COURT FILE NO.: FS-17-416523 DATE: 20170629 SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Anne Kennedy, Applicant AND: Henry Blane Bowen, Respondent
BEFORE: C. Horkins J.
COUNSEL: Harold Niman and Deborah MacKenzie, for the Applicant Aaron Franks and Kristy Warren, for the Respondent
HEARD at Toronto: June 22, 2017
ENDORSEMENT
Introduction
1On May 10, 2007, the applicant wife, Ms. Kennedy and respondent husband, Mr. Bowen were married. They signed a Marriage Contract dated May 9, 2007. The parties separated on September 7, 2016.
2On April 7, 2017, Ms. Kennedy commenced this application. In summary, she seeks a declaration that the Marriage Contract is null and void and that it be set aside in its entirety. If the Marriage Contract is set aside, Ms. Kennedy seeks equalization of net family property and spousal support.
3Ms. Kennedy pleads that the terms of the Marriage Contract are unconscionable and that she signed it under duress and undue influence. She pleads that Mr. Bowen pressured her into signing the Marriage Contract, when he knew it was grossly unfair. Lastly, she pleads that she received inadequate disclosure from Mr. Bowen before signing the Marriage Contract.
4Since separation, Mr. Bowen has been paying Ms. Kennedy $12,000 a month in spousal support pursuant to the terms of the Marriage Contract. This is the maximum amount of monthly spousal support owed under the Marriage Contract.
5Ms. Kennedy’s motion seeks interim spousal support of $50,000 a month pending the court’s determination of whether the Marriage Contract should be set aside.
The Klukach File Issue
6The parties retained experienced family counsel and started to negotiate the terms of the Marriage Contract in the fall of 2006. Ms. Kennedy was represented by Ms. Diane Klukach of Cassels Brock & Blackwell LLP (now of Klukach Family Law) through the negotiations of the Marriage Contract. Mr. Bowen was represented by Elena Hoffstein of Fasken Martineau DuMoulin LLP.
7In his Form 14C confirmation dated June 20, 2017, Mr. Franks, counsel for Mr. Bowen, stated that he would request an adjournment of this motion because Ms. Kennedy had not produced Ms. Klukach’s file (“the Klukach file”) and the motion was in fact a long motion that required more court time.
8The court was able to provide counsel with extra time to argue the motion. While Mr. Franks withdrew his request to adjourn the motion, he did not withdraw his objection concerning Ms. Kennedy’s refusal to produce the Klukach file. He argued that the court should draw an adverse inference that the file would not assist Ms. Kennedy on her motion.
9In her application, Ms. Kennedy has put her state of mind in issue by claiming duress, undue influence and unconscionability as a reason to set aside the Marriage Contract. In her application and affidavit on this motion, she alleges that:
- She signed the Marriage Contract under duress.
- Mr. Bowen exerted undue influence on her.
- The circumstances surrounding the negotiation and signing of the Marriage Contract were unconscionable.
- She had limited contact with Ms. Klukach during negotiations because she was travelling with Mr. Bowen and often had no internet access.
- She "did not understand the process of negotiating a marriage contract".
- She "had limited opportunity to discuss the proposed contract" with Ms. Klukach, and she "believed she had no choice but to sign the contract".
- She had no opportunity to read the Marriage Contract before signing.
- She received inadequate disclosure from Mr. Bowen during negotiations.
- There was no independent legal advice document signed. The Affidavit and Certificate of Solicitor that was attached to the Marriage Contract was not signed. She implies that because the certificate was not signed, she did not receive independent legal advice from Ms. Klukach.
10Mr. Franks wrote to Ms. Klukach in November 2016 asking her to preserve her file. Ms. Klukach advised that she had left the file with Cassels Brock when she departed that firm in 2013. When Cassels Brock was asked to preserve the file, Mr. Franks learned that that file had been delivered to Ms. Kennedy in the spring of 2016 (before the date of separation).
11Ms. Kennedy’s current counsel have had the Klukach file since February 2017. Since at least May 2017, Mr. Franks has been asking for Mr. Niman’s firm to produce the Klukach file. On June 20, 2017, the day before the hearing of the motion, Mr. Niman finally replied. He sent a brief letter to Mr. Franks stating that the file would not be produced because there is "no foundation" for the request "at this time". The letter did not assert privilege as a reason for refusing to produce the file.
