Court File and Parties

COURT FILE NO.: F1614/14

DATE: December 22, 2015

SUPERIOR COURT OF JUSTICE – ONTARIO

FAMILY COURT

RE: DIANE LOUISE BUTLER, applicant

AND:

RONNIE WALTER BUTLER, respondent

BEFORE: VOGELSANG J.

COUNSEL: Scott Merrifield for the applicant

Derek Friend for the respondent

HEARD: October 16, 2015

ENDORSEMENT

[1] In her June 29, 2015 motion, Ms. Butler, the applicant, seeks summary judgment setting aside a separation agreement dated May 12, 2014 and various forms of interim relief, including a partition order and sale of real property in Barrie, Ontario and spousal support. For his part, Mr. Butler raises the separation agreement she attacks and relies on the various recitals and releases it contains.

BACKGROUND

[2] Some explanation may be necessary. The motion is to be determined by applying rule 16 of the Family Law Rules, O. Reg. 114/99, expanded by O. Reg. 69/15 (effective May 2, 2015). The operative portions of the amended rule are:

WHEN AVAILABLE

16(1) After the respondent has served an answer or after the time for serving an answer has expired, a party may make a motion for summary judgment for a final order without a trial on all or part of any claim made or any defence presented in the case.

EVIDENCE REQUIRED

(4) The party making the motion shall serve an affidavit or other evidence that sets out specific facts showing that there is no genuine issue requiring a trial.

EVIDENCE OF RESPONDING PARTY

(4.1) In response to the affidavit or other evidence served by the party making the motion, the party responding to the motion may not rest on mere allegations or denials but shall set out, in an affidavit or other evidence, specific facts showing that there is a genuine issue for trial.

EVIDENCE NOT FROM PERSONAL KNOWLEDGE

(5) If a party’s evidence is not from a person who has personal knowledge of the facts in dispute, the court may draw conclusions unfavourable to the party.

POWERS

(6.1) In determining whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties, and the court may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence.

ORAL EVIDENCE (MINI-TRIAL)

(6.2) The court may, for the purposes of exercising any of the powers set out in subrule (6.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.

ORDER GIVING DIRECTIONS

(9) If the court does not make a final order, or makes an order for a trial of an issue, the court may, in addition to exercising a power listed in subrule 1 (7.2),

(a) specify what facts are not in dispute, state the issues and give directions about how and when the case will go to trial (in which case the order governs how the trial proceeds, unless the trial judge orders otherwise);

(b) give directions; and

(c) impose conditions (for example, require a party to pay money into court as security, or limit a party’s pretrial disclosure).

[3] While the expanded summary judgment provisions have attracted significant comment, other portions of r. 2 of the Family Law Rules remain of considerable importance:

PRIMARY OBJECTIVE

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

DEALING WITH CASES JUSTLY

(3) Dealing with a case justly includes,

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

(b) saving expense and time;

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

(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases.

DUTY TO PROMOTE PRIMARY OBJECTIVE

(4) The court is required to apply these rules to promote the primary objective, and parties and their lawyers are required to help the court to promote the primary objective.

[4] Counsel for Mr. Butler surprised Mr. Merrifield with a preliminary objection to the use of the rule 16 motion procedure. He raised subrule 16(2) and (3) which are formulated as follows:

AVAILABLE IN ANY CASE EXCEPT DIVORCE

16(2) A motion for summary judgment under subrule (1) may be made in any case (including a child protection case) that does not include a divorce claim.

DIVORCE CLAIM

(3) In a case that includes a divorce claim, the procedure provided in rule 36 (divorce) for an uncontested divorce may be used, or the divorce claim may be split from the rest of the case under subrule 12 (6).

[5] While Mr. Friend correctly points out that Ms. Butler has claimed a divorce in this proceeding, I am not satisfied that he is correct in his position that the very inclusion of that claim bars resort to the summary judgment procedure with respect to other claims advanced, as here where Ms. Butler seeks to set aside the separation agreement.

[6] It was telling that no authority was advanced in support of this argument.

[7] It appears clear to me that the particular words of subrule 16(3) are a complete answer to the objection, providing a separate procedure – indeed two procedures – where an applicant seeks dissolution of a marriage without a trial. While the wording of subrule 16(2) may be somewhat clumsy, in my view what is prohibited is employment of the summary procedure to obtain a divorce, not to prevent a determination of a claim for some other relief sought in the case.

[8] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (S.C.C.), the Supreme Court explained how undue, protracted trials, and attendant unnecessary expense and delay, could result in a process disproportionate to the nature of the case and the issues, thereby obviating a fair and just result. The Court discussed the new powers granted in rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and heralded a required “shift in culture.”

