COURT FILE NO.: FS-18-006074
DATE: 20210323
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: RICHARD CHEE-A-TOW, Applicant
AND:
SUMINTRA CHEE-A-TOW, Respondent
BEFORE: Sossin J.
COUNSEL: Kenneth E. Snider, Counsel for the Applicant
James Jagtoo, Counsel for the Respondent
HEARD: November 16-30, 2020 via Zoom
REASONS FOR JUDGMENT
OVERVIEW
[1] The main issue in this case is whether to set aside a separation agreement between the applicant husband, Richard Chee-A-Tow, and the respondent wife, Sumintra Chee-A-Tow, dated April 19, 2010 (the “Separation Agreement” or the “Agreement”) pursuant to s. 56(4) of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”). The remaining issues relate to various financial relationships between the parties which must be resolved if the Agreement is set aside.
[2] On November 2, 2018, the applicant brought an application for divorce under s. 8(2)(a) of the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.), seeking to rely on the terms of the Separation Agreement.
[3] The respondent filed her answer on December 7, 2018, taking the position that the Agreement is invalid and should be set aside under s. 56(4) of the FLA.
[4] The applicant filed a reply on December 14, 2018.
[5] The parties attended several settlement conferences, but were unable to resolve their dispute.
[6] A trial was initially scheduled for March 23, 2020 but was postponed as a result of COVID-19 restrictions.
[7] The trial was rescheduled and conducted via Zoom between November 16 and November 30, 2020. Nine witnesses testified, including the parties.
[8] Notwithstanding the adversarial context, I am grateful to counsel for working cooperatively to ensure the fairness and efficiency of the trial.
[9] For the reasons that follow, I find the Separation Agreement is not valid and should be set aside pursuant to s. 56(4) of the FLA.
[10] Consequently, the respondent is entitled to be restored as a 50% joint owner of the matrimonial home on the basis of a resulting trust.
[11] The respondent is also entitled to time-limited spousal support, in addition to a minor increase of the existing child support arrangements.
THE FACTUAL BACKGROUND
[12] The respondent immigrated to Canada from Guyana in 1991. She later returned to Guyana to marry the applicant; they were married on February 5, 1992. The respondent then sponsored the applicant to Canada, where he arrived in 1993.
[13] The parties have three children: Jessica, born in 1993, Ashley, born in 1996, and Chelsey, born in 2002.
[14] The parties experienced family issues over the years which led to the frequent involvement of the Children’s Aid Society (“CAS”) and other authorities.
[15] Jessica ran away from the family home in 2006, when she was 13 years old. She went into CAS care and eventually became a Crown ward.
[16] Ashley left home in 2014, when she turned 18, amid CAS and police involvement.
[17] Chelsey left the matrimonial home to live with the respondent and her grandparents in December 2018. She now attends the University of Toronto.
[18] All three children are estranged from the applicant. Both Ashley and Chelsey testified on behalf of the respondent at trial.
[19] The respondent has a high school education from Guyana. She was continuously employed in various factory settings from 1991, when she arrived in Canada, to June 2018, when she left the workforce on short-term disability leave. She has been on long-term disability since May 2019, through which she receives $1,851.00 monthly. Her annual income for 2019 was $22,212.00.
[20] The applicant has worked continuously since 1994. He began working as a window assembler, earning $7.00 per hour, and is now employed in a maintenance role for a circuit board manufacturing company. As agreed between counsel, the applicant’s annual income for 2019 was $63,611.00.
[21] In July 2000, the parties purchased the matrimonial home, at 42 Millhouse Crescent in Toronto, for $204,000.00. Together they put down a deposit of $15,000, drawn from their respective savings accounts, and paid the balance from the proceeds of a first mortgage from the Royal Bank of Canada, serviced by monthly payments of approximately $1,200.00 from their joint account.
[22] The respondent’s parents lived in the basement apartment in the house, paying monthly rent, until they moved out in 2007. From that point forward, other paying tenants occupied the basement apartment.
The parties’ financial problems
[23] Leading up to the execution of the Separation Agreement in April 2010, the parties appeared to have growing financial problems.
[24] To forestall power of sale proceedings with respect to the matrimonial home, the parties took a second mortgage from the National Bank of Canada (“National Bank”) in the amount of $45,000.00. On January 22, 2010, National Bank registered a notice on title to the matrimonial home.
[25] According to the applicant, these financial problems were the result of the respondent’s gambling debts.
[26] The respondent denies sole responsibility for the escalating gambling debts, pointing to the applicant’s own gambling activity. Additionally, as the respondent says she had no access to the family’s financial information, she claims she had no way of knowing whether the financial stress was real or created by the applicant’s deliberate failure to repay debts.
The Separation Agreement
[27] One day in March 2010, the applicant called the respondent to the garage for a private conversation, during which the parties agreed to enter into a separation agreement.
[28] According to the respondent, the applicant told her the document would not be a true separation agreement, but merely a means of shielding the family assets from creditors and the “government”.
[29] The applicant’s account of the garage discussion is that the respondent took responsibility for the gambling debts and agreed to sign a genuine separation agreement.
[30] On April 19, 2010, the parties entered into the Separation Agreement.
[31] In the Agreement, the respondent acknowledged receipt of independent legal advice prior to execution. She waived all rights to support and agreed to transfer her proprietary interests in the matrimonial home to the applicant solely and to pay the $45,000.00 outstanding on the second mortgage.
[32] The Agreement also required the respondent to vacate the matrimonial home by the end of July 2010. In August 2010, the respondent moved out of the home after being threatened with eviction by counsel for the applicant.
[33] The respondent briefly lived in a shelter until securing public housing later in 2010. She remained in public housing until moving back with her parents in 2012, where she continues to reside.
[34] In June 2018, the respondent was diagnosed with depression relating to family concerns. The respondent applied for and was granted short term disability leave from her employer. The respondent has been receiving long-term disability benefits since March 2019.
[35] In September 2018, an incident occurred between the parties which resulted in an assault charge being filed against the respondent, after which the parties ceased contact with one another.
ANALYSIS
[36] The trial raised two issues which must be addressed.
[37] The first and central issue is the validity of the Separation Agreement.
[38] The second issue concerns the corollary relief to which the respondent may be entitled, including a trust interest in the matrimonial home, the equalization of the net family property and child and spousal support.
Credibility
[39] Before turning to the issues, I will address the credibility of the parties more broadly. The bulk of the trial consisted in the testimony of the parties. Each party takes issue with the credibility of the other.
[40] In considering the issue of credibility in Dai v. Ding, 2019 ONSC 6118, C. Gilmore J. summarized, at paras. 38-39, the relevant principles in the family case law:
Much of this case turns on credibility as the parties’ versions of various important fact scenarios are completely polarized. A judge has the overriding authority to determine credibility upon weighing all the factors. Considerable weight is placed on the extent to which the testimony is consistent with other, undisputed and proven facts in the case, but no one factor is determinative. Assessment of credibility is not a scientific process and involves a consideration of many relevant factors.
Recent family law decisions in G (J.M) v. G (L.D), 2016 ONSC 3042, and Christakos v. De Caires, 2016 ONSC 702, summarized some aspects of the credibility assessment as set out in Novak Estate, Re, 2008 NSSC 283 at paras. 36-37:
(a) The ability to consider inconsistencies and weaknesses in the witness’ evidence, which includes internal inconsistencies, prior inconsistent statements, inconsistencies between the witness' testimony and the testimony of other witnesses.
(b) The ability to review independent evidence that confirms or contradicts the witness' testimony.
(c) The ability to assess whether the witness' testimony is plausible or, as stated by the British Columbia Court of Appeal in Faryna v. Chorny, 1951 CanLII 252 (BC CA), 1951 Carswell BC 133, it is “in harmony with the preponderance of probabilities which a practical [and] informed person would readily recognize as reasonable in that place and in those conditions”, but in doing so I am required not to rely on false or frail assumptions about human behaviour.
(d) It is possible to rely upon the demeanour of the witness, including their sincerity and use of language, but it should be done with caution (R. v. Mah, 2002 NSCA 99 [at paras.] 70-75).
(e) Special consideration must be given to the testimony of witnesses who are parties to proceedings; it is important to consider the motive that witnesses may have to fabricate evidence. R. v. J.H., 2005 CanLII 253 (ON CA), [2005] O.J. No.39 (OCA) [at paras.] 51-56).
(f) There is no principle of law that requires a trier of fact to believe or disbelieve a witness’ testimony in its entirety. On the contrary, a trier may believe none, part or all of a witness’ evidence, and may attach different weight to different parts of a witness's evidence. (See R. v. D.R., [1966] 2 S.C.R. 291 at [para.] 93 and R. v. J.H. supra).
[41] Additionally, in some instances, where disclosure has been inadequate, it is also open to a trier of fact to draw adverse inferences against the party who failed to make timely disclosure: Meade v. Meade (2002), 2002 CanLII 2806 (ON SC), 31 R.F.L. (5th) 88 (Ont. S.C.), at para. 81.
