ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: FS-17-21908

DATE: 20190923

BETWEEN:

MANSOUR EZZATI

Applicant

– and –

NAM SOOK BAE

Respondent

Self-Represented

Self-Represented

HEARD: September 9 and 10, 2019

REASONS FOR DECISION

DIAMOND J.:

Overview

[1] The applicant and the respondent were married for approximately 20 years. Since their separation in late 2014, they have mostly been living separate and apart under the same roof at 217 Finch Avenue West (“the Finch property”, the matrimonial home owned by the respondent). As set out hereinafter, at least two court orders issued in this proceeding have permitted each of the applicant and the respondent to maintain exclusive possession of the Finch property’s first and second floors respectively.

[2] The respondent obtained a divorce order on December 17, 2015, which she claims was issued with the applicant’s consent (although the applicant disputes this). In any event, both parties ultimately signed a Separation Agreement dated September 27, 2016. The terms of the Separation Agreement provided that the respondent would keep several business/investment properties located on Dundas Street East and Kennedy Road (“investment properties”), and the applicant would either assume ownership of the Finch property, or receive the net proceeds from the sale of the Finch property.

[3] After signing the Separation Agreement, the respondent continued to own and/or sold the investment properties, but refused to either transfer the Finch property to the applicant, or agree to sell the Finch property.

[4] In his application issued in December 2017, the applicant seeks an order directing a sale of the Finch property together with an order paying the net sale proceeds to him. The applicant further seeks payment of “damages in an amount to be determined” from the respondent.

[5] In response, the respondent seeks a declaration that the Separation Agreement is null and void, or in the alternative that it be set aside. Flowing from that relief, if granted, the respondent seeks child support (although the children are now adults), spousal support and an equalization of the parties’ net family property.

[6] At the conclusion of the trial of this proceeding, I took my decision under reserve. These are my Reasons for Decision.

Setting aside the Separation Agreement

[7] Pursuant to section 56(4) of the Family Law Act, R.S.O. 1990 CF. 3, the Court may set aside all or part of a domestic contract:

(a) if a party failed to disclose to the other party a significant asset or significant debt 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.

[8] As held by the Court of Appeal for Ontario in Virc v. Blair 2014 ONCA 392, the Court must undertake the following two stage analysis:

● can the party seeking to set aside the domestic contract demonstrate that one or more of the section 56(4) circumstances are engaged; and,

● if so, is it nevertheless appropriate for the Court to exercise its discretion to set aside the domestic contract?

[9] As set out in section 56(4)(c) of the Family Law Act, ordinary contract law principles apply to domestic contracts. In the recent decision of M.O. v. F.S. 2019 ONSC 5091 (SCJ), my colleague Justice Horkins held that domestic contracts may be set aside on any of the following grounds:

● there was undue influence at the time of signing

● there was duress at the time of signing

● unconscionability.

● there was a mistake as to an essential element of the contract.

● there was fraud or material misrepresentation; or

● there was a repudiation of a term in the contract.

[10] At the outset of the trial, I asked the respondent to set out the specific grounds upon which she is relying in support of her request to set aside the Separation Agreement. The respondent advanced four, separate grounds in response to my question:

(a) the applicant failed to disclose the existence of Iranian properties in which he either owned or sold an interest, and this amounted to material non-disclosure at the time of entering into the Separation Agreement;

(b) the respondent signed the Separation Agreement under duress;

(c) the respondent failed to obtain proper legal advice from her lawyer (an argument which, by itself, cannot set aside the Separation Agreement and the respondent did not argue that the Separation Agreement was unconscionable); and

(d) section 22 of the Separation Agreement renders the Separation Agreement null and void as the parties allegedly cohabited as spouses for more than three months following the execution of the Separation Agreement.

[11] I will deal with each of these grounds later in these Reasons. It is first important to set out a summary of the salient facts leading up to the execution of a Separation Agreement, and the key events which follow thereafter.