[9] As the amendments to r. 16 of the Family Law Rules now effectively mirror the changes to summary judgment under the Rules of Civil Procedure, the statements of Karakatsanis J. represent a call for a significant and general change to determine family law claims at an earlier state, geared to avoid the almost inevitable prolixity, cost and frustration – it is what she says, a wide cultural shift in which we as judges have to participate:

4 In interpreting these provisions, the Ontario Court of Appeal placed too high a premium on the "full appreciation" of evidence that can be gained at a conventional trial, given that such a trial is not a realistic alternative for most litigants. In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.

5 To that end, I conclude that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.

[10] If a “full appreciation” of evidence as at a conventional trial requires too much, the court walked through what now suffices:

34 The summary judgment motion is an important tool for enhancing access to justice because it can provide a cheaper, faster alternative to a full trial. With the exception of Quebec, all provinces feature a summary judgment mechanism in their respective rules of civil procedure. Generally, summary judgment is available where there is no genuine issue for trial.

(footnotes omitted)

[11] The Supreme Court emphasized that a motion judge will be able to differentiate between cases amenable to a more summary resolution and those where the issues or the evidence make a full trial a necessity:

43 The Ontario amendments changed the test for summary judgment from asking whether the case presents "a genuine issue for trial" to asking whether there is a "genuine issue requiring a trial". The new rule, with its enhanced fact-finding powers, demonstrates that a trial is not the default procedure. Further, it eliminated the presumption of substantial indemnity costs against a party that brought an unsuccessful motion for summary judgment, in order to avoid deterring the use of the procedure.

44 The new powers in Rules 20.04(2.1) and (2.2) expand the number of cases in which there will be no genuine issue requiring a trial by permitting motion judges to weigh evidence, evaluate credibility and draw reasonable inferences.

45 These new fact-finding powers are discretionary and are presumptively available; they may be exercised unless it is in the interest of justice for them to be exercised only at a trial; Rule 20.04(2.1). Thus, the amendments are designed to transform Rule 20 from a means to weed out unmeritorious claims to a significant alternative model of adjudication.

(footnotes omitted; emphasis in original)

[12] The court took pains to avoid categorizing cases or issues where no genuine issue requires a trial and mandated a broader approach:

47 Summary judgment motions must be granted whenever there is no genuine issue requiring a trial (Rule 20.04(2)(a)). In outlining how to determine whether there is such an issue, I focus on the goals and principles that underlie whether to grant motions for summary judgment. Such an approach allows the application of the rule to evolve organically, lest categories of cases be taken as rules or preconditions which may hinder the system's transformation by discouraging the use of summary judgment.

49 There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[13] As the expanded judicial powers of weighing evidence, evaluating credibility and drawing inferences delineated in r. 16(6.1) may be exercised “unless it is in the interest of justice for such powers to be exercised only at a trial,” the following words of Karakatsanis J. are helpful:

52 The enhanced fact-finding powers granted to motion judges in Rule 20.04(2.1) may be employed on a motion for summary judgment unless it is in the "interest of justice" for them to be exercised only at trial. The "interest of justice" is not defined in the Rules.

56 While I agree that a motion judge must have an appreciation of the evidence necessary to make dispositive findings, such an appreciation is not only available at trial. Focussing on how much and what kind of evidence could be adduced at a trial, as opposed to whether a trial is "requir[ed]" as the Rule directs, is likely to lead to the bar being set too high. The interest of justice cannot be limited to the advantageous features of a conventional trial, and must account for proportionality, timeliness and affordability. Otherwise, the adjudication permitted with the new powers - and the purpose of the amendments - would be frustrated.

57 On a summary judgment motion, the evidence need not be equivalent to that at trial, but must be such that the judge is confident that she can fairly resolve the dispute. A documentary record, particularly when supplemented by the new fact-finding tools, including ordering oral testimony, is often sufficient to resolve material issues fairly and justly. The powers provided in Rules 20.04(2.1) and (2.2) can provide an equally valid, if less extensive, manner of fact finding.

58 This inquiry into the interest of justice is, by its nature, comparative. Proportionality is assessed in relation to the full trial. It may require the motion judge to assess the relative efficiencies of proceeding by way of summary judgment, as opposed to trial. This would involve a comparison of, among other things, the cost and speed of both procedures. (Although summary judgment may be expensive and time consuming, as in this case, a trial may be even more expensive and slower.) It may also involve a comparison of the evidence that will be available at trial and on the motion as well as the opportunity to fairly evaluate it. (Even if the evidence available on the motion is limited, there may be no reason to think better evidence would be available at trial.)

