Court File and Parties
Court File No.: FC-13-2342 Date: 2016-05-27 Ontario Superior Court of Justice
Between: Julia Jean Gamble, Applicant – and – Antoine Joseph Longpre, Respondent
Counsel: Self-represented (Applicant) Edward Conway, counsel for the Respondent
Heard: May 25 and 26, 2016
T.D. Ray, J.
Reasons for Judgment
[1] This is the trial of an issue to determine the validity of the parties’ separation agreement signed July 30, 2012, in accordance with the order of Shelston, J dated September 18, 2015 under rule 2 of the Family Law Rules. The respondent seeks an equalization payment as well as other claims and seeks to set aside the separation agreement. The applicant relies on the separation agreement. At a settlement conference, September 18, 2015, Shelston, J ordered that the settlement conference resume after disposition of this issue.
[2] The respondent was self-represented until 3 days ago, when he retained counsel. The parties each filed a trial record/document brief. The respondent complained that he had not been served with the documents. The applicant swore under oath that she followed the direction of the trial management judge, and provided copies to the respondent by email. It appears Mr. Conway was previously on the record for the respondent and in fact had conducted the questioning of the applicant on behalf of the respondent. I ruled that the documents had been exchanged even though the respondent and his counsel had elected not to print all the emailed documents; but I ruled that I would ensure the respondent and his counsel would have sufficient time during the various breaks to review the court marked exhibits.
[3] I accept that the burden is on the applicant to prove the formalities of the separation agreement, but the burden is upon the respondent to establish its invalidity, since he is the one asserting the separation agreement should be set aside.
[4] The respondent’s position is that the agreement should be set aside on the following grounds: there was no signed agreement, the agreement was not witnessed, the agreement was not fair, and there had been no financial disclosure by the applicant. He contends that the onus is on the applicant to establish the validity of the agreement and that failure to produce the original is fatal. Furthermore, he argues that in any event, the absence of evidence concerning the witness’ signature is fatal. In addition he contends that the agreement is unfair because the house was overvalued, and the division of vehicles meant he was left with the lion’s share of the debt. He contends that he was under undue influence from the applicant when he signed and it was misrepresented to him that the agreement was only a temporary agreement so she could buy her house.
[5] The applicant’s position is that she prepared a spreadsheet of their finances and exchanged them over the month of July, that there was a lot of back and forth with the exchanges so that the respondent was involved in every step of the process. She had attempted to equalize their assets when she prepared the spreadsheets. She said that in general terms the credit card amounts were about equal, they had agreed to divide the household furnishings with him paying her approximately $13,000 for the difference in value, there was approximately $100,000 equity in the house which they had agreed to divide equally. The respondent had made it clear he did not want lawyers involved, and in the final days had approached her to get the agreement completed for signature because he knew that she was not prepared to leave the matrimonial home unless the agreement was signed. She said that all she received was an IOU for $65,000 which he never paid, and he got the house.
[6] The jurisdiction to set aside a separation agreement is found in section 56(4) of the Family Law Act. The test and the procedure to be followed where the validity of a separation agreement is in issue is described in the following authorities: LeVan v. LeVan [1]; Virc v. Blair [2]. A two-step process is required where non-disclosure is the basis of the challenge.
[7] First the trial judge must be satisfied the party that seeks to set aside the separation agreement has met the onus of showing the opposite party failed to discharge its duty to disclose significant assets. This includes the making of a material misrepresentation about the true value of assets, and the failure to disclose changes in income. The significance of an asset is assessed by measuring the value of an the asset against a party’s disclosed net assets. There must be some evidence to verify the value or extent of the party’s assets either at the date of marriage or the date of the agreement.