[42] In this case, it is apparent that the applicant failed to provide timely disclosure to the respondent at several junctures of the dispute. This continuing failure to disclose generally detracts from the applicant’s credibility.
[43] Generally, I found the respondent to be a credible witness. Her account of the applicant’s controlling nature appeared both genuine and coherent, and found support in the testimony of other witnesses in the family, and in particular, the two daughters Ashley and Chelsey. I also found support for this account in some of the documentary evidence, including notes that the respondent testified she was required to put in writing in order to obtain money from the applicant in the period of financial challenges leading up to the signing of the Separation Agreement.
[44] I found the applicant fixed and unwavering in his account of what transpired in the family, even where this account appeared at odds with the documentary record in addition to the testimony of other witnesses. At times, the applicant would become combative, particularly on cross-examination when his account was challenged. This posture detracted from the credibility of the applicant’s testimony and lent credibility to the respondent’s testimony.
[45] As parties, I found the testimony of each of the respondent and applicant was at times self-serving or appeared tailored to fit into a particular narrative. Additionally, the other witnesses were all family members, friends or neighbours, each with an apparent allegiance either to the account of the respondent or applicant, which also presented challenges when assessing credibility.
[46] On balance, where the testimony of the respondent and applicant was at odds, I generally had more confidence in the testimony of the respondent, although with some exceptions set out below.
[47] I turn now to the issue of whether the Separation Agreement is valid.
ISSUE 1: THE VALIDITY OF THE SEPARATION AGREEMENT
[48] Before considering whether the Separation Agreement should be set aside, I consider whether the parties in fact reconciled within the terms of the Agreement. If so, the terms of the Agreement would be void regardless of the statutory set-aside analysis.
(a) Did the parties reconcile after executing the Separation Agreement?
[49] Section 35 of the Separation Agreement addressed the possibility of reconciliation in the following terms:
If at any time in the future the husband and the wife, with their mutual consent, cohabit as husband and wife for a period or periods totaling no more than ninety days with reconciliation as the primary purpose, the terms of this agreement will not be affected. If the husband and the wife, by mutual consent, cohabit as husband and wife for a period or periods totaling more than ninety days with reconciliation as the primary purpose, the terms of this agreement will become void, except that nothing in this section will affect or invalidate any payment, conveyance or act made or done pursuant to the terms of this agreement without the written consent of the parties.
[50] Notwithstanding the terms of a domestic contract between spouses, the Court of Appeal for Ontario has recognized that a separation agreement may also be nullified by reconciliation at common law: Miaskowski v. MacIntyre, 2020 ONCA 178.
[51] The applicant’s position is that the parties never reconciled after separating on August 1, 2010, the date by which the respondent was required under the Agreement to have vacated the matrimonial home.
[52] The respondent’s position is that there never was a separation in 2010 and therefore no circumstances of reconciliation could arise. Alternatively, in the event a separation did occur in 2010, the respondent’s position is that the parties resumed cohabitation thereafter, in the meaning of Molodowich v. Penttinen (1980), 1980 CanLII 1537 (ON SC), 17 R.F.L. (2d) 376, at para. 16, and did not separate again until September 2018, following the incident leading to her assault charge.
[53] On August 10, 2010, the respondent received a formal letter from the applicant’s lawyer, Mr. Pilon, requiring her to vacate the matrimonial home pursuant to a provision of the Separation Agreement requiring the parties to live separate and apart. The letter stated,
As you will recall I acted for your husband with respect to negotiating a final and binding separation agreement. Pursuant to that agreement you were to vacate the home by July 31, 2010.
I am advised that you have not vacated and therefore are in breach of the agreement. If required, we will bring a Court application to have you evicted from the home and we will seek that the Court impose on you the obligation to reimburse your husband for all of his legal fees.
Please immediately abide by the letter and spirit of the agreement and vacate the home.
[54] Consistent with her position that she believed the Separation Agreement was a sham to shield the parties from creditors, the respondent had not made plans to leave the matrimonial home.
[55] Under threat of forced eviction, however, the respondent left the matrimonial home in August 2010, and found housing initially through a shelter.
[56] Notwithstanding the clear reality that the applicant intended to enforce the Separation Agreement as a legally binding document, the respondent took no steps to oppose or challenge it. She testified she still believed that all the applicant’s actions were tied to the scheme for avoiding the loss of the matrimonial home.
[57] The respondent testified that while establishing her own residence, she continued to attend at the matrimonial home every weekend.
[58] The respondent’s evidence is that, during these weekends at the matrimonial home, she performed a range of domestic chores for the children and the applicant. She also testified that she and the applicant continued a sexual relationship.
[59] According to the respondent, this pattern of weekends together continued as the respondent secured subsidized public housing in late 2010.
[60] The respondent left public housing to move in with her parents in 2012. According to the respondent, these changes of residency did not affect her uninterrupted contact with the applicant and the children in the matrimonial home.
[61] On the respondent’s account, the weekend visit arrangement continued until September 2018, when, by virtue of the conditions of bail following her charge for assault, she was prevented from attending the matrimonial home.
[62] The fact of the respondent’s continuing presence in the matrimonial home, and performing a range of domestic tasks for the applicant and the children, is supported by the testimony of two of the respondent’s children, Ashley and Chelsey, the respondent’s father, Sugrim Roopnarain, and her two sisters, Jasmine Boodram and Ann Lall.
[63] The respondent also put into evidence a series of approximately 100 text messages between the parties, which she says support her account of the ongoing nature of the marital relationship.
[64] Although the authenticity of these messages is not contradicted by any evidence of the applicant, he offered a different interpretation of the messages than that put forward by the respondent. The applicant also pointed out that the text exchanges are not complete but appear to cover only select time periods. However, the applicant did not provide additional texts or communications to fill any of the gaps to which he referred.
[65] On their face, the messages indicate relations between the parties were warm. The respondent wishes the applicant a happy birthday in one message, dated November 8, 2017. In two messages, dated February 5 and February 14, 2018, the applicant wishes the respondent a happy anniversary and a happy Valentine’s Day.
[66] The messages also provide some support for the respondent’s position that the parties continued a sexual relationship after the Separation Agreement.
[67] For example, in one message, dated February 16, 2018, the applicant states: “Wow you are good in bed now. Thanks.” In another exchange, dated June 1, 2017, the applicant asks to meet the respondent because he feels “horney” [sic]. In several texts, the applicant tells the respondent that he needs to blacken his hair. According to the respondent, this was their private code for sexual activity.
[68] The applicant denies these statements held any meaning other than attending to his hair colouring. He denies having any sexual relationship with the respondent after executing the Separation Agreement in April 2010.
[69] The respondent relies on other evidence which suggests the parties’ marital relationship was not disrupted by the Separation Agreement. For example, the parties kept each other on their respective insurance plans and remained beneficiaries of each other’s life insurance policies. There is evidence the applicant attended the respondent’s work holiday party in 2015. The applicant also paid for the respondent to accompany their daughter, Chelsea, when she participated in a Taekwondo tournament in Argentina in the summer of 2018.
[70] The applicant disputes the evidence of any ongoing relationship with the respondent after 2010.
[71] The basement tenant, Linda Laundry, began living in the home in 2009 and testified that she did not see or hear the respondent at the matrimonial home after 2010.
[72] Similarly, Melbourne Allen, a neighbour whose home faced the matrimonial home, testified that, sometime in 2011, the applicant told him that the parties had separated. He also confirmed seeing the respondent at the house only occasionally, doing pick-ups or drop-offs in the driveway.
[73] In Al-Sajee v. Tawfic, 2019 ONSC 3857, Chappel J. set out, at para. 26, the criteria for a determination of when two spouses began living “separate and apart” within the meaning of the Divorce Act. Those criteria may be summarized as follows:
• Ascertaining when spouses begin to live separate and apart requires a global analysis of the unique realities of their relationship, routines, social and other habits and practices and living arrangements over time. No one factor will be determinative. In deciding how much weight, if any, to give to any particular factor, the court must carefully assess whether there have been any real changes in regard to that factor since the parties were clearly together in a conjugal relationship;
• There are two aspects to spouses living separate and apart: (1) they must live apart from each other, and (2) there must be an intention on the part of one or both of them to live separate and apart from the other;
• To live “apart” requires a physical separation between the parties, meaning that they cannot be cohabiting in a conjugal relationship, although they may be living separate and apart under the same roof if there is no conjugal relationship;
• The fact that the spouses have two residences and spend significant periods apart in the two homes is not determinative of whether they are living separate and apart. Spouses in these circumstances will only be considered to be living separate and apart if at least one of them intends to end the marital relationship. Where the parties live primarily in separate residences, the court must examine all of the other circumstances surrounding their relationship to determine whether they were, in fact, living separate and apart;
• In order to establish the requisite intent to live separate and apart, there must be a withdrawal by one or both spouses from the matrimonial obligation with the intent of repudiating the matrimonial relationship; and
• The law does not require a meeting of the minds regarding the intention to separate; a physical separation, coupled with the intention of one party to live separate and apart, is sufficient.
