COURT FILE NOS.: FS-17-21818
CV-18-00607821
DATE: 20210521
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
M.S.
Applicant
– and –
I.S.
Respondent
TOE
Applicant
Jaret Moldaver and Martine Ordon, for the Applicant
Sean Zeitz, for the Applicant, TOE
Noreen Aleem, Mick Hassell for the Respondent, I.S.[^1]
– and –
I.S.
Respondent
HEARD: October 20-23, 26-30, November 2-6, 9-10, 12, 2020 (by videoconference)
REASONS FOR DECISION
NISHIKAWA j.
Contents
Overview and Procedural Background. 3
Issues. 4
Factual Background. 5
The Parties’ Relationship. 5
M.S. Purchases the Property. 6
J.’s Birth. 6
The Parties Enter into the Agreement 6
The Property. 7
The Parties’ Relationship Breaks Down Further 7
I.S. Attempts to Redeem the Mortgage. 8
M.S. Commences the Application. 8
Analysis. 8
The Evidence. 8
The Applicants. 8
The Respondent 8
Credibility. 9
The Statutory Framework. 12
The Agreement 13
Parenting Arrangements. 13
Child Support 14
Spousal Support 15
Confidentiality Provisions. 15
Name Change Provision. 16
Additional Provisions. 16
Was There a Meeting of the Minds Between the Parties?. 16
The Applicable Principles. 16
The Parties’ Positions. 17
Findings. 17
Did I.S. Repudiate the Agreement?. 21
The Applicable Principles: Repudiation and Fundamental Breach. 21
The Parties’ Positions. 23
What Is the Purpose of the Agreement?. 24
The Alleged Fundamental Breaches. 25
Summary. 42
Did M.S. Accept the Repudiation and Elect to Terminate the Agreement?. 43
Did M.S. Breach the Agreement?. 45
Should This Court Exercise Its Discretion to Set Aside the Agreement?. 46
Did I.S. Breach the Mortgage Agreement?. 48
Background to the TOE Mortgage. 48
The Option to Sell or to Redeem.. 49
The Parties Positions. 49
Was I.S. in Default of the Mortgage?. 50
Should I.S. Have Been Entitled to Redeem the Mortgage?. 53
What Are the Appropriate Remedies?. 59
To What Relief is I.S. Entitled?. 59
To What Relief are M.S. and TOE Entitled?. 60
Conclusion. 61
Overview and Procedural Background
[1] The main issue in this case is whether the domestic contract agreed to by the parties in October 2015 ought to be set aside.
[2] The Applicant, M.S., and the Respondent, I.S.,[^2] were involved in an extra-marital relationship from 2010 to 2014. In August 2014, I.S. gave birth to the parties’ child, J., who is now six years old. Throughout the parties’ relationship, M.S. was married to G. and lived with her and their two children.
[3] In August 2014, I.S. brought an Application in this court seeking, among other things, child and spousal support. M.S. disputed, and continues to dispute, that he and I.S. were ever spouses within the definition of the Family Law Act, R.S.O. 1990, c. F.3.
[4] On October 2, 2015, the parties resolved all matters between them and entered into minutes of settlement and full and final releases (the “Agreement”), which they agreed constituted a domestic contract under the Family Law Act.
[5] Despite having entered into the Agreement, the parties continued to have significant ongoing conflict over M.S.’s access to J. and financial issues, among other matters. Their attempts at mediation failed.
[6] In January 2017, I.S. brought an application in the Ontario Court of Justice (“OCJ”) to enforce the Agreement.
[7] In October 2017, M.S. brought this Application to set aside the Agreement under s. 56(4)(c) of the Family Law Act. M.S. submits that the Agreement is void ab initio because there was never a meeting of the minds, or consensus ad idem, between him and I.S. on its terms. Alternatively, M.S. seeks to set aside the Agreement on the basis that I.S. repudiated or fundamentally breached its key terms, denying him substantially the whole benefit of the Agreement. M.S. also seeks damages for intentional infliction of emotional distress, punitive and exemplary damages.
[8] I.S. denies repudiating the Agreement, which she maintains is valid and binding on both parties. I.S. alleges that M.S. has breached the Agreement by failing to pay certain expenses. She seeks arrears and/or damages.
[9] The corporate applicant, TOE, is a company for which M.S. is the principal and sole shareholder. TOE holds a mortgage registered against title to a house that M.S. purchased for I.S. in December 2013. In October 2018, TOE brought a civil action against I.S. to enforce its remedies under the mortgage.
[10] M.S.’s family law application and TOE’s civil action were consolidated pursuant to the Order of Goodman J. dated February 21, 2019. Both cases were to proceed in accordance with the Family Law Rules.
[11] This proceeding has a contentious history, characterized by numerous motions and appearances. Only those procedural steps that are relevant to the issues to be determined at trial will be mentioned here. This proceeding was also vigorously case managed. Despite the benefit of significant judicial resources, the issues were not narrowed and additional issues were raised for the first time at trial, including the Respondent’s attempt to rely on an amended Answer for which leave had not been granted. I further note that rulings on objections and other matters at trial were made on the record and will not be repeated in these Reasons.
Issues
[12] As a result of the family law application and civil action proceeding together, the trial raises various inter-connected issues. The issues between M.S. and I.S., including the relief requested, will be addressed first. The issues relating to the TOE mortgage will be addressed subsequently. The issues to be determined in this case are as follows:
(a) Was there a meeting of the minds, or consensus ad idem, between the parties on the Agreement, or is the Agreement void ab initio?
(b) Did the Respondent, I.S., repudiate or fundamentally breach the Agreement?
(c) If I.S. did not repudiate or fundamentally breach the Agreement, did she nonetheless breach its terms?
(d) Did M.S. breach the Agreement?
(e) If the Agreement was repudiated, should this court exercise its discretion to set the Agreement aside?
(f) Did I.S. default on the mortgage?
(g) What are the appropriate remedies?
Factual Background
[13] The following is a chronology of events for the purposes of setting out the context of the parties’ dispute. Specific facts and evidence will be examined in greater detail in the Analysis section. I note that the parties’ evidence and arguments will be addressed to the extent that they are relevant to the legal issues identified above.[^3]
The Parties’ Relationship
[14] It is undisputed that M.S. and I.S. met through an online dating platform in the spring of 2010. They disagree on the nature of the website and the type of arrangements people seek on it; however, no evidence from the website was adduced at trial. At the time, M.S. was 49 years old and I.S. was 27 years old.
[15] M.S. maintains that he was not looking for a long-term relationship because he continued to live with his wife and two children, who were teenagers at the time. M.S. testified that the parties’ relationship began as a money for sex arrangement that eventually “morphed into something more.”
[16] I.S. denies that she ever agreed to a transactional arrangement. She testified that she was looking for a stable, long-term relationship. I.S. testified that M.S. swept her off her feet and that they spent significant time together, including many nights a week and numerous trips.
[17] It is undisputed that M.S. and I.S. saw each other regularly. I.S. eventually moved into a condominium in downtown Toronto, which M.S. paid for. The lease for the condominium was in the name of one of M.S.’s companies. At some point, I.S.’s grandmother came to live at the condominium.
[18] In the fall of 2010, M.S. hired I.S. to work at his company (the “Company,” which is distinct from TOE). During that time, I.S. obtained a trading licence at the Company’s expense.
[19] In April 2013, I.S. became pregnant. The pregnancy was not planned. In June 2013, I.S. terminated the pregnancy. I.S. testified that M.S. required her to have an abortion, which M.S. denies. I.S. testified that they had previously discussed having children, including possible names. M.S. admitted that they talked about children’s names but maintains that he had told I.S. that he was not interested in having more children and that she reassured him that she was on birth control.
[20] I.S. felt a great deal of guilt about the abortion and became depressed. Both parties’ evidence is that the pregnancy and abortion caused significant strain on their relationship.
M.S. Purchases the Property
[21] In December 2013, M.S. purchased a house in the Beaches area of Toronto (the “Property”) for $1,187,000. Title to the Property was registered in I.S.’s name.
[22] The entire purchase price of the Property was advanced by TOE, a company for which M.S. is the sole shareholder and principal. TOE registered a mortgage on title to the Property for the full purchase price. The mortgage was interest-free for two years until December 19, 2015, at which time the entire balance would be payable.
J.’s Birth
[23] In late November or early December 2013, I.S. became pregnant again.
[24] Before telling M.S. about the pregnancy, I.S. went to the office, packed her belongings and liquidated her accounts. On January 12, 2014, I.S. notified M.S. of the pregnancy by email. I.S. did not return to work in the meantime.
[25] By that time, M.S. was winding down the operations of the Company. In January 2014, I.S. brought an action against M.S. for wrongful dismissal, alleging that she was terminated because she was pregnant. The case was eventually settled.
[26] I.S. gave birth to J. on August 23, 2014. In August 2014, I.S. brought an application for child and spousal support, among other things (Court File No. FS-14-19641). M.S. denied that the parties were ever spouses.
[27] M.S. commenced paying child support on a without prejudice basis in August 2014. The monthly amount was $3,500.
[28] M.S. visited J. for the first time in December 2014. I.S. testified that the parties reconciled around that time and that M.S. was living with her at the Property. M.S. denies that they reconciled and that he ever lived at the Property.
The Parties Enter into the Agreement
[29] M.S. and I.S., with the assistance of counsel, negotiated the terms of a potential resolution for over a year. On October 2, 2015, they entered into the “Minutes of Settlement/Domestic Contract/Full and Final Releases.”
The Property
[30] The Agreement provided that M.S. would cause TOE to extend the interest-free period of the mortgage to June 30, 2018. At that time, I.S. would have the option of either purchasing or selling the Property, subject to terms that will be detailed further below.
[31] On November 12, 2015, the parties entered into an Agreement Amending Charge/Mortgage (the “Amending Agreement”) extending the due date of the mortgage balance to June 30, 2018. All the other terms of the mortgage continued in full force and effect.
The Parties’ Relationship Breaks Down Further
[32] Despite having agreed to terms to govern their parenting and financial arrangements, the parties’ relationship deteriorated further.
[33] The parties continued to have disputes about various issues, including M.S.’s access to J. and the payment of expenses, among other things. M.S. alleges that I.S. constantly threatened to tell his family about their relationship and about J., despite having agreed not to in the Agreement.
[34] I.S. alleges that M.S. was abusive toward her during access exchanges. She expressed regret at having agreed to certain terms in the Agreement.
[35] The parties’ counsel corresponded at length with each party about their respective grievances and concerns. During that time, I.S. had a succession of different lawyers.
[36] In January 2017, I.S. took the position that M.S. was in default of his obligations and filed the Agreement with the OCJ to have the terms enforced by the Family Responsibility Office (FRO).
[37] On May 19, 2017, the parties attended a case conference in the Superior Court before McWatt J. and agreed to the terms of a consent order, which included a without prejudice access schedule, mediation of the parenting issues with Dr. Irwin Butkowsy, and mediation of the financial issues with Stephen Grant.
[38] In June and July 2017, M.S., through his counsel, sent letters to I.S.’s counsel stating that he was assessing his legal remedies in view of I.S.’s repudiation of the Agreement.
[39] In July 2017, the parties attended mediation of the financial issues with Stephen Grant, but were unsuccessful in resolving them.
[40] In the fall of 2017, the parties attended mediation with Dr. Butkowsky regarding the parenting issues, but were unable to resolve them. The parties had agreed not to engage in litigation while mediating with Dr. Butkowsky.
I.S. Attempts to Redeem the Mortgage
[41] On September 1, 2017, M.S.’s counsel sent an email to I.S.’s counsel to follow up on an earlier request for an “appraisal inspection” of the Property.
[42] On September 12, 2017, I.S.’s counsel sent an email to M.S.’s counsel stating that she had been approved for financing and would be exercising the option to redeem the mortgage. I.S. had arranged for mortgage financing from Scotiabank through a mortgage agent, J.M.M. The arrangement included transferring a one percent interest in the Property to her friend, A.R.
[43] On September 18, 2017, I.S. did not allow an appraiser hired by TOE to attend the Property and advised him that she would be “returning” the mortgage.
M.S. Commences the Application
[44] On October 4, 2017, M.S.’s counsel advised I.S.’s counsel that M.S. would be bringing an application to set aside the Agreement and that he would not be performing any of his obligations under the Agreement other than paying child support and s. 7 expenses.
[45] On October 16, 2017, M.S. commenced this Application to set aside the Agreement.
[46] In November 2017, I.S. brought a motion (in Court File No.14-19641) to compel TOE to allow her to redeem the mortgage. The motion was dismissed by Gilmore J. on the basis that there were significant factual and legal issues regarding the enforceability of the Agreement: I.S. v. M.S., 2017 ONSC 7160.
Analysis
The Evidence
The Applicants
[47] The Applicants’ witnesses were M.S.; I.S.’s friend, A.R.; and I.S.’s mortgage broker, J.M. The Applicants argued at trial that I.S. ought to have called A.R. and J.M.M.[^4]
The Respondent
[48] The Respondent’s witnesses were herself; her friends, P.S. and J.P.A.; her neighbour, F.C.; her real estate lawyer, D.R.L.; and a Children’s Aid Society social worker, K.T.
Credibility
[49] Needless to say, the parties have diametrically opposed versions of events, from the beginning of their relationship to the present. As a result, much of the case turns on the parties’ credibility. As Gilmore J. stated in Dai v. Ding, 2019 ONSC 6118, at para. 38, assessment of credibility is “not a scientific process and involves a consideration of many relevant factors.” Gilmore J. outlined the relevant considerations, based on recent family law decisions in G. (J.M.) v. G. (L.D.), 2016 ONSC 3042, and Christakos v. De Caires, 2016 ONSC 702, and summarized in Re Novak Estate, 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 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 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).
[50] In this case, assessing credibility poses some challenges because the relationship at issue was based on dishonesty. To this day, M.S. remains married his spouse, G., whom he married in 1991. M.S. has concealed the relationship and J.’s existence from G. and their two children, who are now adults. I.S. knew that M.S. was married and that he had children. I.S. even met the children while she was working at the Company, although they were not told about the nature of the relationship. Both parties have demonstrated an ability to perpetrate an ongoing deception to serve their purposes.
M.S.
[51] The Applicants submit that M.S. was a credible and forthright witness and that his evidence ought to be accepted in its entirety. They submit that since the Agreement was executed, his conduct has been “exemplary.” In their view, M.S. has stepped up to his obligations, both financial and parental, toward J.
[52] For the purposes of assessing credibility, in my view, M.S.’s testimony at trial cannot be separated from the fact that he continues to conceal that he has another child from the rest of his family. In addition, I find that M.S.’s testimony was inconsistent with the documentary evidence or otherwise problematic in the following ways:
• M.S. tried to portray the relationship as casual and transactional, including by testifying that “it was always sex for money.” Contrary to his categorical statement, the evidence shows that M.S. and I.S. were together for over three years, during which he rented a condominium for her, gave her a car, hired her to work for the Company, took numerous trips with her, and introduced her to certain friends and family, including his father and siblings;
• When M.S. was confronted with text messages expressing his feelings about I.S. and their future, he testified that he was not talking about their relationship, but about I.S.’s career. This explanation was not credible, given the content of the messages, which stated, for example: “thinking how absolutely crazy i am about you and how excited i am for [the] future”; “[i]t may not seem so sometimes but [the] future is actually very bright”; and “Don’t give up please I. Its [worth]fighting for”;
• When cross-examined about the ongoing nature of their relationship, M.S. disingenuously testified that he continued to see I.S. because she worked at the Company, even though it was clear from the evidence that they were still in a relationship at the time;
• M.S. denied that he lied to his family when he told them that he was on business trips when he was actually travelling with I.S. The denial is untenable, given that the justification was that he worked “24/7” and was “always” on business trips. The one example he provided involved meeting a friend who worked in Switzerland and would not be considered a business trip; and
• As detailed later in these Reasons, M.S.’s explanation for purchasing the Property for I.S. is not credible.