12Stating that there was no foundation for requesting the file is contrary to the law. Ms. Kennedy’s application puts her state in issue and does lay the foundation for the request. The law in this area is well known. When a party places her state of mind in issue with respect to her claim and has received legal advice to help form the state of mind, privilege will be deemed to be waived with respect to such legal advice (Creative Career Systems Inc. v. Ontario, 2012 ONSC 649 at para. 26).
13During the hearing of this motion, Mr. Niman asserted for the first time that privilege was a reason for not producing the file. Mr. Niman has had the Klukach file since February 2017. He has also known since May, at the latest, that Mr. Franks was requesting production of the file. He never raised privilege as a reason for not producing the file until faced with the request that the court draw an adverse inference.
14To be clear, I am not deciding on this motion if the file is or is not privileged. That said, counsel for Ms. Kennedy has had the file for months and had every opportunity to assess its contents and decide if a claim for privilege could be sustained. In these circumstances, the reason given for not producing the file, as stated in Mr. Niman’s letter, did not include privilege.
15Faced with this motion and in the absence of the Klukach file, Mr. Bowen attached a note to his affidavit dated January 24, 2007. The note is a memorandum to file on Fasken Martineau memo paper. The firm logo and address is on the document. The memo describes the Client as “Blane Bowen – Marriage Contract”. The “Re” line states “VM from Diane Klukach”. VM is obviously short form for voice mail. The memo transcribes a telephone message that Ms. Klukatch left on January 24, 2007 for the respondent’s counsel at Fasken Martineau. The relevant portion of the voice mail transcribed in the note is as follows:
The suggestions in your last letter – the proposed revisions are all acceptable. I spoke with Ann this morning. So she’s good to go and will sign the agreement once you get it turned around.
16The note refers to the parties’ travelling plans. They were going to Florida and then to Mr. Bowen’s home in the Bahamas. Ms. Klukatch mentioned that they would have to arrange to get the final agreement to the clients to sign and “then send back to us”.
17Mr. Niman objects to the use of this note in the absence of an affidavit from Ms. Klukatch who left the message. He argues that it is inadmissible and should not be considered on this motion when the file has not been produced.
18I will not exclude this note from my consideration of the relief requested. On this interim motion it is a relevant document in Mr. Bowen’s possession. Ms. Kennedy did not deal with the Klukach file issue in a timely manner. It could have been resolved well in advance of her motion. Instead, counsel advised it would not be produced because there was no “foundation” for the request. As I have stated the pleading and Ms. Kennedy’s affidavit evidence, creates foundation for the request. The Klukach file may contain some privileged information. However, the note recording Mr. Klukach’s message would not be privileged.
19The message is relevant to this motion. Ms. Kennedy chose not to rely on the Klukach file for this motion. Given her refusal to produce the file it would be unfair to ignore this note of an important telephone call. Ms. Kennedy could have asked to adjourn this motion to respond to the note and she did not. Her decision not to produce the Klukach file, cannot limit Mr. Bowen’s ability to present his evidence.
20I find the last minute claim of privilege questionable since it was never raised until the hearing of this motion. In the circumstances set out, this is a situation where it is appropriate to draw an adverse inference against Ms. Kennedy. I conclude that the file if produced would not have assisted her on this motion. With or without an adverse inference, my decision on this motion is the same. The motion is dismissed. My reasons follow.
The Marriage and the Contract
21The parties began to date in December 2005. In April 2006, they agreed to marry. It was Ms. Kennedy’s first marriage and Mr. Bowen’s third. Ms. Kennedy is currently 58 years old and Mr. Bowen is 78 years old.
22The parties agree that Mr. Bowen insisted on a Marriage Contract being signed before marriage. Given his advanced age, two prior marriages, his three children and seven grandchildren, he made it clear that he would not remarry without a Marriage Contract. Mr. Bowen wanted to protect himself and his family in the event that he and Ms. Kennedy ever separated.
23When the parties met, Ms. Kennedy was a Senior Cultural Development Officer with the City of Toronto. She earned $75,000 per year and $39,000 per year in rental income. Ms. Kennedy owned two properties.
24In December 2006, Ms. Kennedy took a leave from her position with the City of Toronto and did not return. This decision was unrelated to any household responsibilities. They travelled extensively and Ms. Kennedy would not have been able to enjoy the travel if she had continued to work.