[74] In this case, I find the applicant decided to permanently separate from the respondent in 2010. I come to this conclusion notwithstanding that the respondent has established that the parties continued to have a relationship after the Separation Agreement, including the respondent spending time at the matrimonial home, performing domestic tasks, and engaging in a sexual relationship from time to time.
[75] However, these findings do not amount to a reconciliation, either within the meaning of the Separation Agreement or at common law.
[76] There is no evidence that the mutual intent of these periods together was indeed “reconciliation,” as required under the Separation Agreement. While the respondent may well have believed the marriage continued uninterrupted during the period after she left the matrimonial home, I also accept the applicant’s evidence that he considered himself separated from the respondent over this period.
[77] In light of these positions and the record before me, I find that the parties did in fact separate in August 2010, when the respondent vacated the matrimonial home and established her own residence. I also find that they never reconciled after that date, either by the terms of the Agreement or at common law.
[78] Therefore, for the purpose of resolving financial arrangements in this proceeding, I accept that the date of separation was August 1, 2010.
[79] The respondent argues that she was deceived by the applicant, who ended up with the financial rewards flowing from the Separation Agreement, including sole ownership of the matrimonial home, while also gaining the benefit of the respondent’s contributions to his well-being and the maintenance of the household.
[80] To the extent this narrative is established on the evidence, the respondent’s entitlement to a remedy would require that the Separation Agreement be set aside. As such, I turn now to the analysis of the validity of the Agreement under the governing legislation.
(b) Should the Separation Agreement be set aside?
(i) The terms of the Separation Agreement
[81] The Separation Agreement, dated April 19, 2010, was signed by both parties. It includes a preamble which states, in part:
WHEREAS the parties were married in Guyana on February 5, 1992
AND WHEREAS the parties purchased their matrimonial home on July 21, 2000 at 42 Millhouse Crescent, Toronto with a value now of approximately $270,000.00 and subject to a first mortgage of $135,700.00 and a second mortgage of $45,000.00.
AND WHEREAS the parties have agreed to live separate and apart and have lived separate and apart since 2004 (the “separation date”).
AND WHEREAS the husband and wife are desirous of settling by agreement all rights, claims, demands, and causes of actions which each has or may have against the other with respect to possession, ownership and division of their property, equalization of net family property, and with respect to any right either of them may have to maintenance and support from or against the other under the Family Law Act or any successor thereto, or the Divorce Act, 1985, or any other statute under which they may have rights and/or obligations.
AND WHEREAS the parties have made full and frank disclosure each to the other, have been given reasonable opportunity by the other to obtain full financial disclosure, have made such investigations of the financial circumstances of the other as he or she considers reasonable and is satisfied with the information furnished and the disclosure made.
[82] For the purposes of my analysis below, the key terms of the Separation Agreement may be summarized as follows:
• The respondent agreed to vacate the matrimonial home on or before July 31, 2010 and acknowledged that the contents of the home would be divided to their mutual satisfaction: at s. 22;
• After the respondent vacated the matrimonial home, the parties would “continue to live separate and apart from each other”: at s. 3;
• The parties agreed to joint custody of the children, Ashley and Chelsea, who would continue to reside in the matrimonial home with the applicant, with “liberal access to the wife as agreed upon between the parties.” This clause referred to Jessica as already under the care and control of the CAS: at s. 6;
• The applicant was not “at the present time” seeking child support from the respondent: at s. 18;
• Both parties released each other from any claims to spousal support: at s. 25;
• With respect to the matrimonial home, the parties agreed to transfer the joint tenancy in the home to the applicant’s sole ownership. The applicant would assume sole responsibility for the first mortgage, while the respondent assumed sole responsibility for the second mortgage: at ss. 19-21;
• With respect to equalization, the parties agreed that there was “no equalization payment owing from one to the other and neither party shall have any other claims one against the other”: at s. 24;
• No change in circumstances “whether catastrophic, drastic, radical, material, profound, unanticipated, foreseeable, foreseen, unforeseeable, unforeseen or beyond imagining” would alter the agreement or entitle either party to support from the other: at s. 26;
• The parties also expressly acknowledged the following:
o they were financially independent and did not require financial assistance from the other: at s. 27(a);
o they negotiated the Agreement in an “unimpeachable” fashion and the terms of this Agreement fully represented their intentions and expectations: at s. 27(b);
o they received independent legal advice and had all the disclosure they needed to understand the nature and consequences of the Agreement and the implications of waiving support, and to support their conclusion that the terms reflected an “equitable arrangement for support in their cohabitation, marriage or upon the breakdown of the relationship”: at s. 27(c);
o the terms of the Agreement substantially complied with the overall objectives of the Family Law Act and the Divorce Act, specifically those set out in ss. 30 and 33 of the FLA and ss. 15.2 and 17 of the Divorce Act: at s. 27(d);
o the Agreement could be pleaded as a complete defence to any claim brought by either party for spousal support in contravention of the Agreement: at s. 27(f);
o the terms of the Agreement and the release of spousal support reflected their own particular objectives and concerns, and were intended to be a final and certain settling of all support issues between them. Among other considerations, they were also relying on this spousal release, in particular, upon which to base their future lives: at s. 27(g); and
o The Agreement was jointly prepared, meaning each party personally participated in its preparation and that it “must be construed as if the parties were joint authors, and it will not be construed against one party as if that party or that party’s lawyer were the sole or major author of the agreement”: at s. 38.
(ii) The governing legislation
The FLA
[83] The validity of separation agreements is governed by the FLA. With respect to the formation of separation agreements, s. 54 provides as follows:
Two persons who cohabited and are living separate and apart may enter into an agreement in which they agree on their respective rights and obligations, including,
(a) ownership in or division of property;
(b) support obligations;
(c) the right to direct the education and moral training of their children;
(d) the right to custody of and access to their children; and
(e) any other matter in the settlement of their affairs.
[84] Section 56(4) of the FLA sets out the circumstances in which a court may set all aside all or part of a domestic contract, such as the Separation Agreement:
A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
The Divorce Act
[85] The federal Divorce Act, by contrast, does not confer authority to set aside domestic contracts, but permits a court to make spousal support orders as corollary relief to a divorce.
[86] Under s. 15.2 of the Divorce Act, a valid separation agreement is but one factor to consider in determining whether the court should exercise its authority to award corollary spousal support:
(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.
(4) In making an order under subsection (1) … 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.
(5) In making an order under subsection (1) … the court shall not take into consideration any misconduct of a spouse in relation to the marriage.
[87] The objectives of the Divorce Act with respect to spousal support, set out at s. 15.2(6), are to:
(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.
The respondent’s claim for statutory relief from the Separation Agreement
[88] In this case, the respondent seeks to set aside the Separation Agreement under s. 56(4) of the FLA, on the basis that:
(a) the applicant failed to disclose significant assets existing when the Separation Agreement was made;
(b) the respondent did not understand the nature or consequences of the Separation Agreement; and
(c) otherwise in accordance with the law of contract, namely that the Separation Agreement is unconscionable and that the respondent entered into it under duress.
[89] In the alternative, if this court does not set aside the Separation Agreement, the respondent seeks corollary relief under s. 15.2 of the Divorce Act, namely an order for spousal support notwithstanding the terms of the Agreement.
[90] I will assess the respondent’s respective claims pursuant to each scheme in turn.
(iii) The analytical framework under [s. 56(4)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-f3/latest/rso-1990-c-f3.html) of the [FLA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-f3/latest/rso-1990-c-f3.html)
[91] Section 56(4) of the FLA deals with intrinsic flaws in the formation of a contract that nullify the apparent consent between the parties and invalidate the agreement, allowing a court to set aside the contract: Faiello v. Faiello, 2019 ONCA 710, at para. 17.
The two-stage approach
[92] The Court of Appeal for Ontario has repeatedly endorsed a two-stage approach to the application of s. 56(4), as articulated by Clarke L.J.S.C. in Demchuk v. Demchuk (1986), 1986 CanLII 6295 (ON SC), 1 R.F.L. (3d) 176 (Ont. H.C.):
(1) the party seeking to set aside must demonstrate that one of the circumstances listed under s. 56(4) has been engaged;
(2) if so demonstrated, the court must then consider whether it is appropriate to exercise its discretion in favour of setting aside the agreement: see, LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d), at para. 51, leave to appeal refused, [2008] S.C.C.A. No. 331; Faiello, at para. 20.
[93] Under this approach, the party seeking to escape the effect of the agreement bears the burden to demonstrate there are grounds for setting it aside: Doughtery v. Doughtery, 2008 ONCA 302, 89 O.R. (3d) 760, at para. 11.
[94] This analysis seeks to reconcile two competing principles. First, the public interest in compliance with the legislative scheme, a key objective of which is ensuring the equitable settlement of affairs upon the dissolution of a marriage: FLA, Preamble. Second, the interest in encouraging parties to freely negotiate a final settlement of their family law entitlements as they see fit: Aly v. Halal Meat Inc. et al., 2013 ONSC 1313, 13 B.L.R. (5th) 209, at para. 353.