(emphasis added)

59 In practice, whether it is against the "interest of justice" to use the new fact-finding powers will often coincide with whether there is a "genuine issue requiring a trial". It is logical that, when the use of the new powers would enable a judge to fairly and justly adjudicate a claim, it will generally not be against the interest of justice to do so. What is fair and just turns on the nature of the issues, the nature and strength of the evidence and what is the proportional procedure.

[14] The discretionary nature of the decision whether or not to use the expanded power by the motion judge and how to use it to find facts or require oral evidence is emphasized by the Supreme Court in para. 68:

68 While summary judgment must be granted if there is no genuine issue requiring a trial, the decision to use either the expanded fact-finding powers or to call oral evidence is discretionary. The discretionary nature of this power gives the judge some flexibility in deciding the appropriate course of action. This discretion can act as a safety valve in cases where the use of such powers would clearly be inappropriate. There is always the risk that clearly unmeritorious motions for summary judgment could be abused and used tactically to add time and expense. In such cases, the motion judge may choose to decline to exercise her discretion to use those powers and dismiss the motion for summary judgment, without engaging in the full inquiry delineated above.

(footnotes omitted)

[15] In this case, I am satisfied that there is no reason to suspect that better evidence could be made available at trial. I cannot foresee that other witnesses could be called to testify about these relatively narrow and limited factual issues; indeed, the case is driven by the documents and, with respect to the very few areas of disagreement about facts, each party was subjected to a rigorous cross-examination under oath on the affidavits filed, and the extensive transcripts formed part of the record before me. This issue, at its essence, involves only one transaction, not a long series of events or a pattern of conduct over years.

THE PROVINCIAL LEGISLATION

[16] For the balance of general statute or regulatory direction, it is necessary to recall the stated purpose of the applicable Family Law Act, R.S.O. 1990, c. F.3 in its preamble, formulated as follows:

Whereas it is desirable to encourage and strengthen the role of the family; and whereas for that purpose it is necessary to recognize the equal position of spouses as individuals within marriage and to recognize marriage as a form of partnership; and whereas in support of such recognition it is necessary to provide in law for the orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership, and to provide for other mutual obligations in family relationships, including the equitable sharing by parents of responsibility for their children;

Therefore, Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows …

(emphasis added)

FACTS AND EVIDENCE

[17] These parties began living together in 1979 when Ms. Butler was 18 years of age and Mr. Butler was 21. They married on April 24, 1982 and raised two children, both now adults. Throughout the marriage and continuing today, Mr. Butler worked on the automotive assembly line at Honda Canada. The couple was able to purchase the home at 67 Burke Drive in Barrie – which they own jointly – in which they resided in their years together.

[18] Although he described Ms. Butler working in a series of short-term jobs in the first eight years of their relationship – before pregnancy – Mr. Butler does not vigorously dispute Ms. Butler’s description of the role adopted by her as a “traditional marriage” where he worked and provided his salary as their joint income and she was responsible for maintaining the home and raising children. In his affidavit sworn July 12, 2015 he tries to complain that Ms. Butler could have “done some work” when the children were in school fulltime and that he tried to “get her working” but she refused and he eventually acquiesced; however, he conceded in his cross-examination that there was an agreement at the outset dividing the partners’ areas of responsibility. What is clear is that their agreement did not change and Ms. Butler has had no substantial paid employment for at least 26 years.

[19] The result of the agreed traditional nature of the relationship was that Ms. Butler has no solid work experience or training to allow her to be successful in competitive employment, while Mr. Butler remains in a stable, well-paid job, earning in excess of $80,000 annually and enjoying significant benefits. Ms. Butler asserts that her acceptance of the homemaker role for nearly 35 years has resulted in a serious disadvantage to her and a corresponding benefit to Mr. Butler.

[20] The parties separated initially in late August 2013. There is really little dispute between them about the circumstances surrounding the preparation of the separation agreement.

[21] About two weeks after Ms. Butler announced that she was leaving, she received a letter from Mr. Friend who enclosed the agreement for her signature and two post-dated cheques for $10,000. Ms. Butler deposed that the agreement was prepared on Mr. Butler’s instructions to Mr. Friend. In her affidavit sworn July 3, 2015 she denied having the benefit of legal advice before signing the agreement and swore it was “prepared entirely by the Respondent’s counsel without my input or discussion.” That somewhat ambiguous statement was clarified later in her cross-examination where she denied any communication with Mr. Friend before the agreement was prepared. There is nothing cogent or convincing to indicate she ever had legal advice.

[22] In her cross-examination, Ms. Butler related the discussions between her husband and herself before the preparation of the agreement and her later acquiescence to its terms. She swore that Mr. Butler, after seeing Mr. Friend, told her that she was not entitled to anything from him because she did not work outside the home and therefore did not contribute. She said at Q. 351: “… And I didn’t question him because I didn’t think he would lie to me about that.”