Assessment of Credibility

[12] As the trier of fact, I am charged with determining the truth. On occasion, that task can be rendered unenviably difficult when both sides of a dispute are motivated to offer evidence designed to “fit” within a specific theory of the case. In Prodigy Graphics Group Inc. v. Fitz-Andrews 2000 CarswellOnt 1178 (S.C.J.) Justice Cameron offered a non-exhaustive list of traditional criteria by which the evidence of each witness, and, where appropriate, the exhibits presented at trial, ought to be assessed:

1. Lack of testimonial qualification

2. Demeanour of Witness: apparent honesty, forthrightness, openness, spontaneity, firm memory, accuracy, evasiveness

3. Bias/Interest in the Outcome (if a party, motive)

4. Relationship/Hostility to a party

5. Inherent probability in the circumstances i.e. in the context of the other evidence does it have an "air of reality"

6. Internal consistency i.e. with other parts of this witness' evidence at trial and on prior occasions

7. External consistency i.e. with other credible witnesses and documents

8. Factors applicable to written evidence:

(a) Presence or absence of details supporting conclusory assertions

(b) Artful drafting which shields equivocation

(c) Use of language in an affidavit which is inappropriate to the particular witness

(d) Indications that the deponent has not read the affidavit

(e) Affidavits which lack the best evidence available

(f) Lack of precision and factual errors

(g) Omission of significant facts which should be addressed, and

(h) Disguised hearsay

[13] The assessment of the credibility of witnesses is especially important when bearing in mind the onus of proof. As the trial judge, I must decide whether a specific proposition of fact has or has not been established on a balance of probabilities by the party having the onus of proof. For a party to seek to discharge its legal onus of proof, I must first be satisfied with the credibility and reliability of the evidence in order to be in a position to make the relevant findings of fact.

[14] Put another way, a moving party has the onus of factual proof of the evidence necessary to satisfy its legal burden. As stated by Justice Stinson in Zesta Engineering Ltd. v. Cloutier 2010 ONSC 5810 (S.C.J.) ():

“In certain instances it is simply not possible to reconcile some aspects of the evidence that was presented by the witnesses at this trial. In part, I liken the situation to attempting to assemble several old jig-saw puzzles whose various parts have sat, co-mingled, in the bottom of an actively-used desk drawer for a decade: some pieces are missing, some are undecipherable, some have changed over time and no longer fit together, and some are not what they seem to be, all due to the passage of time and intervening events. In this case my task is to use the pieces of evidence to re-create as clear a picture of past events as I can give the foregoing limitations, applying the "real test of…truth" as described above, drawing inferences where appropriate, and applying the rules of burden and standard of proof, as required.”

[15] In evaluating the credibility or reliability of evidence, I look to a number of interrelated factors such as its probability, logical connection with other findings and support from independent facts or documents. As held by Justice Brown (as he then was) in Atlantic Financial Corp. v. Henderson et al, [2007] 15230 (S.C.J.):

“In deciding between these two diametrically opposed positions, I am guided by the observations made about assessing the credibility of witnesses by O’Halloran, J.A. in Faryna v. Chorny, 1951 CanLII 252 (BC CA), [1952] 2 D.L.R. 354 (B.C.C.A.) where he stated, at page 357:

‘The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.’”

[16] I carefully listened to and observed the testimony of all the witnesses called by both parties at trial. I also reviewed the exhibits tendered and relied upon by the parties.

[17] I encountered difficulty in believing the respondent’s versions of events. From the outset of the trial, the respondent attempted to present herself as a person who not only did not understand English very well, but did not understand the nature of consequences of most, if not all, of her decisions arising from the events forming the basis of the dispute(s) between the parties.

[18] The respondent employed the use of a Korean interpreter during the trial. This step alone caused me to question the respondent’s credibility, as during her lengthy marriage to the applicant (who has never spoken Korean), the parties consistently communicated and understood each other in the English language. In addition, other witnesses, such as Shilla Parsa (“Parsa”, a real estate broker/agent retained by the respondent to list the Finch property for sale) not only communicated with the respondent in the English language, but had her review and sign documents (such as a Buyer Representing Agreement and Listing Agreement) in English.

[19] The respondent gave her evidence in chief by reading a series of handwritten notes made in the Korean language. This may well be acceptable when making oral argument, but evidence is typically much more genuine and believable when it is unrehearsed and natural.

[20] As explained in greater detail hereinafter, the respondent also made unsupported, bald and serious allegations against her lawyer Chang Ming Shin (“Shin”), who she retained to represent her interest during the negotiation and ultimate execution of the Separation Agreement. Shin brought his file with him to trial, and gave his evidence in a straightforward manner, essentially refuting all of the respondent’s allegations.

[21] Conversely, I found the applicant to be contrite, direct, and focused upon the issues to be addressed in this proceeding. The applicant admitted facts which ought to have been admitted, and for the most part gave evidence consistent with the documents filed as exhibits by both parties. The applicant did not overstate or exaggerate his case, while the respondent took several positions that were either inconsistent with key exhibits, or simply lacked any air of reality.