[95] Accordingly, a court should be reluctant to interfere with a pre-existing domestic contract unless it is convinced that the agreement does not comply substantially with the objectives of the FLA and the Divorce Act: Miglin v. Miglin, 2003 SCC 24, at paras. 45-46.
The role of independent legal advice
[96] Judicial deference for private spousal arrangements will be particularly strong where the agreement was negotiated with the benefit of independent legal advice (“ILA”). Such advice is an important means of ensuring an “informed decision”: Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550, at paras. 9, 36, and 60.
[97] Indeed, the presence or advice of counsel will often, but not always, overcome an imbalance of power between the parties: Miglin, at paras. 82-83; Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295, at paras. 60-61. As such, when one party makes choices with the benefit of ILA, that party cannot usually resile from the agreement unless the financial disclosure received was inaccurate, false, or misleading: Quinn v. Epstein Cole LLP, 2008 ONCA 662, 55 R.F.L. (6th) 241, at paras. 3-4.
[98] However, legal advice is not an “automatic antidote” for a defective bargaining process: Kelly v. Kelly (2004), 2004 CanLII 4328 (ON CA), 72 O.R. (3d) 108 (C.A.), at para. 27. In other words, a trial judge should consider whether any legal advice received was enough to overcome a party’s vulnerability, or whether a power imbalance vitiated the negotiations such that the agreement merits little weight: Miglin, at para. 83; Kelly, at para. 28.
Stage one: Is s. 56(4) of the FLA engaged?
Section 56(4)(a) – Lack of financial disclosure
[99] The failure to disclose pertinent financial information regarding family assets or income, particularly if not known to the other party, is a significant factor in determining the validity of a separation agreement: Aly, at para. 357. There is no onus on the recipient of disclosure in a family law proceeding to inquire as to the veracity or completeness of the other spouse’s financial disclosure: Virc v. Blair, 2014 ONCA 392, at para. 58.
[100] As Abella J. stated in Rick, at para. 47, the “deliberate failure” to make financial disclosure may warrant judicial intervention where it results in an agreement that is “substantially at variance from the objectives of the governing legislation”.
[101] Whether a court will intervene therefore depends on the circumstances of each case, including the extent of defective disclosure and whether it was deliberate: Rick, at para. 49.
[102] In Rick, Abella J. stated that the sufficiency of information available to the parties goes to the heart of whether the parties’ contractual autonomy should be respected, at paras. 45-48:
Parties should generally be free to decide for themselves what bargain they are prepared to make. And it is true that most separating spouses appear to determine their agreements without judicial participation…
This contractual autonomy, however, depends on the integrity of the bargaining process. Decisions about what constitutes an acceptable bargain can only authoritatively be made if both parties come to the negotiating table with the information needed to consider what concessions to accept or offer. Informational asymmetry compromises a spouse’s ability to do so…
In my view, it flows from the observations and principles set out in Miglin that a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances. The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation.
Such a duty in matrimonial negotiations anchors the ability of separating spouses to genuinely decide for themselves what constitutes an acceptable bargain. It also helps protect the possibility of finality in a32greements. An agreement based on full and honest disclosure is an agreement that, prima facie, is based on the informed consent of both parties. It is, as a result, an agreement that courts are more likely to respect. Where, on the other hand, an agreement is based on misinformation, it cannot be said to be a true bargain which is entitled to judicial deference. (Emphasis added.)
Section 56(4)(b) – Understanding the nature or consequences of the agreement
[103] Under s. 56(4)(b), the court must examine the circumstances at the time of execution to conclude whether or not the party understood the “fundamental nature” of the agreement as well as the “effect or impact” of its terms: Faiello, at paras. 33-34.
[104] This assessment is comparable to, but broader than, the common law doctrine of non est factum: Dillon v. Dillon, 2014 ONSC 2236, [2014] W.D.F.L. 2347, at para. 202; Dougherty, at para. 25.
[105] The nature and degree of legal advice received will obviously be relevant in assessing whether a party understood the nature and consequences of an agreement. However, professional assistance will not always temper the effect of informational asymmetry between the parties. Indeed, the mere fact that a party knew the agreement was unfavourable to them does not mean they understood its nature or consequences: Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, at paras. 43-45.
[106] For instance, defective financial disclosure may result in a lack of understanding of the agreement by a party that cannot be overcome by legal advice: LeVan, at paras. 52-53; B.L.S. v. D.J.S., 2019 BCSC 846, at paras. 282-286.
[107] Similarly, a failure to appreciate the consequences of an agreement because of the other spouse’s misrepresentations regarding its true nature may result in the agreement being set aside: Tailor v. Tailor (2008), 2008 CanLII 51474 (ON SC), 59 R.F.L. (6th) 316, at paras. 34-35.
Section 56(4)(c) – Otherwise in accordance with the law of contract
[108] In this case, in addition to relying on the above statutory grounds, the respondent argues that the Agreement should be set aside because it is unconscionable and was obtained under duress.
Unconscionability
[109] The concept of unconscionability in the context of the execution of domestic contracts is broader than in the common law of contract: Miglin, at para. 82; Tadayon v. Mohtashami, 2015 ONCA 777, 341 O.A.C. 153, at para. 28. As put by the Supreme Court in Miglin, at para. 82:
There is a danger in borrowing terminology rooted in other branches of the law and transposing it into what all agree is a unique legal context. There may be persuasive evidence brought before the court that one party took advantage of the vulnerability of the other party in separation or divorce negotiations that would fall short of evidence of the power imbalance necessary to demonstrate unconscionability in a commercial context between, say, a consumer and a large financial institution.
As such, where there are circumstances of oppression, pressure, or other vulnerabilities and evidence of one party’s exploitation of such vulnerabilities during the negotiation process, with the result that the domestic contract deviates substantially from the legislation, s. 56(4)(c) may be engaged: Miglin, at paras. 81-83; Rick, at para. 44; Tadayon, at para. 29.
[110] For instance, in Rick, the Supreme Court upheld the trial judge’s finding that a separation agreement was unconscionable. The husband in that case knowingly exploited the wife’s fragile emotional and mental state during negotiations that were tainted by misleading financial information stemming in part from the husband’s deliberate non-disclosure: at para. 63.
[111] Although the wife in Rick had ILA, she was unable to make use of it because of her vulnerabilities and the seriously flawed bargaining process: at paras. 60-62. Abella J. affirmed the trial judge’s finding that the agreement deviated substantially from the relevant legislative objectives, rendering it unconscionable and therefore unenforceable: at para. 63.
Duress
[112] Duress is a sub-category of unconscionability. The party seeking to establish duress must show they were subject to pressure by the other party which rendered them unable to freely decide and left them with no realistic alternative but to agree: Stott v. Merit Investment Corp. (1988), 1988 CanLII 192 (ON CA), 63 O.R. (2d) 545, at para. 48, leave to appeal refused, [1988] S.C.C.A. No. 185; and Glazer v. Hill, 2019 ONSC 809, at para. 38.
[113] However, not all pressure, economic or otherwise, constitutes duress sufficient to make an agreement unenforceable. It must have two elements: (i) pressure that the law regards as illegitimate (ii) applied to such a degree as to amount to a “coercion of the will”: Taber v. Paris Boutique & Bridal Inc., 2010 ONCA 157, at para. 9; and Glazer, at paras. 37-39.
[114] Even where ILA is received, duress may be established through evidence that a party feels he or she has no realistic choice but to sign due to a power imbalance with the other party: Aly, at para. 404.
Stage two: Is it appropriate to set the agreement aside?
[115] A finding that s. 56(4) is engaged at stage one does not automatically render the contract a nullity. Rather, the court must exercise its discretion to determine whether it is appropriate to order the contract set aside: LeVan, at para. 33.
[116] This discretionary exercise requires the court to review the procedural and substantive integrity of the negotiation and execution of the domestic contract in accordance with the legislative scheme: Rick, at para. 50. However, the fact that property division is not consistent with the FLA is not, by itself, sufficient to set aside the separation agreement. Spouses are entitled to enter into a bad deal as long as the integrity of the bargaining process is respected by both parties: Aly, at para. 370.
[117] Once the court finds that one or more of the statutory preconditions exist, it is entitled to consider the overall fairness of the contract together with any factors engaged at stage one: LeVan, at para. 60; Aly, at para. 371.
[118] I now turn to the application of the foregoing principles to the Separation Agreement in this case and consider whether it should be set aside.
(iv) Applying the s. 56(4) framework to the Separation Agreement
Stage one: Is s. 56(4) of the FLA engaged?
Section 56(4)(a) – the applicant’s financial disclosure
[119] There does not appear to be any dispute that no financial disclosure was provided by either party in the lead-up to the execution of the Separation Agreement in April 2010.
[120] Further, the letter provided by the respondent’s ILA counsel, Mr. Fleury, confirms the absence of disclosure from the applicant:
As you are aware, we advised you that due to the fact that you and your husband had not exchanged sworn Financial Statements, we were unable to provide you with any advice concerning support and property issues contained in the Separation Agreement. Notwithstanding our advice, you confirmed that you had sufficient financial information from your husband such that you believe the terms of the Agreement to be reasonable.