[53] M.S.’s testimony demonstrates a reluctance to be forthright about the nature of the relationship, which is relevant to the context within which the Agreement was negotiated. This reluctance also gives rise to questions about M.S.’s credibility generally.
[54] Moreover, M.S.’s testimony was frequently broad, overstated, and lacking in specifics, as further detailed in these reasons. For example, he testified that there was a “constant threat of extortion” and that I.S., her lawyers, friends and family threatened him and his family. It became clear from the evidence that no member of his family was ever threatened by I.S. or anyone else. The specific threats that M.S. testified to were those made by I.S. to him to disclose the relationship to his family. M.S. also testified that I.S.’s father had threatened him. In response to further questioning, it was evident that I.S.’s father told M.S. that he had to fulfill his obligations toward I.S. and their unborn child. No threat was made by I.S.’s father.
I.S.
[55] I.S.’s credibility is also significantly challenged. Rather than respond to questions, I.S. took examination in chief as an occasion to tell her version of the story, in great detail, even when it was not relevant to the issues to be determined by the court. On cross-examination, I.S. made certain admissions, but was frequently argumentative and took issue with the questions being asked. Rather than respond to the questions, I.S. repeatedly sought to cast M.S. and his counsel in a negative light, including by accusing counsel of lying. More than once, I.S. sought to make argument to the court. This combativeness reflects that I.S. has a lot at stake in this proceeding, namely, the Property, and weighs against her credibility.
[56] I.S. too made categorical, sweeping and self-serving statements. For example, I.S. testified that she “never” reduced access and that M.S. breached the no-alcohol provision “many times.” As further detailed in these reasons, those statements were inaccurate. I.S.’s testimony was also undermined in the following respects:
• I.S. testified that M.S. was in default of child support payments but later admitted that she had post-dated cheques for child support that she did not cash and eventually sent back to M.S.;
• She alleged that M.S. abused her and called her names in front of the neighbours during access exchanges but failed to question any of her witnesses, including her neighbour, about it;
• Similarly, while I.S. testified that she and M.S. reconciled and cohabitated at the Property, P.S., who also lived at the Property, was not asked whether M.S. ever resided at the Property;
• While seeking to have the Agreement upheld, I.S. nonetheless insinuated that M.S. had tricked her into entering the Agreement by promising that they would reconcile;
• When asked to confirm that certain letters from her counsel were what I.S. relied upon as notice under the Agreement, I.S. refused to confirm and said there was other correspondence. However, the letters she relied upon had not been adduced into evidence in chief; and
• I.S. made certain allegations that were never put to M.S. on cross-examination, which significantly undermined the veracity of those allegations. Specifically, that M.S. admitted to her that he had used cocaine; that M.S. had a “self-destructing” email account or application that would retain her messages but delete his; and that M.S. came to her house yelling and screaming after she sent the email advising him that she was pregnant.
[57] The Applicants submit that I.S.’s credibility is also undermined by: (i) her counsel’s opening statement, which made numerous allegations that were not proven at trial; and (ii) a discussion with her counsel that took place while I.S. was under cross-examination.
[58] I find that neither of those incidents are relevant to my assessment of I.S.’s credibility. Both have more to do with her counsel than with the party’s credibility. I.S. was entitled to rely on counsel’s judgment in making an opening statement that would adhere to the applicable legal principles. She was also entitled to rely on counsel to refrain from communicating with her during cross-examination and to remind her of that constraint. At the time, the Applicants submitted that they were satisfied that the communication was for the limited purpose of addressing the date of a particular document and that they wished to continue with the trial. I.S.’s counsel admitted that it was a lapse on her part. There was no indication that I.S. altered her testimony as a result of the communication. In the end, the document at issue was not entered as evidence and the matter is of little consequence to the trial.
[59] Notwithstanding the large volume of documents produced by the parties, there was a lack of precision in respect of alleged breaches and compliance with the Agreement. On the whole, based on the considerations identified above, and despite the challenges inherent in this case, I find that M.S.’s evidence was more consistent with the contemporaneous documentary evidence, especially in respect of compliance with the financial obligations under the Agreement. On the issues relating to I.S.’s attempt to redeem the TOE mortgage, I.S.’s evidence was consistent with the documentary evidence and corroborated by other witnesses, J.M.M. and D.R.L. Moreover, TOE’s lack of cooperation in facilitating the redemption and its aggressive enforcement steps suggest a motive that was not purely financial.
The Statutory Framework
[60] In seeking to set aside the Agreement, M.S. relies upon s. 56(4)(c) of the Family Law Act. Subsection 56(4) states as follows:
Setting aside domestic contract
(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
[61] In LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 51, the Court of Appeal held that the following two-step process applies when determining whether to set aside an agreement under s. 56(4):
(i) Does one of the circumstances under s. 56(4) apply?
(ii) If so, is it appropriate for the court to exercise its discretion to set aside the contract?
[62] The party seeking to set aside the domestic contract bears the onus of establishing both elements of the two-step test.
[63] In the circumstances of this case, I must first determine whether the Agreement may be set aside in accordance with the law of contract, specifically: (i) because there was no meeting of the minds; or (ii) for repudiation or fundamental breach. I must then consider whether it is appropriate to exercise my discretion to set aside the Agreement.
The Agreement
[64] The Agreement was a settlement of the family law application brought by I.S. in Court File No. FS-14-19641. It is 17 pages long and contains 80 paragraphs. The Agreement states that it settles all issues between the parties on a full and final basis and that both parties agree to be bound. Both M.S. and I.S. acknowledged that they received independent legal advice.
Parenting Arrangements
[65] The Agreement gives sole custody of J. to I.S.
[66] Under Clause 6 of the Agreement, M.S. has “reasonable and generous access to J. on dates and times to be reasonably agreed between the parties… always keeping in mind the best interests of J.” The parties incorporated the maximum contact principle into the Agreement, specifically stating that “maximum contact between M.S. and J. is in J.’s best interest.” The provision goes on to say that M.S.’s access will need to be changed over time based on J.’s needs and interests, as well as his age and stage of development.
[67] M.S. and I.S. also agreed:
• To work cooperatively to accommodate each other’s schedules and J.’s schedule;
• To work together to implement a more formal and structured access arrangement at such time as it is feasible or at such time as either party believes that it is in J.’s best interests to do so;
• To respect each other’s ability to care for J. appropriately;
• Not to unreasonably object to the other’s plans;
• To “at all times maintain a reasonable and flexible position respecting the access arrangements for J.”;
• Not to speak disparagingly of one another in J.’s presence or allow others to do so; and
• To prefer J.’s interests to their own and at all times keep the best interests of J. in mind.
[68] When they entered into the Agreement, M.S. was to have access to J. two times per week for one and a half hours each time. M.S.’s access was to be unsupervised as long as he advised I.S. of his plans and refrained from the consumption of alcohol prior to and during the visit.
[69] Both parties were entitled to make inquiries with J.’s teachers, school officials, doctors, dentists, health care providers and others involved with J.
[70] The parties agreed to attend mediation in the event that they were unable to resolve a parenting issue.
Child Support
[71] The Agreement stipulated that M.S. would pay $5,000 per month in child support which would be indexed annually to adjust for inflation.
[72] M.S. agreed to pay 100 percent of the agreed upon special and extraordinary expenses until the earlier of January 1, 2017 or until I.S. obtained full-time employment, after which M.S. would pay 90 percent and I.S. would pay 10 percent. Private school was specifically excluded from the special and extraordinary expenses.
[73] Clause 30 (the “Nanny Provision”) stipulates that until J. turned five years old or entered full-time daycare or school, and provided that I.S. employs a full-time nanny, M.S. will pay 100 percent of the cost of a nanny to a maximum of $2,500 including payroll taxes, if paid through the Company’s payroll. Alternatively, if I.S. elected to pay the nanny directly, M.S. was required to contribute $500 per week toward the cost.
[74] The Agreement specifically states that M.S. provided an expert report in relation to his income and that I.S. opted not to retain an expert to critique the report. Nonetheless, Clause 46 of the Agreement states that the parties are not relying on the report or M.S.’s income representations in calculating child support. The parties agreed to the child support provisions on the basis that the terms are reasonable under all of the circumstances and will meet J.’s needs, “now and in the future.” As a result, the Agreement further stipulated that M.S. would have no obligation going forward to provide I.S. “with any financial disclosure of any kind.”
[75] M.S. agreed to contribute no less than $3,000 per year to an RESP for J.’s post-secondary education. I.S. was also required to contribute at least $1,000 per year once she secured full-time employment.
[76] M.S. agreed to keep a life insurance policy and to designate I.S. as the irrevocable beneficiary of $1,750,000 in trust for J. for as long as he is obligated to pay child support under the Agreement.
[77] The parties agreed that they would first try to resolve any disputes over child support by negotiation, between themselves or through counsel. If unable to resolve the dispute within 30 days, they would attend mediation with a senior family law lawyer to be mutually agreed upon. If unable to resolve the dispute through mediation, either party would make application to the court in Court File No. FS-14-19641.
Spousal Support
[78] Both parties released any rights to spousal support, which release was intended to be “forever final and non-variable.”
[79] They further agreed that “no change, no matter how extreme or consequential for either or both of them, will alter this Agreement and their view that the terms of this Agreement reflects their intention to always be separate financially.”
[80] The Agreement included provisions relating to the Property, which are detailed further in these Reasons. Clause 61 of the Agreement states that the “spousal support and property sections of this Agreement are interdependent and inextricably intertwined. Together they fully satisfy the objectives of the legislation and a fair global resolution.”
Confidentiality Provisions
[81] Clause 77 of the Agreement (the “Confidentiality Provision”) precludes either party from disclosing the terms of their settlement. The Confidentiality Provision also prohibits I.S. from communicating directly or indirectly with M.S.’s family to advise them of the nature of the relationship between him and J., unless he has previously done so and introduced them to J. Further, the Confidentiality Provision prohibits M.S. from discussing with any third party who is not a family member the manner in which he met I.S. An additional provision, Clause 22, prohibits I.S. from contacting any member of M.S.’s family, or from discussing or disclosing, directly or indirectly, the issues in the legal proceedings with them.
[82] The parties agreed to a term that they would continue to comply with the order of Moore J. in Court File No. FS-14-19641 prohibiting the publication of any portion of the court file containing information identifying them, their children, their places of work, their occupations, and other private information.
Name Change Provision
[83] Clause 17 of the Agreement (the “Name Change Provision”) states that I.S. will not change J.’s last name to M.S.’s last name without M.S.’s consent.
Additional Provisions
[84] The Agreement states that in the event that the Agreement is subsequently challenged, the references to the Family Law Act are without prejudice to M.S.’s position that the parties were never spouses and I.S.’s position that they were.
Was There a Meeting of the Minds Between the Parties?
The Applicable Principles
[85] For parties to be bound in a contractual relationship, there must be a manifest meeting of the minds or consensus ad idem on all the essential terms of what that relationship will be: Holly Downs Developments Inc. v. 1428508 Ontario Ltd., 2014 ONSC 1628.
[86] Whether there was consensus ad idem is determined at the time of formation, on an objective standard. The question is “whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract.”: G.H.L. Fridman, The Law of Contract in Canada, 5th ed. (Toronto: Carswell, 2006) at p. 14.
[87] The burden of proof is on the party seeking to prove the existence of the contract – in this case, I.S.
[88] In determining whether there is consensus ad idem, the court may consider the parties’ conduct leading up to and following the conclusion of the agreement.
The Parties’ Positions
[89] M.S.’s position is that the Agreement is void ab initio because when he and I.S. entered into the Agreement, there was no meeting of the minds between them. M.S. relies on the following as demonstrating that there was no meeting of the minds on the Agreement:
• I.S.’s testimony that she would not have entered into the Agreement if she had known that she would have to “keep J. a secret”;
• I.S.’s testimony that she would not have entered into the Agreement if she had known that she could not put M.S.’s name on J.’s birth certificate; and
• Questions posed by I.S.’s counsel on cross-examination implying that the Agreement was no more than agreement to agree.
[90] M.S. has not argued that the Agreement is void ab initio because I.S. made a material misrepresentation when the Agreement was concluded or because she entered into the Agreement in bad faith.
[91] I.S. rejects the Applicant’s position that there was no meeting of the minds, arguing that the Agreement is a settlement that was negotiated at length between them with the assistance of counsel.
Findings
[92] In their pleadings in Court File No. FS-14-19641, both parties made allegations that were unbecoming of each other and the nature of their relationship. The Agreement constitutes a settlement which put an end to a highly contentious family law proceeding. The Agreement consists of detailed and comprehensive terms governing their parenting arrangements and the financial support of J.
[93] In the Agreement, the parties recognize the need to be flexible and revisit the issue of access as J. gets older. They turned their minds to the need to handle the circumstances surrounding J.’s conception “in a sensitive manner, taking into account J.’s need to love and respect both of his parents.” They agree to seek professional assistance about how to discuss the matter with J. and agree to “carefully and thoughtfully consider the professional recommendations that they receive in this respect to protect J.’s interest.”
[94] The Agreement disentangles the parties financially, including in relation to the Property, by providing options for the removal of TOE’s mortgage. In the Agreement, I.S. forgoes any entitlement to spousal support. The Agreement provides for a dispute resolution process for parenting and child support issues.
[95] As M.S. has argued, the Agreement is thoughtful. It reflects an intent to strike a balance between J.’s best interests and M.S.’s obligations toward J., while respecting M.S.’s autonomy in disclosing the relationship between himself and J., and with I.S., to his existing family.
[96] The terms of the Agreement were vigorously negotiated at length with the assistance of experienced family lawyers. It took over a year for the parties to come to terms. The parties signed an Agreement that they were each prepared to live with at the time.
[97] The Agreement specifically states that:
• The parties agree to be bound to the Agreement, which settles all issues between them;
• The parties “negotiated this Agreement in an unimpeachable fashion and that the terms of this Agreement fully represent their intentions and expectations”;
• They have had independent legal advice and “all of the disclosure that they have requested and require to understand the nature and consequences of this Agreement and to come to the conclusion, as they do, that the terms of this Agreement, including the release of all spousal support rights, reflect an equitable sharing of the economic consequences of the relationship and its breakdown”;
• They “require the Courts to respect their autonomy to achieve certainty and finality in their lives”; and
• Both parties acknowledge that the Agreement is fair and reasonable, that they were not under any undue influence or duress, and that they both signed the agreement voluntarily.
[98] In addition, the Agreement contains background information and explanations that would not ordinarily be included in a contract. The inclusion of the background as to how certain matters, such as child support, were determined was undoubtedly intended to guide any future interpretation of the Agreement.
[99] The above provisions leave no doubt that the parties freely and fully, after careful consideration, agreed to the terms of the Agreement and intended to be bound. I have no difficulty in finding that the parties indicated to the objective reasonable bystander their intention to contract and the terms of their agreement. To suggest at this stage that there was no meeting of the minds at the time of formation is revisionist history.
[100] The parties’ subsequent conduct further demonstrates their intent to be bound to the terms of the Agreement: Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. (1995), 1995 438 (ON CA), 24 O.R. (3d) 97 (C.A.), at pp. 107-8. M.S. has consistently paid child support and sought ongoing access to J. While I.S. has made access challenging, as will be addressed further below, she has not withdrawn access or questioned his rights under the Agreement. Both parties have sought through their lawyers the other party’s compliance with the terms of the Agreement. M.S. sought I.S.’s adherence to the terms relating to access and confidentiality. I.S. sought M.S.’s compliance with the financial terms. Both attended mediation as contemplated by the Agreement. This conduct belies M.S.’s position that there was no meeting of the minds.
[101] While both parties raise issues about the other party’s compliance, neither party has conducted themselves in a manner that would undermine that there was a meeting of the minds on the essential terms at the time of formation.
[102] The issues that M.S. raises, as identified above, are differences in interpretation or potential breaches of particular clauses that do not undermine the existence of the Agreement itself.