[22] For the foregoing reasons, I prefer the evidence of the applicant over the respondent. I will now set out a summary of the key facts necessary for the disposition of the issues in this proceeding.

The Breakdown of the Marriage

[23] Both parties described their marriage as tumultuous at times, with brief separations occurring on a few occasions. Both parties testified that, due to various problems including the applicant’s apparent gambling issues (a fact which the applicant did not deny), they separated “for good” some time in or around late 2014. That said, they continued to reside, while the applicant was in Toronto, inside the Finch property although separate and apart from each other.

[24] In or around late December 2015, the respondent proceeded to obtain a divorce order. She testified that this divorce order was obtained with the applicant’s consent. For his part, the applicant testified that he never provided his consent, and the grounds upon which the respondent obtained the divorce order were untrue. In any event, a divorce order was issued on December 23, 2015, and neither party has taken any steps to set aside or vary that order. The parties did not resolve their property and/or equalization claims prior to the divorce order being issued.

[25] The respondent testified that some time in the latter half of 2015, she and the applicant entered into an oral agreement whereby the applicant would be paid $100,000.00, and he would then walk away from all of his property and equalization rights and relocate to Iran. The respondent further testified that she provided the applicant with $94,000.00 arising from two bank loans and money from her chiropractic business.

[26] There are little to no documents supporting the respondent’s versions of event. The applicant did go back to Iran in early 2016 to visit family, but was back living at the Finch property (separate and apart from the respondent) by March 2016. The respondent testified that they were living on a “common law” basis at this time. I do not accept such a suggestion by the respondent.

[27] In any event, the respondent gave evidence that she was the one responsible for carrying the debt load of the Finch property and the investment properties which they had purchased during the marriage (although title to the properties remained in the respondent’s name only). She claimed that the applicant never made any financial contributions to carry the debt load, which was increasing on a monthly, if not daily basis. For his part, the applicant testified that any money he ever made, either through working or through investment properties, was provided to the respondent as she was the one who oversaw the parties’ financial affairs.

[28] It appears that after the summer of 2016, the parties were involved in discussions aimed at resolving all matter between them on a formal basis. There is a handwritten agreement produced in the record, signed by both parties and witnessed by their children. The contents of this handwritten agreement are as follows:

“My name is Mansour Essati. I give my x-wife the store at Steeles, 4 stores in Mississauga, store at Kennedy, and apartment in Korea belongs to my son and daughter which is a decision made by me and my wife and I will take the house and the rest belongs to her. The investment on my son belongs to my wife as well.”

[29] The respondent’s initials are placed above the words “the store at Steeles”. Both parties gave evidence that their children were witnesses to this handwritten agreement, although neither of the parties’ two children (who are both over 18 years of age) were called as witnesses at trial.

[30] The thrust of the brief, handwritten agreement is that the applicant would take title to the Finch property, and the other properties would either remain in the respondent’s name, or be transferred or kept for the benefit of their children. The respondent did not give much evidence on this handwritten agreement, and she was not asked questions on it by the applicant in cross-examination.

The Separation Agreement

[31] There is no dispute that both parties ultimately executed a Separation Agreement dated September 27, 2016. The respondent would have the Court believe that she was not only pressured into signing the Separation Agreement, but she had little to no idea about its terms as she had never received proper legal advice. A review of the written record, together with the evidence of the applicant and Shin, tells a much different story.

[32] Using the framework set out in the handwritten agreement, in or around early September 2016, the applicant retained the services of a lawyer named Ali Ahmari Moghaddam (“Ahmari”). In an email between Ahmari and the applicant dated September 14, 2016, Ahmari confirms the applicant’s instructions that the respondent would keep four units at 1525 Dundas Street East, two units at 8339 Kennedy Road, the respondent’s clothing store (and all that entailed) and the loan to their son in exchange for title to the Finch property being transferred to the applicant.

[33] On the same date, Shin (who had been retained by and met with the respondent) emailed Ahmari to confirm that the respondent was the owner of the Dundas Street and Kennedy Road properties along with the Finch property. In that email, Shin confirmed that the respondent “wanted to have access to the Finch property for five years while her children lived there”. It is apparent that from the outset of Shin’s retainer, the respondent was instructing Shin with a view to obtaining favourable terms to protect her interests.