[8] If so, then the court must determine, in light of the facts of the case whether it should exercise its discretion to rescind the contract. The burden remains on the party seeking to set aside the agreement. In doing so, the court must consider the following factors:
a. Whether the party who did not make full disclosure was asked or refused to do so; whether that party misrepresented or concealed financial facts; whether the other party had full financial information in any event; and, whether the other party would have signed the contract even if the disclosure had occurred; b. Whether the party relied on the non-disclosure or misrepresentations in entering into the separation agreement in the sense that the party would not have entered the agreement had she known the true value of the assets; c. Whether a party consented to incomplete disclosure, or was otherwise aware of the asset and had the means to ascertain its value; d. Whether one party took benefits under the contract and then moved to set it aside; and e. Whether there had been duress, or unconscionable circumstances; whether the petitioning party neglected to pursue full legal disclosure; whether she moved expeditiously to have the agreement set aside; and whether the other party had fulfilled his obligations under the agreement. [3]
[9] The respondent said that the applicant took responsibility for all of the financial affairs of them both, and he had nothing to do with it. In chief, he said that during his various sales and self-employment work he had never prepared financial statements, and the applicant had even prepared his income tax returns while they were married. During his cross-examination he admitted signing the separation agreement, but could not remember if the applicant’s father, before signing as witness, had telephoned him to confirm he had signed the agreement. He agreed that the applicant’s father had loaned the respondent over $125,000 and after the applicant’s business went into bankruptcy, her father was the largest creditor at $65,000. He agreed that her father would have signed various documents with him.
[10] He said that the agreement was unfair because in part it made no allowance for the property on Golden Lake that he expected they would retire to. However he acknowledged that the property was always in the applicant’s father’s name during their marriage, and that the applicant had two sisters who had not expressed much interest in the property. The applicant and one of her sisters now own the property following its transfer in December, 2014. The respondent said he considered that property ‘theirs’, meaning him and the applicant.
[11] He also complained that when they divided the vehicles, he took the most expensive one and owed $37,000 on it 4 years later. However in cross-examination, he acknowledged that he had received a generous mileage allowance with a gas card so that the vehicle cost him nothing every month. Interest on the car loan was at 0%. He eventually got rid of the vehicle because of his involvement with a female friend and not because it was costing him money. He disputed the valuation at the time of the matrimonial home by $50,000, and took issue with the applicant’s evaluation. In addition, he complained that he had been given no financial disclosure. However in cross-examination he identified spreadsheets that had been sent to him by the applicant containing full financial disclosure along with the applicant’s explanation for the various amounts. It showed that the vehicles were divided on the basis of equal car payments even though his vehicle was essentially free. He also agreed that he had been aware in July during the discussions between the parties that this was the proposal. He agreed that he had told the applicant in July 2012 before signing the agreement that he did not want lawyers involved. In re-examination he said the reason he did not want lawyers at the time was because he felt confused and lost.
[12] The respondent said that the only financial disclosure he received was when she gave him the passwords to all of their banking information and credit cards. He said he never accessed any of the statements himself. There was no evidence that he ever asked her for more information or explanations. He said the reason he did not deal with it at the time was because he was upset by the fact of the separation. He said he trusted her. In cross-examination, he agreed that he had received a spreadsheet of their financial information from the applicant but said he did not understand it. He agreed that they had gone back and forth at the time with the spreadsheets; that everything was pretty well equalized, and the vehicles were dealt with on the basis of equality of car payments. He agreed that at the time the car payments on the Nissan were $800 per month, and he received a monthly car allowance of $800 from his employer so that it was at no cost; and that the car loan was at 0% interest. The Infiniti that the applicant took was leased and therefore had no end value. He said he got no information about the applicant’s RRSP’s. He said the applicant told him that she needed the agreement signed so she could get a mortgage, and he believed that it was going to be renegotiated afterwards but nothing ever happened. The respondent said that he found out in August, 2012 that he had responsibility for a $40,000 debt. He said he knew in July that he had liability for the $40,000 line of credit but he said he did not know that the applicant was going to use it to make a down payment on a town house for herself.
[13] He said that a property in Newfoundland was given a value of $46,000. It has been on the market for five years and has not sold. He said as a result he disputes the valuation. He reviewed all of the provisions in the separation agreement, said that while he had reviewed it at the time, he had played no part in writing it, and that the only reason he signed it was because she told him to. He said that the applicant’s father was not present when he signed it, and said that he “doesn’t know the applicant’s father’s signature”. In cross-examination he admitted that he had had business dealings with the applicant’s father and that he had signed various documentation as an investor for the respondent. He admitted that he had borrowed $120,000 from Mr. Gamble and that he would have known the respondent’s signature.