The confidentiality provision:
[103] On the issues raised by M.S., it is not entirely clear what I.S. meant when she testified she would not have entered into the Agreement if she knew she had to “keep J. a secret.” The was no term in the Agreement requiring that M.S. or I.S. keep J. a secret from the world at large. The Confidentiality Provision prohibited I.S. from disclosing the relationship between M.S., J. and herself to M.S.’s family, whether directly or indirectly, unless he told them first. I.S. was also prohibited from discussing the legal proceedings with M.S.’s family.
[104] M.S. testified that these provisions were important to him. I.S. testified that she understood that M.S.’s family should not find out about J. from her and that the matter had to be handled in a “dignified manner.” There was clearly a meeting of minds on the Confidentiality Provision.
[105] In fact, M.S. rejected the notion that he is keeping J. a secret. He testified that if he were trying to keep J. a secret, he would not take him to his club, drive with him in a convertible, take him to the family farm, or attend a baseball game with J. and business associates. He described J. as a “poorly kept secret.”
[106] Based on M.S.’s testimony, as of the trial, he had not told his family or children about his relationship to J. or to I.S. I.S. would thus continue to be bound to the provision prohibiting her from disclosing. If third parties, who are not bound to confidentiality, know about M.S.’s relationship with J., however, it is unclear how long he can keep the information from his family. Moreover, if M.S.’s family knows about I.S. and J., which it appears from M.S.’s testimony that they may, it would not be clear who the source of the information is.
[107] In any event, while I.S.’s compliance with the Confidentiality Provision is at issue, which will be addressed further below, the potential breaches do not show that there was no meeting of the minds. For example, M.S. alleges that I.S. breached the Confidentiality Provisions when she posted a photograph of him as a child on social media alongside J.’s photo. The issue is whether the social media posting breached the Confidentiality Provision because it constituted “communicating directly or indirectly” with M.S.’s family to advise them of the relationship between M.S. and J. It does not mean that there was no meeting of the minds on the Confidentiality Provision or the Agreement itself.
[108] As a result, I.S.’s testimony that she would not have entered the Agreement if she had known that she had to keep J. a secret does not mean that there was no meeting of the minds on the Agreement. It means that the parties differ as to the proper interpretation of the Confidentiality Provision and whether the social media posting was a breach of that provision.
The name change provision:
[109] Similarly, I.S.’s testimony that she would not have entered into the Agreement if she had known that she could not put M.S.’s name on J.’s birth certificate does not mean that there was no meeting of the minds on the Name Change Provision or the Agreement as a whole. This issue shows only that the parties differ as to the proper interpretation of the Name Change Provision and whether it prohibits I.S. from putting M.S.’s name on J.’s birth certificate, as opposed to legally changing J.’s name.
[110] M.S. testified that even after the Agreement, I.S. was constantly asking to change J.’s last name to his. M.S. suspects that I.S. wants to put his name on J.’s birth certificate as a first step to changing his last name.
[111] I agree that it is inconsistent to agree to a contractual term and then immediately request the opposite of what was agreed to. To date, however, I.S. has not changed J.’s last name to M.S.’s name. She has not taken any steps to do so, including putting M.S.’s name on J.’s birth certificate. Not only has she not breached the Name Change Provision, I.S.’s conduct demonstrates that she understands that she is bound by that provision.
[112] If the Agreement expressly stipulated that I.S. was prohibited from putting M.S.’s name on J.’s birth certificate, then I.S.’s testimony that she would not have entered the Agreement had she known could raise questions about whether there was a meeting of the minds, at least in respect of that term. That is not the case here.
[113] The Name Change Provision reflects that there was a meeting of the minds that J.’s last name could not be changed without M.S.’s consent. The fact that the Name Change Provision does not address whether M.S.’s name can be put on J.’s birth certificate, and the parties’ differing views about that, does not undermine the parties’ agreement to the Name Change Provision.
The cross-examination questions:
[114] On the last point raised by M.S., for the following reasons, I place no weight on questions posed by counsel on cross-examination as altering the position otherwise taken by I.S. in this case.
[115] At trial, I.S. was represented by Ms. Aleem. On certain days of the trial, Ronald Peterson also appeared as I.S.’s counsel. Mr. Peterson briefly cross-examined M.S. and put to him that the term giving him “reasonable and generous access” to J. was unenforceable because it was nothing more than an agreement to agree. This was not a position that I.S. had taken at any point in the proceeding, including in her Answer. In closing, I.S.’s counsel did not argue that any part of the Agreement was a non-binding agreement to agree.[^5] In any event, it would be problematic for a family lawyer to take the position that access provisions are generally non-binding agreements to agree. I.S. should not be prejudiced by misguided cross-examination questions on the part of her counsel, which are not evidence in any event.
[116] In support of his position that there was no meeting of the minds, M.S. submits that within weeks, I.S. behaved as if the Agreement did not exist. Specifically, despite the Confidentiality Provision, I.S. repeatedly threatened to tell his family about J. and about their relationship. In her testimony, I.S. acknowledged that she was upset and “might have said things at the time in anger.” I.S. was clearly unhappy about aspects of the Confidentiality Provision. Certainly, I find that her threats to disclose to M.S.’s family were contrary to the spirit of the provision that she had just agreed to. However, the evidence does not demonstrate that she actually disclosed the relationship to M.S.’s family. The fact that I.S. did not make good on her threats demonstrates her awareness that she was bound.
[117] Based on the evidence, I find that there was a meeting of the minds on the essential terms of the Agreement and that it is not void ab initio.
Did I.S. Repudiate the Agreement?
The Applicable Principles: Repudiation and Fundamental Breach
[118] Repudiation of an agreement occurs when a party, by words or conduct and without justification, evinces an intention to refuse the performance of the contract and not to be bound by it: Guarantee Company of North America v. Gordon Capital Corporation, 1999 664 (SCC), [1999] 3 S.C.R. 423, at para. 40. The Supreme Court of Canada further stated as follows (at para. 40):
[T]he effect of a repudiation depends on the election made by the non-repudiating party. If that party treats the contract as still being in full force and effect, the contract remains in being for the future on both sides. Each (party) has a right to sue for damages for past or future breaches…. If, however, the non-repudiating party accepts the repudiation, the contract is terminated, and the parties are discharged from future obligations. Rights and obligations that have already matured are not extinguished. [Internal quotations and citations omitted.]
[119] In Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd., 2006 16346 (Ont. C.A.), at para. 51, LaForme J.A. described repudiation as an “exceptional remedy that is available only in circumstances where the entire foundation of the contract has been undermined, that is, where the very thing bargained for has not been provided.” The totality of the circumstances must be considered in determining whether a party repudiated a contract through conduct that amounts to a rejection of their obligations under that contract.
[120] Whether a party has repudiated a contract is determined on an objective standard. The party’s subjective intention is not relevant but may throw light on the way the repudiatory conduct would be viewed by a reasonable person: Potter v. New Brunswick (Legal Aid Services Commission), 2015 SCC 10, [2015] 1 S.C.R. 500, at para. 171.
[121] In Guarantee Capital, at para. 50, the Supreme Court also considered the concept of fundamental breach,[^6] which it defined as a failure in the breaching party’s performance of its obligations under the contract that deprives the non-breaching party of substantially the whole benefit of the agreement.
[122] The test for fundamental breach requires the court to decide “what is the real purpose of the contract, the true benefit intended to be obtained by the injured party, and the extent to which the misperformance by the defendant goes beyond falling short of what was desired by the victim of the breach and involves the complete denial to him of any benefit from the performance that was provided”: Smith v. Lau, 2004 BCCA 443, at para. 42 (quoting Fridman, at p. 570).
[123] The Court of Appeal has set out five factors to consider when determining whether a party has been substantially denied the benefit of the contract:
(i) The ratio of party’s obligations not performed to that party’s obligations as a whole;
(ii) The seriousness of the breach to the innocent party;
(iii) The likelihood of repetition of the breach;
(iv) The seriousness of the consequences of the breach; and
(v) The relationship of the part of the obligation not performed to the whole obligation.
Spirent Communications Ltd. v. Quake Technologies Inc., 2008 ONCA 92, 88 O.R. (3d) 721, at para. 36.
[124] M.S. relies on Ward v. Ward, 2011 ONCA 178, 104 O.R. (3d) 401, at para. 21 as authority for his position that a domestic contract may be set aside for repudiation. That case lists common law grounds such as duress, unconscionability, and mistake, among others, but does not specifically mention repudiation. In Nashid v. Michael, 2010 ONCA 661, the Court of Appeal upheld the motion judge’s finding that a separation agreement had been repudiated because of a fundamental alteration to an accepted offer. The parties were unable to refer me to any other Ontario cases in which the court specifically considered setting aside a domestic contract on the basis of repudiation.[^7]
[125] In Smith v. Lau, a majority of the British Columbia Court of Appeal declared that the parties’ separation agreement was repudiated because of the wife’s fundamental breaches of the agreement.[^8] The majority recognized that family law agreements involve different considerations than commercial contracts between arms’ length parties, but nonetheless held that family law agreements are not immune from basic principles of contract law, including repudiation and fundamental breach. In that case, the mother breached numerous financial obligations under the agreement, including to sell joint assets. In addition, she thwarted the father’s access to their child by removing him from the jurisdiction when the father was to exercise his access time. Levine J.A., in dissent, found that the father was not deprived substantially the whole benefit of the agreement.
The Parties’ Positions
[126] M.S. alleges that I.S. repudiated or fundamentally breached the Agreement such that he was denied the entire benefit of the Agreement. In M.S.’s view, the benefit of the Agreement to him was peace, access, and privacy. M.S.’s position is that as a result of I.S.’s repudiation, he received none of the benefit.
[127] M.S. argues that I.S. fundamentally breached what he considers the following five “fundamental requirements” of the Agreement for which he bargained:
(i) Reasonable and general access to J.;
(ii) Confidentiality;
(iii) No involvement of the Family Responsibility Office;
(iv) All matters be returned to the same court file; and
(v) No change to J.’s name without his consent.
[128] I.S. denies that she repudiated or fundamentally breached the Agreement, such that M.S. has been substantially deprived of the benefit of the Agreement.
What Is the Purpose of the Agreement?
[129] Where a party alleges that the other contracting party has repudiated the contract, the court engages in “an investigation of the underlying nature and purpose of the contract into which the parties have entered, and the respective benefits designed to be obtained or preserved by the agreement”: Smith v. Lau, at para. 52, quoting Fridman, at p. 532.
[130] Therefore, before turning to the five obligations identified by M.S., it is necessary to consider the underlying nature and purpose of the Agreement as a whole.
[131] In this case, the Agreement resolved I.S.’s family law application seeking child and spousal support and a declaration of parentage, among other things. Given that the relationship was an extra-marital affair that M.S. concealed from his wife and children, M.S. characterizes the benefit of the Agreement to him as “peace, access, and privacy.” While I.S. has not specifically characterized the benefit of the Agreement to her, it provided her with certainty and financial security. She released any entitlement to spousal support but had the option to purchase or sell the Property.
[132] As a domestic contract, however, the Agreement is not limited to terms that specifically benefit either party. It contains a host of additional terms and obligations that do not directly benefit, in a narrow sense, one party or the other. The provisions governing the parties’ ongoing parenting arrangements and child support are intended to benefit the child by ensuring that both parents fulfill their parental responsibilities.
[133] When the nature and the purpose of the Agreement is examined in its entirety and placed into its factual context, it becomes clear that it is about much more than the “five fundamental requirements.” The purpose of the Agreement is to ensure that J. would be cared and provided for and that a satisfactory parenting arrangement was in place. The Agreement is not only for the benefit of the contracting parties, M.S. and I.S, but also for the benefit of their child, J.
[134] Moreover, the terms relating to J.’s care and support also benefit both parties. They both have an obligation to care and provide for their child. Resolving and setting down the terms under which this would happen was in both of their interests and to their mutual benefit. Such provisions ought not to be interpreted as benefitting the custodial parent alone.
[135] M.S. and I.S. also agreed to processes to navigate the challenging situation that resulted from their relationship and J.’s birth. They agreed to seek professional assistance to discuss the matter with J., as well as dispute resolution processes for future parenting and financial issues. These terms are also to both parties’ benefit.
[136] In Smith v. Lau, Levine J. (dissenting) rejected the father’s argument that the agreement was repudiated because he was denied the only benefit to him, which was access to the parties’ child. Levine J. found that the provision granting sole custody to the mother provided additional benefits to the father because it enabled him to move to England, leaving her with all the responsibilities as sole custodian.
[137] In this case as well, it would be overly simplistic to find that, since I.S. sought sole custody of J. in the family law proceeding, the term granting sole custody to I.S. is to her benefit alone. M.S. was not in a position to seek custody of J. because, as is clear from the terms of the Agreement, his family did not know about J., and he was not yet prepared to disclose J.’s existence to them. As a result, the provision giving sole custody of J. to I.S., with all of the responsibilities that entails, also benefits M.S. He remains free to continue living with his family without having to worry about the day-to-day care of J. In this manner, the Agreement provides M.S. with peace of mind in relation to J., which was also a benefit to him.
[138] In addition, M.S.’s five fundamental requirements fail to take into account other benefits of the Agreement to him, including the spousal support release and an end to the family law proceeding. M.S. admits that he was in a vulnerable position because he did not want his “folly” to result in his family being dragged into the sordid details of the dispute. M.S. argues that he did not obtain the benefit of an end to the litigation because he has been required to litigate despite the settlement. However, those were tangible benefits to him when the Agreement was executed. M.S.’s belief that the parties were not spouses does not necessarily mean that a court would have agreed. Ending the litigation was thus a material benefit to him. In addition, under the Agreement, M.S. was relieved of the obligation of providing ongoing financial disclosure for child support purposes.
[139] Based on my findings about the nature and purpose of the Agreement and the benefit to M.S., I find that on an objective standard, while I.S. breached certain terms of the Agreement, she did not repudiate or fundamentally breach the Agreement.
The Alleged Fundamental Breaches
Did I.S. Breach the Access Provisions?
[140] One of the most contentious issues between the parties is M.S.’s access to J. Despite the detailed provisions of the Agreement and their commitment to cooperate in J.’s best interests, the access arrangements for J. deteriorated quickly.
[141] The Agreement specifically required I.S. refrain from withholding or interfering unreasonably with M.S.’s access. The parties agreed to work cooperatively to accommodate each other’s schedules and J.’s schedule.
[142] M.S. alleges that I.S. began to “dial back” access “within days” after M.S. paid the $90,000 lump sum amount required under the Agreement. M.S. testified that I.S. “micro-managed” his access to J in the following ways:
• She demanded to know M.S.’s plans in advance and vetoed them when she did not agree;
• If M.S. refused to provide this information, I.S. denied his access to J.;
• She frequently told M.S. that J. was sick to cancel the access. M.S. eventually required I.S. to produce a doctor’s note if she was going to cancel his access based on J.’s illness;
• She accused M.S. of drinking alcohol during access visits;
• She accused M.S. of not feeding J. or not changing his diaper during access visits;
• She “cross-examined” M.S. after his access time about who they saw, what they did, and what he fed J;
• She constantly changed where exchanges would take place;
• She called M.S.’s private club to verify whether M.S. was there with J., as he had told her;
• She hired a private investigator to follow M.S. and J. during access visits;
• She threatened to call police if M.S. didn’t respond when he had J.;
• She never permitted M.S. to visit J. for his birthday or Christmas;
• She interfered to prevent M.S.’s access with J. when he made special plans, such as going to see the Lion King or the space shuttle launch;
• She caused a scene during access exchanges by hitting the window of M.S.’s car with J. in her arms;
• She made false allegations of abuse, involving the police and Children’s Aid Society;
• She did not answer the door when M.S. brought J. home after an access visit, requiring M.S. to contact the police; and
• She refused to extend access as contemplated by the Agreement.
[143] I.S. admitted some of the conduct alleged by M.S. but denies that she restricted or interfered with his access to J. She testified that M.S. had the agreed-upon access to J. and that it was M.S. who cancelled his access when it was not convenient for him. She denied that she was micro-managing M.S.’s access, and testified that her main concern was that because M.S.’s family did not know about J., M.S. would have to take him to various places or keep him outdoors. I.S. also testified that she was concerned that M.S. did not have a car seat for J., because it was difficult for him to conceal.