[121] The respondent signed an acknowledgment with respect to Mr. Fleury’s advice, dated April 19, 2010, which states:
I, Sumintra Chee-a-Tow, hereby acknowledge having consulted Stephen Fleury of Fleury, Comery LLP to obtain independent legal advice concerning a draft separation agreement prepared by Maurice Pilon on the instructions of my husband, Richard James Chee-a-Tow.
I further confirm having been advised by Stephen Fleury that in the absence of sworn financial statements, he was unable to provide me with advice concerning the support and property issues contained in the draft separation agreement. On this basis, I was advised by Stephen Fleury not to sign the separation agreement without obtaining financial disclosure from my husband but, notwithstanding this advice, I elected to proceed with the signing of the separation agreement and associated Transfer documentation pertaining to the matrimonial home.
[122] The respondent testified that what little financial information she had was what the applicant chose to provide. The respondent had no basis to test or confirm any of this information. For example, the respondent could not verify the true value of the matrimonial home in 2010, the actual balance remaining on the first or second mortgages, or the applicant’s other financial holdings, including an apparent interest in a family property in Guyana.
[123] I conclude that the near-complete absence of disclosure by the applicant to the respondent suggests that the Separation Agreement did not reflect a true bargain between the parties. This conclusion is further supported by the misleading terms of the Agreement itself, in which the parties acknowledged that sufficient disclosure had in fact occurred.
[124] The respondent’s stated intent to sign the Separation Agreement notwithstanding the absence of disclosure does not alter this conclusion. Her decision to ignore the ILA she received was not an informed one; it was based on a lack of information and misinformation.
[125] This case is unlike those relied on by the applicant, such as Dochuk v. Dochuk (1999), 1999 CanLII 14971 (ON SC), 44 R.F.L. (4th) 97 (Ont. Gen. Div.) and Turk v. Turk, 2018 ONCA 993, where non-disclosure was found not to be important to the outcome of negotiations. On the record before me, I am unable to conclude that the disclosure of more financial information, for instance about the true extent of the family’s liabilities, would not have affected the respondent’s decision to sign the Agreement.
[126] In sum, the applicant did not provide the respondent with sufficient disclosure to enable her to negotiate a true bargain. Further, as in Rick, I find that the applicant deliberately withheld disclosure.
[127] Accordingly, I find that s. 56(4)(a) is engaged.
Section 56(4)(b) – the respondent’s understanding of the nature and consequences of the Agreement
[128] The inadequacy of disclosure outlined above should not be viewed in isolation. Rather, it must be situated in the broader context of the Separation Agreement, including the respondent’s position that she signed it on the understanding that it was a sham agreement and not one which she expected to change her marital situation.
[129] Yet it is this very lack of disclosure which makes it difficult to understand that broader context with any degree of clarity.
[130] For example, while the role of the alleged gambling debts in the Agreement was a central issue at trial, there was insufficient documentary evidence outside the assertions of the parties to establish that those debts existed, let alone the amount owing or the proportion for which each party is responsible.
[131] As such, for the period leading up to the execution of the Separation Agreement, I am unable to conclusively determine who owed what to whom and why. However, I am satisfied that, to the extent gambling debts played a role in the family’s financial difficulties in 2010, both parties contributed to this situation.
[132] This finding is supported by the testimony of the respondent’s two sisters, Ms. Boodram and Ms. Lall. Each stated that they went on frequent gambling outings organized, facilitated, and attended by the applicant, during which he often gambled into the early hours of the morning.
[133] Beyond this, I find it unnecessary to disentangle the details of the parties’ finances as they existed in 2010 for the purpose of determining whether the respondent understood the nature and consequences of the Agreement. For two reasons, I am satisfied that she did not.
[134] First, recall the informational asymmetry between the parties. As in Rick, I find that this asymmetry, compounded by the respondent’s vulnerabilities, undermined her ability to understand and appreciate the fundamental nature of the Agreement, notwithstanding the ILA.
[135] The respondent testified that the applicant controlled all the finances in the household. According to the respondent, the applicant often provided insufficient funds for the respondent to meet the basic needs of the household; she was required to put requests for money in writing.
[136] The evidence supporting this account includes handwritten notes from the respondent to the applicant asking for specific loans. For example, in a note dated June 3, 2008, the respondent asks the applicant for a loan of $2000. In a note dated June 6, 2008, the respondent writes, “you said to go out and beg my family for money but there [sic] nothing anyone have to give me.” A subsequent note stated that the respondent had spent all the “kids savings” and that “bills are not pay [sic].”
[137] The respondent received ILA from Mr. Fleury, as arranged by the applicant. According to the respondent, Mr. Fleury was also paid by the applicant, though the applicant disputes this.
[138] According to the respondent, she never received or read the Separation Agreement in advance of her meeting with Mr. Fleury to receive ILA.
[139] In light of the applicant’s financial control and the respondent’s lack of information and sophistication, the ILA she received was of limited value. Even if she did understand it, the ILA could not overcome the impact of the defective financial disclosure on the negotiations in this case.
[140] Second, I am persuaded that the Separation Agreement did not reflect a genuine domestic contract between the parties. Rather, it was drafted and signed for ulterior purposes, at least in the mind of the respondent.
[141] In cases where domestic contracts are signed for ulterior purposes, courts have held those agreements may be set aside under s. 56(4)(b) of the FLA.
[142] For instance, in Maka v. Maka, 2015 ONSC 3480, Barnes J. set aside a separation agreement which the husband believed had been devised for tax purposes, concluding, at paras. 64-65:
The cumulative effect of all the evidence leads me to conclude that the parties did not respect the contents of their own separation agreement. Under those circumstances, it was very reasonable for Mr. Maka to conclude that the separation agreement was signed only for income tax purposes.
The conduct of the couple after the agreement was signed was inconsistent with an intent to separate. I am satisfied that Mr. Maka was misled on the true intent of the separation agreement. This is the type of circumstance described under s. 56(4)(b) of the Family Law Act and, therefore, the separation agreement is set aside.
[143] A similar analysis was conducted by Richetti J. in Tailor v. Tailor, [2008] O.J. No. 3900, where he found a separation agreement should be set aside as the wife was misled by the husband into believing the purpose of the agreement was to appease the husband’s parents: at paras. 33-36.
[144] While neither of these cases involve the same factual matrix as the one before me, I find a similar principle applies in this case.
[145] The respondent testified that at some point in March 2010, the applicant called her to the garage for a private conversation. During that conversation, he allegedly outlined a scheme by which the parties would sign a separation agreement, transfer the house to the applicant’s name, and thereby protect the house from creditors and the “government”. According to the respondent, the applicant assured her that nothing in their life would need to change.
[146] The applicant agrees the garage discussion took place and led to the decision to enter into the Separation Agreement. On his account, however, at that time the respondent acknowledged “screwing up” by accumulating debt through gambling and agreed to the key aspects of the Separation Agreement as a means of accepting responsibility for her financial misbehaviour.
[147] Overall, I find that the evidence supports the respondent’s narrative that she was misled to believe the Agreement would not change the marital relationship and that she signed it to save the family home.
[148] The fact that both parties signed the Agreement notwithstanding the presence of key facts and representations each knew to be untrue supports the respondent’s argument that neither party took the document seriously at the time of execution.
[149] For example, the Separation Agreement states that the parties separated in 2004, which both parties acknowledge is not true. The Agreement also states that the parties had provided each other with financial disclosure and that both had taken part in drafting the Agreement, representations which both parties also knew to be untrue.
[150] The Separation Agreement was drafted by the applicant and his then counsel, Mr. Pilon. The respondent testified that she had no input whatsoever into the Separation Agreement, and only saw its terms when at Mr. Fleury’s office, the lawyer from whom the applicant had arranged for her to obtain ILA.
[151] I accept the respondent’s evidence that the ILA was entirely arranged by the applicant, and that the respondent believed this was simply part of a scheme in which she had agreed to participate.
[152] As in Maka, the parties’ conduct after April 2010 supports the reasonableness of the respondent’s belief that the Agreement was not a genuine separation agreement. I accept that the parties communicated and saw each other regularly. In 2015, they attended the applicant’s work holiday party as a couple. They remained on each other’s insurance for years following the Agreement. As recently as 2018, they appear to have been maintaining a conjugal relationship.
[153] In sum, I find that the respondent had insufficient financial information to understand the nature and consequences of the Agreement when it was executed. Even if there had been sufficient disclosure, I accept that the applicant misled the respondent to believe the true intent of the Agreement was to shelter the family assets from creditors and the “government”.
[154] Accordingly, I find that s. 56(4)(b) of the FLA is engaged.
Section 56(4)(c) – otherwise in accordance with the law of contract
Unconscionability
[155] There is no doubt that the Separation Agreement was an improvident deal for the respondent. But does the Separation Agreement meet the threshold of unconscionability?