[23] When questioned further about giving up her support entitlement, Ms. Butler said at Q. 352:

… And that’s why. I was trusting him. So yes, when I read it, I thought, okay, that’s what he had said. I didn’t contribute because I wasn’t working so I wasn’t entitled to half the house … I believed him. I’ve never been through a divorce before.

[24] Later in her cross-examination, Ms. Butler reiterated at Q. 412: “And if I could just say, I was trusting that I was being treated fairly after 34 years of marriage.”

[25] With respect to Mr. Butler’s Honda retirement pension, Ms. Butler said:

Q. 439 Did you understand that if you signed this agreement you would not have any claim as against Ron’s pension?

A. Yes, because he always told me I wouldn’t have a claim. So, like I said, I never thought he was lying. I believed him, so I just signed it.

Q. 440 So you knew if it would be signed it would be final?

A. Yeah. And I already thought it was final, anyway. I didn’t think I had a right to his pension.

Q. 441 And you never asked that question of a lawyer?

A. No, I did not. Again, I trusted the 34 year old relationship.

[26] When cross-examined about her acceptance, at signing the agreement, of its finality, Ms. Butler testified at Q. 447:

A. Yes. And, like I said, I read everything was yes, yes, yes. I read it. But because of what he had told me verbally I signed it because I figured this is what I get, this is it, let’s get it done.

[27] Finally, when Ms. Butler was questioned about any assets or debts of Mr. Butler about which she was unaware, she replied at Q. 479:

I don’t think I knew about … I didn’t know about – I knew he had a pension. I didn’t know anywhere near what it was worth.

[28] For his part, Mr. Butler, in his affidavit and cross-examination, demonstrated how betrayed he felt when his wife decided to separate from him and to go off with a new man. While spousal misconduct cannot be considered by a court in a question of entitlement to support – see s. 15.2(5) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) c.3 [as am. by S.C. 1997, c.1] and s. 33(10) of the Family Law Act – I am convinced that Mr. Butler found himself unable to take a similarly noble tack in his discussions with Ms. Butler about settling their affairs. He was successful in persuading her that her leaving and taking up with another man would require him to shoulder the burden alone of propping up both their son and daughter (aged 26 and 31) who were exhibiting significant difficulties in finally achieving a semblance of adult responsibility. Asked in cross-examination about his equating the assumption of that obligation to “an equitable sharing of the economic consequences of [their] relationship,” he answered at Q. 271:

She walked out and left me with responsibilities because she could not handle the stress of what was going on with our family. That is the main reason why she left, in my opinion.

[29] Mr. Butler gave evidence in his cross-examination about Ms. Butler’s urgent desire to avoid any future prejudice to their children or grandson and her plan to adopt a fresh life with Mr. Harlton, her new boyfriend, and agreed that she would have no part of retaining a lawyer. Importantly, he admitted that Ms. Butler was “trusting [him] to handle everything.”

[30] The factual matrix of the separation became somewhat more complicated. Ms. Butler signed the separation agreement only a few days after Mr. Friend sent it to her, but Mr. Butler did not execute the agreement. He and Ms. Butler then embarked on an attempted reconciliation after they “started talking longer and longer.”

[31] After four or five months, the reconciliation broke down. Mr. Butler’s feelings of hurt and betrayal when Ms. Butler first said she was leaving the marriage paled when compared with his reaction now. Paragraph 19 of his affidavit is revealing: he deposes to a “false reconciliation” on the part of Ms. Butler; being “tricked into making an attempt because of her lies”; her “pretending to get back together”; that she was “carrying on her relationship with Mr. Halton [sic]”; “not telling me the truth”; the “reconciliation attempt was a fraud”; that Ms. Butler continued her affair with Harlton and continued “to pretend she was working on her marriage.”

[32] Mr. Butler maintains that no inference can be maintained against him by reason of his not promptly signing the agreement prepared by Mr. Friend, his solicitor. He insists, in his unusually emotional affidavit evidence, that if he had known Ms. Butler would continue her relationship while “pretending” to reconcile with him, he would have signed the contract sooner and rejected the proposed reunion. In fact, he executed the agreement May 12, 2014, almost immediately after the reconciliation foundered. In my view, any delay in signing the contract by Mr. Butler is irrelevant to its validity. It is a valid contract in terms of formality. The real issue is whether or not the provisions of the Family Law Act and established contract law render it invalid.

THE SEPARATION AGREEMENT

(a) Spousal Support

[33] In the agreement, Ms. Butler accepted a complete waiver of spousal support upon an immediate payment of $5,000, a further $10,000 upon execution of the agreement and, six months thereafter, a further $10,000. In her evidence, Ms. Butler said that she had understood from her discussions with Mr. Butler that she was to receive payments totalling $40,000 but when she saw Mr. Friend’s agreement, the total had been reduced to $25,000. She signed anyway.