[144] It is not necessary to address each of M.S.’s allegations pertaining to access. Some of the alleged micro-managing, such as accusing M.S. of not feeding or changing J., can arise from differences in parenting styles. Unfortunately, because of the parties’ hostility and inability to communicate, these differences became overblown. Other conduct that M.S. considers interference was contemplated by the access provisions. For example, the Agreement specifically states that “access shall be unsupervised as long as M.S. advises I.S. as to his plans for the visit and refrains from the consumption of alcohol prior to and during the visit[.]” M.S. is thus required to advise I.S. of his plans to have unsupervised access. The Agreement further stated, however, that neither party would object unreasonably to the other’s plans.
[145] I.S. admitted that she called the club to check up on M.S. and that she had M.S. and J. followed by a private investigator. She admitted to becoming upset during access exchanges and acknowledged that this was not in J.’s best interest. I.S. admitted that on one occasion she refused to take J. back after M.S.’s access because she was having an anxiety attack. While some of this behaviour is problematic for other reasons, I do not find that it breached the parties’ Agreement.
[146] On the totality of the evidence, however, I find that I.S. breached the provision requiring that she “not withhold or interfere with M.S.’s access to J. unreasonably.” My finding is based on the evidence that M.S.’s access to J. was reduced to less than what was initially contemplated by the Agreement and because M.S. had to seek the court’s assistance to have his access restored and increased, as contemplated by the Agreement.
[147] Specifically, the evidence shows that by November 2015, I.S. limited access to once a week on the weekend as opposed to twice a week. I.S. justified ending weekday access on the basis that M.S. drank after work and the Agreement required that he avoid alcohol consumption prior to and during access visits.
[148] While I.S. testified that M.S. breached the no-alcohol provision many times, she identified only one instance of M.S. drinking alcohol during an access visit with J. M.S. admitted that on one occasion, which was early on, he took J. to a restaurant down the street from I.S.’s home and had a glass of wine with his meal. When I.S. confronted M.S. about it, he said he would not drink during his access. However, she used this incident to cancel his weeknight access.
[149] After I.S. terminated the weeknight visits, M.S.’s counsel wrote to I.S.’s counsel on November 11, 2015, seeking to restore weeknight access. I.S. refused to restore weeknight access and instead offered an additional hour on the weekend.
[150] Because of the issues relating to access, in the spring of 2016, the parties agreed to mediate with a parenting counsellor who was later unable to continue to mediate their dispute. In August 2016, M.S.’s counsel sent a letter to I.S.’s counsel to work through a plan for access. At that time, M.S. was having less access to J. than he had before the Agreement was concluded. Multiple letters were exchanged between counsel, which reflect that M.S. sought to resolve the parties’ access issues. The letters from I.S.’s counsel reflect that she consistently raised financial issues in response.
[151] In October 2016, M.S.’s counsel wrote to I.S.’s counsel regarding his concern that I.S. was engaging in name-calling and inappropriate behaviour during access exchanges. On cross-examination, I.S. admitted that “needlessly” causing a scene during access exchanges was not in J.’s best interest and would constitute interference with access. I.S. alleged that M.S. was abusive toward her and required that access exchanges take place at the police station, or M.S. would not have access. The exchanges continued to be hostile, even at the police station. For example, I.S. insisted that M.S.’s car seat had not been installed properly.
[152] On May 19, 2017, the parties attended a case conference before McWatt J. They agreed to the terms of a consent order which provided that M.S. would have access to J. on Wednesdays from 5:00 to 7:00 p.m. and on Saturdays from 9:30 a.m. to 12:30 p.m. I.S. admitted that she had not agreed to Wednesday access or to extend access before attending the case conference that day. The consent order also discontinued access exchanges at the police station.
[153] When the parties entered into the Agreement, they agreed that “[a]t the present time” M.S. would have access to J. two times per week for one and a half hours each. Before the case conference with McWatt J., M.S. was not having access two times per week. One three-hour visit per week was not equivalent, especially for a child of J.’s young age. Moreover, the Agreement stated that maximum contact between M.S. and J. was in J.’s best interest and contemplated that access would change over time, based on J.’s needs and interests, based on his age and stage of development. I interpret this to mean that M.S.’s access would increase as J. grew older. I.S. admitted on cross-examination that she understood that M.S.’s access would increase over time and that maximum contact meant as much time as possible. While two visits of one and a half hours each might have been appropriate when J. was one year old, it ought to have been increased as J. got older, without the necessity of going to court.
[154] Despite participating in open mediation with Dr. Butkowsky in October 2017, the parties were unable to resolve the access issues. While M.S. testified that the mediation failed because I.S. refused to agree to terms of a memorandum of understanding reached between the parties, I.S. testified that she had been prepared to accept the terms. A draft memorandum of understanding dated November 2, 2017 was prepared by Dr. Butkowsky and summarizes areas of agreement and areas on which no agreement was reached. As a result of further issues and questions raised by both parties, Dr. Butkowsky prepared a further summary dated February 7, 2018. Dr. Butkowsky states that he tried to reconvene the mediation to resolve certain minor issues but that I.S. declined to participate. The summary also clarifies that while I.S. initially had reservations regarding the proposed access schedule, she eventually agreed to it.
[155] In April 2019, M.S. again sought the court’s assistance to increase his access. The order of Gilmore J. dated April 25, 2019 extended M.S.’s access time to full days on Saturdays and overnight access on the first Saturday of each month. By that time, M.S. had taken the position that the Agreement was repudiated. While I find that I.S. did not repudiate the Agreement, based on M.S.’s position, at that time, both parties would have understood their obligations to have come to an end. As a result, I do not rely on the April 2019 order to support my finding that I.S. breached the access provisions of the Agreement. I note, however, that the Order belies I.S.’s testimony that she agreed to overnight access and only wanted to know where it would be taking place.
[156] At trial, I.S. testified M.S. had regular access and that he cancelled more frequently than she did. Access is not only about quantity, but also about quality. The evidence shows that I.S. interfered with M.S.’s access as detailed above because she was consumed by M.S. not telling his family about J. and her conviction that the secrecy was harmful to J. In the Agreement, however, she agreed not to disclose the relationship to his family unless M.S. had done so first. As is evident further in these Reasons, I.S. had significant difficulty with this requirement. Her resentment of the situation led to constant conflict and interfered with J. having maximum contact with M.S, contrary to J.’s best interest.
(a) CAS involvement
[157] M.S. alleges that I.S. also interfered with his access by making false allegations that he abused J. to the CAS.
[158] M.S.’s evidence is that the CAS has closed three investigations in relation to his treatment of J. The CAS files were not produced, and I have little evidence regarding those investigations other than the parties’ testimony and the testimony of I.S.’s witness, K.T., in relation to one of the investigations.
[159] K.T. is a supervisor at the Toronto CAS. She conducted one investigation relating to J. in July 2019, when J. was four years old. K.T. testified that the CAS became involved because J.’s therapist reported potential abuse by M.S. The therapist’s report was based on an audiotape submitted by I.S. in which J. stated that M.S. hit and bit him. I.S. testified that she gave the audiotape to the therapist, Dr. Tenne, to find out if she thought J. was telling the truth or making it up, but that Dr. Tenne reported it to the CAS before speaking to J.
[160] K.T. interviewed M.S., I.S. and J. She testified that J. said that M.S. hit and bit him “everywhere”, but also said that I.S. hit and bit him too. K.T. testified that J. was unfocussed during the interview and could not provide any context or specifics. While M.S. had testified that the allegation was that he fed J. broken glass, K.T. did not recall that. K.T. testified that I.S. told her that J. said that M.S. put glass in his mac and cheese, but that I.S. stated that she did not believe it.
[161] K.T. testified that while the investigation was in progress, she suggested that M.S. not have access to J. in order to avoid any issues. K.T. testified that in the end, the allegations were not verified. She concluded that J. was safe in both parents’ homes and closed the file. K.T. could not comment on whether she thought J. had been coached.
[162] M.S. testified that I.S. fabricated the allegation to interfere with his plans to take J. to see the Lion King and that, on the same weekend, I.S. posted photographs of herself and J. at the African Lion Safari. None of the relevant dates, such as when the recording was made, when it was provided to Dr. Tenne and when Dr. Tenne reported to the CAS, are in evidence. There is insufficient evidence to find that the allegation was fabricated to interfere with M.S.’s planned activity.
[163] I have no information about the other two investigations other than the parties’ vague testimony. The parties did not obtain the CAS files. I.S. testified that one of the other investigations was initiated by another doctor. Based on the evidentiary record, I am not satisfied that the allegations were fabricated to interfere with M.S.’s access. I would add, however, that the possibility that unsubstantiated allegations are being made to the CAS is concerning, especially if a young child is being recorded for this purpose.
[164] Based on the totality of the evidence regarding access, I find that I.S. breached the spirit and the substance of the term requiring that she refrain from interfering unreasonably with M.S.’s access. I.S.’s non-compliance is evident in the fact that M.S. had to seek the assistance of the court in order to maintain or increase his access to J. Despite the terms of the Agreement, I.S. did not consent to any increases, and only agreed to restore weekday access during the case conference before McWatt J. in May 2017.
Medical records
[165] The Agreement states, at Clause 12, that both I.S. and M.S. “may make inquiries and be given information by J.’s teachers, school officials, doctors, dentists, health care providers, summer camp counselors or others involved with J.” Clause 12 further states that if the provision is not sufficient to provide each party with access to the information, they “will cooperate to execute the required authorization or direction necessary to enforce the intent of this clause.”
[166] M.S. submits that I.S. refused to tell him who J.’s doctors were. M.S. testified that after “years” of asking, he eventually had to make a request through OHIP to find out who J.’s doctors were. M.S. testified that he discovered that J. had been seen by 62 doctors. M.S. later testified that J. had been seen by 47 doctors. No documentary evidence was adduced to support the statements, which were also not tested on cross-examination. It is unclear to me whether either statement was accurate or whether they were hyperbole.
[167] I.S. testified that she shared all of the required information with M.S. The evidence includes an email from I.S. dated October 30, 2015, providing the name and contact information for a pediatrician, Dr. Do. This was within a month after the Agreement was signed. In June 2017, M.S. sent an email requesting the name of J.’s teachers, pediatrician and a copy of his OHIP card. I.S. responded providing the name of the teacher and school. She also provided Dr. Do’s contact information, noting that she had provided it previously. She provided J.’s social insurance number and said that she would forward the OHIP number. No other email or text messages from M.S. requesting school or medical information were adduced into evidence. The email messages from I.S. undermine M.S.’s assertion that he had been requesting the information for years and that I.S. refused to provide it. However, it is possible that if J. was being taken to many different doctors, the information provided by I.S. was incomplete.
[168] M.S. also testified that J. once fell through a glass table and had to go to the hospital to get stitches on his face. He testified that he only found out about the incident much later, at the mediation with Dr. Butkowsky. It is unclear from the evidence when the incident occurred. I.S. was not cross-examined on this incident.
[169] In September 2017, J. had surgery on his ears. M.S. testified that I.S. did not advise him about it until shortly before the surgery. M.S. testified that the ear issue is hereditary in his family and that he should have been consulted about how it would be treated. I.S. testified that she had advised M.S. of the surgery well in advance and that M.S. attempted to delay the surgery at the last minute.
[170] In an email dated July 14, 2017, I.S. advised M.S. that J. “has water in his ears and will need surgery to remove that.” She also mentioned that J. had a hearing test and asks him to keep J. dry to avoid further water accumulation. M.S.’s responding email states: “I hope he feels better and keep me apprised of his situation.” He did not say anything about having knowledge about the ear issue or that it was hereditary. On cross-examination, M.S. maintained that he had not been kept informed about the ear issue, which requires numerous appointments with specialists before proceeding with surgery. Based on the evidence, I find that M.S. was told about the ear issue in July 2017 and not at the “eleventh hour” as he testified. There is, however, no further documentary evidence to suggest that he was kept apprised of the situation.
[171] The Agreement clearly stated that both parties would have access to information from J.’s teachers, doctors, dentists, and others involved with him. Clause 12 presupposes that the information would be shared, because it would not otherwise be possible for the other parent to obtain the information. In addition, at Clause 18 of the Agreement, both parties agree to exchange information and communicate about J., and to share all documents regarding J. by scanning and emailing the documents.
[172] When M.S. brought his motion for access in April 2019, he also sought an order requiring that I.S. provide the names of all of J.’s doctor and service providers. Gilmore J. ordered that I.S. provide “a complete list of the names and addresses of every doctor, dentist, specialist and service provider who has treated J.S. from birth.” I.S. was also required to provide an updated list if she took J. to any new treating professional. In making the order, Gilmore J. did not specifically find that I.S. had failed to provide this information, stating: “If the alleged cooperation by respondent is insufficient, a court order is required.” Insufficient cooperation, while concerning and inconsistent with the spirit of the Agreement, does not necessarily constitute a breach.
[173] As with other factual issues, the parties rely on broad allegations and denials. A finding of breach, however, must be based on more than broad allegations. There is no clear evidence as to what doctors and specialists J. has seen and when that information was or was not provided to M.S. The list required by Gilmore J.’s order, and whether that information had been previously provided, was not adduced into evidence. Based on the evidence adduced at trial, I am not satisfied on a balance of probabilities that I.S. breached Clause 12 of the Agreement.
[174] Notwithstanding my finding, the lack of cooperation between the parties and their inability to communicate effectively in J.’s interest is apparent from the record. The issue regarding J.’s surgery is an example of how a mature, rational discussion would have furthered J.’s interest but could not take place because of the ongoing distrust and rancour between the parties.
Did I.S. Breach the Confidentiality Provision?
(a) Disclosure of the Agreement
[175] M.S. testified that I.S. told him that she showed the Agreement to “everyone” in breach of the Confidentiality Provision. While M.S. testified that I.S. told him by email or text, no such text or email message was entered into evidence.
[176] In her testimony, I.S. admitted that she provided the Agreement to the following people:
• J.’s schools and school officials;
• J.’s physician, therapist and the hospital where he had surgery; and
• Her mortgage broker, J.M.M. of Dominion Lending, who provided the Agreement to Scotiabank.
[177] I.S. could not recall whether the Agreement was provided to the police and the CAS. There was no evidence demonstrating that it had.
[178] While M.S. alleged that I.S. disclosed the Agreement to her friends, A.R., P.S., and J.P.A., they all testified that they had not seen the Agreement. Based on the evidence, I am not satisfied that I.S. disclosed the Agreement to A.R., P.S., or J.P.A.
[179] I.S. admitted that she did not seek M.S.’s consent before providing the Agreement to the individuals and institutions identified above.
[180] Settlement agreements often provide exceptions to confidentiality to enable the parties to provide the agreement to their legal and financial advisers. The Confidentiality Provision in the Agreement contained no such exceptions, suggesting that the Agreement was to remain confidential. The parties, who were advised by counsel throughout, could have made exceptions to the Confidentiality Provision, but chose not to.
[181] The provision dealing with the sharing of information, Clause 12, states that “[t]he parties intend this clause to provide each of them with access to any information or documentation to which a parent of a child would otherwise have a right of access.” It further states that if the clause itself is not sufficient, the parties will cooperate to execute the required authorization or direction. This wording implies that the provision could be shown to a service provider to obtain access to information regarding J. It does not, however, permit the disclosure of any other provision.
[182] I.S. justifies her disclosure of the Agreement to all the third parties to whom she provided it on the basis of necessity. I.S. testified that the schools, doctors, and hospital required the Agreement to show that she had custody and decision-making authority for J. However, I.S. did not attempt to inquire into alternatives, such as disclosing only the parenting section or a redacted version of the Agreement.
