Moses v. Metzer, 2016 ONSC 1765

CITATION: Moses v. Metzer, 2016 ONSC 1765

COURT FILE NO.: CV-12-00470045

DATE: 20160314

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TSUR MOSES as ESTATE TRUSTEE for the ESTATE OF ORA MOSES, deceased

Plaintiff

– and –

ODED METZER

Defendant

Igor Ellyn, QC, and Evelyn Perez Youssoufian, for the Plaintiff

Brian Morris and Amanda Deveaux, for the Defendant

HEARD: June 22, 23, 24, 25, 26, August 25 and 26, 2015

REASONS FOR JUDGMENT

Justice W. Matheson

1This action is brought by the Estate Trustee of the Estate of Ora Moses. The claim relates to the proceeds from the sale of the property known as 21 Parkwood Avenue, Toronto. About $3.8 million has been paid into court in relation to this claim.

2Ora Moses was a Canadian and Israeli citizen who lived in both countries from time to time. When in Canada, she lived in Toronto. She passed away from cancer in October 2012 at the age of 65. There is no issue that Ora Moses was of sound mind throughout the relevant time period. The defendant, Oded Metzer, is from Israel and was in a common law relationship with Ora Moses from about 2004 to 2011, mainly in Ontario.

3Tsur Moses, the Estate Trustee, and his brother Guy Moses, are Ora Moses’ two sons. They are the only, and equal, beneficiaries of their mother’s estate. Given the overlapping last names of family members, the trial was conducted mainly using first names. I follow that practice in these Reasons for Judgment.

4Generally, this claim relates to a dispute between the parties about whether a cohabitation agreement between Ora and Oded governs the disposition of the proceeds of the sale of the Parkwood property or whether another agreement between them governs. The plaintiff relies on the other agreement, under which the proceeds should be distributed by repaying the money that Ora invested in the property, then splitting the profits 50/50 between Ora’s Estate and Oded. Alternatively, the plaintiff relies upon trust principles. In defence of the claim, Oded relies on the cohabitation agreement between them and takes the position that all of the funds that have been paid into court are due to him.

5The defendant Oded Metzer is from Israel and now lives in Israel after spending some years in Canada. Similarly, Tsur Moses lived in Canada for about ten years but has now returned to live in Israel. Guy Moses has lived in Israel throughout. These individuals have varying degrees of proficiency in English. A Hebrew interpreter was available for their testimony at trial and assisted with translation where needed. Many of the documents were also originally in Hebrew. Translations were provided for use at trial, with corrections made in the course of the trial testimony.

6Much of the trial testimony recounted what Ora was said to have told various witnesses from time to time. Given the nature of the claim, I have had regard for s. 13 of the Evidence Act, R.S.O. 1990, c. E.23, under which Oded shall not obtain a decision on his own evidence in respect of any matter occurring before Ora’s death unless his evidence is corroborated by some other material evidence. The corroboration required by s. 13 must be evidence independent of the evidence of Oded that shows that his evidence on a material issue is true. It can be either direct or circumstantial. It can consist of a single piece of evidence or several pieces considered cumulatively: Perry Estate v. Cholette, 2013 ONSC 4610, 90 E.T.R. (3d) 227, at para. 41; Burns Estate v. Mellon (2000), 2000 5739 (ON CA), 48 O.R. (3d) 641 (Ont. C.A.), at para. 29; Botnick et al. v. The Samuel and Bessie Orfus Family Foundation et al., 2011 ONSC 3043, 71 E.T.R. (3d) 210 at para. 16, aff’d 2013 ONCA 225, 86 E.T.R. (3d) 6.

Background giving rise to the claim

7Ora and Oded were introduced by a friend in around 2004, at a time when Ora was a widow and was living in Toronto. Oded lived in Israel. At the time, both were in their 50’s and both had adult children. They began their relationship by telephone, after which they met in person when Ora made a trip to Israel. They then embarked on a full personal relationship.

8In November 2004, Ora and Oded entered into a prenuptial agreement. That agreement, governed by Israeli law, recited that the parties intended to live together and decided to formalize the financial arrangement between them. Ora had significant wealth. She wanted to make sure her assets were protected. The parties agreed that their “entire relationship” would be governed solely by the provisions of that agreement, and excluded the operation of various statutory rights and obligations under Israeli and Ontario law. Among other things, Oded waived his right to receive alimony from Ora or from her estate.

9The plan was that Oded would come to Canada. In doing so, it was not expected that he would be able to continue to practice as an architect, as he did in Israel. In the prenuptial agreement, it was agreed that upon termination of the agreement or the relationship, or upon occurrence of a number of designated events, Oded would receive US $200,000. This would provide some compensation if he found it difficult to find work in Canada.

10The prenuptial agreement also included the following paragraph regarding the purchase of property:

13A In the event that the parties shall purchase a real estate property and/or any other property whatsoever (hereinafter - the “Property”), each party’s share in such asset, in the case of separation, shall be pro rata to the investment he/she made in purchasing the Property.

11In June 2005, Oded signed another document called a “Declaration”, in which he stated that all the money in a certain bank account under his name was “the money of Ora Moses”, except for $100,000. At the time, Ora had transferred about $710,000 into that account.

12In August 2005, Oded moved to Canada and moved in with Ora at her condominium at 123 Eglinton Avenue East, Toronto.

13The parties to this litigation give different accounts about the extent to which Ora’s and Oded’s families were enthusiastic about or supportive of their relationship. Tsur frankly testified that his relationship with the defendant had its ups and downs but both brothers denied allegations made by Oded to the effect that they had refused to visit their mother if Oded was there, among other allegations. From the standpoint of Tsur and Guy, there was no animosity until after Ora’s death. In contrast, Oded testified that there were family problems from the start and throughout the relationship, caused by Ora’s sons.

14Having considered all of the trial testimony, I accept Tsur’s account of the relationship between the two families. The relationship was neither perfect nor was it especially fractious. I further find that Ora made her own decisions, including about where to live and with whom, regardless of what her sons had to say about it. It is apparent from all the evidence that she was an intelligent independent-minded individual, who did what she wished to do. She may have complained to Oded about her sons from time to time, and complained to her sons about Oded from time to time, but during their relationship there were no issues between the families that materially affected her choices.

15When Oded moved to Canada, the plan was that he would work in construction/property development. He testified that it was Ora’s idea, and she said she would give him seed money. He expected to have to pay that money back. The monies that were the subject of his Declaration were seed money from Ora.

16There then began a course of events through which three houses in Forest Hill were purchased, torn down, new houses built and then resold. In late 2005, the property 14 Clarendon Avenue was purchased and registered in Oded’s name. It was sold in the fall of 2007. In November, 2006, the property 8 Silverwood Avenue was purchased and registered in Ora’s name. It was sold in the spring of 2011. The third property was 21 Parkwood Avenue, purchased in 2008. It was sold in 2014, after the commencement of this litigation. The financing for these projects came mainly from Ora and from commercial mortgages. All three properties were sold at a profit and, on the sale of the first two properties, that profit was shared.

17Tsur was also involved in real estate and house construction in Toronto during this time period, and Oded discussed the Clarendon and other building projects with Tsur. Tsur was also the real estate agent on the purchase and sale of the Silverwood property. In his conversations with Oded, Oded confirmed that Ora was providing the majority of the financing, and the plan was that the two of them would split the profit.

18In 2007, Ora initiated a process through which she and Oded entered into a new agreement called the Cohabitation Agreement. The new agreement was fully signed by the end of August, 2007. Unlike the prenuptial agreement, it was in English and was governed by Ontario law. Oded agreed in his testimony that one reason Ora wanted the Cohabitation Agreement was that at the time they were living together in her Eglinton condominium and if they broke up she did not want him to have a claim on it.

19Ora and Oded began the process of entering into this new agreement by undergoing a mediation with a Toronto family lawyer, Avra Rosen. Ms. Rosen testified at trial.

20Ms. Rosen met with Ora and Oded and prepared a draft Cohabitation Agreement. She does not now have an independent recollection of her meetings with Oded and Ora, but has her notes. When she met with the parties she had a discussion with them about their assets but was told that there would be no financial disclosure schedules. This was confirmed at a later meeting.