[34] Email correspondence continued between Shin and Ahmari, including correspondence from Shin confirming that, according to the respondent, the applicant did agree to give up all his rights to the loans to the parties’ son. Ahmari delivered a draft Separation Agreement to Shin for his and the respondent’s review and comment. That original draft was marked as an exhibit at trial. The salient terms of that original draft Separation Agreement are as follows:

• both the applicant and the respondent would be financial independent from each other, and neither would pay spousal support to the other. The agreement provided that “no material change will ever entitle the parties to spousal support from the other.”

• Ahmari (mistakenly) understood that title to the Finch property was held in both parties’ names, and the draft Separation Agreement provided that the respondent would transfer her interest in the Finch property to the applicant upon the attainment of a mortgage by the applicant. The parties valued the Finch property at $1,500,000.00, with an outstanding CIBC mortgage of $1,150,000.00.

• from the date of transfer of title of the Finch property, the mortgage payments would be the sole responsibility of the applicant.

• all other properties were to be transferred to or maintained in the respondent’s name “on account to equalization of the parties respective net family properties and in consideration of the transfer of the Finch property to the applicant”.

• in consideration of the mutual covenants set out in the draft Separation Agreement, each party had satisfied their disclosure obligations, and waived any further rights and equalization claims.

[35] In response, the respondent instructed Shin to draft and forward a revised draft Separation Agreement which included various revisions prepared on the respondent’s instructions. The highlights of these proposed revisions are as follows:

• title to the Finch property was in fact in the respondent’s name, and upon the attainment of a mortgage by the applicant she agreed to transfer her interest in the Finch property to the applicant. The respondent took no issue with the valuation numbers for the Finch property and the outstanding mortgage.

• the respondent required the applicant to be solely responsible for paying the costs of the preparation and registration of the transfer of the Finch property from the respondent to the applicant.

• from the date of the Separation Agreement to the ultimate transfer of title of the Finch property, the applicant would be solely responsible for the mortgage payments, insurance premiums and any other expenses related to the Finch property. The respondent further asked the applicant to indemnify her from any liability relating to the Finch property pending her transfer of title to the applicant.

• the respondent requested that the applicant release all his rights and interests in the various investment properties.

• the respondent inserted a new clause providing that in the event the applicant failed to assume or obtain a mortgage for the Finch property within 180 days of the Separation Agreement, the parties would agree to sell the matrimonial home and the net proceeds would be paid to the applicant.

• the respondent inserted additional clauses requiring the applicant to release all of his rights and interests in the respondent’s business, and the loan to the parties’ son.

• finally, the respondent amended a clause that now required the applicant to be solely responsible for all the parties’ legal fees incurred in negotiating, drafting and signing the Separation Agreement.

[36] The respondent’s proposed revisions set out above evidence the actions and intentions of a party who not only understood the issues contemplated by the proposed Separation Agreement, but who sought to protect and advance her own interests in negotiating a Separation Agreement.

[37] Unfortunately, a dispute as to legal fees between the applicant and Ahmari resulted in the delay of the execution of the Separation Agreement. The applicant ultimately retained a new lawyer to finalize the drafting of the Separation Agreement ultimately signed by the parties. The final version of the Separation Agreement essentially incorporated all of the revisions proposed by the respondent, and included the following specific clauses:

“5.2 Upon signing of this Agreement, the Husband agrees to obtain either assignment of existing mortgage or a new mortgage at which time the Wife shall transfer ownership of the Matrimonial Home to the Husband. Approximate balance of the outstanding mortgage principle amount is $1,150,000.00.

5.3 The value of the Matrimonial Home is estimated to be $1,500,000.00 by valuation between the parties.

5.4 The Husband shall prepare all documentation required for the assumption/new mortgage and transfer of ownership at his own cost

5.5 Upon signing of this Agreement the Husband shall be responsible for all mortgage payments, property taxes, home insurance premiums and any other expenses related to the property.

5.6 If the Husband is unable to assume or obtain a new mortgage, the Parties agree to list for sale and to sell the Matrimonial Home. After deducting real estate commission, legal fees and disbursements and any other expenses related to the sale, the remaining sale proceeds (if any) shall be paid to the Husband.

6.1 the Husband releases all rights to, and interest in the following properties and transfers all ownership and title (if applicable) to the Wife:

(a) Units 98, 99, 109 and 110 at 1525 Dundas Street East, Mississauga

(b) Unit 2C 231 at 2529-8339 Kennedy Road, Markham,

(c) Unit 2C 256 at 2330-8339 Kennedy Road, Markham.