[183] I am not satisfied that I.S. was required to produce the entire Agreement to all the individuals and agencies to whom she disclosed it. While there may have been legitimate reasons for providing documentation to support custody and/or decision-making arrangements to the schools, doctors, therapist, or hospital, it is unlikely that the entire Agreement had to be provided. None of those service providers would have any interest in the financial arrangements between the parties. I.S. adduced no documentary evidence of specific requests or requirements that the Agreement be provided, whether in its entirety or otherwise.
[184] In the absence of any exceptions to the Confidentiality Provision, she ought to have sought M.S.’s consent first. At no time did she take any steps to do so.
[185] Dominion Lending and Scotiabank would not fall under the service providers identified in Clause 12. In that instance, both I.S. and J.M.M. testified that I.S. first provided J.M.M. only portions of the Agreement, and he required the full document.
[186] J.M.M. testified that I.S. had to provide the entire Agreement to support her mortgage loan application and that, based on his experience, Scotiabank would not have accepted a redacted version of the Agreement. J.M.M. is not an employee or representative of Scotiabank and cannot speak to Scotiabank’s requirements. No policy or document from Scotiabank was provided in support of his testimony.
[187] I.S.’s mortgage loan application depended upon her income and child support. The provisions of the Agreement regarding J.’s parenting were of no relevance to I.S.’s income or finances, which is what would have concerned Scotiabank. I do not accept J.M.M.’s testimony that “every lender” requires the full document or “they think fraud is going on.” He made no attempt to disclose a redacted version of the Agreement or to advise Scotiabank of the confidentiality obligations in the Agreement. Had I.S. or J.M.M. inquired with Scotiabank about providing more limited disclosure, and if such attempt was rejected, there would be a record of the exchange.
[188] I.S. seeks to further justify her disclosure of the Agreement on the basis that the parties to whom she disclosed are subject to legal obligations to protect personal information. However, the Agreement did not provide an exception for disclosure to individuals and entities subject to a legal obligation to protect the information. The fact that the Agreement might be protected from further dissemination does not relieve I.S. from her confidentiality obligations. In case of doubt, I.S. ought to have sought legal advice and/or M.S.’s consent. I note that this would not have created an additional burden to I.S., since the parties were constantly communicating through their lawyers at the time.
[189] As a result, I find that by disclosing the Agreement without M.S.’s consent, I.S. breached the Confidentiality Provision. She was aware at all times of the sensitive nature of the Agreement. Despite this, she behaved as if it were her right to disclose the Agreement if she felt it necessary to do so, regardless of the Confidentiality Provision and without M.S.’s consent. In fact, her testimony indicated that she believed that she was entitled to disclose the Agreement.
[190] At the same time, I.S.’s disclosure of the Agreement to the above-named third parties did not constitute a fundamental breach of the Agreement. I.S.’s disclosure reflects an awareness that she was bound to the Confidentiality Provision. She did not provide the Agreement to random third parties but to parties who arguably had a legitimate basis for asking for either the parties’ parenting arrangements (J.’s schools, doctors, the hospital) or I.S.’s financial circumstances (Dominion Lending and Scotiabank).
(b) The Instagram posting
[191] In early 2016, I.S. posted a photograph of J. on Instagram alongside a photograph of M.S. at approximately the same age as J., with the caption “like father, like son” and other comments about their resemblance. M.S.’s first name was mentioned in the posting.
[192] M.S. testified that he gave I.S. the photograph because she had asked for one to put in J.’s room. M.S. testified that he was very upset about the posting because he viewed it as an invasion of his privacy, which he values to the point that there are no photographs of him on the internet. He was also concerned that his wife or children could find the photograph by searching the internet. M.S. interpreted the social media posting as a “campaign of willful terrorism to circumvent the Confidentiality Provision.”
[193] While M.S. testified that there were “many” social media postings that were derogatory toward him, this was the only one adduced in evidence.
[194] I.S. testified that her Instagram account is private and that she did not believe that posting the photograph would violate the Confidentiality Provision. The posting was removed after M.S.’s counsel wrote to I.S.’s counsel.
[195] The Confidentiality Provision, which prohibited I.S. from communicating, directly or indirectly, with M.S.’s wife or children to disclose the relationship between M.S. and J., made no mention of social media.
[196] In my view, the Instagram posting was ill-advised and contrary to the spirit of the Confidentiality Provision. However, I am not satisfied that the posting constitutes indirect communication by I.S. with M.S.’s family to disclose the relationship. The posting was a childhood photograph of M.S., who was not identified other than by his first name, which is a common name. The posting would not be communicated to M.S.’s wife or children unless they were following I.S.’s Instagram account. While it is possible for a posting to be shared by I.S.’s followers to M.S.’s wife or children, I have no evidence that this happened here. In addition, the possibility that M.S.’s wife or children could have discovered the posting would require the additional step of searching the internet which, in my view, would not constitute a communication by I.S.
[197] My finding that the posting at issue did not breach the Confidentiality Provision is based on the facts in evidence before me and should not be interpreted as suggesting that social media postings about J., the parties, or their relationship are generally permissible under the Agreement. Moreover, a social media posting can quickly go beyond the control of the original poster, and caution ought to be exercised to maintain the confidentiality agreed to between the parties, in their own and J.’s interest.
(c) The “drive-by”
[198] M.S. testified that in August 2020, I.S. drove by his house while he and his wife were on the driveway. A.R. and J. were in the vehicle at the time. Upon seeing M.S. through the open rear window, J. said “Dada” as they drove by. M.S. testified that I.S. had “continuously threatened” to drive by his home and gives this as an example of I.S.’s constant threats to tell his family about J.
[199] I.S. testified that she and A.R. were on their way from the Yorkdale shopping centre to A.R.’s home at Yonge and Eglinton, and that she did not intend to drive by M.S.’s house. I.S. maintains that she was following the GPS.
[200] A.R. testified that I.S. was driving and that they were following the GPS. He stated that he did not know that they were going by M.S.’s house until I.S. said “Oh my God, it’s M.”
[201] It is not clear to me for what purpose M.S. relies on this incident, which occurred after he accepted I.S.’s purported repudiation of the Agreement. Based on his position, the Agreement would have come to an end at this point, and both parties were relieved of further performance. The drive-by could not then constitute a breach. Moreover, M.S. was not asked and did not testify as to whether his wife heard J. or her reaction to the incident. It is not possible to conclude that the “drive-by” would be a disclosure of the relationship between M.S. and J. to M.S.’s family.
[202] While I.S. and A.R. claim to have been following the GPS, M.S.’s home, which is south of both Yorkdale and A.R.’s residence, was out of the way. The drive-by was too coincidental to be accidental. The fact that I.S. had threatened to do so further supports this. Given that her position in this litigation is to have the Agreement upheld, I.S. ought to have been scrupulously adhering to its obligations. Yet, she could not resist skirting the line between compliance and breach, despite the confusion and potential harm this could cause to J.
(d) Threats to disclose
[203] M.S. testified that I.S. repeatedly made threats against him, his family and his employees. Other than the general nature of the threats, which was that if M.S. did not give I.S. what she wanted, she would “blow up” his relationship with wife and children, M.S. provided little detail regarding the alleged threats.
[204] The exception is a telephone conversation in December 2015 that M.S. recorded. In that conversation, I.S. told M.S. that he had to fire one of his employees, J.L., who was previously her friend. She threatened that if J.L. was not “gone” she would tell M.S.’s wife everything and bring down both of their families. I.S.’s explanation of the conversation, that she told M.S. that his drug use would bring down both of their families, is entirely incredible based on the content of the conversation. Moreover, M.S. was not cross-examined about any alleged drug use, giving rise to the inference that it was a spurious allegation.
[205] M.S. further testified that I.S. would send him hundreds of nasty text and email messages. At some point, M.S. had the Company’s I.T. people block I.S.’s phone number and email, including her sister’s email address, which she sometimes used to contact him. M.S. testified that I.S. called his wife at their home. M.S. did not specify when the call took place or what I.S. told his wife. I.S. admits that she called M.S.’s wife once, but states that it was before the Agreement was signed.
[206] When asked whether I.S. had ever approached any member of M.S.’s family and told them about their relationship, M.S. testified she has had “other people” do that. However, M.S. provided no specifics as to when, where, or by whom such disclosure was made. As proof that the information had been disclosed to his family, M.S. testified that “family members,” without being specific as to who, have told him that his “whore” called.
[207] In the Agreement, M.S. and I.S. agreed to keep their communications private and respectful, and related solely to J. The threats and harassing behaviour are contrary to their Agreement and fall well below the standard of behaviour expected from parties to a domestic contract, which are “contracts of the utmost good faith”: Baxter v. Baxter, 2003 1992 (Ont. S.C.), at para. 12. The threats to disclose demonstrate that I.S. had little regard for her obligations under the Agreement and that she threatened to breach for completely unrelated ends. While the threats are certainly contrary to the spirit of the Agreement, in the absence of proof that I.S. disclosed information that she was prohibited from disclosing to M.S.’s family, I am not prepared to find that I.S. breached the Agreement.
[208] Moreover, I find that M.S.’s testimony on the whole on the issue of what his family knows about J. was opaque, revealing the tension in his position. On cross-examination, M.S. testified that he had not advised his family of his relationship with I.S. and J. M.S. insinuates, however, that they know about the relationship as a result of I.S.’s breach of the Agreement. At the same time, he wishes to continue to hold her to the obligation not to disclose. This suggests that I.S. has not told them.
[209] If I.S., whether directly or indirectly, has disclosed the relationship to M.S.’s family, then the term has been breached and the damage is done. Similarly, if M.S.’s family is aware of the relationship through third parties, which is a possibility, given M.S.’s testimony that he is not keeping J. a secret, then there is no secrecy to maintain. It is apparent, however, that M.S. wishes to continue to hold I.S. to the obligation not to tell his family. Based on the equivocal nature of M.S.’s evidence, I am not satisfied that I.S. breached the Agreement by disclosing their dispute or the relationship between M.S., herself, and J.
Did I.S. Breach the FRO Provision?
[210] Clause 43 of the Agreement states that M.S. will pay child support directly to I.S. and not to the FRO. It further stated that “[n]either party will file this Agreement with the Family Responsibility Office for enforcement unless M.S. defaults in payment and does not pay within 5 days of getting a written notification from I.S.” (the “FRO Provision”).
[211] M.S. alleges that I.S. breached this provision when she sought enforcement by the FRO in January 2017.
[212] I.S. alleges that she filed the Agreement with the FRO because M.S. was in default of child support.
[213] It is clear from the evidence that M.S. consistently paid I.S. $5,000 per month in child support by providing post-dated cheques for the year. I.S. admitted this on cross-examination. At no time was he in default of monthly child support.
[214] At trial, I.S. argued that she filed the Agreement with the FRO because M.S. was in default of paying the nanny expenses. She further testified that she did not cash child support cheques after she heard from the FRO that it would interfere with her efforts to have the nanny expenses enforced.
[215] Based on the express language of the Nanny Provision, M.S.’s obligation to pay the nanny expenses was contingent on I.S. employing a full-time nanny. The obligation was not contingent on I.S. being employed full-time. If I.S. chose to pay the nanny directly, M.S. would contribute at the rate of $500 per week. The amount was to be paid monthly on the first access date each month or at a time agreed to by the parties. There was to be an annual adjustment of $2,000.
[216] Much trial time was consumed by the issue of whether I.S. employed a full-time nanny and whether M.S. was in default of paying the nanny expenses.
[217] However, it is unnecessary to resolve the issue of whether I.S. employed a full-time nanny throughout the period in question. This is because I.S. did not meet the other requirements of the FRO Provision, namely that she give M.S. five days’ written notice of default before filing the Agreement with the FRO.
[218] I.S. relies on a note dated March 22, 2016 from herself to M.S. as notice of default. The note states: “This is your five-day written notice… for overdue support payments.” However, the expenses sought in that letter, in the amount of $1,149.83, are not in respect of child support or s. 7 expenses. Therefore, the written notification that I.S. relies upon as fulfilling the notice requirement of the FRO Provision did not pertain to obligations enforceable by the FRO.
[219] In addition, I.S. did not have proof that the note was sent to M.S. or how it was sent to him. Unlike much of the communication between the parties, it was not sent through counsel. M.S. testified on cross-examination that he “recognized” the document but denies that he received it at the time.
[220] I.S. did not identify any other written notification pertaining to a purported default in child support or s. 7 expenses. In cross-examination, I.S. admitted that she cashed M.S.’s cheques for nanny expenses to November 2016, which means that nanny expenses were not in default when the note was written. Moreover, if the March 2016 note was intended to provide notice of default under Clause 43, the timing is unusual, since I.S. did not file her application with FRO until January 2017, more than nine months later.
[221] Since there was no proper written notification of default, I.S. was not entitled to file the Agreement with the FRO. Even if the March 2016 note constitutes proper notice under Clause 43, there is no evidence to support that M.S. was in default of child support or nanny expenses at the time.
[222] Moreover, the Agreement included a dispute resolution process for child support issues which required that they first try to resolve the dispute through negotiation, failing which they would mediate with a senior family lawyer, and then make application to the court under Court File No. FS-14-19641. I.S. did not engage in this process before filing the Agreement with the FRO in January 2017. The parties did not proceed to mediation on the financial and access issues until after the consent order of McWatt J. on May 19, 2017.
[223] The issue regarding the existence of the nanny is a further example of how a relatively straightforward matter became fraught with conflict and acrimony. Given that M.S.’s obligation to contribute to the nanny expenses was conditional on I.S.’s employment of a full-time nanny, it was incumbent on her to prove that she employed a full-time nanny. This could have been done by providing an employment agreement and/or proof of payment. Instead, there was unnecessary and costly communication between the parties and counsel over a lengthy period of time. However, as I set out above, the nanny issue has no bearing on whether I.S. breached the FRO provision. I have determined this based on I.S.’s failure to give five days’ notice of default.
[224] I include the following account for completeness and to emphasize the unnecessary conflict between the parties on a simple issue.
[225] In August 2016, M.S.’s counsel requested that I.S. provide the nanny’s name and phone number. The letter stated that upon confirmation that there was a full-time nanny, M.S. would pay the $2,000 adjustment contemplated in the Agreement before October 2, 2016. This amount was paid, as reflected by correspondence sent on September 30, 2016.
[226] There was further back and forth about putting the nanny on M.S.’s payroll, which was contemplated by the Agreement and which M.S. agreed to do commencing on December 1, 2016. I.S. subsequently changed counsel and no longer agreed to this.
[227] I.S. eventually provided a note dated March 20, 2017, purportedly from the nanny, J.T., which stated that she has been assisting I.S. since J. was two months old and that “I have been full-time Monday to Friday for $2,000.” However, when M.S. tried to call the telephone number J.T. provided, it was disconnected.
[228] In her own testimony, I.S admitted that she initially hired J.T. on a part-time basis and that she paid her $1,500 per month. She did not say at what point J.T. was working full-time. She admitted on cross-examination that she could not confirm that three cash withdrawals that she relied on as evidence of payment for the nanny were actually paid to the nanny. In addition, on February 8, 2017, FRO advised I.S. that they could not enforce the Nanny Provision because it was ambiguous.
[229] The nanny issue was also discussed at mediation. While I.S. was to provide an affidavit regarding J.T.’s employment, she never did so. J.T. eventually left I.S.’s employment in December 2017.
[230] At trial, I.S. called three witnesses to prove that she hired a full-time nanny. Two of the witnesses, F.C. and J.P.A., had little to no first-hand knowledge or information and ought not to have been called.[^9]
[231] I.S.’s neighbour, F.C., testified that he saw a woman with J. whom he assumed was a live-in nanny, but was never introduced to her. F.C. was not able to identify the photograph of J.T.. Moreover, before the COVID-19 pandemic, F.C. worked daily, leaving his home at 8:20 a.m. and returning at 5:30 p.m. He would be in no position to say whether I.S. employed a full-time nanny.
[232] I.S.’s friend, J.P.A., testified that he visited I.S. “a few weekends a year” from Ottawa, where he moved in 2014. He stated that he would see the nanny, whom he did not identify by name, there when he visited. This testimony was inconsistent with I.S.’s evidence that J.T. did not work on the weekend and went to stay with her boyfriend.