25When Ms. Kennedy moved in with Mr. Bowen in 2006, she rented her house in Rosedale (and continued to rent a duplex she owned in Midtown Toronto). Mr. Bowen paid all the carrying costs associated with the matrimonial home, including but not limited to the condominium maintenance fees, property taxes, utilities, and repairs and maintenance.
26The parties maintained separate finances during the marriage. They did not have any joint bank accounts and had only one joint credit card, which was to be used for joint household expenses. Mr. Bowen paid for this joint credit card and gave Ms. Kennedy $3,000.00 per month as "spending money". During the marriage she had significant savings of her own and earned rental income from her properties.
27Mr. Bowen paid for a cleaning service for both the matrimonial home and his property in the Bahamas, and arranged for maintenance and repairs when necessary.
28In 2008, Ms. Kennedy sold her two properties and invested the money. She blames Mr. Bowen for urging her to sell and claims that she has lost money. Mr. Bowen denies that he forced the sale of the properties. Regardless of the reason, Ms. Kennedy invested the money. Her net worth as revealed in her financial statement is $2,480,952.40. It was $1,762,491.14 on the date of marriage.
29The parties postponed their wedding on three occasions because of delay in finalizing the Marriage Contract. The Marriage Contract negotiations took place over several months.
30Ms. Hoffstein provided Ms. Klukach with the first draft of the Marriage Contract in October 2006, seven months before the parties married. Ms. Klukach began to negotiate with Ms. Hoffstein on her client’s behalf in November 2006.
31Changes were made to the Marriage Contract as a result of the negotiations. These changes benefited Ms. Kennedy. In the draft and final Marriage Contract, Ms. Kennedy received spousal support depending on the length of the marriage. Spousal support increased with the duration of the marriage. In each draft the duration of spousal support was capped.
32Based on the date of separation, under the first draft agreement, Ms. Kennedy would have received a total of $960,000 gross is spousal support. The total spousal support under the signed Marriage Contract increased. Under the Marriage Contract, the respondent must pay a month of spousal support for every year of marriage. On the facts, this means that Mr. Bowen must pay spousal support for 112 months. As long as his yearly income exceeds $1,440,000, Mr. Bowen must pay Ms. Kennedy $12,000 a month or $1,344,000 gross. This is $384,000 more than what he would have paid under the first draft.
33If Mr. Bowen predeceased Ms. Kennedy during the marriage, certain benefits were provided to Ms. Kennedy. Mr. Bowen agreed that his estate would pay the applicant a lump sum. In the signed Marriage Contract, this benefit increased from $2M to $2.5M. Further, in the signed Marriage Contract, Mr. Bowen agreed that the $2.5M would be paid regardless of the length of their marriage. He also agreed that Ms. Kennedy could continue to live in the matrimonial home for one year and the estate would pay all expenses.
34The draft Marriage Contract and the final version both state that in the event of a “Marriage Breakdown or death” the property that Mr. Bowen and Ms. Kennedy owned would not be subject to “equalization of net family property”. Their property was specifically identified in the Marriage Contract. The value of each property item was set out in Schedule A for Mr. Bowen and Schedule B for Ms. Kennedy. There was no ambiguity about Mr. Bowen’s wealth. Schedule A listed his total assets at $30,200,000 and an estimated tax liability on death of $4,677,000. Mr. Bowen also gave Ms. Kennedy a copy of his 2005 income tax return. In that year, he had line 150 income of $1,842,722.90.
35Mr. Bowen states that Ms. Kennedy’s counsel never asked for additional disclosure. Even if an item of disclosure was missing, the details of Mr. Bowen’s wealth were clearly revealed to Ms. Kennedy. She obviously knew that he had significant wealth.
36The parties present conflicting evidence about Ms. Kennedy’s contact with her counsel and her opportunity to review the Marriage Contract before signing.
37Ms. Kennedy states that she had limited contact with Ms. Klukach because she was frequently travelling with Mr. Bowen and often had no internet access and limited telephone access. Mr. Bowen disputes this evidence. He states that in January and February 2007, they were staying at Mr. Bowen’s home in the Bahamas where Ms. Kennedy had access to a computer, internet, a fax machine and a telephone. There is no evidence that they travelled to any destination in this period of time other than Florida and the Bahamas. In these locations access to the internet should have been available.