[34] There was some discussion about the final payment of $10,000 for which Ms. Butler had received a post-dated cheque. Apparently Mr. Butler’s sister passed on to Ms. Butler that the bank might not honour the cheque when it became negotiable and Ms. Butler undertook some “self-help,” withdrawing $10,000 from the joint line of credit. I think nothing turns on this as Mr. Butler appears to have acquiesced and, perhaps reluctantly, accepted that his wife had received the equivalent of her final payment of spousal support under the agreement.

[35] With respect to the $25,000 purported total lump sum payment to extinguish Ms. Butler’s potential claim for spousal support (which necessarily should have featured a quite considerable compensatory component), it is instructive when Mr. Merrifield points out that the Spousal Support Advisory Guidelines suggest monthly indefinite support of roughly $2,500 - $2,800 - $3,200 (low – mid – high).

(b) Matrimonial Home

[36] By the terms of the agreement she signed, Ms. Butler was to transfer her interest in the former matrimonial home to Mr. Butler. The residence in Barrie had an equity at separation of around $210,000.

[37] In return, Mr. Butler was to shoulder the entire responsibility of paying off the existing joint line of credit encumbering the real property, which at that time had a balance of only about $39,000.

[38] The only other undefined consideration, if that term can be used, for Ms. Butler’s transfer of her interest in the matrimonial home was Mr. Butler’s promise to continue the occasional payments and accommodations the parties had extended over a long time to rescue their two adult children, neither of which was demonstrating anticipated independence.

(c) Honda of Canada Pension

[39] Ms. Butler expressly waived any claim she might have had in Mr. Butler’s employee defined benefit pension. Both agree that she was aware that, upon his retirement, he would receive approximately $34,000 annually. Neither knew that the family law value of the pension was approximately $272,000. Ms. Butler accepted, and trusted, her husband’s assertion that she had no claim to his pension entitlement by virtue of her failure to contribute and he, in fact, vigorously maintained his position in cross-examination that Ms. Butler had achieved a “fair division” under the terms of the agreement.

(d) Equalization

[40] Ms. Butler waived her claim to any payment equalizing the couple’s net family properties. Exhibit F to tab 10 of the Continuing Record is a draft net family property statement showing an equalizing payment due to Ms. Butler of approximately $160,000 at separation, or $275,000 when the family law valuation is included as provided by the administrator.

ANALYSIS

[41] Section 56(4) of the Family Law Act is as follows:

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.

[42] In LeVan v. LeVan, 2008 ONCA 388 (C.A.), the Court of Appeal said:

50 Section 56(4) of the FLA was designed to address and codify prior concerns maintained by courts that both parties fully understood their rights under the law when contracting with their spouses. It has been characterized as the "judicial oversight" provision of marriage agreements: Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550 at paragraph 14. The provision is of such significance that, in accordance with s. 56(7), it cannot be waived by the parties.

51 The analysis undertaken under s. 56(4) is essentially comprised of a two-part process: Demchuk v. Demchuk (1986), 1986 CanLII 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. This approach was adopted and applied by the trial judge in this case.

(footnotes omitted)

[43] Some argument was directed to the possibility of a failure to disclose significant assets on the part of Mr. Butler but, in my view, the evidence shows nothing close to the sort of infringement which might lead to redress. Here, the assets held by the parties were simple, obvious and not extensive. There was nothing in any of the evidence to suggest that there had ever been any concealment or lack of transparency with respect to any financial dealing by the couple over 34 years. While Mr. Butler may have been given general responsibility to look after the money and distribute it, I am satisfied that Ms. Butler knew their financial circumstances at separation with the exception of what Mr. Butler’s pension would yield as a family law value – but Mr. Butler himself then had no idea what that figure would be. As the Court found in Quinn v. Epstein Cole LLP (2007), 2007 CanLII 45714 (ON SC), 87 O.R. (3d) 184; affirmed 2008 ONCA 662:

[48] Finally, formal disclosure by way of sworn financial statements prior to executing an agreement is not necessary to meet the obligation to disclose. A general awareness of the assets of the other party may be sufficient to avoid setting aside an agreement. 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. One must inquire whether the responding party withheld information or whether the information was available to the party seeking to set aside the agreement.

(footnotes omitted)

[44] There is no merit to the complaint of non-disclosure. Ms. Butler had the requisite general awareness of the couple’s finances. The onus remains on her and she has failed to meet her evidentiary burden on this point. See James v. James, [2010] O.J. No. 2869 (Sup. Ct.).