[233] I.S.’s friend, P.S., lived at the Property from 2014 to 2017. P.S. testified that the nanny moved into I.S.’s home approximately one month after J.’s birth, and that she was initially hired part time to clean. P.S. gave inconsistent testimony about whether she knew how much I.S. was paying the nanny and whether she had seen I.S. pay her. P.S. had no first-hand information about the terms of employment between I.S. and J.T..
[234] M.S. seeks that an adverse inference be drawn from I.S.’s failure to call J.T. as a witness, given how hotly contested the nanny issue was. I.S. did not summons or attempt to locate J.T.. Given my finding that I.S. breached the notice provision by failing to provide written notice before going to the FRO, whether I.S. employed a full-time nanny throughout the entire period was not a central issue. I decline to draw an adverse inference.
Filing the Agreement with the Ontario Court of Justice
[235] Clause 79 of the Agreement states that in the event that either party challenges any provisions of the Agreement or requires any order to issue in respect of the Agreement, “the challenge or Order shall be brought or issued under the original Court File FS-14-19641.” The clause further states that in the event a new court file is required, “the parties agree that the proceedings shall… comply with the terms of the Order of Moore J. dated February 9, 2015.” That Order, which was on consent, required that all court materials be initialized and redacted to exclude any information identifying the parties, their children, their addresses, and other personal information.
[236] In January 2017, I.S. brought an application in the OCJ seeking enforcement of the Agreement. It is undisputed that I.S. filed an unredacted version of the Agreement with the Ontario Court of Justice and that the application included both parties’ full names and other identifying information.
[237] M.S. submits that I.S.’s filing of the Agreement in the OCJ breached the above provision because: (i) she was required to bring the matter in the original SCJ court file; and (ii) the filing was not initialized and redacted to exclude identifying information.
[238] I.S. admitted on cross-examination that the application filed in the OCJ did not comply with the Agreement or with Moore J.’s Order. However, she relies on s. 35 of the Family Law Act to argue that she could not have filed the Agreement with the Superior Court in Toronto. She further maintains that she would not have been able to file a redacted version of the Agreement in the OCJ or to have the file initialized.
[239] Section 35 of the Family Law Act states as follows:
(1) A person who is a party to a domestic contract may file the contract with the clerk of the Ontario Court of Justice or of the Family Court of the Superior Court of Justice together with the person’s affidavit stating that the contract is in effect and has not been set aside or varied by a court or agreement.
[240] Pursuant to s. 35(2)(a) of the Family Law Act, a provision for support or maintenance contained in a contract filed with the court may be enforced as if it were an order of the court where it is filed. Subsection 35(4) further states that subsections (1) and (2)(a) apply “despite an agreement to the contrary.”
[241] Based on s. 35(4), Clause 79 of the Agreement could not and did not prohibit I.S. from filing the Agreement with the OCJ. The filing was thus not a breach of the Agreement.
[242] Contrary to I.S.’s submissions, however, while s. 35 permitted her to file the Agreement with the OCJ for enforcement, it did not preclude her from returning the matter to the original Superior Court file or from commencing a new proceeding in the Superior Court to seek an order, as provided in Clause 79. Filing the Agreement with the OCJ was not the only avenue of relief available to her. She could have, but did not, seek relief in the existing court file, which would have been protected by the terms of Moore J.’s Order.
[243] I.S.’s justification for bringing an application in the OCJ does not explain why she chose not to seek relief in the SCJ or adhere to the requirement that identifying information be initialized or redacted. While I.S. testified that she would not have been able to file a redacted version of the Agreement or have the OCJ proceeding initialized, it does not appear that she made any effort in that regard. I.S. was represented by counsel at the time and would be expected to exercise reasonable diligence to comply with the Agreement. If she could not file a redacted Agreement with the OCJ or have the court file initialized, she ought to have proceeded in a manner consistent with the express terms of the parties’ Agreement.
[244] In fact, I.S. would not agree to an order initializing the OCJ proceeding and took the position that such an order would be detrimental to J. because it would allow M.S. to evade his support obligations. In a letter dated August 23, 2017, I.S.’s then counsel advised that “[i]n the absence of a final resolution of all other outstanding financial issues, [I.S.] is not agreeable to an order sealing or initializing the [OCJ] court file...[.]” M.S. had to bring a motion for an order that the file be initialized and redacted in a manner consistent with the Moore J. Order, which eventually proceeded unopposed and was granted by Zisman J. on October 17, 2017.
[245] When I.S. filed the application in the OCJ, she failed to comply with Clause 79 of the Agreement and then failed to cooperate with M.S.’s efforts to have the OCJ file initialized or redacted. She knew how important it was to M.S. that the proceedings not identify him. She resented the Moore J. Order, as is evident from her testimony that she felt duped into agreeing to it, and knew she was circumventing it. While I.S.’s actions were no doubt contrary to the intent of the provision, given the language of s. 35(4), I decline to find that I.S. breached Clause 79 of the Agreement.
Name Change
[246] As detailed above, the Agreement prohibited I.S. from changing J.’s last name to M.S.’s last name without M.S.’s consent.
[247] M.S. testified that he wanted this provision in the Agreement because I.S. repeatedly told him that she wanted J. to have his last name, and he was concerned that I.S. would change J.’s name to get around the Confidentiality Provision.
[248] M.S. testified that within ten days after the settlement funds were paid, I.S. asked to be able to put M.S.’s name on J’s birth certificate. This is evidenced by an email dated November 6, 2015 from I.S. to M.S. He believed this to be a first step to changing J.’s last name. When it was put to M.S. in cross-examination that changing J.’s name was different from identifying M.S. as J.’s father on his birth certificate, M.S. stated: “I don’t care what it is. I don’t want my name on public documents.” M.S. testified that the Agreement required his consent to put his name on any public document.
[249] To date, I.S. has not breached the Name Change Provision. I.S. has not changed J.’s last name. I.S. has not put M.S.’s name on J.’s birth certificate. While M.S. suspects that putting his name on the J.’s birth certificate is a first step to changing J.’s last name, they are not the same thing. Contrary to M.S.’s belief, the Name Change Provision is not so broad as to require his consent to put his name on any public document.
Summary
[250] Based on my findings above, I.S. breached the access provisions of the Agreement by interfering repeatedly with M.S.’s access. I.S. also breached the Confidentiality Provision by disclosing the Agreement to third parties without M.S.’s consent. I.S. breached the Agreement by filing the Agreement with the FRO because M.S. was not in default of a child support obligation and because I.S. failed to provide written notification of a purported default.
[251] I find that I.S. did not breach the Name Change Provision or the medical records provision. Also, I.S. did not breach the Agreement by filing an application in the OCJ.
[252] Notwithstanding my findings that I.S. breached certain terms of the Agreement, none of the individual breaches of the “five fundamental requirements” resulted in a fundamental breach of the Agreement. The Agreement is a complex contract with numerous interdependent clauses. Given my findings on the underlying purpose and nature of the Agreement, breach of any one of the requirements did not result in a repudiation of the Agreement.
[253] Applying the Spirent factors, the seriousness of the breaches and the likelihood of repetition weigh in favour of finding that M.S. has been substantially denied the benefit of the Agreement. Access and confidentiality were the most important aspects of the Agreement to M.S. Because I.S. has demonstrated particular difficulty with those provisions, there is a likelihood of repetition of the breach. In respect of confidentiality, the consequences of the breach were mitigated somewhat because disclosure of the Agreement was limited to parties that arguably had a legitimate purpose and who would not disseminate the information further.
[254] Based on the ratio of the obligations not performed by I.S. to her obligations as a whole, and the relationship between that part and the whole obligation, I find that M.S. has not been substantially deprived of the benefit of the Agreement. While I.S. has disregarded certain obligations and threatened to breach others, she is keeping her end of the deal where it matters most. She continues to fulfil her parental responsibilities toward J. She has not told M.S.’s family about J. She continues to recognize that M.S. is entitled to access to J. She participated in mediation of the parenting and support issues. Consequently, M.S. was not deprived of the whole benefit of the Agreement.
[255] As the Supreme Court stated in Jedfro v. Jacyk, 2007 SCC 55, [2007] 3 S.C.R. 679, at para. 21, “having little regard for an agreement does not establish that a party is repudiating the agreement. Ordinary, non-repudiatory breach is consistent with ignoring the terms of an agreement. More is required to establish repudiation.”
[256] In short, I.S. has not demonstrated by her conduct an intent not to be bound, but that she recognizes that she is. As a result, I find that the cumulative effect of I.S.’s breaches of the Agreement did not result in a repudiation of the Agreement as a whole. This is not one of the exceptional circumstances in which the entire foundation of the contract has been undermined.
[257] My finding that I.S. did not repudiate the Agreement does not in any way excuse I.S.’s conduct. The Agreement anticipated that both parties would act as mature and responsible adults with J.’s best interest in mind. Rather than to cooperate, I.S. sought to cause problems for M.S. at every turn. Her conduct demonstrates that she was acutely aware of her obligations under the Agreement but that she ignored the Agreement when it suited her purposes. She has demonstrated a lack of maturity and an inability to put J.’s interests ahead of her own, while constantly using J. to justify her actions. I.S.’s conduct, in particular, the threats to disclose the relationship and the problems in relation to access, give rise to a concern that she was motivated by a desire to exact more from M.S. than the Agreement provided.
[258] At the same time, M.S. frequently refused to acknowledge any legitimate basis for I.S.’s concerns as they related to J.’s well-being. I.S. objected to M.S. taking J. swimming or keeping him outdoors in the cold because of his ear problem and when he was sick. While this was not unreasonable, M.S. interpreted this as I.S.’s micro-managing and interfering with his access. Unfortunately, the mutual mistrust and disdain was too great to enable them to overcome their differences of opinion.
[259] Based on my finding that I.S.’s breaches of the Agreement did not amount to a repudiation or fundamental breach, M.S. was not entitled to treat the Agreement as terminated.
Did M.S. Accept the Repudiation and Elect to Terminate the Agreement?
[260] Upon one party’s repudiation of a contract, the non-repudiating party has the option of: (i) accepting the repudiation, terminating the contract and suing for damages; or (ii) disregarding the repudiation and continuing to perform the contract. The non-repudiating party must communicate their acceptance of the repudiation within a reasonable period of time. The acceptance may be words or by conduct but must be clear and unequivocal: Brown v. Belleville (City), 2013 ONCA 148, 114 O.R. (3d) 561, at para. 45; Jedfro v. Jacyk, at para. 22.
[261] Because I have found that I.S. did not repudiate the Agreement, it is not necessary for me to determine whether M.S. demonstrated that he intended to treat the Agreement as terminated. Had I found that I.S. repudiated the Agreement, however, I would further find that M.S. did not communicate his election to treat the Agreement as terminated until October 2017.
[262] M.S. relies on three letters from his lawyer to I.S.’s lawyer, dated June 16, July 24, and October 4, 2017, as demonstrating that he accepted I.S.’s repudiation and elected to treat the Agreement as terminated.
[263] The first letter, dated June 16, 2017, stated that M.S. would participate in mediation with Stephen Grant in good faith in an effort to resolve the outstanding financial issues. The letter further stated: “However, in the event that [resolution] is not possible, then my client will determine what legal remedies he will avail himself of in respect of your client’s repudiation of the Minutes.”
[264] Although the letter mentions repudiation, it fails to communicate M.S.’s acceptance of the repudiation and his election to treat the Agreement as terminated. To the contrary, the letter stated that M.S. would participate in mediation, which was the process envisaged under the Agreement. Moreover, because the letter stated that M.S. would determine his legal remedies, it is clear that no election had been made at that point.
[265] The second letter, dated July 24, 2017, stated “my client will assess the remedies that he will pursue against your client now that mediation has failed.” The letter does not specifically mention I.S.’s repudiation, M.S.’s acceptance of the repudiation, or the termination of the Agreement. Moreover, the letter was marked “without prejudice” and addressed issues relating to the nanny expenses and initialization of the OCJ file, which were obligations under the Agreement.
[266] The second letter is similar to the first letter in that it failed to state that as a result of I.S.’s repudiation of the Agreement, M.S. was electing to treat the Agreement as terminated. It stated only that M.S. was assessing his remedies, which were either to continue to perform the Agreement or to elect to treat it as terminated. Moreover, the nanny expenses and initialization of the OCJ file are governed by the Agreement. Seeking to resolve those matters in accordance with the Agreement is inconsistent with M.S.’s current position that he conveyed his intention to terminate the Agreement.
[267] Given the contradictory terms of both letters, I find that M.S. did not, by words or conduct, make clear to I.S. that he accepted her repudiation and elected to treat the Agreement as terminated.
[268] Not only did the letters fail to clearly communicate M.S.’s acceptance of the repudiation, M.S.’s conduct did not evince that he saw the Agreement as terminated. If the Agreement was terminated because of I.S.’s repudiation, both parties were relieved of future performance. M.S. could not treat the Agreement as terminated in respect of his obligations and expect I.S. to continue to perform her obligations. M.S.’s expectation that I.S. would continue to adhere to the access and Confidentiality Provisions, however, shows that he did not view the Agreement as having come to an end. There is a fundamental inconsistency in M.S. purporting to terminate the Agreement while expecting that I.S. would continue to perform her obligations. Moreover, at no time did M.S. suggest that because the existing Agreement had come to an end, the parties would need to discuss new terms.
[269] On October 4, 2017, after the failed mediation of parenting issues with Dr. Butkowsky, M.S.’s counsel sent a letter to I.S.’s counsel advising her that M.S. would be bringing an application to set aside the Agreement and that, other than paying child support and s. 7 expenses, he would not be performing his obligations under the Agreement. The letter further expressed the view that I.S. was in fundamental breach of all of the terms of the Agreement. Somewhat inexplicably, the letter further stated that M.S would be assessing his remedies. M.S. commenced this Application seeking an order setting aside the Agreement shortly thereafter.[^10]
[270] In my view, if I.S. had repudiated the Agreement, which I find she did not, M.S. did not communicate his election to treat the Agreement as terminated until October 4, 2017.
[271] Even then, however, I question whether the non-repudiating party to a domestic contract is entitled to treat the agreement as terminated without further intervention by the court. In Critchley v. Critchley (1998), 1988 3136 (BC SC), 30 B.C.L.R. (2d) 316, the husband terminated child support after the wife moved their children to New Brunswick without his consent, in breach of their separation agreement. Taylor J. (as he then was) stated at para. 9 that it is “contrary to good sense that conduct such as that complained of on the part of the wife in relation to the children should be held to terminate the husband’s contractual obligation to support them. That would be using one wrong to justify another, with the result in both cases being contrary to the interests of the children – the true intended beneficiaries of these covenants.”
[272] In the family law context, it may not be appropriate for the non-repudiating party to be entitled to unilaterally determine that the contract has come to an end. This could lead to instability for the child, who is not a party to the contract and who was not involved in its repudiation. Moreover, when repudiation is disputed, as was the case here, the parties would be left with uncertainty as to the status of their agreement and to what obligations they remain bound. I need not resolve the matter, however, because I have found that I.S. did not repudiate the Agreement.
Did M.S. Breach the Agreement?
[273] In her Answer, I.S. alleged that M.S. breached the Agreement by failing to pay certain expenses. She sought damages of $1 million, punitive damages in the amount of $100,000, arrears of expenses and, alternatively, specific performance. At trial, aside from the dispute about whether there was a full-time nanny, little documentary evidence was adduced to support her claim that M.S. had failed to pay for expenses. I.S.’s position appears to have changed during the course of the trial. In closing, her counsel argued that M.S. breached the Agreement by refusing to allow I.S. to redeem the mortgage under Option 2. This alleged breach was not pleaded in her Answer and ought not to have been raised for the first time at trial.
[274] Based on the evidence adduced at trial, I.S. has failed to satisfy me that M.S. breached the Agreement.