38Mr. Bowen’s lawyer gave Ms. Klukach the final draft of the Marriage Contract in February 2007. Mr. Bowen’s son brought the execution copies of the Marriage Contract to the Bahamas on March 13, 2007. Mr. Bowen says that he gave Ms. Kennedy her copy.
39The Marriage Contract was signed on May 9, 2007, the night before the wedding. Ms. Kennedy states that this was the first time that she saw a “hard copy” of the Marriage Contract. Further, she states that she had no opportunity to read the Marriage Contract before it was signed, except on her Blackberry. Such an allegation ignores Ms. Klukatch’s message that was transcribed. Since Ms. Kennedy has refused to produce the Klukach file, the Fasken Martineau note to file is relevant evidence of what transpired between Ms. Kennedy and her counsel during the negotiations.
40In her Application and affidavit, Ms. Kennedy states that she "did not understand the process of negotiating a marriage contract", she "had limited opportunity to discuss the proposed contract" with Ms. Klukach, and she "believed she had no choice but to sign the contract". Such claims demonstrate the relevance of the Klukach file.
41Ms. Kennedy also states that “[t]here was no ILA document signed and attached to the contract by either lawyer”. It seems that the applicant is alleging a lack of independent legal advice since she uses this as a reason to support the claim of duress, undue influence and unconscionability.
42There is no dispute that the Certificate of the Solicitor (evidencing independent legal advice) was not signed. That does not necessarily mean that independent legal advice was not provided.
Analysis
43When a party to a Marriage Contract seeks to set it aside, the Marriage Contract is not a bar to a motion to a request for interim spousal support (see Chaitis v. Christopoulos, [2004] O.J. No. 907).
44Ms. Kennedy is seeking a divorce and on an interim spousal support motion the court is required to consider s. 15.2 of the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.) that states:
15.2 (1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.
(2) Where an application is made under subsection (1), the court may, on application by either or both spouses, make an interim order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse, pending the determination of the application under subsection (1).
(3) The court may make an order under subsection (1) or an interim order under subsection (2) for a definite or indefinite period or until a specified event occurs, and may impose terms, conditions or restrictions in connection with the order as it thinks fit and just.
(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including
(a) the length of time the spouses cohabited;
(b) the functions performed by each spouse during cohabitation; and
(c) any order, agreement or arrangement relating to support of either spouse.
(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
45A party claiming spousal support in the face of a fixed spousal support regime in a contract bears the significant burden of establishing that it would be appropriate to award spousal support in the circumstances (see Miglin v. Miglin, 2003 SCC 24 at para. 78).
46In Miglin at paras. 81-91, the court enunciated a two stage test for determining whether a court should uphold an agreement that limits or waives a spouse's support rights. The moving party must show that there is a serious issue to be tried (Chaitis v. Christopoulos at para. 21).
47At the first stage, the court should look at:
(i) The circumstances in which the agreement was negotiated and executed to determine whether there is any reason to discount it, including any circumstances of oppression, pressure or other vulnerabilities. A court should not presume an imbalance of power and the degree of professional assistance received by the parties may be sufficient to overcome any systemic imbalances between the parties.
(ii) The substance of the agreement to determine whether it is in substantial compliance with the objectives of the Divorce Act at the time it was entered. The court considers if the agreement reflects an equitable sharing of the economic consequences of marriage and its breakdown. Only a significant departure from the objectives of the Divorce Act will warrant the court’s intervention.
48At the second stage, the court must assess whether the agreement still reflects the original intentions of the parties and the extent to which it is still in substantial compliance with the objectives of the Divorce Act. It is unlikely that the court will be persuaded to disregard the agreement in its entirety, but for a significant change in the parties' circumstances from what could reasonably be anticipated at the time of negotiation.
49The Miglin analysis applies to marriage contracts as well as separation agreements and the analysis must be applied on a motion for interim spousal support where there are contractual limitations to a party's support rights (Chaitis v. Christopoulos, at paras. 12; Jones v. Murray at paras. 4-5).
50Caution should be exercised when granting interim relief that would contradict or nullify a contract (Jones v. Murray at paras. 6-10).