21Ms. Rosen was given the prenuptial agreement but, according to her notes, paragraph 13A of that agreement was never discussed, nor was her attention drawn to it. She was told that the parties were building a house together to sell, but she was not told that Ora gave Oded about $700,000 to purchase the house, nor was she provided with Oded’s 2005 Declaration regarding the seed money from Ora. She testified that the draft Cohabitation Agreement did not deal specifically with business. She testified that it was a boiler plate agreement.

22By letter dated March 13, 2007, Ms. Rosen provided the parties with her draft agreement. She noted in her cover letter that the purpose of her mediation was a cohabitation agreement that “would be similar” to the prenuptial agreement. In keeping with that statement, Ms. Rosen’s notes of the meeting with the parties after review of the draft indicates that they were satisfied with the agreement and her notes say: “consistent with Israeli [agreement].”

23Each of Ora and Oded then went for independent legal advice. Ms. Rosen was not involved afterward.

24Ora received independent legal advice from Michael Kleinman, a Toronto family lawyer. He testified at trial. In the course of giving independent legal advice, he discussed the absence of financial disclosure in the draft agreement and indicated that the validity of the agreement would be enhanced if it was accompanied by financial disclosure. Mr. Kleinman also had a discussion with the lawyer giving independent legal advice to Oded, who apparently shared this view.

25Financial schedules were added to the agreement before it was signed. They were based on information obtained from Ora, and from the lawyer giving independent legal advice to Oded. The contents and completeness of the financial statements was not verified; Mr. Kleinman testified that it was of no concern to Ora.

26Mr. Kleinman was satisfied that Ora understood the nature and contents of the Cohabitation Agreement, including the paragraphs now at issue. He provided a certificate of independent legal advice. Independent counsel to Oded did so as well.

27Ora’s property development activities with Oded were not raised with Mr. Kleinman, nor was paragraph 13A of the prenuptial agreement. His independent legal advice therefore did not expressly address the property development activities.

28The Cohabitation Agreement was signed in July 2007. It expressly superseded and replaced the prenuptial agreement. Among other things, it also provided as follows:

3. PURPOSE OF CONTRACT

a. The parties wish to enter into this Agreement which shall be considered a domestic contract within the meaning of section 53 of the Family Law Act. …This contract has, at its principal purpose, the definition and clarification of:

i. to waive all property rights arising out of their cohabitation or subsequent marriage;

ii. that neither party will be entitled to receive financial support from the other party for himself or herself, or be obliged to provide financial support for the other party; …

iv. to supersede and replace the Israeli “Pre-Nuptial Agreement” between them dated November 10, 2004, which is of no further force or effect.

9. RIGHTS OF OWNERSHIP GOVERN PROPERTY DIVISION

a. Subject to specific provisions of this contract dealing with particular property, the division of all property between the parties will be determined solely by rights of ownership and there will be no division of property other than according to ownership.

b. Without in any way limiting the generality of the foregoing, the parties agree that:

i. rights of ownership govern the division of property between them, and there shall be no division of property except according to ownership,

ii. neither of them will be entitled to property rights arising out of their cohabitation, or their marital relationship,

iii. neither of them will be entitled to a division of property owned by the other,

iv. neither of them will be entitled to the equalization of their net family properties, and

v. Neither of them will be entitled to a share of any property or the value of any property owned by the other notwithstanding,

4. they are separated,

5. one party has died leaving the other surviving.

6. WAIVER AND RELEASE TO BENEFICIAL OWNERSHIP

a. Except as expressly set out in this contract, each party waives all rights and releases the other in the other’s estate from all claims that he or she has or, in the future may have:

i. to the beneficial ownership of property held by the other party, where that party is holding the property on a resulting, implied, or constructive trust; and

ii. to compensation for any contributions made to property.

12. SPECIFIC RELEASE

a. Without limiting the generality of other waivers and releases in this contract, Oded and Ora, and each of them specifically waives all rights to and releases the other from all claims for any interest in, or for any sum calculated on the value of the other’s interests now existing or arising in the future in the properties of each other, and any income from such properties, as well as any property into which the property described therein can be traced.

20. COROLLARY DOCUMENTS AND VARIATION OF THIS AGREEMENT

b. This Agreement may only be varied by a subsequent domestic contract.

22. INDEPENDENT LEGAL ADVICE AND FINANCIAL DISCLOSURE

a. The parties acknowledge that:

i. they have had independent legal advice;

ii. they have read this agreement in its entirety and has [sic] full knowledge of the contents;

iii. they understand his or her respective rights and obligations under this agreement, the nature of this agreement, as a Domestic Contract, and the consequences as such;

iv. each party has fully and completely disclosed to the other the nature, extent and probable value of all his or her significant assets and all his or her significant debts or other liabilities existing at the date of this contract, as reflected in part by the statements of net worth attached to this Contract as Schedules “A” and “B” and in addition to this disclosure:

1. has provided to the other all information and particulars about his or her assets and liabilities generally and, in particular, that have been requested by the other;

2. is satisfied with the information and particulars received from the other;

3. acknowledges that there are no requests for further information or particulars that have not been met to his or her complete satisfaction; and

4. confirms that he or she is completely aware of and familiar with his or her own financial circumstances and financial circumstances of the other.

v. they acknowledge that the terms of this agreement are fair and reasonable;

vi. they entering [sic] into this agreement without any undue influence, fraud or coercion whatsoever;

vii. they are signing this Agreement voluntarily;

29At the time the Cohabitation Agreement was signed, Oded owned the Clarendon property and Ora owned the Silverwood property. Those properties were listed on the schedules that purported to set out Ora’s and Oded’s net worth. However, Oded’s schedule failed to disclose that a third party had a 50% interest in Clarendon or the loan of the seed money. The values for the Silverwood and Clarendon properties did not account for the rebuilds. As well, neither schedule included the property that each of Ora and Oded held in Israel, among other omissions. Oded testified that he did not know at the time that for the financial schedules to be reliable they had to be accurate.

30In turn, and despite the review of the Cohabitation Agreement with independent counsel, paragraph 22 of that Agreement was simply wrong inasmuch as it stated that the parties’ significant assets and liabilities were as set forth in the net worth statements attached as schedules to the Cohabitation Agreement.

31The Clarendon property was sold in October 2007, just a few months after Ora and Oded entered into the Cohabitation Agreement. The proceeds were distributed by the repayment of investments made and profit sharing, not in accordance with the Cohabitation Agreement. Under the Cohabitation Agreement, the legal owner, Oded, was entitled to keep everything subject only to third-party obligations. That did not occur, nor was there evidence about any dispute between Ora and Oded in that regard.

32Ora and Oded never lived in the Clarendon property. However, after the Silverwood house was rebuilt, Ora and Oded did live in the property for a few years as did one of Oded’s daughters from time to time.

33The Parkwood property was purchased in 2008. Oded testified that it was purchased because they intended to live there, but this evidence was not corroborated and I do not accept it. There is ample evidence to show that it was purchased with the intention to resell it and divide the profits.

34In the fall of 2010, Ora moved out of Silverwood, back to her Eglinton condominium, and Oded moved into the Parkwood property with his daughter. Tsur testified that he helped his mother move and understood from her that it was the beginning of the end of her relationship and she had decided to separate. She left furniture behind in the Silverwood property to assist in its staging for its sale. Similarly, furniture owned by Ora was used to stage the Parkwood property. Ultimately, after Parkwood was sold, the furniture was returned.

35Oded testified at trial that despite moving back to her condominium, Ora did move in with him in the Parkwood property. He said she spent most of her time at Parkwood. However, in 2012, after Ora’s death and before this lawsuit, he described their relationship differently, saying that after they separated Ora “came to sleep at my place from time to time” and he did the same. Oded’s daughter testified consistent with her father’s trial testimony, but also not his earlier statement. I find that Oded’s earlier statement, made before the lawsuit, is more credible.

36Oded’s ex-wife testified, suggesting that Ora had told her that she had been very reluctant to return to the Eglinton condominium in the fall of 2010, but her sons had suggested it would be best. I do not find that evidence deserving of much weight given the nature of the relationship between this witness and Ora, the very limited extent of this witness’s evidence and knowledge, and the other evidence about Ora making her own decisions throughout the relevant time.