[275] I have found earlier in these Reasons that M.S. was not in arrears of child support when I.S. filed the Agreement with the FRO. I.S. has failed to demonstrate that M.S. was in default of child support.
[276] When cross-examined on the question of whether there were any invoices for s. 7 expenses that M.S. failed to pay, I.S. responded that the documents had been provided. However, I.S. bears the burden of demonstrating at trial that M.S. breached the Agreement, as well as damages.
[277] On the issue of the nanny expenses, the evidence demonstrates that J.T. initially worked part-time. There is no proof as to when she began working full-time. It is unclear how much she was being paid over the course of her employment. While I am satisfied that J.T. was employed by I.S. as a nanny, I.S. has failed to demonstrate on a balance of probabilities the shortfall between the amounts she received from M.S. and the amounts she actually paid to J.T.
[278] While I.S. testified that M.S. failed to contribute to an RESP for J., as required under the Agreement, on cross-examination, she changed her evidence to say that he did not contribute to the RESP she set up in her name. M.S. contributed J.’s RESP and did not breach that term of the Agreement.
[279] Similarly, the evidence supports that M.S. has complied with the term of the Agreement requiring that he obtain a suitable life insurance policy.
[280] Accordingly, I.S. has failed to demonstrate that M.S. breached any provisions of the Agreement.
Should This Court Exercise Its Discretion to Set Aside the Agreement?
[281] Subsection 56(4) permits the court to set aside a domestic contract “otherwise in accordance with the law of contract.” Leaving aside the issue of whether repudiation of a domestic contract would permit the non-repudiating party to treat the contract as terminated, as common law contract principles provide, s. 56(4) gives the court the discretion to set the agreement aside.
[282] I.S. relies on s. 56(1) of the Family Law Act to argue that the court should refuse to exercise its discretion to set aside an agreement where to do so would be in the child’s best interest. Subsection 56(1) allows the court to disregard any provision in a domestic contract respecting the education, moral training or decision-making responsibility or parenting time with respect to a child where to do so is in the best interests of the child. In my view, it is unnecessary to rely on that provision, which does not appear to be directly applicable to the circumstances.
[283] If I have erred in finding that I.S. did not repudiate the Agreement, I would nonetheless decline to exercise my discretion to set aside the Agreement under s. 56(4) of the Family Law Act. In this case, the following factors weigh against this court exercising its discretion to set aside the Agreement.
[284] First, courts have repeatedly reiterated the strong policy reasons to enforce settlements generally, that “it is in everyone’s interest that litigation be concluded by the parties’ agreement”: Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576, at para. 54.
[285] Second, when parties enter into a separation agreement, they have agreed to terms in which the court ought not to interfere lightly. In Petruzziello v. Albert, 2014 ONCA 393, at para. 31, the Court of Appeal recognized “the established policy that the courts encourage settlement of disputes by recognizing the validity of settlements of pending litigation that parties freely and properly enter into, with the benefit of legal advice.”
[286] Third, the terms of the Agreement reflect that central to the Agreement was the parties’ child, J. The benefit to J. is inherent in almost every aspect of the Agreement. The parties were able to resolve their dispute because they prioritized J.’s interests. To set aside the Agreement would be to undermine all of the benefits that were intended to accrue to J.
[287] M.S. submits that upholding the Agreement would make a mockery of contract law and would encourage parties to domestic contracts to disregard their contractual obligations, because they would understand that they would still be entitled to reap the benefits if they did. I do not accept that upholding the Agreement in this case would open the floodgates to parties indiscriminately breaching their separation agreements. Parties to domestic contracts do not enter into such agreements with the intention of flouting them, which would be in bad faith. They enter into such arrangements to govern their relationship going forward, in their own and their children’s interest.
[288] Here, the parties find themselves in a uniquely complicated situation because of the background to their relationship. They resolved a number of contentious matters between them. It is the unresolved issues that keep threatening that delicate balance.
[289] If the Agreement were set aside, there would be no specific terms governing the parties’ relationship. For two parties who have had innumerable challenges interacting despite the existence of their carefully negotiated Agreement, this would be nothing short of disastrous. Most importantly, it would be contrary to J.’s best interest. Six years after J.’s birth, M.S. and I.S. would be back at the beginning. This time, however, it would be exponentially more difficult for them to resolve the dispute because the animosity of this proceeding would be layered onto their pre-existing conflicts.
[290] In this case, the Agreement was intended to resolve the parties’ disputes and allow them to move forward in their child’s best interest. The parenting terms were carefully crafted and reflect the parties at their best. They recognized J.’s need to love and respect both parents. They agreed to cooperate, to accommodate each other’s schedules, to respect each other’s ability to care for J., and to prefer J.’s interests to their own. At some point, their disputes became so frequent and rancorous that the terms to which they had agreed were obscured. The Agreement ought not to be set aside because the parties fell short of their own expectations.
[291] In my view, the path forward to resolving the parties’ ongoing conflict is not to set aside the Agreement but, rather, to underscore and hold the parties to it. Accordingly, even if I.S. had repudiated the Agreement, I would decline to exercise my discretion to set aside the Agreement.
Did I.S. Breach the Mortgage Agreement?
Background to the TOE Mortgage
[292] When M.S. purchased the Property in December 2013, the funds were advanced by TOE, an entity controlled by him. TOE had a two-year, interest-free mortgage on the Property, which was encumbered for the full value thereof. Standard Charge Terms 200033 (the “Standard Charge Terms”) applied to the mortgage, including that on default, all sums secured by the charge were immediately due and payable and that TOE was entitled to take possession of the Property.
[293] I.S. testified that M.S. purchased the Property as a surprise for her for Christmas 2013. She testified that when she asked M.S. how she would repay the mortgage in two years, he told her not to worry about it. I.S. testified that M.S. told her to attend at a lawyer’s office to sign the mortgage agreement.
[294] M.S. testified that he purchased the Property because he knew that I.S. “had always expressed an interest or desire to own some real estate,” that he wanted to help her out, and that it would be “forced savings” for her. He denies that the Property was a gift and testified that “no one gets houses for free.” M.S. testified that he thought I.S. would be able to repay the mortgage because he knew that she had saved $350,000 from investments made while working for the Company.
[295] I need not determine whether the Property was a gift when it was purchased because the parties subsequently agreed to terms dealing with the Property in the Agreement. I note, however, that M.S.’s testimony about the purchase of the Property was inconsistent with the text messages exchanged between the parties at the time. On cross-examination, M.S.’s explanation for purchasing a five-bedroom house was that “that’s how they built the house.” When the Property was purchased, M.S. told I.S. “You have a home forever” and that it was “[r]eady for new and amazing memories together” and “We will fill that house with fantastic times together.” When I.S. texted that she could not “believe the house is mine”. M.S. responded “All yours my love. All yours.” Regarding the mortgage, M.S. sent a text message to I.S. saying “Don’t sweat it. Well [sic] have it paid in two yrs.”
[296] M.S. did not purchase the Property simply to help I.S. out or as an investment for TOE. In either of those circumstances, there would be no reason for TOE to pay the full purchase price or for I.S. to make no contribution, especially if she had $350,000 in savings, as M.S. testified. Moreover, it was not reasonable for M.S. to expect I.S. to be able to repay the mortgage in two years when, at the same time, her employment with the Company was being terminated. M.S.’s explanations for the purchase of the Property are disingenuous and unconvincing and raise questions about his credibility generally.
The Option to Sell or to Redeem
[297] Under the Agreement, M.S. agreed to cause the TOE mortgage to be extended until June 30, 2018. Clause 62(c) of the Agreement further provided I.S. with two options in relation to the Property:
(i) If I.S. did not want to retain the Property after June 30, 2018, the Property would be sold with the net proceeds shared with I.S. receiving one-third and M.S. receiving two-thirds (“Option 1”); or
(ii) If I.S. wanted to retain the Property after June 30, 2018, she had the right to redeem the TOE mortgage for two-thirds of its value, or $791,333.33 (“Option 2”), and M.S. would cause TOE to discharge the mortgage.
[298] According to Clause 62(d) of the Agreement, if I.S. did not exercise either option, M.S. had the right to sell the Property under clause 62(d) of the Agreement, and the proceeds would be divided as specified under Option 1.
[299] After the Agreement was executed, TOE and I.S. entered into the Amending Agreement, extending the mortgage term to June 30, 2018. All of the original mortgage terms remained in place.
The Parties Positions
[300] In October 2018, TOE commenced a mortgage enforcement action against I.S. for default for failing to pay the entire balance of $1,187,000 when it was due on June 30, 2018. M.S. and TOE take the position that I.S. was not entitled to avail herself of the options available under Clause 62(c) because she had repudiated the Agreement, which M.S. accepted, bringing the Agreement to an end.
[301] I.S. argues that she attempted to redeem the mortgage in September 2017 in accordance with Option 2 but TOE prevented her from doing so. I.S.’s position is that she did not default on the mortgage.
[302] The contentious nature of this proceeding is illustrated by the fact that in November 2017 (in Court File No. 14-19641), I.S. brought a motion to compel TOE to allow her to exercise Option 2 to redeem the mortgage, which M.S. opposed on the basis of his Application to set aside the Agreement. Gilmore J. dismissed I.S.’s motion, finding that there were significant factual and legal issues regarding the Agreement’s ongoing validity: 2017 ONSC 7160.
[303] Then, in September 2020, TOE brought a motion to compel I.S. to redeem the mortgage, arguing that its interest in the Property was at risk because real estate prices were falling due to the COVID-19 pandemic.[^11] I.S. opposed the motion and asked that the issue be decided at trial. Nakonechny J. dismissed TOE’s motion, finding that the test for a mandatory order had not been met and that the matter was better determined at trial, which was just over a month away: 2020 ONSC 5818.
Was I.S. in Default of the Mortgage?
[304] Based on the allegations pleaded in its Statement of Claim, TOE’s action for default is based solely on I.S.’s failure to pay the mortgage principal of $1,187,000 when it was due on June 30, 2018. No other default is pleaded. In addition, the Statement of Claim failed to mention the Agreement or the options available to I.S. under it.
[305] I pause to note that TOE’s attempt to have the mortgage enforced by the court in the absence of any mention of the Agreement, the context in which the extension was agreed to, or the family law proceeding is highly questionable. I reject TOE’s legal argument that TOE was not bound to the Agreement. M.S. clearly controlled TOE. M.S. testified that the money for the Property was advanced by TOE rather than M.S. himself for tax reasons. In the Agreement, M.S. specifically agreed that he would cause TOE to extend the mortgage. In addition, the Agreement states that the proceeds of a sale of the Property would be split between I.S. and M.S., not I.S. and TOE. If I.S. chose to redeem under Option 2, Clause 62(c)(ii) stated that M.S. would cause TOE to discharge the mortgage. TOE cannot rely on its separate corporate identity when M.S. and TOE themselves have failed to maintain that distinction.
[306] Clearly, I.S. did not pay the principal amount by June 30, 2018. She did, however, attempt to redeem the mortgage pursuant to Option 2 under the Agreement. Based on M.S.’s position that the Agreement had been repudiated, TOE did not accept I.S.’s attempt to redeem and resisted I.S.’s motion to compel TOE to allow her to redeem in November 2017.
[307] As a result of M.S.’s Application to set aside the Agreement, the enforceability of Clause 62(c) was in question. Given the unclear status of the Agreement, I find that I.S.’s failure to pay the entire mortgage principal by June 30, 2018 did not result in a default. The mortgage agreement must be read in the context of the Agreement. It would be unreasonable to expect I.S. to pay the entire mortgage principal of $1,187,000 when, in the event that the Agreement continued to be valid and enforceable, she would be entitled to redeem the mortgage for two-thirds of that amount. That issue was yet to be determined.
[308] At trial, TOE argued that I.S. was in default of the mortgage because she breached the Standard Charge Terms in two ways: (i) by renting rooms to various individuals; and (ii) by refusing to permit an inspection of the Property. Neither breach was pleaded in TOE’s Statement of Claim.
[309] Given that TOE did not plead any default other than I.S.’s failure to pay the mortgage principal, I need not address the arguments made at trial that I.S. was in default of the Standard Charge Terms by renting rooms in the Property and by failing to allow an inspection. For the sake of completeness, I provide my findings below.
Leasing
[310] Paragraph 14 of the Standard Charge Terms states as follows: “If the Chargor sells, transfers, disposes of, leases or otherwise deals with the land, the principal amount secured by the Charge shall, at the option of the Chargee, immediately become due and payable.”
[311] While TOE sought to demonstrate at trial that I.S. leased the Property in violation of paragraph 14, at no time did TOE give notice to I.S. that she breached this provision by renting rooms at the Property. TOE did not give notice that as a result of such breach, the principal amount was due and payable. As a result, I find that TOE is not entitled to rely upon the renting of rooms as a breach entitling it to seek payment of the entire amount due on the mortgage.
[312] Moreover, I.S. did not lease the Property or the land, as paragraph 14 specifies. The rationale of paragraph 14 would be to prevent a deterioration in the value of the property secured by the mortgage. I.S. continued to occupy the Property. It is unlikely that renting individual rooms at the Property was sufficient to constitute a breach of paragraph 14.
[313] It is clear from the evidence that at least three, and possibly four, individuals lived at the Property for some period of time. I.S. admitted that she rented a room to an individual, A.B. for $800 per month, as was evidenced by a rental agreement dated February 18, 2019. The lease was on a month-to-month basis. I.S. testified that A.B. moved out shortly before the COVID-19 pandemic.
[314] I.S.’s friend P.S. also lived at the Property from June 2014 to 2017. P.S. testified that I.S. asked her to move in shortly before J.’s birth. P.S. testified that she initially paid rent for a number of months but was eventually not paying rent because I.S. told her it was sufficient if she helped out around the house. Unlike A.B., P.S. was not just renting a room at the Property. She lived at the Property as I.S.’s friend and helped her care for J. It is clear from the evidence that she assisted with access exchanges. Moreover, M.S. knew that P.S. was living at the Property and did not raise it as a breach of the Standard Charge Terms.
[315] In respect of A.R., it appears that he lived at the Property while in between apartments from May to September 2017. TOE argues that renting a room to him would have been a breach of the Standard Charge Terms. Yet, for the purposes of challenging the Scotiabank mortgage application, the Applicants question whether A.R. ever lived at the Property. In any event, I find that A.R.’s brief period of occupancy would not constitute leasing the Property in breach of paragraph 14.
[316] The nanny, J.T., moved in shortly after J.’s birth. It is unclear from the evidence whether she lived at the Property the entire time she worked for I.S. In my view, having a live-in nanny would not constitute leasing the Property in breach of paragraph 14.
[317] Based on my interpretation of paragraph 14 and the evidence, I.S. did not breach that provision by renting a room to A.B. or by allowing friends stay at the Property for various periods of time.
Inspection
[318] TOE further alleges that I.S. breached paragraph 17 of the Standard Charge Terms by failing to allow it to inspect the Property. Paragraph 17 states that “the Chargee may, whenever he deems necessary, by his agent enter upon and inspect the land and make such repairs as he deems necessary….”
[319] On September 1, 2017, M.S.’s counsel, Ms. Ordon, wrote to I.S.’s counsel requiring an “appraisal inspection” of the Property. While that message referred to earlier correspondence dated July 27, 2017, no email of that date was adduced into evidence. The email advised that Mr. Parthenis of Lebow Carrington Appraisal Group would contact I.S. to arrange the inspection.
[320] On September 12, 2017, I.S.’s family lawyer advised M.S.’s counsel, Ms. Ordon, that she had been approved for a mortgage and was electing to exercise Option 2 to redeem the mortgage for $791,333.25.
[321] On October 3, 2017, TOE, through its real estate lawyer, issued a formal Notice of Default under Charge to I.S. (the “Notice”), on the basis that I.S. refused to permit TOE to have access to the Property for an inspection. TOE’s counsel advised that TOE would require an inspection to take place during the week of October 9, 2017 and that a failure or refusal to establish a mutually convenient time for inspection would be viewed as a breach of the charge. The Notice stated that TOE would exercise its remedies, which include applying to the court for an order permitting access or commencing a power of sale proceeding. The Notice did not advise that the amount due under the mortgage agreement was immediately payable.