UNCONSCIONABILITY

[45] Ms. Butler further claims that all of the facts surrounding the making of the contract demonstrated a clear inequality of bargaining position and the agreement itself was thereby rendered patently unconscionable.

[46] It has been argued that child support agreements, marriage contracts and cohabitation agreements require a fiduciary standard in bargaining, see Dubin v. Dubin, 2003 CanLII 2103 (ON SC), 2003 CarswellOnt 534 (Sup. Ct.), but it has not been held that utmost good faith is required in disclosure where a separation agreement is negotiated. See Horner v. Horner, 2004 CanLII 34381 (ON CA), 2004 CarswellOnt 4246 (C.A.) and D’Andrade v. Schrage, 2011 CarswellOnt 1292 (Sup. Ct.). That said, concepts of undue influence and consequent unconscionability are frequently engaged in applications to set aside agreements.

[47] The subject of potential exploitation in the formation of a separation agreement was discussed succinctly by Abella J. in Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295 (S.C.C.) in the following paragraphs:

1 This Court has frequently recognized that negotiations following the disintegration of a spousal relationship take place in a uniquely difficult context. The reality of this singularly emotional negotiating environment means that special care must be taken to ensure that, to the extent possible, the assets of the former relationship are distributed through negotiations that are free from informational and psychological exploitation.

4 This appeal, therefore, attracts a spotlight to the duties owed by separating spouses during the process of negotiating and executing a separation agreement for the division of matrimonial assets. In Miglin [2003 SCC 24], based on the inherent vulnerability of spouses during negotiations, this Court stated that in order to safeguard a separation agreement from judicial intervention, a spouse must refrain from using exploitative tactics. It held that the failure to do so, particularly if the agreement fails to materially comply with the objectives of the governing legislation, could well result in the agreement being set aside.

39 While Miglin dealt with spousal support agreements in the context of a divorce, it nonetheless [page309] offers guidance for the conduct of negotiations for separation agreements generally, including negotiations for the division of matrimonial assets.

40 There is no doubt that separation agreements are negotiated between spouses on the fault line of one of the most emotionally charged junctures of their relationship -- when it unravels. The majority in Miglin concluded that because of the uniqueness of this negotiating environment, bargains entered into between spouses on marriage breakdown are not, and should not be seen to be, subject to the same rules as those applicable to commercial contracts negotiated between two parties of equal strength:

The test should ultimately recognize the particular ways in which separation agreements generally and spousal support arrangements specifically are vulnerable to a risk of inequitable sharing at the time of negotiation and in the future.

Negotiations in the family law context of separation or divorce are conducted in a unique environment ... [at] a time of intense personal and emotional turmoil, in which one or both of the parties may be particularly vulnerable. [paras. 73-74]

41 LeBel J., in his dissenting reasons in Miglin, additionally observed that the law must be sensitive to the "social and socio-economic realities" that shape parties' roles in spousal relationships and have the potential to negatively impact settlement negotiations upon marriage breakdown. Wilson J. too noted these inherent vulnerabilities in Leopold v. Leopold (2000), 2000 CanLII 22708 (ON SC), 51 O.R. (3d) 275 (S.C.J.), where she said:

[F]or parties negotiating a separation agreement, one party may have power and dominance financially, or may possess power through influence over the children... . The reality ... is that often both contracting parties are vulnerable emotionally, with their judgment and ability to plan diminished, without the other spouse preying upon or influencing the other. The complex [page310] marital relationship is full of potential power imbalance. [para. 128]

(See also M. Shaffer and C. Rogerson, "Contracting Spousal Support: Thinking Through Miglin" (2003-2004), 21 C.F.L.Q. 49, at p. 70.)

42 Based on these realities, the Court in Miglin stated that judicial intervention would be justified where agreements were found to be procedurally and substantively flawed:

[W]here the parties have executed a pre-existing agreement, the court should look first to the circumstances of negotiation and execution to determine whether the applicant has established a reason to discount the agreement. The court would inquire whether one party was vulnerable and the other party took advantage of that vulnerability. The court also examines whether the substance of the agreement, at formation, complied substantially with the general objectives of the Act. [para. 4]

43 Miglin represented a reformulation and tailoring of the common law test for unconscionability to reflect the uniqueness of matrimonial bargains:

[W]e are not suggesting that courts must necessarily look for "unconscionability" as it is understood in the common law of contract. There is a danger in borrowing terminology rooted in other branches of the law and transposing it into what all agree is a unique legal context. There may be persuasive evidence brought before the court that one party took advantage of the vulnerability of the other party in separation or divorce negotiations that would fall short of evidence of the power imbalance necessary to demonstrate unconscionability in a commercial context between, say, a consumer and a large financial institution. [para. 82]

44 Where, therefore, "there were any circumstances of oppression, pressure, or other vulnerabilities", and if one party's exploitation of such vulnerabilities during the negotiation process resulted in a separation agreement that deviated substantially from the legislation, the Court in Miglin [page311] concluded that the agreement need not be enforced (paras. 81-83).