37Bearing in mind all of the trial evidence, I conclude that Ora did intend to separate when she moved back to the Eglinton condominium in 2010. This does not mean that she completely cut off contact. There was not a single event that caused her and Oded to separate, such as a fight, and they continued to have contact after that point, including an unsuccessful attempt at reconciliation in January 2011. They continued in contact with one another. The decision to separate was Ora’s decision, not caused by her sons.

38The Silverwood property was sold, closing in June 2011, for $3,785,000. The proceeds were distributed by the repayment of investments and profit sharing, not in accordance with the Cohabitation Agreement. Under the Cohabitation Agreement, the legal owner, Ora, was entitled to keep everything subject only to third-party obligations. That did not occur, nor was there evidence about any dispute between Ora and Oded in that regard.

39At a later stage, Tsur talked to his mother about her investment in Parkwood and he and his brother suggested that she get something in writing, which she did. In 2012, Oded wrote two letters to Ora at her request concerning her contributions and entitlement to a share of the profits from the sale of the Parkwood property. One letter was dated January 21, 2012, and the other, May 5, 2012.

40Oded testified that Ora requested that he send these letters because she was under pressure from her two sons. On the trial evidence, I do not find that Ora was pressured in the sense of being pushed to do something that she did not want to do. To the extent that Oded suggested she was, his evidence was not corroborated. Oded further suggested that Ora said to him that these letters were not intended to be legally binding. This was also not corroborated evidence, and I do not accept that she said it. In any event, Oded repeatedly agreed at trial that his two letters did represent an agreement that he had with Ora, subject only to the need to finalize the numbers in the first letter.

41The first letter from Oded to Ora was dated January 21, 2012, and stated as follows:

I wish to declare that the house at 21 Parkwood, Toronto, that is registered to my name and was built as a new house, was built in partnership with Ora Moses.

Oded invested $220,000 of his money and he was also the developer, planner and builder of the house.

When the house is sold, the mortgage on it shall be settled as well as all other debts to the bank, the city, etc.

Ora will be paid back the money that was invested in purchasing the lot and all the costs for the construction of the house, which as of today, add up to $1,487,447.

The balance of the money left over after deducting the debts, Ora’s investment and Oded’s investment, shall be split in equal parts, 50% – 50%. …

• Ora shall pay Oded back the balance of his share from the sale of the house at 8 Silverwood, the amount $140,397.

42Oded testified at trial that the $140,397 referred to in this letter was a gift to him from Ora. He provided no reasonable explanation for a gift in that odd amount. He testified that the wording in his letter – that the amount was to “pay Oded back” the balance of “his share from the sale of the house” – was Ora’s wording, which is also inconsistent with the suggestion of gift. On discovery, he testified that she owed him that money because he had helped her build Silverwood, even though he had testified at trial that she did not owe him anything. At trial, Oded also attempted to say that the figures in the letter were not accurate, but failed to put forward a credible explanation for where the figures came from if not from him.

43In February 2012, Ora went back to Israel. By this time she was ill and experiencing significant symptoms. Ultimately, she was admitted to hospital in Israel.

44In or around May, Ora began preparing a will. Her accountant assisted her, and met with her in hospital in that regard. At that time, Oded sent her his second letter, dated May 5, 2012, provided for her accountant. It stated as follows:

At your request, I am writing to you with details of what we have agreed.

I confirm hereby that the house at 21 Parkwood Street in Toronto is an additional house which we have built under the same agreement model.

According to the agreement made between us, my responsibility was finding the lot, purchasing it, and the whole course of construction of the house which took about 15 months. …

Against my investment in this project, it was agreed that our self-financing is not equally shared between us, and your portion of the financing was larger.

To complete the funding required for the project we took mortgages as required.

According to the agreement made between us, once the house sale process is complete, the mortgages and all other debts related to the house will be settled and each of us will be refunded our share of the initial investment. The balance amount (the profit) will be shared between the two of us in equal parts (50% for each one of us).

45This second letter was received by Ora in Israel. Oded agreed in his trial evidence that the agreement referred to in this letter was as set out in his January 21, 2012 letter.

46At trial, Oded testified that both of these letters were essentially written by Ora and dictated to him. He provided no corroborating evidence for that testimony, and, in any event, agreed with the content of the letters excepting only the figures in the January letter.

47These two letters confirmed a pre-existing oral agreement between Ora and Oded regarding the Parkwood property (the “property development agreement”) as well as the earlier two property developments. The plaintiff submits that the terms of this property development agreement govern the disposition of the proceeds from the sale of the Parkwood property.

48In connection with the preparation of her will, Ora asked Tsur, who lived in Toronto at that time, to go to her condominium and obtain Oded’s January 21, 2012 letter from her safe. Tsur was not previously aware of the document. On May 13, 2012, he emailed his mother that he found the document and he attached a copy of it. Later in May, he heard about the second letter from Oded.

49In the same time period, Guy, who was in Israel, was assisting by gathering financial information. He had conversations with and sent emails to Oded requesting financial information about the Parkwood property. He also asked about the progress of the sale of the Parkwood property, or lack thereof.

50Guy became frustrated because Oded was not providing the financial information he had previously agreed to provide. The information was needed so that Ora could make her will. On May 28, 2012, Oded and Guy had a telephone conversation that Guy recorded without Oded’s knowledge. On that call, Oded said he would not be providing the requested information, saying that he was regularly in touch with Ora and gave her updates about the house directly. He said that there was a clear agreement with Ora and referenced the January letter from him to her that “details everything.” Again, he did not say that the figures in that letter were inaccurate.

51On May 30, 2012, Ora sent Oded an email that indicated in strong terms that she did not understand why Oded was ignoring her requests. Oded replied to this email, but now questions whether Ora wrote it. Ora had an iPad at her bedside and did communicate by email but Oded was surprised by her tone. Oded did not establish that anyone else had written the email. In any event, his reply is his own. He said, among other things, the following:

… You know very well our agreement. At the end of January, before my trip to Israel, I gave you a letter signed by me, detailing the investment of each of us today, expenses involved in construction, and details of mortgages. …

52On June 6, 2012, there was another email exchange between Ora and Oded. Ora wrote referring to the disputes between them, saying that they were causing her health problems. Oded wrote back again referring to his earlier letter to her. This time, he also referenced the second letter that Ora had requested once she was already in Israel. That email went on to say: “[Ora], I shall do what I’ve promised. …”.

53Ora executed her will on June 7, 2012, in hospital. She had retained a lawyer in Israel to assist her with her will. Guy helped her find the lawyer, but she dealt with her lawyer directly without Guy present.

54In her will, Ora expressly referenced her interest in the Parkwood property as follows:

Without derogating from the generality of the aforesaid, and for the avoidance of doubt with regard to my rights and obligations regarding my ex-partner [Oded], wish to clarify the following matters:

a. My assets include my rights in the house on 21 Parkwood St. in Toronto, Canada (hereafter – “the house”) which I purchased together with Oded, as per the agreement signed between us on January 21, 2012, a copy of which is attached and marked “Appendix A.”

b. The provisions of the agreement stipulate that I and Oded shall divide the proceeds from the sale of the house, in equal parts, after the settlement of the mortgage, discharge of all debts and the return of our investments in the house. In this context I wish to mention that after signing the agreement I have invested additional funds in the house, so the amount due to me is 2 million Canadian dollar and not $1,487,447 Canadian dollar as written in the agreement.

c. In addition to the foregoing agreement, Oded and I signed a financing agreement which, inter alia, provided that I should pay Oded an amount of 200,000 Canadian dollar. It should be noted that following the agreement pertaining to the house as mentioned above, Oded has waived my liability to him for the amount of 200,000 Canadian dollar as above, and therefore it is null and void.

55The use of the term “financing agreement” in paragraph (c) of the English translation was the subject of some clarification at trial suggesting that it ought to have been translated as the “prenuptial agreement.” This is consistent with the reference, in that paragraph, to a $200,000 payment.

56The will did not mention the Cohabitation Agreement. Guy testified that he did not know why it was not mentioned. He thought that Ora might have said that she thought it was not in effect because she and Oded had separated, but fairly conceded that he did not remember.