8.2 With the discussion of a division of their Matrimonial Home in section 5 under Real Estate Property, the parties have divided between them all their properties to their mutual satisfaction and the contents of this Agreement are in full satisfaction of any claims that either party may have for an equalization payment pursuant to provisions of the Family Law Act.

9.1 The Husband hereby releases any claim against, and all of his rights to the Wife’s business located at 180 Steeles Avenue West, Unit 32 in Thornhill, Ontario.

9.2 The Wife has made an investment in the amount of $300,000.00 to the Husband’s son Arvin Ezzati. The Husband releases any and all rights to the principal amount of the investment of any accrued interest.

11.1 All children of the marriage are independent adults, and no support is required from us.

22.2 If the Husband and Wife cohabit as Husband and Wife for any periods of less than ninety (90) days, the terms of this Agreement shall not be affected. If the parties cohabit as Husband and Wife for a continuous period of more than ninety (90) days, the terms of this Agreement shall immediately become void, except that nothing in this paragraph shall affect or invalidate any payment, conveyance or act made as pursuant to the terms of this Agreement.

[38] The parties waived any rights or claims to spousal support, and acknowledged that they each received independent legal advice and understood their respective rights and obligations under the Agreement, together with an acknowledgment of having made full and complete disclosure of all financial circumstances.

[39] In her testimony, the respondent stated the pressure to sign the Separation Agreement was from “the debt load” and financial hardship she was experiencing. While that debt load was, according to the respondent, caused at least in part by the applicant, her testimony was at best inconclusive as to how the applicant himself allegedly personally forced her to sign the Separation Agreement.

[40] Shin gave evidence that the respondent came alone to meet with him on several occasions during the negotiation period, and they went over the draft Separation Agreement clause by clause. Shin completely denied the respondent’s allegations that she never understood the nature, significance or consequences of signing the Separation Agreement, and that she “never received any legal advice” with respect to the preparation and execution of the Separation Agreement. Shin testified that there were a few weeks of negotiations, and that there was absolutely no duress placed upon or experienced by the respondent. While Shin is not a family lawyer by trade (as he does mostly real estate work), he has performed services in family law in the past, and advised the respondent as to the “pros and cons” of signing the final Separation Agreement, which was of course prepared with the respondent’s proposed changes therein.

Post-Separation Events

[41] After the parties executed the Separation Agreement, they continued to live separate and apart in the Finch property. The respondent testified that she and the applicant in fact reconciled, and she tendered four photographs of the two of them posing and smiling with friends during the 2017 calendar year. The applicant denied ever reconciling with the respondent, and gave evidence that, until the Finch property was either transferred to him or sold, he was simply trying to co-exist with the respondent in the Finch property for the sake of their children and their own ongoing post-separation relationship.

[42] The applicant maintained exclusive possession of the first floor of the Finch property (including the business/commercial space therein) while the respondent had exclusive possession of all of the second floor. They both agreed to use the kitchen on the main floor for cooking as necessary, and on occasion they ate together with or without their children. Indeed, this “separate and apart” living arrangement continues right through until the present day, as codified and ordered by the Endorsement dated September 14, 2018 of Justice Sanfilippo, and the Endorsement dated January 18, 2019 of Justice Nakonechny.

[43] Title to the investment properties remained in the respondent’s name, and according to the applicant some of those properties were sold although no particulars of the proceeds of the sale were provided to the Court at trial. This information was within the respondent’s knowledge, and to the extent necessary I am prepared to draw the appropriate adverse inferences against her in the circumstances of this case.

[44] With respect to the Finch property, the terms of the Separation Agreement provided that in the event the applicant was unable to obtain an assignment of the existing mortgage, or a new mortgage, then title to the Finch property would not be transferred to him and the property would instead be sold, leaving the applicant with the net sale proceeds. Unlike the previous iterations of the draft Separation Agreement, in the final Separation Agreement there is no time limit placed upon the applicant to obtain an assignment of the existing mortgage or a new mortgage.

[45] The applicant called Rui Yao as a witness. Yao was a CIBC employee who testified that in the “first half of 2017”, he was working as a financial service representative and was approached by the applicant for a new mortgage. For his part, the applicant testified that he believed that his efforts to refinance the Finch property took place in or around April/May 2017, and that the respondent advised him that she would simply not co-operate with those efforts.