45 Notably, the Court also stressed the importance of respecting the "parties' right to decide for themselves what constitutes for them, in the circumstances of their marriage, mutually acceptable equitable sharing" (para. 73). Parties should generally be free to decide for themselves what bargain they are prepared to make. And it is true that most separating spouses appear to determine their agreements without judicial participation (Craig Martin, "Unequal Shadows: Negotiation Theory and Spousal Support Under Canadian Divorce Law" (1998), 56 U. T. Fac. L. Rev. 135, at p. 137).

46 This contractual autonomy, however, depends on the integrity of the bargaining process. Decisions about what constitutes an acceptable bargain can only authoritatively be made if both parties come to the negotiating table with the information needed to consider what concessions to accept or offer. Informational asymmetry compromises a spouse's ability to do so (Leskun v. Leskun, 2006 SCC 25, [2006] 1 S.C.R. 920, at para. 34; Marcia Neave, "Resolving the Dilemma of Difference: A Critique of 'The Role of Private Ordering in Family Law'" (1994), 44 U.T.L.J. 97, at p. 117; Penelope E. Bryan, "Women's Freedom to Contract at Divorce: A Mask for Contextual Coercion" (1999), 47 Buff. L. Rev. 1153, at p. 1177).

[48] While Miglin involved a Divorce Act claim for spousal support in the face of a previous contractual waiver, the statements of Abella J. in Rick v. Brandsema express quite effectively the general context of the making of a bargain between separating spouses and the applicable basic principles.

[49] In Harnett v. Harnett, 2014 ONSC 359, [2014] O.J. No. 237, 43 R.F.L. (7th) 464 (Sup. Ct.), McGee J. discussed some aspects of predatory unconscionability, stating:

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 [(Sup. Ct.)].

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.).

[50] Ms. Butler demonstrated a remarkable lack of sophistication when Mr. Butler was sorting out their post-separation financial affairs for them. An important concern for her was not to cause prejudice to Mr. Butler or the two rather feckless adult children the parents had been protecting and assisting financially. It is not a difficult inference that Ms. Butler felt some significant guilt that she was leaving an established family and a very long marriage for another man. To their credit, neither spouse appears to have been angry or vindictive towards the other, and Ms. Butler was forthright about her trust that Mr. Butler, who had always been primarily responsible for financial matters, would be fair and take care of everything. Unfortunately, the result was that she virtually threw herself on his mercy – instead of actually bargaining – with respect to her reasonable entitlements on separation. Her capitulation, while appearing magnanimous, was actually a demonstration of a sad misunderstanding of her position and her actual rights.

[51] In my view, Mr. Butler exerted his will over Ms. Butler and was in a demonstrably stronger position which had the result of a real disadvantage to Ms. Butler. His telling her what the result would be, in the context of her trust in him that he would be fair, represented a pressure on her will that left her no realistic ability to freely decide. See Aly v. Nader Halal Meat Inc., 2013 CarswellOnt (Sup. Ct.) at paras. 367 and 368.

LACK OF INDEPENDENT LEGAL ADVICE

[52] Lack of independent legal advice is not fatal to an agreement but, depending on all the circumstances, can affect the determination.

[53] Justice Kent placed the burden of proof on the party seeking to set aside an agreement in James v. James, [2010] O.J. No. 2869 (Ont. Sup. Ct.):

11 A party seeking to set aside a domestic contract bears the burden of proof. This burden is particularly heavy when the parties have received independent legal advice. See Dougherty v. Dougherty, (2008), 2008 ONCA 302, 89 O.R. (3d) 760 (C.A.), at paragraph 11. As a general rule, the court should enforce an agreement arrived at between parties. See Farquar v. Farquar, 1983 CanLII 1946 (ON CA), [1983] O.J. No. 3185 (C.A.), at paragraph 20-21.

[54] In that case the respondent had counsel but still complained of a lack of independent legal advice. Kent J. continued:

15 This is not a case where one party can be said to have preyed upon the other or taken advantage of her/his ability to make a better bargain or was in a demonstrably stronger position. While counsel for the respondent characterizes the respondent's situation as not having received independent legal advice from his own lawyer, it is clear from the respondent's testimony that he assumed that his lawyer was looking after his (the respondent's) interests. It is hard to imagine this being anything other than a correct assumption. It must also be observed that even the absence of independent legal advice, so long as a party is competent and reasonably intelligent, is not necessarily a basis for setting aside a domestic agreement on grounds of unconscionability. See Loy v. Loy, [2007] O.J. No. 4274 at paragraph 211.