[156] Applying the framework set out in Miglin and Rick to the circumstances of this case, I find that the Separation Agreement deviates substantially from the relevant legislative objectives. Specifically, the Separation Agreement deviates from those objectives in the following ways:
• the respondent loses any ownership interest in the matrimonial home to which she contributed for 10 years;
• the respondent is deprived of any benefit of the equalization of net family property, including the value of the matrimonial home;
• the respondent assumes sole responsibility for the second mortgage in the amount of $45,000.00; and
• the respondent foregoes any spousal support for all time, whether or not her circumstances change.
[157] I find that this deviation resulted from the flawed bargaining process outlined above, through which the applicant took advantage of the respondent’s lack of sophistication and knowledge about the family finances. By misleading the respondent as to the true nature of the Agreement, the applicant exploited the respondent’s trust and financial dependency. This imbalance of bargaining power was not overcome through ILA in this case.
[158] For these reasons, I conclude that s. 56(4)(c) of the FLA is also engaged on the basis of unconscionability.
Duress
[159] Turning to whether the Separation Agreement may be set aside on the basis of duress, the respondent argues that she relied on her husband to make decisions for the family, and stood by his side when he instructed the respondent to enter into the Separation Agreement.
[160] The applicant suggested that the matrimonial home be transferred solely to him to shield it from “creditors” and the “government”. The respondent testified that she agreed to this arrangement, believing honestly that this was the only way to save the matrimonial home for the family.
[161] According to the respondent, she believed the Separation Agreement was created to convince creditors of the genuineness of the separation. Her evidence is that she believed signing the Agreement was the only way to protect the matrimonial home, relying wholly upon the applicant’s judgment to see them through difficult times.
[162] The respondent gave evidence that she signed the Agreement based on her honest belief that the “bank” or the “government” would take away the home, given the applicant’s representations and the fact that the first mortgage was in default.
[163] While I accept that the applicant had a controlling nature, the respondent’s own evidence is that she was a willing participant in the scheme. There is no evidence that the applicant coerced or threatened the respondent in order to convince her to participate.
[164] Therefore, while I am satisfied that the applicant initiated the Separation Agreement, and that the respondent agreed to receive ILA and sign the Agreement in order to placate him, the evidence in the record does not rise to meet the threshold of duress.
Stage two: Is it appropriate to exercise to set the Agreement aside?
[165] In considering whether to exercise this Court’s discretion to set aside the Separation Agreement, it is first necessary to recap my conclusions with respect to the statutory preconditions under s. 56(4) of the FLA.
[166] The first ground under s. 56(4)(a) is engaged, based on my finding that the applicant deliberately withheld financial disclosure from the respondent prior to the execution of the Agreement.
[167] The second ground under s. 56(4)(b) is also engaged, as I have found that the respondent misunderstood the fundamental nature and consequences of the Separation Agreement due to the applicant’s deliberate lack of disclosure and misrepresentations as to the true purpose of the Agreement.
[168] Finally, the third ground under s. 56(4)(c) is engaged, as I have found the Separation Agreement to be unconscionable; it was negotiated in a manner that exploited the respondent’s vulnerabilities such that its terms deviate significantly from the relevant legislative objectives.
[169] Any one of these grounds alone would likely have provided a sufficient basis on which to render the Separation Agreement invalid.
[170] Based on their cumulative impact, I am satisfied that the negotiations leading to the Agreement were procedurally and substantively flawed. The “bargaining” process was tainted by inaccurate information and false representations. That process, through which the applicant took advantage of the respondent’s lack of sophistication and financial savvy, resulted in an Agreement that is fundamentally unfair. This unfairness adds further justification for exercising this Court’s discretion to set aside the Separation Agreement: LeVan, at para. 60.
Conclusion on s. 56(4) of the FLA
[171] For these reasons, the Separation Agreement is set aside under s. 56(4) of the FLA.
(v) [Section 15.2](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-3-2nd-supp/latest/rsc-1985-c-3-2nd-supp.html) of the [Divorce Act](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-3-2nd-supp/latest/rsc-1985-c-3-2nd-supp.html)
[172] Section 15.2 of the Divorce Act permits a court, looking at both the formation of the agreement and all the circumstances at the time of the application, to override the support provisions of an agreement and order support contrary to the agreement: Faiello v. Faiello, 2019 ONCA 710, 438 D.L.R. (4th) 91, at para. 17.
[173] As such, even where a separation agreement is not set aside under s. 56(4) of the FLA, a court may deal with an inadequate support provision by fashioning an order in accordance with s. 15.2 of the Divorce Act: Ann Wilton, Judy S. Miyauchi & Lynn Kirwin, Enforcement of Family Law Orders and Agreements: Law and Practice (Toronto: Thomson Reuters, 2019), at 3§3(a); Faiello, at paras. 60-64.
The Miglin test
[174] In Miglin, the Supreme Court articulated a two-stage inquiry applicable in the face of an application for spousal support that is inconsistent with a valid pre-existing agreement between the parties.
[175] At the first stage, the court must consider: (a) whether the agreement was negotiated under “unimpeachable” conditions such that there is no reason to discount it, and (b) if so, whether the substance of the agreement substantially complies with the overall objectives of the Divorce Act: Miglin, at paras. 57 and 80; Faiello, at paras. 45-46.
[176] At the second stage, the inquiry is focused on the circumstances surrounding the agreement at the time of the application for spousal support. If, and only if, the circumstances at the time of the application represent a significant departure from the range of reasonable outcomes anticipated by the parties, in a manner that puts them at odds with the objectives of the Divorce Act, the Court may be persuaded to give the agreement little weight: Miglin, at para. 91; Faiello, at para. 47.
Was the Agreement negotiated under unimpeachable conditions?
[177] In light of my findings above and applying the Miglin test, I find the Separation Agreement was not negotiated in “unimpeachable conditions.”
[178] To the extent there has there been a significant change in circumstances since execution of the Agreement, it is the growing affluence of the applicant.
[179] The applicant continues to work full-time. He has sole ownership of the matrimonial home, which is now mortgage-free and increasing in value. The respondent went from living in a shelter, to public housing, to residing with her parents. She has no assets of any significant value and now subsists on long-term disability payments.
[180] In short, in the years following its execution, the Separation Agreement left the applicant far better off than he had been prior to 2010, and the respondent far worse off.
Conclusion on s. 15.2 of the Divorce Act
[181] Accordingly, if I had not found that the Separation Agreement should be set aside, I would have found that the respondent was entitled to spousal support, notwithstanding the terms of that Agreement.
ISSUE 2: DETERMINATION OF SPOUSAL ENTITLEMENTS
Having found that the Separation Agreement must be set aside, I turn now to the issue of the parties’ respective spousal entitlements, namely: (a) ownership of the matrimonial home; (b) equalization of the parties’ net family property; (c) child support, and (d) spousal support.
(a) Ownership of the matrimonial home
[182] The respondent seeks a declaration that she is a 50% joint owner of the matrimonial home, either on the basis of a resulting trust or on the basis of unjust enrichment.
[183] The respondent also seeks an accounting for all rents received by the applicant from April 2010 onward.
[184] The respondent further seeks an accounting for all payments received by the applicant from the respondent in the amount of $600.00 per month between April 2010 and December 2017, representing payments towards the $45,000.00 second mortgage which the respondent alone assumed under the terms of the Separation Agreement.
[185] The applicant argues that if the Separation Agreement is set aside and the respondent retains an interest in the matrimonial home, he should be entitled to repayment of 50% of all expenses associated with the property on the basis that he assumed disproportionate responsibilities for the mortgage and maintenance after 2010.
[186] The applicant also states that he paid down the $45,000.00 second mortgage, even though the Separation Agreement stated that this would be the sole responsibility of the respondent.
[187] The respondent testified she paid the applicant $600.00 monthly from April 2010 to December 2017, when she was no longer able to afford the payments. According to this schedule, the debt in respect of the second mortgage would have been more than repaid.
[188] Part I of the FLA governs this Court’s authority to determine spousal entitlements to family property in the absence of a domestic contract, including questions of title to property between spouses.
[189] Section 10 of the FLA provides that questions of title must be settled before the property can be equalized: Korman v. Korman, 2015 ONCA 578, at para. 25 and 29; Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70, at pp. 90-91; Gionet v. Pingue, 2018 ONCA 1040, at para. 11.
[190] Questions of title may not always be resolved simply by looking to legal title; even if a party does not hold legal title, they may advance a claim that they hold beneficial ownership in the property through a resulting or constructive trust.
[191] A resulting trust exists when a party makes a financial contribution to the initial purchase of a property, but then gratuitously transfers their title. In other words, a resulting trust arises where one party contributes to the purchase of the property but then transfers their interest in the property to the other party for them to hold “in trust” for the transferring party: Kerr v. Baranow, 2011 SCC 10, at paras. 16-19.
[192] When dealing with a matrimonial home, s. 14 of the FLA creates a presumption of a resulting trust when there has been a gratuitous property transfer from one party to the other: Korman, at paras. 26-27.