57In the summer of 2012, Oded went to see an Ontario lawyer. He testified that by May 28, 2012 he had heard from friends that the Moses’ had seen a lawyer. He therefore sought legal advice. His lawyer advised him that the Parkwood property was his under the Cohabitation Agreement. Even so, Oded was still prepared to go ahead with the property development agreement as set out in his letter of January 21, 2012.

58Oded testified that he had a “gentleman’s agreement” with Ora that she would receive her part of the Parkwood proceeds after sale. Despite the Cohabitation Agreement and the legal advice that he had received, he still agreed to follow his January letter, subject to finalizing the numbers, and he told Ora’s sons that this agreement extended to them as well.

59Oded testified at trial that he was not planning any other action because Ora was still alive. However, he also testified that he maintained his intention to honour the property development agreement, as confirmed in his letters, right up until this action was commenced in December 2012.

60In August, 2012, Ora gave a continuing power of attorney for property to her son Tsur. Among other things, that power of attorney expressly authorized Tsur to act on Ora’s behalf on all matters concerning her interest in the Parkwood property, “including any matters relating to my dispute with [Oded] and including any litigation connection therewith and respect of the settlement of any issues concerning [the Parkwood property], including but not limited to the execution and delivery of documents.”

61Ora passed away in October 2012 in Israel. At trial, Oded claimed that he and Ora were still in a conjugal relationship right through to the time of her death. Quite the contrary, at the time of Ora’s death, Oded was on vacation in Italy with another woman, Nirda Sperling. Ms. Sperling’s evidence was introduced at trial through some agreed facts and a transcript of a Rule 39.03 examination at an earlier stage of these proceedings. Ms. Sperling is no longer in a relationship with Oded but their relationship did not end on bad terms.

62Ms. Sperling met Oded in May 2012 and commenced a romantic relationship with him. At that time, he told her that he was not involved with anyone else. She knew that he had previously been involved with Ora. He told her that his romantic relationship with Ora had ended about a year before, that is, in about May 2011.

63When Oded and Ms. Sperling were traveling together in October 2012, they were travelling with another couple who were good friends of Ora. Oded therefore believes that Ora knew about the trip. Whether she knew or not, I accept Ms. Sperling’s evidence and conclude that Oded and Ora were no longer in a romantic relationship as of May 2011 if not earlier, which is consistent with considerable other trial evidence.

64Oded was unable to return from Italy in time for the funeral, but did attend on the last day that the family was sitting Shiva. In the next few weeks, while everyone was still in Israel, he and Ora’s two sons had a discussion about the Parkwood property and planned to meet to get together to talk about it again when they were all in Canada.

65On November 22, 2012, Tsur and Guy met with Oded at the Parkwood property and had a lengthy discussion about it. Again Guy recorded the conversation without Oded’s knowledge. At one point, Oded indicated that he had put $380,000 into the house and said “all the rest is yours.” He confirmed other aspects of the monies Ora put into not just this property but the other two properties. Tsur suggested that they do some kind of memorandum of understanding, to which Oded said the following:

No, we’re not doing any memorandum of understanding. The house will get sold, it will end exactly the way we agreed here, it will be over. I don’t need more than, more than what I put in and what’s here, one half of the profit, we don’t need any memorandum of understanding. …

66Oded conceded in his cross-examination that he was being honest during that meeting, but also testified that he was confused and that some of the things he said were not true. Yet on his examination for discovery he testified that he believed what he said was true and made no suggestion that he had been confused. This is another one of a number of instances where Oded’s trial testimony conflicted with his answers at examination for discovery. His testimony often also conflicted with the documentary evidence. Overall, I did not find Oded to be a reliable witness.

67Oded also testified at trial that he had intended to honour the property development agreement out of respect for Ora or to be nice. This is certainly not what was said in his written communications at the time, which are much more reliable and I prefer those communications over Oded’s positions taken after the commencement of this litigation.

68Guy testified that it was Ora who had wished to sue about Parkwood, if necessary, which is consistent with the reference in her power of attorney to litigate any issues surrounding the Parkwood property. After their meeting with Oded at the Parkwood property, Tsur and Guy became concerned that Oded would sell the Parkwood property and the money would be gone. This action was commenced on December 3, 2012. A certificate of pending litigation was put on the property.

69Oded testified that up until the commencement of the lawsuit, he intended to fulfill the agreement he had with Ora to give back her investment and divide the profits from the sale of the Parkwood property. He repeatedly testified that he had an agreement to do so. He testified that changed his mind after the lawsuit was commenced.

Real estate transactions

70The Clarendon property was purchased in late 2005 for $1,100,000. Title to this property was registered in Oded’s name. The house was rebuilt and the property sold in October 2007 for $2,785,000. The financing for the acquisition of the Clarendon property came primarily from Ora. She initially invested about $710,000 for the purchase of that property.

71In addition to Ora and Oded, there was a third-party with an interest in the Clarendon property. The third-party put up about half the financing for the rebuild, for which the third party received a 50% interest in the property. Thus, when the profit was divided, the third party received 50% and Ora and Oded each received 25%.

72After the Clarendon property was sold, $706,743.09 was transferred into the bank account for the Parkwood property. These funds became part of Ora’s financial contribution to the Parkwood property. Oded testified that this total amount was gifted to him by Ora. He said she made the additional gift to him because they were spouses. These funds were invested in the Parkwood property, and each side claims them as part of their contribution. As for the alleged gift, there is no evidence to support it other than Oded’s own testimony, which was not corroborated. It fails on this basis alone. However, I also note that there is no evidence based upon which the applicable presumption of resulting trust could be rebutted by him. I have therefore concluded that it properly forms part of Ora’s investment in the Parkwood property.

73The Silverwood property was purchased in late 2006 for $1,200,000. Title to this property was registered in Ora’s name. The house was rebuilt and the property sold, closing on June 14, 2011, for $3,785,000. The profit on the sale was divided equally between Ora and Oded.

74The Parkwood property was purchased on May 14, 2008, for $1,800,500. The purchase transaction closed in July 2008. Title to this property was also registered in Oded’s name. The existing building was demolished and a new house built, which was completed in June 2011.

75The precise amount of money that Ora contributed to the Parkwood purchase and rebuild is the subject of dispute, but it was substantial. In his January 21, 2012 letter, Oded wrote that her contribution to the construction costs was, as of then, about $1.487 million, which did not include the money she contributed to the purchase of the property. Among other amounts, Ora contributed about $900,000 by putting a mortgage on two other properties owned by her and contributed her $706,743.09 from the sale of Clarendon.

76The amount contributed by Oded is also the subject of dispute. In his January 21, 2012 letter, he indicated that his contribution was $220,000. He now submits that his contribution totals about $1.33 million, as is addressed below in the context of the expert accounting evidence.

77As well, Tsur gave loans totaling $100,000 for the Parkwood project, which were repaid prior to the sale of the property.

78Several years after purchase, in February 2011, Oded obtained a $500,000 mortgage from CIBC, secured against the Parkwood property, which was repaid upon the sale of the property.

79The Parkwood property was first listed for sale in October 2011 for $4,995,000. Instead of using Tsur as the real estate agent, Oded used his daughter who was living with him as the agent. She ultimately received the commission.

80Tsur and Oded had discussions about the house being over-priced, but Oded disagreed. The property did not sell. Subsequent listings over two years reduced the listing price to $4,588,000 by October 2013. The property was ultimately sold in February 2014 for $4,395,000 and that sale closed in May 2014. The property was therefore on the market for a very long period of time, much longer than necessary from Tsur’s standpoint, given the real estate market for Forest Hill. And for that entire period, Oded lived in the house. For a lengthy period of time, one of his daughters lived in the house as well. Oded paid the carrying expenses of the property but made no payments to Ora or to her Estate, and in that regard did not pay occupancy rent.

81The net sale proceeds, after deducting real estate commission and legal fees only, were $4,217,787.75. The CIBC mortgage was also paid out at the time of sale, then in the amount of $477,089.74. The balance, $3,743,954.79, was paid into court. That amount has increased somewhat since that time as a result of accumulated interest, and at the time of trial totaled $3,823,809.35.

