaw regarding this issue. If the trial judge had treated them as assets that were acquired after separation, the wife would likely not be entitled to an interest in the equity. If they were treated as property that the husband acquired during their relationship, it is unclear whether the wife would be entitled to a constructive trust claim. The way in which a trial court might treat the stock options and restricted share awards was uncertain.

ix. The Irish pension was collapsed in 2003 and a lump-sum payment was made. There would have been a live issue at trial whether the lump sum payout of the Irish pension would be treated as property or income.

x. The husband’s income had been substantially reduced as a result of the loss of his employment. The husband would have raised issues about the higher cost of living in Ireland and likely would have argued undue hardship. Spousal support was not certain.

xi. The grossing up of the husband’s untaxed income.

xii. The determination of the proper date of separation.

xiii. Determining the exchange rates as between Irish pounds, British pounds, Euros, and Canadian dollars would complicate the calculations. The calculation of the husband’s income is further complicated by the transition in Ireland from the Irish pound to Euros in 2002.

xiv. Until the trial before me, the wife believed that the husband was not taxed on the expatriate/housing allowance and car allowance. At trial, the husband explained that he had paid tax on these amounts. At the time of settlement, it appears that the wife overinflated her estimate of the husband’s income by incorrectly assuming that these funds were untaxed.

xv. Until the trial before me, the wife believed that the husband received two severance payments which effectively would have doubled the amount of the severance. At this trial, the CIBC representative explained the entries on the Bank of Butterfield account statement. The statement supports the husband’s position that there was only one severance payment. The second entry is a correction to the first entry, and is not a second payment. At the time of settlement, it appears that the wife may have overinflated the amount of the husband’s severance payment by incorrectly assuming that there were two payments.

xvi. Although the non-disclosure of the stock options is a significant consideration, the wife had quite a bit of information about the stock options before settlement.

xvii. The complexities of the financial issues would require the retainer (likely by both parties) of forensic accounting expert for trials, including the preparation of a report, preparation and attendance at trial. Mr. Carnegie testified as the wife’s financial expert at this trial. He acknowledged numerous differences between his report and that of PWC in the calculation of the husband’s remuneration. He stated that these differences show that this is a “confusing fact scenario.”

xviii. The wife was of the view that she would have to incur the expense of bringing her Irish lawyer to Canada for the trial.

xix. The wife’s attempts at self-sufficiency and whether the wife was underemployed.

xx. The wife feared that there was a risk of never collecting against husband because he resides in Ireland. At this trial, CIBC stated that the husband’s CIBC pension is federally regulated and cannot be moved from Canada. This was not known to the wife at the time of settlement.

[148] In many ways, the settlements were beneficial to the wife. In Ireland, she was only entitled to approximately 10% equity in the home. The husband settled for significantly more than that. She achieved a result overall in the Irish proceedings that was very beneficial to her position and allowed her to return to Canada with the children.

[149] In the 2006 settlement, the lump sum payment of child support and settlement of other claims meant peace of mind for the wife but also meant that the wife was getting a more valuable settlement than receiving periodic payments made over a number of years. The lump sum permitted investment or other opportunities that would not otherwise be available.

[150] The wife seeks to set aside the settlement and re-litigate all issues. The trial on the application to set aside the order was complex and a substantial amount of material was filed. To litigate the full trial will be a time-consuming and complex exercise. In addition, a significant amount of time has passed which will affect the ability of the parties to mount a defence to the claims made in the litigation.

E. Should the Court Exercise its Discretion to Set Aside the Agreement?

[151] In determining whether this court should set aside the agreement, I have considered the factors in LeVan, as follows:

1. I find that there has been concealment of the Spanish property and therefore there was material misrepresentation. I further find that there was non-disclosure of some of the stock options and shares.

2. I find that neither party was under duress, or unconscionable circumstances, at the time of the agreement.

3. I find that the wife neglected to pursue full legal disclosures, in that she failed to examine CIBC when provided with an opportunity to do so. This factor carries less weight than the others, as the wife does not have a positive obligation to pursue legal disclosures.

4. The application was brought almost six years after the agreement. I find that the wife did not move expeditiously to have the agreement set aside. While it is true that she found most of information regarding the stock options (on the internet) and the Spanish property (from the private investigator and lawyer) in 2011, the information could have been obtained if these searches had been pursued earlier with reasonable diligence.

5. The wife has received substantial benefits under the agreement (more than a million dollars).

6. The husband has fulfilled his obligations under the agreement.

7. I find that the non-disclosure was not a material inducement to entering the agreement. The failure to disclose the Spanish property, the stock options and the shares would not have affected the negotiations.

[152] There were significant risks to both parties in taking this matter to trial. I find that the non-disclosure would not have materially affected the negotiations.

RESULT

[153] In all of the circumstances, I decline to set aside the agreement. The application to set aside the Minutes of Settlement and Order of Justice Coats is dismissed.

COSTS

[154] In the event that the parties cannot agree as to costs, they are directed to provide written submissions as to costs, no longer than two typed pages each. The husband shall provide cost submissions by July 15, 2015 and the wife shall provide any response by July 31, 2015.

Braid J.

Released: June 30, 2015

CITATION: Hillman v. Letchford, 2015 ONSC 3670

COURT FILE NO.: FC-11-2055

DATE: 2015-06-30

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

DAWN HILLMAN

Applicant

• and -

IAN LETCHFORD

Respondent

REASONS FOR JUDGMENT

Released: June 30, 2015