[193] However, as Cromwell J. observed in Kerr, at para. 20, “the presumption of resulting trust … is neither universal nor irrebuttable.” Accordingly, when the presumption applies, the party holding the interest may rebut the presumption by showing that the gratuitous transfer was a gift and there was no intention for them to hold the transferred interest for the other party’s benefit.
[194] I find that the transfer of title in this case resulting from the Separation Agreement was for no compensation and was not a gift. I find the presumption of a resulting trust under s. 14 of the FLA is not rebutted in this case.
[195] I note as well that claims of ownership of land advanced by way of a resulting trust are subject to the 10-year limitation period under s. 4 of the Real Property Limitations Act, R.S.O. 1990, c. L.15: Waterstone Properties Corporation v. Caledon (Town), 2017 ONCA 623, at para. 32; McConnell v. Huxtable, 2014 ONCA 86, at paras. 38-39. Therefore, the respondent’s resulting trust claim is not statute-barred.
[196] I find that the respondent is entitled to a 50% beneficial interest in the matrimonial home and is entitled to share in the post-separation increase in the matrimonial home’s value.
[197] Under s. 19(1) of the FLA, both spouses have an equal right to possession of a matrimonial home.
[198] The applicant has been living in the matrimonial home for eleven years since the date of separation. The home is now unencumbered by mortgages. The applicant has been responsible for all decision-making in relation to the house, including expenditures for upkeep, arrangements for the rental of the basement apartment, and related logistics.
[199] On the basis that the respondent retains a one-half interest in the matrimonial home retroactive to April 19, 2010, the respondent argues that she is entitled to a share of all the rents for the basement apartment received by the applicant after that date. The respondent seeks an order requiring the applicant to account for these funds.
[200] I am not prepared to make this order. While the applicant received income from the rental apartment in the house, he also paid all the expenses towards the upkeep of the property, including payments towards the first mortgage.
[201] With respect to the second mortgage, I accept the respondent’s evidence that she paid cash to the applicant to meet the $600.00 monthly commitment toward paying down this debt. This conclusion is reinforced by the fact that the applicant never sought to enforce this aspect of the Separation Agreement. Given the steps the applicant took to enforce the clause of the Separation Agreement relating to the respondent vacating the home, it is highly unlikely the applicant would have taken no steps to enforce the respondent’s commitment to take responsibility for the second mortgage.
[202] The amount of the second mortgage, however, was significantly less than the remaining portion of the first mortgage for which the applicant was solely responsible.
[203] The respondent also seeks occupation rent from the applicant for this period. It is true that once the Separation Agreement is set aside, there was no legal basis for the applicant to require the respondent to leave the matrimonial home.
[204] However, the respondent took no steps to challenge the arrangement under which she left the matrimonial home after 2010 until the divorce proceedings were initiated by the applicant in 2018. I would reiterate here as well that the applicant was responsible for all the expenses relating to the home throughout this period.
[205] In these circumstances, an order for occupation rent is not warranted.
[206] I also reject the applicant’s request for repayment of expenses associated with the matrimonial home.
[207] It is well established law that parties should generally share in the capital expenses of a joint property: see e.g., Taillefer v. Taillefer, 2012 ONSC 6684, at para. 36. While the applicant has paid these expenses and contributed to the upkeep of the property on his own since 2010, these expenditures are off-set by the rent the applicant has collected for the basement apartment, the respondent’s $600.00 monthly contributions, and the fact that the applicant alone has lived in the house.
[208] Therefore, as a result of setting aside the Separation Agreement, the respondent retains a 50% beneficial interest in the matrimonial home.
[209] As such, going forward the parties will need to collaborate on all decisions relating to the matrimonial home and share in any rental income and maintenance costs, unless an agreement can be reached whereby one party buys the other party’s interest, or the property is sold.
[210] As a related matter, the respondent seeks the return of jewellery and other personal effects that she claims she left in the matrimonial home.
[211] Pursuant to s. 24(1)(d)(ii) of the FLA, a court may direct that the contents of the matrimonial home be removed from the home for the use of a spouse or child.
[212] The respondent’s jewellery or any other possessions of value currently in the matrimonial home should be returned to the respondent. The applicant shall provide an inventory of any contents of the home which belong to the respondent, so arrangements for their return may be made.
[213] Having determined that the respondent is entitled to 50% beneficial ownership of the matrimonial home on the basis of an unrebutted statutory presumption of a resulting trust, it is not necessary to consider the respondent’s alternative argument with respect to unjust enrichment.
[214] I turn now to the calculation of net family property, if any, and the application of the equalization provisions under the FLA.
(b) Equalization of net family property
[215] According to s. 4 of the FLA, “net family property” generally refers to the value of assets that each spouse owned on the valuation date (subject to statutory exceptions), less each spouse’s liabilities on the valuation date, and deducting for the net value of the property that they each owned (other than the matrimonial home) on the date of marriage.
[216] The spouse whose net family property is the lesser of the two is entitled to a payment of one-half of the difference, pursuant to s. 5(1) of the FLA:
When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.
[217] In this case, the valuation date is the date of separation: August 1, 2010.
[218] It is difficult to determine the entirety of the net family property in this case, other than the matrimonial home, in the absence of the necessary financial disclosure.
[219] It would appear that the other main asset which could be subject to equalization is the applicant’s Guyana property.
[220] In addition, the respondent seeks the return of $20,000.00 “taken from the parties joint account, to renovate and maintain the husband’s property in Guyana,” or for the applicant to pay half of that sum to the respondent.
[221] Other than the matrimonial home, is there sufficient evidence of assets and liabilities as at the date of separation to order any further equalization of net family property?
[222] With respect to the property in Guyana, there is a Registrar’s Certificate in the record, dated December 22, 2002, which states the applicant is the sole owner. It appears the property was transferred to him by three of his aunts. The applicant states he only discovered the property during the discovery process for these proceedings.
[223] The applicant’s position is that the Guyana property was gifted to him and therefore is excluded from the calculation of net family property under s. 4(2) of the FLA. Section 4(3) states that the onus of establishing excluded property rests with the party claiming the exclusion.
[224] In this case, the respondent has not provided evidence to counter the applicant’s assertion that the Guyana property was a recently discovered gift.
[225] Therefore, I find the Guyana property to be excluded from the calculation of net family property.
[226] With respect to the withdrawal of $20,000.00 for the renovation of the Guyana property, I find this transaction was not established in the evidence on the record.
[227] Accordingly, as of the date of separation in August 2010, I find that the only net family property subject to equalization is the matrimonial home. Since I have found that each party is entitled to a one-half interest in the property, no further equalizing exercise is necessary.
[228] I would add that, even if an equalization payment had been warranted in this case, the respondent’s post-separation equalization claim likely could have been subject to the six-year limitation period pursuant to s. 7(3)(b) of the FLA.
[229] In light of setting aside the Separation Agreement, I turn now to the remaining issues of child support and spousal support.
(c) Child support
[230] Section 15 of the Divorce Act governs this Court’s authority to make orders for corollary relief upon the breakdown of the marriage, including spousal and child support.
[231] Pursuant to s. 15.1(3) of the Divorce Act and s. 16 of the Federal Child Support Guidelines, SOR/97-175, a parent’s annual income for child support purposes is determined using the sources of income set out under the heading “Total Income” in that parent’s T1 General Tax Form (at line 150), unless the court imputes additional income.
[232] The parties agreed on an interim basis that the applicant would pay $536.00 in child support, on the basis of the applicant’s stated 2019 income of $58,000.00. This arrangement arose out of the trial management conference held on March 13, 2020 before Kiteley J.
[233] The respondent now argues that child support should have been calculated on the basis of the applicant’s revised and greater 2019 income of $63,611.00, yielding a table amount of $591.00, or an additional $55.00 per month.
[234] In an earlier endorsement, dated September 8, 2020, I decided a motion in favour of the respondent for expenses relating to Chelsey’s University fees under s. 7 of the Child Support Guidelines. The order requires the applicant to pay $11,780.00 towards Chelsey tuition, books, ancillary fees and residence expenses.
[235] With one exception, I do not see a basis for retroactive child support in light of the fact child support was not sought by the applicant for the years both Ashley and Chelsey lived in the matrimonial home, and given the existing arrangements for child support and s. 7 expenses.
[236] The exception is that I accept the respondent’s argument that table child support, which the applicant had agreed to provide arising out of the trial management conference of March 13, 2020, should have been based on the applicant’s 2019 income of $63,611.00.
[237] As a result, arrears will be owing based on the additional $55.00 monthly child support award, with pre-judgment interest in accordance with s. 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[238] Ongoing child support in the amount of $591.00 shall continue for the period that Chelsey is a full-time undergraduate University student.
(d) Spousal support
[239] In Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420, the Supreme Court of Canada recognized three conceptual grounds for entitlement to spousal support: (1) compensatory; (2) non-compensatory; and (3) contractual. The third ground is not relevant here, as the Separation Agreement has been set aside.