Occupancy rent

82Expert evidence was introduced at trial regarding the quantification of occupancy rent for the Parkwood property for the period of time that it was occupied by Oded and one of his daughters. In particular, the opinion of Jim Parthenis, CRA, was introduced into evidence and was not contested.

83Mr. Parthenis’ opinion was that the fair market rent for the Parkwood property for 2011 was $14,000 per month, which does not include utilities. He then provided the consequential rents for 2012, 2013 and 2014 based on the percentage allowable rent increase, giving rise to the following monthly rents for those years: $14,434, $14,795 and $14,913, respectively. I am satisfied with Mr. Parthenis’ expert qualifications and methodology and accept his opinion.

Accounting expert evidence

84The plaintiff called an expert forensic accounting witness, Ivor Gottschalk, CPA, CA, CA.IFA, CFF, CBV. Mr. Gottschalk’s qualifications were not challenged. Based upon his extensive background, professional qualifications and designations and professional activities, I accepted him as an expert in forensic accounting.

85Mr. Gottschalk was asked to provide his opinion about the amount outstanding between Ora and Oded, leaving aside the question of rent for Oded’s occupation of the Parkwood property. His opinion was not limited to the Parkwood property. He was also asked to consider contributions toward and distribution of profits arising from the Clarendon and Silverwood properties. Mr. Gottschalk prepared his opinion on the assumption that the property development agreement applied, more specifically that for each of the three properties, each of Ora and Oded were entitled to the return of their investment and an equal portion of the profit. For Silverwood and Parkwood, the proportion was 50:50. This assumption accords with Oded’s letter to Ora of January 21, 2012. Mr. Gottschalk did not purport to express an opinion on the relationship between this letter and the Cohabitation Agreement, which is an issue for this Court.

86Mr. Gottschalk considered an extensive financial record and fairly distinguished, in his report, between amounts admitted by Oded in his own documents, charts and spreadsheets, and amounts disputed by him. The necessary factual evidence to support Mr. Gottschalk’s opinion was properly introduced into evidence at trial, including answers to undertakings given on discovery, bank records and other documentation and evidence.

87It was apparent from Mr. Gottschalk’s testimony, report, updated report and cross-examination that he was careful, reasonable and showed great attention to detail, explaining each of his assumptions and conclusions in a satisfactory way, showing that he had taken seriously his obligation as an expert witness to provide fair, objective and non-partisan opinion evidence.

88Mr. Gottschalk used two different scenarios because of uncertainty about payments to a company called Leal Investments Group. Given the business name, Mr. Gottschalk reasonably allowed for the possibility that Leal Investments Group was not a supplier to the Parkwood construction project. He therefore prepared two scenarios, one assuming that those payments were a proper construction cost as put forward by the defendant, and the other assuming that they were not. In the defendant’s case, the principal of Leal Investment Group testified and I am satisfied that despite its business name, it is a concrete supplier. I therefore find it is appropriate to use the scenario that treats that expenditure as a legitimate expense of the Parkwood construction project.

89In Mr. Gottschalk’s opinion, there was no amount due to Ora regarding the Clarendon property. On the Silverwood property, he concluded that there was an amount due from Ora to Oded. And on the Parkwood property, he concluded that there was a substantial amount due to Ora.

90With respect to the Silverwood property, Mr. Gottschalk noted that the January 21, 2012 letter from Oded to Ora stated that Oded was owed $140,397. Mr. Gottschalk therefore assumed that Oded was owed that amount. Apart from that amount, it is agreed that the distribution of the proceeds of the Silverwood sale, including the equal sharing of the profit, took place at around the time of the sale in 2011.

91With respect to the Parkwood property, Mr. Gottschalk did an extensive review of the construction costs as put forward by Oded and as compared to the financial records, and also determined Ora’s total contributions to not only the construction project but also the original purchase price. He then rendered his opinion based on different categories of funds. I accept his opinion that Ora’s contributions that were acknowledged by Oded totaled $1,340,627.36. In addition, she contributed $706,743.09 from the proceeds of the sale of the Clarendon property and the proceeds of a mortgage she took out on other properties owned by her in the amount of $880,135.21. These amounts total $2,927,505.66.

92Mr. Gottschalk also noted other amounts totaling $259,844.17, which were supported by the documents as paid by Ora but it was less clear that these payments were in respect of Parkwood. Given the other evidence about monetary gifts that Ora made to Oded from time to time, not in relation to Parkwood, I am not prepared to assume that these amounts were in respect of Parkwood and do not otherwise find a factual basis for including those amounts.

93Mr. Gottschalk further noted that payments totaling $479,158.90 were also made from Ora to Oded and claimed to be gifts, but that he was not provided with any supporting documentary evidence. Those payments are not included in the above totals of Ora’s contributions to the Parkwood property.

94Mr. Gottschalk further determined that the profit on the sale of the Parkwood property, based on the sale price, net of real estate commissions, legal costs, the purchase price, land transfer tax and other taxes and construction costs, was $717,148.43. Assuming that profit would be divided 50:50, each would be entitled to $358,474.22.

95I therefore find that, in total, Ora contributed $2,927,505.66 to the purchase and rebuild of the Parkwood property and her share of the profit was $358,574.22, totaling $3,286,079.88.

96Looking only at Parkwood, and assuming that the property development agreement applied, Ora was owed $3,286,079.88 from the proceeds of sale. I find these figures well supported by the trial evidence.

97The defendant put forward a letter from Errol Soriano, CPA, CA, FCBV, CFE, which was accepted into evidence without an objection from the plaintiff. Mr. Soriano had a very limited mandate and did not express an opinion. He reviewed a defendant-prepared document entitled “HSBC Account for 21 Parkwood Avenue re: Expenses” to “evaluate the accuracy of the data entry” in that document. He expressly stated that his letter “does not express a conclusion and is not a report as defined by the Practice Standards of the Canadian Institute of Chartered Business Valuators.”

98The letter simply states that after his review of the document, Mr. Soriano discussed several issues with the defendant and his daughter and, where appropriate, updated the Summary to reflect corrections for transcription errors, removal of duplicate transactions and additional transactions identified during his review. Mr. Soriano further noted that no source documentation was provided to him to explain the purpose of numerous expenditures on the chart in order to confirm that those expenses were Parkwood expenses, but that the Summary had not been adjusted for those amounts.

99Oded testified about the document that Mr. Soriano reviewed, and relies upon it for his position on the quantification of Ora’s investment in the Parkwood property. His chart concludes that Ora contributed $1,853,665.21 to the purchase and development of the Parkwood property, and that he contributed $1,335,119.11.

100This chart is subject to a number of frailties including but not limited to those identified by Mr. Soriano. For example, the $706,000 that Oded contended was a gift to him from the proceeds of the sale of Clarendon, but was not, is credited as part of his contribution. Numerous other problems with the specific entries on the chart were revealed on cross-examination. I find that the conclusions described on the last page of the chart are not sufficiently supported by the trial evidence and the errors are sufficiently material that those conclusions are unreliable.

Discussion

101There is ample evidence before me from which I conclude that, subject to the Cohabitation Agreement and the relevant provisions of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), Ora and Oded had an agreement with respect to the distribution of the proceeds of the sale of the Parkwood property, specifically the property development agreement. The terms of that agreement are set out in Oded’s January 21, 2012 letter, confirmed by him in his May letter, and confirmed by him in his conversations with Tsur and Guy. The terms were that each of Ora and Oded would be repaid their investment and the profit would be shared equally between them.

102On Oded’s own evidence, his correspondence accurately set outs the terms of their agreement, subject only to determining the final amounts at the time of distribution. The terms had been followed with respect to the Silverwood property when it was sold. The terms were confirmed by Ora through her request for and receipt of the letters, and in her will, again subject only to determining the final amounts. And there was consideration, specifically Ora’s continued investment of funds in the Parkwood project over time.

103The issues in this lawsuit relate to the relevance and impact of the Cohabitation Agreement and certain related provisions of the FLA on this property development agreement. The plaintiff submits that the property development ventures were separate, and not covered by the Cohabitation Agreement. Alternatively, the plaintiff submits that the Cohabitation Agreement produces an absurd and unconscionable result and should not be enforced, at least in part, or should be set aside in part. The defendant argues that the property development activity was covered by the Cohabitation Agreement, and that under the FLA, that agreement was never effectively amended.