[46] I cannot conclude from the evidence why the applicant was unsuccessful in obtaining an assignment or a new mortgage for the Finch property. In any event, there is no dispute that the respondent did initially agree to then list the Finch property for sale. As previously stated, the respondent signed a Listing Agreement with Parsa’s brokerage on May 17, 2017, and the listing period ran for three months. Parsa testified that the respondent insisted on a listing price of $2,999,000.00. While the applicant was agreeable with the respondent’s proposed listing price, Parsa believed that the Finch property was worth approximately $2,200,000.00 and suggested to the parties that they reconsider lowering the listing price to that amount. They refused, although the applicant was simply following the respondent’s lead.

[47] Within a few days, Parsa was able to secure a verbal offer to purchase the Finch property from an agent she knew for the sum of $2,200,000.00. When Parsa approached the respondent in the driveway of the Finch property (as she was there to fix a broken brokerage sign), the respondent flatly refused to even consider such a price. No further offers were secured, as according to Parsa the Finch property was simply significantly overpriced for the market.

[48] As stated, this proceeding was commenced in December 2017. While a Certificate of Pending Litigation against the Finch property was sought in the applicant’s prayer for relief, no such motion was ever brought in this proceeding. It was nevertheless abundantly clear that the applicant was seeking specific performance of the Separation Agreement, and specifically an order mandating the sale of the Finch property with the net sale proceeds being paid to him. Despite same, in or around early October 2018 the applicant registered a $300,000.00 mortgage against title to the Finch property in favour of Toronto Finance Inc. According to the documentation produced by the respondent (which is, regrettably but not surprisingly, incomplete), a cheque for the net mortgage proceeds in the amount of $285,887.71 was paid to the respondent personally on the closing of the registration of the Toronto Finance Mortgage.

[49] It was the respondent’s evidence that the net mortgage proceeds were used to pay down accumulated debt, although no documents were produced (such as bank statements or cancelled cheques) to show where the net mortgage proceeds were deposited or paid. While I am prepared to accept that some of the net mortgage proceeds were likely used to pay down debt associated with the Finch property, the respondent also gave evidence that in 2016 she had refinanced the existing CIBC mortgage to pay down all of her personal debts (save for a car loan), including credit cards and unsecured lines of credit. Approximately 18 months after the refinancing of the CIBC mortgage, in support of the Toronto Finance Mortgage the respondent completed a mortgage application listing over $100,000.00 in credit card and line of credit debt. The respondent was very selective with what documents she was willing to produce, despite numerous disclosure orders made during the lifespan of this proceeding. As stated, while some of the net mortgage proceeds were likely used to pay down debt associated with the Finch property, it appears that nearly half of those net mortgage proceeds were used to pay new or accumulated debts and obligations belonging to the respondent personally.

Should the Separation Agreement be set aside?

[50] It is trite to state that the Court views it desirable that parties settle their own family law affairs if possible. Absent the presence of unconscionability, the parties should know that the terms of any Separation Agreement will be binding and recognized by the court. In Turk v. Turk 2018 ONCA 993, the Court of Appeal for Ontario repeated the criteria to be used as a guide for the exercise of the discretion to set aside a Separation Agreement once a party has established that the provisions of section 56(4) of the Family Law Act apply. Those criteria are as follows:

(a) whether there had been concealment of the asset or material misrepresentation;

(b) whether the non-disclosure was a material inducement to the aggrieved party entering into the agreement (in other words, how important the non‑disclosed information would have been to the negotiations)

(c) whether there had been duress, or unconscionable circumstances;

(d) whether the petitioning party neglected to pursue full legal disclosure;

(e) whether he/she moved expeditiously to have the agreement set aside;

(f) whether he/she received substantial benefits under the agreement; and

(g) whether the other party had fulfilled his/her obligations under the agreement.

[51] I will now assess whether the respondent has demonstrated that one or more of the section 56(4) circumstances have been engaged, and if so whether it is still appropriate to exercise my discretion to set aside the Separation Agreement.

(a) The applicant’s alleged non-disclosure

[52] The respondent submitted that prior to the execution of the Separation Agreement, the applicant did not make full disclosure of his finances, or swear a Financial Statement. Ironically, there is also no evidence that the respondent swore any Financial Statement prior to signing the Separation Agreement. In any event, the particulars of the applicant’s alleged non-disclosure consist of the respondent’s “belief” that the applicant owned real estate in Iran. In paragraph 47 of her amended Answer, the respondent admitted knowing during their marriage that the applicant “transferred assets to Iran and purchased building and commercial properties to make significant rental and/or investment income”, and that she “suspected” that the applicant still had significant properties in Iran that were not disclosed as of September 27, 2016.