[55] The question of a failure to obtain independent legal advice was discussed further in Harnett v. Harnett, supra, where McGee J. said:

79 Providing independent legal advice means more than being satisfied that a party understands the nature and the contents of the agreement and consents to its terms. Gurney v. Gurney, 2000 BCSC 6, [2000] B.C.J. No. 13, 2000 CarswellBC 90 (B.C. S.C.) The lawyer should make inquiries of the party so as to be fully apprised of the circumstances surrounding the agreement. The party should be advised of her legal rights and obligations. Simply stated, a client must understand the legislative scheme out of which she is opting.

80 It is the lawyer who should offer his or her opinion on whether it is appropriate for the party to sign the agreement, and not leave that question to the party.

81 It is only with comprehensive advice that a party can make an informed decision about the advisability of entering into an agreement as opposed to pursuing some other course. Only with comprehensive advice can a party appreciate the future risks and obligations of the agreement, and how best to organize one's affairs accordingly.

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 (C.A.); Raaymakers v. Green, [2004] O.J. No. 2791, 2004 CarswellOnt 2712.

(emphasis added)

[56] In my view, the lack of independent legal advice in this case created an unsurmountable obstacle for Ms. Butler in assuming anything like an effective bargaining stance in her dealings with Mr. Butler. It robbed her of the minimum information she had to have to resolve the financial aspects of her separation effectively. Without her appreciating the statutory scheme dealing with spousal support, joint property and the process of equalization, the agreement arrived at was unconscionable and s. 56(4)(c) is engaged.

THE DISCRETION TO SET ASIDE

[57] Having determined that the first LeVan hurdle has been overcome, I am required to consider whether it is appropriate to exercise my discretion in favour of setting aside the agreement.

[58] The Court of Appeal observed in LeVan, supra:

60 Based upon the trial judge's twelve findings of fact that I have outlined, she properly exercised her discretion to set aside the contract for failure to comply with s. 56(4)(a). In deciding how to exercise discretion, the trial judge considered the "fairness" of the contract. The appellant emphasizes that unfairness in a contract is not a proper basis for setting aside marriage contracts in Ontario. Although there is nothing in the governing legislation that suggests that fairness is a consideration in deciding whether or not to set aside a marriage contract, I do not see why fairness is not an appropriate consideration in the exercise of the court's discretion in the second stage of the s. 56(4)(a) analysis. 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.

61 However, this was not the only reason the trial judge articulated in support of her decision to set aside the contract. As I have stated, in exercising her discretion, the trial judge also made the following findings: (i) the husband had interfered [with] the wife's lawyer of choice; (ii) the wife's lawyers were unable to appreciate the consequences of the contract and impart them to the wife due to lack of financial disclosure and misrepresentations; (iii) the wife had not received effective independent legal advice and some advice provided was wrong; and (iv) the wife did not understand the nature or consequences of the contract she signed.

62 These findings are reasonably supported by the evidence presented at trial. I therefore see no reason to interfere with them in this case. In essence, the trial judge found that the husband failed to make full disclosure of his significant assets, that his disclosure was incomplete and inadequate and that his failure to make full disclosure was a deliberate attempt to mislead his wife. As such, the trial judge's decision to set aside the contract should be upheld.

(footnote omitted)

[59] In this case, any consideration of the “fairness” of the contract from the perspective of Ms. Butler shows it to be grossly improvident. She was to give up what would necessarily be a very substantial compensatory spousal support claim in exchange for a relatively small lump sum. She received no recognition of her joint ownership in the former matrimonial home and was to relinquish it to Mr. Butler ostensibly so that she could be relieved of her part of a relatively small joint debt. The benefits provided to her by the net family property equalization scheme were denied, including any consideration of his employment pension which her efforts throughout the marriage had assisted him to obtain.

[60] When the obvious unfairness of the contract is viewed against a backdrop of her lack of legal advice, her unsophistication and the fact that, even without malicious intent, Mr. Butler was acting very much in self-preservation as he took advantage of his wife, it is clear to me that the agreement must be set aside.

COSTS

[61] Counsel may make submissions with respect to costs in letter form addressed to me in the care of the trial coordinator. Mr. Merrifield’s submissions should be sent to me and Mr. Friend within 30 days, after which Mr. Friend will have a further 30 days to send his submissions to Mr. Merrifield and to me. I want to know particulars of offers to settle, if any, and when they were made. Submissions must be brief and may be in point form.

“Justice Henry Vogelsang”

Justice Henry Vogelsang

Date: December 22, 2015