Interpretation of domestic contracts

104A cohabitation agreement is a domestic contract, as set out in ss. 51 and section 53 of the FLA.

105The ordinary principles of contract interpretation apply to domestic contracts: D’Andrade v. Schrage, 2011 ONSC 1174, 99 R.F.L. (6th) 40 at para. 108, citing Turner v. DiDonato, 2009 ONCA 235, 95 O.R. (3d) 147, at para. 29.

106A contract must be read “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47; D’Andrade v. Schrage, at para. 108; MacDougall v. MacDougall (2005), 2005 44676 (ON CA), 262 D.L.R. (4th) 120 (Ont. C.A.), at paras. 20-22. A practical, common sense approach is required, not dominated by technical rules of construction, with due regard for proper evidence of surrounding circumstances: Sattva, at para. 47.

107As is apparent from the extensive references to the FLA in the Cohabitation Agreement, a domestic contract must be examined in its family law context. Where two interpretations are possible, the court should favour the interpretation that promotes the reasonable expectations of the parties and provides a sensible result within the family law context: MacDougall, at para. 22.

108The requirement to examine the contract in the family law context means that the relative bargaining position of the parties is an important consideration – domestic contracts should not be seen as the same as commercial contracts negotiated between two parties of equal strength: Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, at paras. 73-74, Rick v. Brandsma, 2009 SCC 10, [2009] 1 S.C.R. 295, at para. 40.

109The FLA imposes additional requirements on the creation, amendment or rescission of domestic contracts. Section 55(1) of the Act requires as follows:

55(1) A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.

110The contractual nature of domestic contracts is underscored by s. 56(4)(c) of the FLA, which provides that a court may set aside the domestic contract or a provision in it “otherwise in accordance with the law of contract.”

The Cohabitation Agreement

111As expressly stated in the Cohabitation Agreement, it was intended to be considered a domestic contract within the meaning of section 53 of the FLA. That section provides as follows:

53(1) Two persons who are cohabiting or intend to cohabit and who are not married to each other may enter into an agreement in which they agree on their respective rights and obligations during cohabitation, or on ceasing to cohabit or on death, including,

(a) ownership in or division of property;

(b) support obligations;

…and

(d) any other matter in the settlement of their affairs.

112The purpose of the Cohabitation Agreement is expressly set out in its paragraph 3, which provides as follows:

3. PURPOSE OF CONTRACT

a. … This contract has, at its principal purpose, the definition and clarification of:

i. to waive all property rights arising out of their cohabitation or subsequent marriage;

ii. that neither party will be entitled to receive financial support from the other party for himself or herself, or be obliged to provide financial support for the other party; …

iv. to supersede and replace the Israeli “Pre-Nuptial Agreement” between them dated November 10, 2004, which is of no further force or effect.

113The Cohabitation Agreement makes repeated references to property rights “arising out of the cohabitation.” At trial, there was a considerable debate about when Ora and Oded ceased cohabiting.

114The Cohabitation Agreement adopts the definition of “cohabit” from s. 1(1) of the FLA, as follows: “‘cohabit’ means to live together in a conjugal relationship, whether within or outside marriage.”

115I have considered all relevant factors in considering when this couple ceased cohabiting, as listed in detail in Andrade v. Andrade, 2012 ONSC 2777, [2012] O.J. No. 2353, at para. 77. I conclude that they were no longer cohabiting as of February 2011. Ora moved from the Silverwood property back to her Eglinton condominium in the fall of 2010. At that point, they were no longer living together. They did not entirely terminate their relationship at that time – I accept that Ora stayed over at the Parkwood property from time to time as did Oded sometimes stay over at the Eglinton condominium, and that there was an attempted reconciliation in January of 2011, but by February 2011 they were no longer living together in a conjugal relationship in any meaningful way. This roughly accords with Oded’s own admission to Ms. Sperling that he and Ora’s romantic relationship had ended by around May 2011.

116Section 1 of the Cohabitation Agreement also included the definition of “Breakdown of the Relationship” as follows:

a. In this contract:

i. “Breakdown of the Relationship” means the earliest of the following events:

1. Whether or not the parties marry, the date upon which they separate with no reasonable prospect that they will resume cohabitation, but does not mean a physical separation of the parties as a result of either of them being ill or otherwise incapacitated or confined to a hospital or other institution;

2. If the parties marry, the date upon which the marriages declared a nullity; or,

3. Whether or not the parties marry, the date upon which either of the parties dies leaving the other surviving.

117This definition, although raised in argument, is not directly relevant to the issues in this case. In the Cohabitation Agreement, this term is only used in paragraph 14, which deals with certain rights to the couple’s Primary Residence. Paragraph 14 provides for a period of notice to the non-owner to vacate after the breakdown of the relationship and for a right to a period of possession and the option to purchase that property if the legal owner dies and there has been no breakdown of the relationship. Neither party suggests that any rights under paragraph 14 are relevant here.

118Whether or not this contractual definition precisely coincides with the statutory definition of cohabitation, I find that these parties were separated with no reasonable prospect that they would resume cohabitation as of February 2011.

119Moving to the interpretation of the property provisions in the Cohabitation Agreement, it contains a number of paragraphs that deal expressly with property rights. Those paragraphs plainly say the following:

(1) each party waives all property rights arising out of their cohabitation (paragraph 5);

(2) the division of property between the parties will be determined solely by rights of legal ownership and that there will be no division of property other than according to legal ownership (paragraph 9);

(3) the parties waive all rights and release the other party and the other party’s estate from all claims to beneficial ownership of property held by the other party, “where that party is holding the property on a resulting, implied, or constructive trust” (paragraph 10 a. i.);

(4) the waiver and release of all claims expressly includes “compensation for any contributions made to property” (paragraph 10 a. ii.); and,

(5) each party specifically waives all rights to and releases the other from all claims for any interest in the properties of each other (paragraph 12).

120In my view, none of these paragraphs are ambiguous. They broadly provide that rights of ownership govern property division. They do not distinguish between property that is the subject of a business venture between the parties, and other property that is not.

121Reading the Cohabitation Agreement as a whole, there are numerous other references that support this interpretation. From a structural standpoint, the Cohabitation Agreement deals separately with waiver of property rights arising out of the cohabitation (in paragraph 5) and property division being governed by rights of ownership (paragraph 9). This structure, and the words of those paragraphs, confirm that paragraph 9 was intended to deal comprehensively with property division. This is consistent with paragraph 11, which gives an absolute discretion to each party to deal with their own property as they see fit. Again, paragraph 11 is not limited – it applies to all property. The Cohabitation Agreement also includes waivers of any rights to equalization under s. 5 of the FLA, which is a process that includes business interests and related property. Further, paragraph 12 releases all claims “now existing or arising in the future in the properties of each other, and any income from such properties, as well as any property into which the property described therein can be traced.”

122Nor is it suggested that Ora was under any pressure to sign the Cohabitation Agreement or was the subject of any diminished bargaining power ˗ quite the contrary. This Agreement was Ora’s initiative, prepared in an orderly way through the process of mediation followed by independent legal advice, and if anyone had superior bargaining power in this relationship, it was Ora. It was she who had the more substantial financial means and there is no evidence to suggest that Oded attempted to exercise any influence over her in the course of entering into this Agreement. As is also set out in Mr. Kleinman’s affidavit of execution, Ora signed the Agreement voluntarily, without compulsion or influence from Oded.

123The plaintiff relies on the principle that if a given construction of a contract would lead to an absurd result, the assumption is that this result could not have been intended by the parties. The concept of avoiding an absurd result has been applied to domestic contracts: D’Andrade, at para. 112.

124The plaintiff relies on “surrounding circumstances” in support of this submission. A number of the plaintiff’s submissions focus on the fact that the Cohabitation Agreement is in the English language. Essentially, the plaintiff is submitting that due to language issues, the Cohabitation Agreement’s words should not be taken at face value. I do not accept this submission. Neither the mediator nor independent counsel testified in support of any suggestion that Ora did not fully understand the document because it was in English.