[53] The applicant gave straightforward testimony that, at one time, he did own some real estate in Iran which was apparently purchased in the fall of 2005. Sale documents produced by the applicant disclosed that those properties were all sold between May - June 2012, and the applicant gave evidence that not only did the respondent know about the sale of those properties, but the sale proceeds from those Iranian properties were transferred to Ontario and given to the respondent.

[54] I believe the applicant’s version of events. Bank statements from an account produced by the respondent show deposits of $15,000,00, $25,000,00, $45,000.00 and $20,000.00 from mid to late 2012, and some if not all of those deposits were transfers from the applicant. I do not find that the applicant failed to disclose other significant assets existing when the Separation Agreement was negotiated and signed, and as such the circumstances of section 56(4)(a) have not been established.

[55] In any event, I find that even if there was non-disclosure, such non-disclosure was not a material inducement to the respondent entering into the Separation Agreement as the non-disclosed information would not have been important to the negotiations leading up to the execution of the Separation Agreement. The Iranian properties were disposed of in 2012, nearly two years before the parties separated, and nearly four years before the Separation Agreement was negotiated and signed.

[56] I reject this ground for setting aside the Separation Agreement.

(b) Did the respondent sign the Separation Agreement under duress?

[57] The respondent’s position on this issue is confusing. She did not specifically advance an argument that the terms of the Separation Agreement were unconscionable. Presumably, that argument would have been based upon her position that the applicant made no contributions to the Finch property and would now end up with 100% of its net value under the terms of the Separation Agreement.

[58] To begin, I do not agree or find that the applicant made no contributions to the Finch property. I also accept the evidence of Shin, and rely upon the prior iterations of the draft Separation Agreements as evidence that not only did the respondent understand the nature and consequences of the Separation Agreement, she sought to vary and negotiate those terms to her advantage. As set out in Berdette v. Berdette 1991 CanLII 7061 (ONCA), for pressure to amount to duress, it must be a “coercion of the will” or result in the party being placed in such a position as to have no “realistic alternative” but to submit to that pressure.

[59] There was no duress present in the circumstances leading up to the negotiation and execution of the Separation Agreement. On the contrary, the respondent’s evidence was that the pressure she felt was internal pressure from the debt load she was carrying. While that debt load may have been impacted by actions or omissions on the part of the applicant, the respondent’s financial hardship did not leave her in a position where her will was coerced by the applicant.

[60] The respondent clearly understood the nature and consequences of the Separation Agreement. The circumstances contemplated by section 56(4)(b) of the Family Law Act have not been engaged.

[61] I reject this ground for setting aside the Separation Agreement

(c) Did the respondent not receive proper or any legal advice?

[62] This issue has already been resolved in favour of the applicant by my findings of fact and disposition of the previous issue. The respondent retained Shin’s services, received legal advice, instructed Shin to negotiate terms which were more favourable to the respondent, and considered Shin’s advice before signing the Separation Agreement.

[63] I reject this ground for setting aside the Separation Agreement.

(d) The parties’ alleged cohabitation

[64] As set out above, I reject the respondent’s evidence on this issue. Section 22.1 of the Separation Agreement provides that in the event the parties’ “cohabited as husband and wife” for a continuous period of more than 90 days, then the terms of the Separation Agreement would become void.

[65] Once the respondent obtained the divorce order, there was no reconciliation and the parties continued to live separate and apart in the Finch property. The findings made by Justices Sanfilippo and Nakonechny on an interlocutory basis support this conclusion, as do the applicant’s efforts to obtain an assignment or new mortgage and ultimately list the Finch property for sale.

[66] Section 22.1 of the Separation Agreement has no application to the facts of this case.

[67] I reject this ground for setting aside the Separation Agreement.

What is the appropriate remedy?

[68] In his prayer for relief, the applicant seeks:

• an order directing the sale of the Finch property.

• an order directing that the net sale proceeds be paid to the applicant; and

• damages in an amount to be determined.

[69] Given that I have not found the presence of any grounds to set aside or vary the Separation Agreement, I see no reason to deny the applicant’s request that the Finch property be sold, and that the net sale proceeds be paid to him in accordance with the terms of the Separation Agreement. While such a remedy is akin to specific performance, in my view there was no question that the Finch property is unique in the sense that it is the only property still available to the applicant given the events which have unfolded at the respondent’s hands since the Separation Agreement was signed.