[14] During July before the agreement was signed the parties spent little personal time together. He would leave the house when she was there and vice versa. While the bank statements were never produced, he said he had a bank card and could have checked. He said he knew they didn’t have a lot.
[15] The respondent said he did not agree with the appraisal of the matrimonial home, to which he took possession, under the agreement. He said that the applicant had a Bank of Montreal appraisal at $500,000. His appraisal was $450,000. When during the pretrial meetings the applicant was ordered to get a fresh appraisal, he said she simply got the same Bank of Montreal appraisal with a date change.
[16] The applicant is 46 years old, and is employed as the finance manager for a not for profit organization. She has always worked in the bookkeeping field for various companies. The parties were married in 1998. The respondent had been a restaurant manager when her father loaned funds as an investment. The respondent’s restaurant supply business did not go well and was eventually taken over by creditors following a proposal. She said she personally paid many of the loans and debts of his company and as a result had made an assignment in bankruptcy. As a result, her credit rating was very poor, and any property was put in the respondent’s name. She said that as a result of the agreement, the respondent ended up with $65,000 of equity in the house, the house, and “all of his toys”. She said that under the agreement, she received only his IOU to pay her $65,000, which has never been paid, and her share of furnishings. She has received no income tax returns from the respondent since 2013. Under cross-examination, she said that there had been voluminous disclosure. In fact the respondent had at the time brought boxes of documents to her, and they had exchanged spreadsheets that had gone back and forth several times. These back and forth emails included the respondent’s questions about treatment of the Senators seasons tickets as well as their camping equipment. She agreed she did not give him any bank statements since it was a joint account and he had his own access. She said he never asked her for any information; and certainly never asked for information that she did not provide.
[17] The applicant said she had used a kit for the separation agreement and the calculations were hers following the exchanges of the spreadsheets. She said that her approach to its preparation was to equalize the assets and the liabilities between the two of them. She said the urgency in having the agreement signed was that she was not prepared to leave the matrimonial home until the agreement was signed, that she had purchased a town house and the real estate lawyer had asked her to show her a copy of the separation agreement. She did not know why the lawyer wanted to see a copy of the separation agreement. She said the closing was August 2, 2012, and the agreement was signed July 30, 2012. She said that the parties had had discussions throughout July about the separation and its terms. Her approach was to assume the house value at $500,000 based on a bank appraisal obtained earlier that spring when they were considering re-mortgaging. She considered that was their only asset after dividing the furniture, calculating the value, and then assigning an equalization amount. She considered the vehicles were essentially equal. While she had a monthly car payment, it was a lease payment and the car had no residual or asset value. She said that his was an expensive Nissan with payments of $800 per month that were offset completely with a car allowance and gas card from his employer. She said she assumed he would keep the Nissan, make the payments and when the car loan at 0% interest had been paid, he would have a residual equity.
[18] She said she took out the line of credit on the joint account which is shown on the spreadsheet for $40,000 as a down payment on the town house so she could buy it.
[19] Under cross-examination, the applicant was closely questioned on the Golden Lake property owned by her father and denied that it was treated as a family asset. She considered it was a potential future inheritance, and in fact was transferred in December, 2014 to her and her sister. Her father now suffers from dementia.
[20] She said she has been unable to locate the original signed copy of the separation agreement, and identified a photocopy of the original in her book of documents. The copy showed all the signatures and the signature of her father as a witness to both their signatures. She said he was suffering from dementia and would be unable to give evidence about his signature. She said she recalled that her father had telephoned the respondent to confirm that he had signed the agreement before signing it as a witness. She said she had been unable to locate the original, that there was only one original, and it was quite possible she had given it to the respondent.
[21] I am satisfied that the separation agreement of July 30, 2012 is signed, witnessed and complies with the requirements of an enforceable agreement. While the copy introduced into evidence was not the original, the respondent identified the copy as containing his signature as did the applicant. The witness was the applicant’s father who suffers from dementia and is unable to give evidence. When asked, the respondent did not deny that the applicant’s father, who he knew very well both as his father-in-law and as an investor in his business had not telephoned him to confirm he had signed the agreement before signing it as a witness. The respondent said he could not remember. The respondent’s reliance on Lalonde v Lalonde [4] is not particularly helpful. In that case there was no witness signature at all noted on the document, and no evidence was led on that point. Where, as here, the respondent admitted signing the agreement, and where, as here, there is uncontradicted evidence that the applicant’s father, who was well known to the respondent, spoke to the respondent, confirmed he had signed the agreement, and has had his signature identified on the agreement as a witness then the less stringent requirements of section 55(1) of the Family Law Act have been complied with [5]. It must be noted that the applicant’s father was not available to give evidence himself because of advanced dementia. The respondent did not raise this issue until after commencement of this proceeding. I am satisfied the applicant has met the onus of establishing the formalities of the agreement.