125The plaintiff also relies on the course of conduct of the parties. The Clarendon and Silverwood properties were sold and the proceeds were distributed as contemplated by the property development agreement. The Clarendon property was sold a few months after the Cohabitation Agreement was entered into, yet that Agreement was not treated as relevant. The Silverwood property was sold in 2011, and again the Cohabitation Agreement was not treated as relevant. There was also a series of events in 2012 in which Oded repeatedly confirmed that the property development agreement applied to the Parkwood property without any mention of the Cohabitation Agreement.

126I agree that the parties conducted themselves as if the Cohabitation Agreement did not apply to any of the three real estate development properties. I conclude that this is more relevant to the question of whether the Cohabitation Agreement should be set aside under s. 56(4) of the FLA, which is addressed below.

127I conclude that the Cohabitation Agreement applies to the Parkwood property, subject only to the amendment or rescission of that Agreement or other possible avenues of relief under the FLA and contract law. Subject to those potential avenues of relief, paragraph 9 provides that Oded’s legal ownership governs and paragraph 10 provides that Ora’s Estate waives all rights and releases Oded from any claims grounded in resulting and constructive trust claims and claims for compensation for any contributions made to the Parkwood property.

Amending the Cohabitation Agreement

128The defendant relies on s. 55(1) of the FLA to submit that the property development agreement documented in Oded’s 2012 letters cannot be treated as an amendment to the Cohabitation Agreement. The plaintiff accepts that it was an oral agreement, describing it as such in the written submissions.

129Section 55(1) of the FLA requires that for an agreement to amend a domestic contract to be enforceable, it must be made in writing, signed by the parties and witnessed.

130A strict reading of s. 55(1) has been held to be inconsistent with the intention of the legislature to encourage, rather than discourage, domestic contracts: Virc v. Blair, 2014 ONCA 392, 119 O.R. (3d) 721. The strict requirements may be relaxed where, for example, a party’s signature was not witnessed. However, no case has been provided to me where the agreement was oral, although confirmed in writing, and was not signed by both parties, let alone witnessed. That is the situation here. I conclude that any flexibility available to me in regard to the requirements of s. 55 does not extend to the situation where none of its formality requirements have been met.

131As a result of s. 55(1) of the FLA, the property development agreement between Ora and Oded that is confirmed by Oded’s letters of January and May, 2012, cannot be an agreement to amend the Cohabitation Agreement.

Setting aside the Cohabitation Agreement

132The plaintiff submits, in the alternative, that if the Cohabitation Agreement prevents implementation of the property development agreement, the Cohabitation Agreement should be set aside to the extent necessary to do so.

133It is well-accepted that courts should respect the terms of domestic contracts, particularly where the parties have obtained independent legal advice: Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550, at para. 9; Miglin, at para. 45. However, s. 56(4) of FLA provides express jurisdiction to set aside all or part of a domestic contract in certain circumstances, as follows:

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.

134The application of s. 56(4) of the FLA requires a two-step analysis: LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 51, leave to appeal ref’d [2008] S.C.C.A. No. 331; Virc, at para. 52. The court must consider the following:

(1) whether the party seeking to set aside the agreement can demonstrate that one or more of the s. 56(4) circumstances is engaged; and,

(2) if so, whether it is appropriate for the court to exercise its discretion in favour of setting aside the agreement.

56(4)(a)(c):

135The plaintiff does not rely on s. 56(4)(a), but I address it because there is no question that the Schedules to the Cohabitation Agreement setting out the net worth of the parties were inaccurate. That was admitted at trial. However, the evidence was that Ora was unconcerned about financial disclosure so much so that she did not want schedules at all, and that both she and Oded knew that each of them had assets that were not listed in the Schedules at all. The value of the unlisted assets was not quantified at trial so their materiality has not been demonstrated. Likely for all these reasons, the plaintiff did not argue that this subsection provided the basis to set aside the relevant parts of the Cohabitation Agreement. Certainly, this is not a case where it was the discovery of some undisclosed assets that gave rise to an inequity and resulting request not to enforce a domestic contract.

136The plaintiff relies on subsections (b) and (c) of s. 56(4). However, with respect to subsection (c), the plaintiff relies upon the law of mutual rescission or modification of a domestic contract. Reliance on rescission or modification squarely conflicts with s. 55(1), given that its formality requirements have not been met. I therefore do not agree that subsection (c) applies.

56(4)(b):

137Subsection 56(4)(b) is most relevant to this case. It provides that a court may set aside all or part of a domestic contract if the party did not understand the “nature or consequences” of the domestic contract. The word “nature” relates to a failure to understand the fundamental nature of the document. The word “consequences” relates to the situation where a party did not knowingly agree to the effect or impact of the provisions in the agreement: Aly v. Tohamy, 2013 ONSC 1315, [2013] O.J. No. 1329, at paras. 362-363, citing Grant-Hose v. Grant-Hose, (1991), 1991 12846 (ON SC), 32 R.F.L. (3d) 26 (Ont. U.F.C).

138Where the parties have received independent legal advice, it is difficult to set aside an agreement on this basis, but it may nonetheless be done: Aly, at para. 364, citing Patrick v. Patrick, [2002] O.J. No. 639 (Sup. Ct.).

139In this case, there is overwhelming evidence that neither party to the Cohabitation Agreement understood its consequences in regard to their property development venture. Specifically, neither party understood that the Cohabitation Agreement had any impact on the property development agreement between them. I summarize that evidence as follows:

(i) Before the Cohabitation Agreement was entered into, the parties had already purchased the Clarendon and Silverwood properties, which were under development.

(ii) The parties’ property development activity was not the subject of any specific attention when Ora received her independent legal advice, nor was any specific attention directed at the prior provision addressing such ventures, s. 13A of the prenuptial agreement.

(iii) Only a few months after entering into the Cohabitation Agreement, the Clarendon property was sold and the proceeds were distributed by the repayment of investments made and profit sharing, not in accordance with the Cohabitation Agreement. Under the Cohabitation Agreement, the legal owner, Oded, was entitled to keep everything subject only to third-party obligations. That did not occur, nor was there any dispute between Ora and Oded about it.

(iv) When the Silverwood property was sold in 2011, again during the period of cohabitation, the proceeds were distributed in accordance with the property development agreement, not in accordance with the Cohabitation Agreement. Under the Cohabitation Agreement, the legal owner, Ora, was entitled to keep everything subject only to third-party obligations. That did not occur, nor was there any dispute between Ora and Oded about it.

(v) Oded kept records, albeit sometimes imperfect records, recording how much money Ora contributed to the Parkwood project from time to time as financing, rather than gifts. These records were unnecessary if the property developments fell under the terms of the Cohabitation Agreement.

(vi) From the time the Parkwood property was purchased in 2008 on forward, Ora contributed large amounts of financing to the venture, even though the property was in Oded’s name.

(vii) In the same period, apart from this financing, Ora also gave Oded monetary gifts that accumulated to a large amount, almost $500,000.

(viii) In January 2012, Ora requested a letter from Oded confirming the terms of their property development agreement, which Oded provided to her. Oded confirmed at trial that, subject only to finalizing the numbers, that letter accurately described their oral agreement in regard to the Parkwood property.

(ix) The terms of the property development agreement are obviously inconsistent with the Cohabitation Agreement. Under the Cohabitation Agreement, the legal owner, Oded, takes all. Under the property development agreement, Ora would be paid back the money that she invested in purchasing the Parkwood lot and in the costs for the construction of the house, which, as of Oded’s letter of January 21, 2012, were at least $1.487 million. As well, Ora was to receive 50% of the profit on the investment.

(x) There is no mention of the Cohabitation Agreement in the January 2012 letter at all, let alone any suggestion that it was relevant to their business deal respecting Parkwood.

(xi) Oded sent Ora a second letter in May 2012, which confirmed not only that the Parkwood property was built under the terms of the January 21, 2012 letter, but also that the prior properties had been as well. In that letter, Oded confirmed the property development agreement once again.

(xii) There is no mention of the Cohabitation Agreement in the May 2012 letter at all, let alone any suggestion that it was relevant to their business deal respecting Parkwood.

(xiii) In his telephone conversation with Guy in late May 2012, Oded confirmed to Guy that he had a clear agreement with Ora as referenced in his January 2012 letter.