[70] That said, title to the property is still in the name of the respondent, and she has certainly displayed a refusal, or at least a reluctance, to honour her obligations set out in the Separation Agreement. I would expect that she co-operate and act reasonably going forward in accordance with these Reasons. However, to the extent that the applicant encounters difficulty in arranging for and concluding a sale of the Finch property, I am prepared to consider the granting of a vesting order of title to the Finch property in the name of the applicant for those purposes. While that relief was not specifically requested in the applicant’s prayer for relief, it flows naturally from the consequences of these Reasons, and the applicant may bring a motion before me (if I am available) seeking such a vesting order if necessary.

[71] This leaves the issue of damages sought by the applicant. The $300,000.00 Toronto Finance mortgage obtained by the respondent obviously ate into the equity in the Finch property. During closing argument, an issue was raised (primarily by the Court) that the particulars of the damages sought by the applicant were not specified in his amended application, other than damages sought “in an amount to be determined”. That said, the $300,000.00 Toronto Finance mortgage was not registered until after the application was amended, as the applicant himself did not discover the existence of the $300,000.00 Toronto Finance mortgage until sometime in 2019.

[72] In my view, the prayer for relief as currently drafted is sufficient to encompass the applicant’s claim for damages arising from the respondent’s registration of the $300,000.00 Toronto Finance mortgage. In any event, I would have granted the applicant leave to amend his application, as the issues only arose during closing argument and all of the evidence had already been tendered surrounding the $300,000.00 Toronto Finance mortgage (albeit that evidence was selective on the part of the respondent).

[73] I have no difficulty in finding that the registration of the Toronto Finance mortgage was in breach of the terms of the Separation Agreement, and as a result the applicant has suffered a corresponding loss. The difficulty I have is that there is a lack of evidence before me to allow a thorough calculation of those damages. The respondent’s evidence is that the mortgage proceeds were used towards the Finch property. I have already rejected that general proposition, although I do believe that some of those mortgage proceeds were used for that purpose. The applicant had been making some contributions to the Finch property expenses, but those contributions ceased at some point and were renewed in February 2019 after Justice Nakonechny’s Endorsement.

[74] The respondent did give evidence that all of her personal debt and line of credit expenses were paid off by the proceeds from the 2016 CIBC refinancing, but on her Toronto Finance mortgage application the respondent listed over $100,000.00 in credit card debt and unsecured line of credit arears. These are no doubt personal obligations of the respondent, but it is possible that she used her credit cards and/or line of credit to fund expenses owing and relating to the Finch property.

[75] Having found a breach of the Separation Agreement, it is the duty of the Court to use its best efforts to assess and quantify the damages flowing from that breach. I am entitled to, and I do, draw an adverse inference against the respondent for failing to provide any documentation evidencing what happened to the Toronto Finance mortgage proceeds, as those documents were clearly under her care and control. That said, I also accept that there was significant debt associated with the Finch property.

[76] Having reviewed the evidence of the parties and the written record, I find that a reasonable assessment of the damages suffered by the applicant, (i.e. the lost equity in the Finch property which was used to pay expenses unrelated to the Finch property), is the sum of $125,000.00, and I order the respondent to repay the applicant damages in that amount.

[77] In summary,

a) I order the Finch property to be sold and direct that the net sale proceeds be made payable to applicant;

b) if necessary, the applicant may bring a motion (before me if I am available) seeking an order vesting title to the Finch property in his name for the purpose of listing the Finch property for sale and closing any sale transaction;

c) the respondent is ordered to pay the applicant damages in the amount of $125,000.00; and,

d) the respondent’s request to set aside the Separation Agreement is dismissed.

Costs

[78] I would urge the parties to exert the necessary efforts to try and resolve the costs of this proceeding. If those efforts prove unsuccessful, they may serve and file written costs submissions (totaling no more than five pages including a Costs Outline) in accordance with the following schedule:

(a) the applicant’s costs submissions within 10 business days of the release of these Reasons; and,

(b) the respondent’s costs submissions within 10 business days from the receipt of the applicant’s costs submissions.

Diamond J.

Released: September 23, 2019

COURT FILE NO.: FS-17-21908

DATE: 20190923

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MANSOUR EZZATI

Applicant

– and –

NAM SOOK BAE

Respondent

REASONS FOR DECISION

Diamond J.

Released: September 23, 2019