[22] The respondent bears the onus of establishing the invalidity of the agreement under section 56(4) of the Family Law Act. The first of the two step process requires that I be satisfied the applicant failed to disclose to the respondent significant assets, significant debts, or other liabilities when the agreement was made. I am satisfied that the applicant did not fail to disclose assets, debts, or other liabilities. I am not satisfied that the respondent has met the onus of showing he did not understand the nature or consequences of the agreement. While he purported to be unskilled with financial matters, there is no evidence that any of his questions at the time went unanswered or were answered with misleading responses. He said he relied on the applicant and trusted her. He has not shown that she was not trustworthy or that his trust was misplaced.
[23] The respondent contends that the agreement was unfair. In particular he points to the disparity in the evidence of the value of the matrimonial home at the time and for the purpose of calculating the value of their assets. I accept the respondent has an appraiser who would have given evidence that the value of the home at the time was $450,000 not the $500,000 that the parties at the time relied upon. Since he was keeping the matrimonial home, it was in his interest to have the house valued at the lower value. I also accept that the applicant had a bank valuation at $500,000 at the time. Both parties at the time accepted the $500,000 valuation which appeared in the calculations. I also accept the applicant’s evidence that the true value of the matrimonial home at the time had probably been higher than $500,000 by reason of extensive repairs and remedial work done by their insurer following a flood—none of which had been taken into account by the bank appraiser since he had done his appraisal a couple of months earlier. This did not create an unfair result. I accept that the reasoning in dealing with the division of the vehicles was to be equitable, and I accept that at the time, the agreement achieved that result. The respondent argued Mme Justice MacKinnon’s comments in Zheng v. Jiang [6] that the policy of the Family Law Act is to discourage ‘kitchen table’ agreements, was apt. While I agree that parties should seek proper advice before attempting to complete the financial affairs following a separation agreement, I am also of the view that where parties are of modest means and where they have shared all of the requisite information without overreaching or intimidation, with the intent to reach a fair agreement, it is not for the courts to easily set it aside because lawyers might have approached it differently. It has long been the policy of the courts that in family law “as a general rule in the determination of what is fit and just, courts should enforce the agreement arrived at between the parties” [7]. I am not satisfied that there is unfairness of the degree to justify intervention by the court.
[24] While the respondent contended that there was undue influence at the time by the applicant, there was no evidence of undue influence. In dealing with undue influence, the court must first consider if the bargain was improvident; and if so whether there was an inequality in bargaining power [8]. I have not found the bargain to be improvident. Had I done so, I would not have found an inequality in bargaining power. The fact that the applicant was skilled in dealing with financial matters and that he trusted her skill does not engage an imbalance in bargaining power. The evidence shows that he volunteered at the time that he did not want lawyers involved. His declaration suggests that he full well knew of his right to consult a lawyer, but chose not to do so. There was no evidence that the applicant had discouraged the respondent from seeking outside advice. The respondent was a successful salesman who dealt with many customers on behalf of his employer. He would have known enough to seek outside advice had he wished it. There was no evidence of a power imbalance of the kind that are contemplated in the authorities. The documentary evidence is consistent with open frank and honest exchanges of information at a time when both parties were clearly suffering from the emotional turmoil of a separation.
[25] Knowing that there are other issues for the parties to deal with, I declare the agreement to be valid, and order in accordance with Shelston, J’s order that the settlement conference resume and hopefully conclude the issues remaining in dispute between the parties.
[26] Unless the parties agree to leave the question of costs of a trial of the issue for a continuation of the settlement conference, they may make submissions of two pages or less within 14 days and with a further 5 days for reply.
Honourable Justice Timothy Ray Released: May 27, 2016