51The evidence does not raise a serious issue to be tried concerning the circumstances in which the Marriage Contract was negotiated and executed. Unlike most of the cases that Ms. Kennedy relies upon, this Marriage Contract was negotiated over many months. Changes were made at the request of Ms. Kennedy and the Marriage Contract was finalized as of January 24, 2007. Ms. Kennedy then had several more months before she was asked to sign the Marriage Contract. The process was not rushed and Ms. Kennedy had ample time to communicate with her lawyer and ask questions.
52Ms. Kennedy received financial disclosure from Mr. Bowen in October 2006 when the first draft of the Marriage Contract was provided to her counsel. She had months to ask questions or request further disclosure. There is no evidence that any requests were made.
53Although Ms. Kennedy alleges a lack of disclosure, this complaint is not supported by the evidence. The Marriage Contract listed Mr. Bowen’s specific assets and the values. It had to be very obvious to Ms. Kennedy that he was and still is a very wealthy person.
54Ms. Kennedy alleges that she was unwell and taking pain medication for chronic pain when she signed the Marriage Contract. She has provided no evidence of illness or proof that the medication interfered with her ability to negotiate over several months and then sign the Marriage Contract.
55While Mr. Bowen insisted on having a Marriage Contract, it was his right to ask for one. This was always made clear to Ms. Kennedy and she had ample opportunity to consider her position. In fact, the wedding had previously been postponed while they negotiated the Marriage Contract. Ms. Kennedy may have felt internal pressure on the signing day, but the evidence does not create a serious issue to be tried on the reasons that Ms. Kennedy advances to set aside the Marriage Contract.
56The second part of stage one, looks at the substance of the Marriage Contract. I find that at the time it was signed it was in substantial compliance with the objectives of the Divorce Act. The Marriage Contract reflects an equitable sharing of the economic consequences of marriage and its breakdown. For the duration of the marriage, Mr. Bowen was financially responsible for Ms. Kennedy. This allowed her to invest and grow her own assets.
57There is conflicting evidence about why Ms. Kennedy left her job. Her evidence on this is not enough to warrant the court intervening and making the spousal support order that she requests. Even if she was forced to leave her job, this cannot be viewed in a vacuum. Ms. Kennedy received a $3000 monthly allowance during the marriage. In addition, Mr. Bowen paid for all of her expenses including extensive travel and many luxuries in their married life.
58In summary, dealing with stage one of the Miglin test, Ms. Kennedy has not established a serious issue to be tried. As a result, Miglin states at para. 87 that the court should “defer to the wishes of the parties and afford the agreement great weight”.
59Even so under stage two, the court must assess whether the agreement still reflects the original intentions of the parties and the extent to which it is still in substantial compliance with the objectives of the Divorce Act.
60The Marriage Contract continues to reflect the original intentions of the parties and it is still in substantial compliance with the objectives of the Divorce Act. There has been no significant change in their circumstances. They each have the property that they took into the marriage and Ms. Kennedy’s assets have grown.
61Ms. Kennedy did not have to deplete her property during marriage because Mr. Bowen paid for all of her living expenses and travel. This is what the Marriage Contract contemplated and this is what actually happened. With this in mind, she agreed to a spousal support of $12,000 a month for a fixed period of time.
62While Ms. Kennedy may not be able to pay for the lifestyle that she enjoyed during the marriage, it was obvious when she signed the Marriage Contract that this would be the case. It cannot be said that she is financially disadvantaged. Ms. Kennedy’s existing circumstances were reasonably anticipated when she signed the Marriage Contract.
63This is not a case where the moving party has waived all spousal support in the agreement. It is not a case where the spouse is financially dependent on the other spouse or has lost her source of income. Such cases often present changed circumstances that cannot be condoned (Chaitis v. Christopoulos; Schulman v. Ganz, 2015 ONSC 3254). This is not such a case.
64The monthly spousal support of $12,000 allows Ms. Kennedy to maintain a reasonable lifestyle until trial. The parties should be able to complete this application within a year. They have agreed to commit to a timetable that will ensure the dispute between them is over by the end of 2018.
Conclusion
65I make the following orders:
- Ms. Kennedy’s motion is dismissed.
- The parties shall agree to a timetable and this will provide that the final hearing in this matter is concluded no later than the end of 2018.
- The parties have agreed that the losing party shall pay costs in the range of $12,500-15,000. I order Ms. Kennedy to pay Mr. Bowen costs fixed at $13,500 all-inclusive.
C. Horkins J.
Date: June 29, 2017