(xiv) On May 30, 2012, Oded emailed Ora indicating “You know very well our agreement”, referencing his January 2012 letter.

(xv) On June 6, 2012, Oded emailed Ora referring to his prior letter and saying “I shall do what I’ve promised.”

(xvi) There is no mention of the Cohabitation Agreement in these emails, let alone any suggestion that it was relevant to their business deal respecting Parkwood. Nor was there evidence that Ora and Oded discussed the Cohabitation Agreement as potentially relevant in this time period.

(xvii) In Ora’s will executed on June 7, 2012, she stated “for the avoidance of doubt with regard to my rights and obligations regarding my ex-partner [Oded], I wish to clarify the following matters: a. My assets include my rights in the house on 21 Parkwood St. … which I purchased together with Oded, as per the agreement signed between us on January 21, 2012, a copy of which is attached…”. The will makes no mention of the Cohabitation Agreement.

(xviii) In the summer of 2012, Ora gave one of her sons a power of attorney that expressly authorized him to act on her behalf and concerning her interest in the Parkwood property. This was completely unnecessary if the Cohabitation Agreement governed that property.

(xix) In the summer of 2012, Oded obtained legal advice to the effect that the Parkwood property was his under the Cohabitation Agreement. After receiving this advice, and despite this advice, Oded was still prepared to go ahead with the property development agreement as had been confirmed in his letter of January 21, 2012.

(xx) Although Oded testified that he intended to honour the property development agreement because Ora was still alive, even after she died he was still prepared to go ahead with it and have her two sons benefit from it.

(xxi) In November 2012, when Ora’s sons wanted a memorandum of understanding regarding the Parkwood property, Oded said that they did not need one and that after the house was sold it would be dealt with exactly as agreed. He said that he did not need more than what he put in and half of the profit, which was what was provided for in the property development agreement.

140For all these reasons I conclude that when entering into the Cohabitation Agreement, neither Ora nor Oded understood the consequences of the broad language in the Cohabitation Agreement in regard to their property development initiative. At least Ora, if not both of them, did not understand it to have any impact on those activities.

141In reaching this conclusion, I recognize that the parties had independent legal advice, but Ora did not raise the property development activity with her lawyer and therefore the advice she received did not specifically address it. In this unusual case, where both parties treated the Cohabitation Agreement as irrelevant virtually from the outset and the defendant repeatedly confirmed the property development agreement as applicable, I conclude that the independent legal advice is not a determinative factor.

142This is not a case where one side or the other disavows an agreement after a personal relationship has broken down. Both parties conducted themselves as if the Cohabitation Agreement was not relevant, both during their cohabitation and after it was over. The defendant repeatedly and consistently proceeded on the basis of his January 21, 2012 letter not just before but also after he received legal advice about the Cohabitation Agreement and its scope in 2012. I find that Oded knew full well that he had agreed to the terms of the property development agreement, which was intended by both he and Ora to apply to the proceeds of sale of the Parkwood property. Further, Oded knew that Ora had invested a very large amount of money in reliance upon that agreement. Neither of them regarded the Cohabitation Agreement as relevant to their obligations as regards the Parkwood property.

143It therefore remains for me to consider whether or not to exercise my discretion under s. 56(4) to set aside all or part of the Cohabitation Agreement.

144In deciding whether to exercise discretion under the second step of the analysis, the court may consider a number of factors, although many of the factors arising from prior cases focus on different circumstances such as material nondisclosure: Dochuk v. Dochuk (1999), 1999 14971 (ON SC), 44 R.F.L. (4th) 97 (Ont. S.J.), cited in Virc v. Blair, 2012 ONSC 7104, [2012] O.J. No. 5935, at para. 31, appeal granted on other grounds, 2014 ONCA 392.

145Among other things, the court may consider the fairness of the domestic contract: LeVan, at para. 60. Not surprisingly, a court would be more inclined to set aside a clearly unfair contract than one that treated the parties fairly: LeVan, at para. 60.

146The plaintiff submits that paragraphs 9 and 10 of the Cohabitation Agreement should be set aside because they produce results that the parties did not intend when they entered into the Cohabitation Agreement. The defendant asks that I decline to exercise my discretion, but submits that if I disagree, I should set aside the entirety of the Cohabitation Agreement. The defendant submits that otherwise it would be unfair to him since, in that Agreement, he gave up his right to claim spousal support. He had already done so in the prenuptial agreement, but under that agreement he was entitled to the payment of $200,000 upon the occurrence of certain events, which was intended to provide him with some compensation if he found it difficult to get work in Canada. That payment was not incorporated into the Cohabitation Agreement.

147The defendant’s submission regarding spousal support and the $200,000 payment should not be considered in isolation. At trial, the evidence was that over the relevant period, Ora gave Oded other cash amounts that totaled more than $650,000, which have not been included as part of Ora’s contribution to the Parkwood property. Oded claims that at least $479,000 of that amount were gifts to him. In those circumstances, I do not find a particular unfairness arising from the waiver of spousal support in the Cohabitation Agreement.

148In my view, it would be a failure of justice to broadly enforce the property provisions in the Cohabitation Agreement in the circumstances of this case. I have found that the parties both intended that a different agreement governs their property development activities, and confirmed that to each other and to others over and over again. By their own conduct, commencing very shortly after entering into the Cohabitation Agreement, both parties treated that Agreement as irrelevant. As well, both parties benefited from that understanding. Ora benefited by receiving proceeds from the sale of the Clarendon property despite it being legally owned by Oded. Oded benefited from receiving proceeds from the sale of the Silverwood property despite it being legally owned by Ora.

149Ora invested millions of dollars in the Parkwood property on the understanding that the property development agreement applied, as confirmed in her dealings with Oded in 2012 and in her will executed that same year. It would be profoundly unfair, in these particular circumstances, for Oded to receive a windfall from Ora, despite his repeated assurances to her that he would meet his obligations under their agreement regarding Parkwood. If he intended to attempt to rely on the Cohabitation Agreement, he had numerous opportunities to convey that position to Ora during her lifetime, and did not do so, instead repeatedly affirming their property development agreement.

150I therefore exercise my discretion to set aside the Cohabitation Agreement, in part. I do not find it necessary to set aside paragraphs 9 and 10 entirely, nor do I find that they are a sufficient answer to the conflict between the Cohabitation Agreement and the property development agreement. There are other relevant provisions as well.

151In order to implement the property development agreement between Ora and Oded, I simply set aside the Cohabitation Agreement as inapplicable to the three real estate properties, Clarendon, Silverwood and Parkwood.

Resulting and constructive trusts and unjust enrichment

152Given my decision regarding s. 56(4) of the FLA, I need not deal with the other bases for the plaintiff’s claims, specifically resulting and constructive trusts and unjust enrichment.

Relief

153Under the terms of the property development agreement, the plaintiff is entitled to the return of Ora’s investment in the Parkwood property, and half of any profits on the sale of that property. This claim has been quantified as $3,286,079.88.

154As for the $500,000 mortgage that Oded took out on the Parkwood property, there is some dispute about the use that was made of those funds. Oded attests that the mortgage funded the continued construction work on the Parkwood property. It therefore forms part of his investment in that property. In any event, it has already been paid from the proceeds of sale, which accords with Oded’s position.

155Mr. Gottschalk also concluded, based on his review of the financial records, that the amount said to be owing to Oded from the Silverwood property had not been paid. Specifically, Oded’s letter of January 21, 2012, stated that $140,397 was due to him from the sale proceeds of that property. I have therefore deducted that amount.

156There is also the matter of a claim for occupancy rent for the several years that Oded and his daughter occupied the Parkwood property. However, occupancy rent did not form part of the terms of the property development agreement, and I conclude that no amount is due in that regard.

157I therefore conclude that $3,145,682.88 is due to the plaintiff from the proceeds of the sale of the Parkwood property.

Judgment

158The plaintiff shall have judgment in the amount of $3,145,682.88.

159If the parties are unable to agree on prejudgment interest or costs, the plaintiff shall make his submissions by delivering brief written submissions together with a costs outline by April 7, 2016. The defendant may respond by delivering brief written submissions and any other material by April 29, 2016. The parties may make written submissions regarding the payment of money out of court at the same time. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by April 7, 2016.