[240] Compensatory support is premised on contributions of one spouse to the other during their relationship. That contribution may arise out of the roles that the parties assumed. Those roles may confer an advantage on one party (such as career enhancement) and a disadvantage to the other (say a spouse giving up, delaying or impairing a career to assume a caregiving role during the relationship). Further, a spouse may make a financial contribution to the other's career (such as supporting the spouse through their schooling).
[241] Non-compensatory support is based on need and ability to pay. This ground of support is based on the relationship itself and the financial interdependence arising from that relationship. A claim to non-compensatory spousal support can arise where there is no basis for compensatory support, or as a complement to a claim for compensatory support.
[242] In order to determine an entitlement to spousal support, the overarching criterion is what is reasonable having regard to the “conditions, means and other circumstances of the parties”: Plese v. Herjavec, 2020 ONCA 810, at para. 14. As stipulated by s. 15.2 of the Divorce Act, a court must also consider the factors and objectives of a spousal support order.
[243] The factors to consider are set out in s. 15.2(4) of the Act. They are: (a) the length of time that the spouses cohabited; (b) the functions performed by each spouse during the cohabitation; and (c) whether there were any orders, agreements or arrangements relating to the support of either spouse.
[244] The objectives, as outlined in s. 15.2(6) of the Divorce Act, are to: (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; (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (d) insofar as possible, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[245] In light of the respondent’s current situation, namely being on long-term disability leave, it is important to consider the impact that the illness or disability of a spouse may have on their entitlement to spousal support.
[246] In Bracklow, McLachlin J. (as she then was) considered the issue of how a spouse’s illness or disability might affect a spousal support award. She highlighted, at paras. 48-49, that a proper determination of non-compensatory spousal support should include consideration of the fact that one spouse is self-sufficient upon the breakdown of a marriage while the other has a disability which may limit their ability to support themselves:
To permit the award of support to a spouse disabled by illness is but to acknowledge the goal of equitably dealing with the economic consequences of marital breakdown that this Court in Moge, supra, recognized as lying at the heart of the Divorce Act. It also may well accord, in my belief, with society’s sense of what is just …
Divorce ends the marriage. Yet in some circumstances the law may require that a healthy party continue to support a disabled party, absent contractual or compensatory entitlement. Justice and considerations of fairness may demand no less.
… [A] review of cases suggests that in most circumstances compensation now serves as the main reason for support. However, contract and compensation are not the only sources of a support obligation. The obligation may alternatively arise out of the marriage relationship itself. Where a spouse achieves economic self-sufficiency on the basis of his or her own efforts, or on an award of compensatory support, the obligation founded on the marriage relationship itself lies dormant. But where need is established that is not met on a compensatory or contractual basis, the fundamental marital obligation may play a vital role. Absent negating factors, it is available, in appropriate circumstances, to provide just support. (Emphasis in original).
[247] In this case, the parties were married for 18 years. The respondent was primarily responsible for childcare when the children were young. It is less clear whether these career pauses negatively affected the respondent’s earning capacity.
[248] Before the respondent went on disability, the difference in income between the parties was modest. For example, in 2016, the applicant reported employment earnings of $39,383.96, while the respondent’s reported employment earnings were $38,213.77.
[249] By 2019, however, the gap had grown considerably.
[250] The applicant earned $63,611.00 in 2019.
[251] In June 2018, the respondent went on short-term disability leave through her employer. In May 2019, her application for long-term disability benefits was approved. She now receives $1851.00 monthly, for an annual income of $22,212.00.
[252] As the respondent’s change in circumstances arose after the breakdown of the marriage, I must consider the extent to which the post-separation change may affect her entitlement to support.
[253] In Ryan v. Ryan, 2017 ONSC 1377, Wilson J. reviewed, at para. 211, the principles applicable when assessing entitlement to support for circumstances arising post-separation, drawing on Chappel J.’s decision in Fyfe v. Jouppien, 2011 ONSC 5462:
• The question is whether, taking into account all of the circumstances of the particular case, and the objectives underlying a spousal support award it is reasonable on an objective analysis to expect the parties to continue to be responsible for each other in the event of post separation need, and if so, for how long.
• Economic hardship in light of the new circumstances must be in the reasonable contemplation of the parties at the time of the breakdown of the marriage. Marriage is not a lifetime future guarantee for support.
• The starting point is whether there is evidence during the period prior to separation to rebut the presumption of mutuality and interdependence arising from the marriage relationship itself. If there is not, it may be reasonable to expect that the parties will support each other for a reasonable period of time for need arising post-separation.
• The passage of time may, or may not be an important consideration in assessing entitlement.
• Time will be less important if the parties have not made a clean break and their relationship continues to be characterized by mutuality and interdependence. In such circumstances, the conclusion may be that the expectation of mutual support and dependency arising from the marriage relationship has continued.
• The presence of ongoing shared responsibility for the raising of children post separation is very relevant to the question of continued mutuality and interdependence.
• However, where the parties both take steps post separation to unravel their interdependencies, effect a clean break, and do not have children in their care, then the objective of promoting self sufficiency within a reasonable time post separation becomes more important.
• If the situation giving rise to need is a medical problem, then the timing of the onset is important. If a disability arises out of a pre-existing known condition that existed during the marriage or at the time of breakdown of the marriage, there would exist a connection between the disability and the marriage or its breakdown.
• If the marriage is short lived, the objective of promoting self sufficiency will be given greater weight in assessing entitlement to support.
[254] Applying the foregoing principles, the question to be addressed is whether, taking into account all of the circumstances, and the objectives underlying a spousal support award, it is reasonable on an objective analysis to expect the applicant to continue to be responsible for the respondent based on her post-separation circumstances, and if so, for how long.
[255] In this case, there is no evidence to rebut the presumption of mutuality and interdependence arising from the marriage relationship prior to separation. To the contrary, even post-separation, I have found that the parties’ lives remained intertwined in many ways.
[256] The marriage was not short lived, and although the parties had attained a measure of independence, they remained in close contact throughout the period of separation, retained each other’s insurance benefits, and continue to share the cost of Chelsey’s post-secondary education and expenses.
[257] On the other hand, the respondent’s disability was not apparent during the marriage and was not a foreseeable consequence of the marriage. Indeed, the precise cause, nature, and duration of the disability is unclear on the record before me. Further, a significant amount of time passed between separation and the respondent’s disability-related reduction in earning capacity.
[258] Taking into account the circumstances of this case, I am not satisfied any spousal support award is reasonable for the period prior to the respondent’s change in circumstances relating to her disability leave in June 2018.
[259] Presently, however, in light of the significant income disparity between the parties, the degree of ongoing mutuality in their relationship, the applicant’s ability to pay, and the respondent’s more significant needs, spousal support is warranted.
[260] In view of the uncertainty regarding the nature and duration of the respondent’s present disability impairments, I find that the amount of spousal support should be modest.
[261] In light of the independence achieved by the parties for a number of years after separation, the quantum of spousal support should take the low range of the Spousal Support Advisory Guidelines as a point of departure.
[262] The determination of spousal support should also take account of existing awards of child support and s. 7 expenses: Anderson v. Anderson, 2018 BCSC 928, at para. 49.
[263] Bearing these factors in mind, I find the applicant should provide monthly spousal support to the respondent in the amount of $500.00, retroactive to June 2018, when the respondent’s disability leave began. Therefore, between June 2018 and March 2021, the respondent is entitled to $16,500.00 in retroactive spousal support.
[264] Balancing entitlement with the need for finality, these spousal support payments shall continue for five years from the date of this judgment, or until the respondent returns to full time work, whichever comes first, subject to any material change to circumstances of the parties.
[265] The retroactive portion of this spousal support is subject to pre-judgment interest calculated pursuant to s. 128 of the Courts of Justice Act.
DISPOSITION
[266] In the result:
(a) With respect to the divorce: The divorce is severed from the corollary issues and either party may proceed to obtain a divorce judgment.
(b) The Separation Agreement is set aside.
(c) The respondent is a 50% joint owner of the matrimonial home by way of resulting trust.
(d) The applicant shall provide an inventory of jewellery and any other possessions of the respondent in the matrimonial home and arrange for their return to the respondent.
(e) The applicant shall pay child support for Chelsey at the monthly amount of $591.00, retroactive to January 2019 (together with pre-judgment interest), and will continue same for the period that Chelsey is a full-time University student.
(f) The applicant shall pay $16,500.00 in retroactive spousal support, together with pre-judgment interest, and ongoing monthly spousal support to the respondent in the amount of $500.00 continuing for five years or until the respondent returns to full time employment, whichever comes first, and subject to any material change of circumstances.
[267] If the parties cannot agree on costs, the respondent may provide brief costs submissions (not in excess of three pages, together with a bill of costs) within 21 days of the release of this judgment, to be followed by brief costs submissions from the applicant (of the same length) no
later than 14 days after the receipt of the respondent’s submissions. Brief reply costs submissions from the respondent, if necessary, may be submitted seven days after the receipt of the applicant’s submissions.
Sossin J.
Released: March 23, 2021