[322] On November 3, 2017, I.S.’s counsel responded, stating that the Notice disregarded the fact that I.S.’s motion to redeem the mortgage had been scheduled for November 21, 2017. The email further stated I.S. was available for an inspection after November 21, 2017.
[323] Under paragraph 17 of the Standard Charge Terms, TOE had a right to inspect the Property and I.S. ought to have permitted the inspection to take place, irrespective of whether she was intending to redeem the mortgage.
[324] The dispute about whether TOE requested an inspection or an appraisal is immaterial. The September 1, 2017 email from Ms. Ordon stated “appraisal inspection” but went on to refer to paragraph 17 of the Standard Charge Terms and stated “inspection” a further three times. Based on the reference to paragraph 17, it ought to have been clear that TOE was seeking an inspection of the Property. If it was unclear, I.S. or her counsel should have sought clarification.
[325] Indeed, when I.S. asked her real estate lawyer, D.R.L., whether TOE was entitled to inspect the Property, D.R.L. advised her that paragraph 17 is standard in most mortgages. The email further stated that while paragraph 17 does not contemplate the attendance of an appraiser, “it could be anyone acting on the mortgagee’s behalf.” D.R.L. suggested requesting the “payout statement” which could negate the request for an inspection.
[326] TOE had a right to inspect the Property and I.S. ought to have permitted it. However, by the time TOE issued the Notice, I.S. had indicated her intent to redeem the mortgage and had taken steps to do so. At that point, it was not reasonable for TOE to insist on enforcing its right to inspect, especially when the redemption issue was before the court. In my view, it was not unreasonable for I.S. to take the position that the inspection ought to await the outcome of the motion on November 21, 2017, as TOE suggests. Had I.S.’s motion to redeem the mortgage been granted, the inspection would have been unnecessary because TOE would be paid the amount owing under Option 2 and would have no further interest in the Property.
[327] It would be disproportionate to find that as a result of failing to allow the inspection, the entire mortgage became payable, especially in the context of the dispute over the Agreement. In any event, TOE did not plead the failure to allow an inspection as a breach of the mortgage in its Statement of Claim.
[328] Based on the foregoing, I find that I.S. was not in default of the mortgage or in breach of its terms.
Should I.S. Have Been Entitled to Redeem the Mortgage?
[329] I have found earlier in these Reasons that I.S. did not repudiate the Agreement and that the letters from June and July 2017 did not communicate M.S.’s acceptance of the purported repudiation. As a result, when I.S. communicated her intent to redeem the mortgage in September 2017, the Agreement remained in force.
[330] M.S. argues that I.S. should not be entitled to obtain the benefit of an Agreement that she has breached. Given my findings regarding I.S.’s willingness to ignore her obligations under the Agreement, the argument has some appeal. However, the evidentiary record also raises concerns about TOE’s conduct when I.S. attempted to redeem the mortgage, at a time when the Agreement had not been repudiated and M.S.’s intent to accept the repudiation had not been clearly communicated. As a result, I find that her breaches did not disentitle her from exercising her right to redeem the mortgage under Option 2.
[331] I would also note that TOE has adopted inconsistent and irreconcilable positions in this litigation. As will be seen below, TOE argues that if I.S. elected to redeem the mortgage under Option 2, she was required to retain the Property, and was not entitled to sell or transfer any portion of it. TOE argues that the purpose of Option 2 was to ensure that J. would have a stable home. Yet, M.S. now argues that the Agreement, which would include Option 2, should be set aside. In addition, M.S. opposed I.S.’s motion to exercise Option 2 in November 2017 and TOE brought the mortgage enforcement action in October 2018. Neither of those steps is consistent with providing J. with a stable home.
[332] TOE submits that even if I.S. was entitled to redeem the mortgage, she was not ready, willing, and able to redeem. First, TOE maintains that I.S. was only entitled to redeem the mortgage if she was going to retain the Property, but that she did not have the financial means to retain the Property and/or she intended to sell it. Second, TOE submits that Scotiabank would not have approved I.S. for financing without a co-signor, which was not permitted under the TOE mortgage. Third, TOE submits that Scotiabank would not have advanced the funds because I.S.’s loan application contained misrepresentations. None of TOE’s arguments have convinced me that I.S. was not entitled to redeem the mortgage.
Was I.S. required to retain the Property after redeeming the mortgage?
[333] On the first argument, M.S. and TOE submit that Clause 62(c) of the Agreement provides only two options: that I.S. sell the Property or that I.S. retain the Property. On TOE’s interpretation, if I.S. elected Option 2, she was required to retain the Property for some unspecified period of time. She was not entitled to redeem the mortgage and then turn around and sell the Property, because, in TOE’s view, a sale would have to take place pursuant to Option 1. The Applicants submit that the purpose of Option 2 was to provide a stable home for J, which purpose would be defeated if I.S. could redeem the mortgage and then sell the Property.
[334] In my view, Clause 62(c) cannot be interpreted in the manner suggested by the Applicants. Option 2 says nothing about I.S. having to retain the Property for any period of time. If the intent was that I.S. would be prohibited from selling the Property after redeeming the mortgage, the provision could have stated so more clearly. It is unclear, however, whether such a provision would be enforceable because it would unduly limit I.S.’s rights as the owner. Under TOE’s interpretation, if I.S. redeemed the mortgage and then landed in financial difficulty, she would not be able to sell a Property that she alone owned. An interpretation of Option 2 that precludes a subsequent sale is untenable.
[335] Once I.S. redeems the mortgage, as the owner of the Property, she is free to sell, lease, mortgage or otherwise deal with the Property. TOE cannot compel I.S. to do anything in respect of the Property after its mortgage is paid off. At that stage, TOE would be out of the picture and I.S. would have no further obligations to TOE. In fact, Clause 62(c)(ii) states that after the mortgage is discharged, “M.S. and the mortgagee will, thereafter, have no further claim against the property whatsoever[.]”
[336] TOE argues that Option 2 precludes a sale because Option 1 specifically deals with the possibility of a sale of the Property. According to TOE’s interpretation, Option 1 would be rendered superfluous if, under Option 2, I.S. is entitled to redeem the mortgage and then sell the Property. I disagree. Option 1 exists in the event that I.S. is unable to redeem the mortgage under Option 2. For example, if I.S. does not qualify for refinancing, she would have to elect Option 1 and sell the Property. Option 1 is thus not rendered meaningless as a result of interpreting Option 2 as permitting a sale after the mortgage is redeemed.
[337] The Property is now valued at over $2 million. TOE’s true complaint is that if I.S. redeems the mortgage and then sells the Property, only I.S. would be able to realize the increase in the value of the Property. TOE would only be reimbursed for two-thirds of the principal amount of the mortgage, or $791,333.33. However, this is how Clause 62(c) was drafted. M.S.’s testimony reflects that he clearly understood that under that provision, there would be no down-side to I.S. in relation to the Property. Under Option 1, she would be entitled to one-third of the net proceeds of a sale, despite not having contributed to the purchase price or mortgage. Under Option 2, she would be entitled to redeem the TOE mortgage by paying $791,333.33, even though the principal amount was $1,187,000. Given that M.S. is a sophisticated investor and businessperson with multiple companies, he would not have agreed to the term unless it was intended to.
[338] The language of Clause 62 makes clear that it is intended to address any potential claim that I.S. had for spousal support. The provision states that it is in “consideration of the full and final releases with respect to past, present and future spousal support and all other claims that the parties may have against one another…[.]” Clause 62 is preceded by Clause 61, which states: “The spousal support and property sections of this Agreement are interdependent and inextricably intertwined. Together, they fully satisfy the objectives of the legislation and a fair global resolution.” While TOE argues that the Property was never intended to be an investment for I.S., the Agreement makes clear that Clause 62 was a settlement of any claims I.S. may have had against M.S. As M.S.’s counsel submitted, it was intended to resolve any claims I.S. might have and to provide her with financial security.
Was I.S. in a position to redeem the mortgage?
[339] TOE further submits that in September 2017, I.S. was not ready, willing and able to redeem the mortgage.
[340] In August 2017, I.S. applied for mortgage financing with the assistance of a mortgage agent, J.M.M. of Dominion Lending Estate Mortgages. J.M.M. advised I.S. that she could not qualify for a mortgage with a major bank without a co-signor. She then asked her friend A.R. to co-sign the mortgage with her.
[341] A.R. was called as a witness by TOE. He testified that he met I.S. in 2016 when she hired him to help her look for a job. When A.R.’s lease expired, I.S. offered him a room in her house. A.R. testified that he lived at the Property from May to September 2017. In September 2017, he obtained another apartment. While A.R. intended to pay rent, I.S. did not ask for or receive rent from him.
[342] A.R. testified that he agreed to co-sign the mortgage with I.S. because he wanted to help her, because she was undergoing significant stress and had helped him in the past. A.R. admitted that at the time, he and I.S. had been friends for only a year. A.R. testified that the real estate lawyer explained to him that he would receive a one percent interest in the Property in exchange. A.R. testified that the one percent interest did not matter to him because he believed that I.S. would pay the mortgage. He admitted that he did not read the documents before signing them and that he never verified whether I.S. would be able to pay the monthly mortgage amount. A.R. stated that he did not receive any money for co-signing.
[343] Although the Scotiabank documents describe A.R. as I.S.’s “boyfriend,” A.R. testified that there was no romantic relationship between them. He was engaged to marry another woman at the time. A.R. admitted that on October 2, 2017, when he and I.S. signed a statutory declaration stating that they were occupying the Property as their principal residence, he was already living at his apartment. He stated that he kept some things at the Property and he was there from time to time until December 2017. P.S., who lived at the Property from 2014 to 2017, confirmed that A.R. lived there for a number of months in 2017.
[344] TOE submits that it is inconceivable that A.R. would agree to be liable for a $800,000 loan with no benefit to him, when he and I.S. were not romantically involved and had only been friends for a year.
[345] Other than the irrationality of undertaking that risk, I have no basis on which to doubt A.R.’s testimony. Based on his testimony, A.R. unquestioningly took I.S. at her word that she would be able to pay the monthly mortgage. A.R. felt indebted to her because she had let him stay in her house rent-free when he was unable to find an apartment. He assumed that because she had a job and support payments that she would be able to carry the mortgage. A.R. appears not to have thought through the potential consequences to him if I.S. were to default on the mortgage. However, it is not inconceivable that he would make an ill-advised decision to help out a friend. Moreover, as TOE points out, A.R. was not without recourse. Even as an owner of one percent of the Property, he could force a sale. The Property was valued at $1.6 million at the time.
[346] While A.R.’s willingness to sign a statutory declaration that was not completely true is concerning, it also supports that he did not fully consider the consequences of agreeing to co-sign the loan.
[347] TOE also called J.M.M. as a witness. TOE attempted to raise various arguments regarding J.M.M.’s credibility, I.S.’s failure to call J.M.M. as a witness, and the fact that J.M.M. had not retained any email correspondence with I.S. TOE sought this evidence to demonstrate that I.S. intended to sell the Property after redeeming the mortgage. Based on my finding that Clause 62(c)(ii) did not prohibit I.S. from selling the Property, the issue of whether I.S. intended to sell the Property is irrelevant.
[348] J.M.M., who has been a mortgage agent for eight years, testified that I.S. contacted him in the summer of 2017 to secure financing to “pay-out” M.S. He did not previously know I.S. J.M.M. testified that he advised I.S. that she would not qualify for a mortgage with an “A” lender, such as a bank, on her own, but that she could qualify for a mortgage with a “B” lender or a private mortgage. I.S. advised him that she wanted the payments to be affordable.
[349] J.M.M. then collected the information and completed the Scotiabank loan application with I.S. As the mortgage agent, J.M.M. submitted all the paperwork and was in contact with Scotiabank on behalf of I.S. J.M.M. met with A.R. when he and I.S. signed the commitment letter. J.M.M. did not recall whether he identified A.R. as I.S.’s boyfriend. J.M.M. testified that I.S. did not tell him that she intended to sell the Property and that if she had told him that, he would have recommended a private mortgage.
[350] On September 6, 2017, Scotiabank provided a commitment letter for a loan of $800,000, for five years. The monthly payments were $3,187.20. At the time, I.S.’s annual employment income was approximately $54,00. She was also receiving $60,000 per year in child support payments.
[351] I.S. called her real estate lawyer, D.R.L., as a witness. D.R.L. was called to the bar in 1988 and has been practicing real estate law since 2000. She testified that in September 2017, all the paperwork was in place for the mortgage financing from Scotiabank. On September 28, 2017, D.R.L. sent a letter to TOE’s real estate lawyer, Shafiq Dar, requesting a discharge statement. The lawyer eventually advised her that his retainer had been terminated but did not advise who TOE’s new lawyer was. D.R.L. went back to him, but then received a letter from another lawyer on TOE’s behalf raising other issues.
[352] D.R.L. testified that although I.S. had secured financing and everything was in place to pay off the mortgage, TOE’s lawyers would not provide a discharge statement. They gave her no reason for their refusal. D.R.L. testified that she found it unusual that I.S. wanted to pay the mortgage and TOE’s lawyers were not facilitating it. Because it was a private mortgage, however, she was reluctant to pay it out until she knew that the discharge would be registered.
[353] The Scotiabank refinancing was originally scheduled to close on October 3, 2017. D.R.L. testified to the sequence in which the redemption and refinancing would take place, which was as follows: (i) TOE would provide a discharge statement; (ii) Scotiabank would advance the funds; (iii) the TOE mortgage would be paid and a discharge would be registered; (iv) the transfer of a one percent interest in the Property to A.R. would be registered; and (iv) the Scotiabank mortgage would then be registered on title to the Property. TOE did not challenge this evidence.
[354] D.R.L. testified that I.S. did not tell her that she intended to sell the Property right after the mortgage was discharged. D.R.L. said she would have remembered if I.S. had told her that because the mortgage was a five-year closed mortgage and would be subject to a penalty if she sold. On cross-examination, D.R.L. admitted that she did not know that the mortgage was “portable” but stated that the bank would not permit a transfer of the mortgage if the value of the subsequent property did not support it.
[355] D.R.L. testified that I.S. never instructed her not to disclose to TOE the one percent transfer to A.R., but thought it best not to because of the underlying family law issues.
[356] I found D.R.L.’s testimony to be objective and credible. She has no interest in the matter. Her testimony was well-reasoned and internally consistent. While I.S. argued in closing that I ought to consider her evidence as expert testimony, she was not called as an expert witness. While D.R.L. opined that I.S. had a right to discharge the TOE mortgage under the Agreement, this is an issue for the court to determine. I place no reliance on D.R.L.’s opinion on that issue.
[357] Based on the foregoing, I find that I.S. was ready, willing and able to redeem the mortgage in September 2017. She communicated her intent to redeem the mortgage before M.S. elected to terminate the Agreement, which he was not entitled to do in any event because the Agreement had not been repudiated.
The alleged misrepresentation
[358] I reject TOE’s argument that Scotiabank would have cancelled the mortgage because the mortgage application contained a misstatement, specifically, that A.R. was I.S.’s boyfriend and that he lived at the Property.
[359] A.R. was not I.S.’s boyfriend and was not living at the Property when he signed the statutory declaration on October 2, 2017. Scotiabank’s Personal Credit Agreement Approval Conditions state that it “may” cancel the approval if there has been any misrepresentation of facts in the credit application. The fact that Scotiabank had the discretion to cancel the loan does not mean that it would have exercised it. TOE did not adduce any evidence to support its position that Scotiabank would have denied the loan on this basis. Scotiabank may have been satisfied with A.R.’s income; the fact that he too would be liable on the mortgage; and that the Property was occupied by a mortgagor, as opposed to a tenant. To suggest that Scotiabank would have cancelled the mortgage is pure speculation.
The one percent issue
[360] TOE argues that the transfer of a one percent interest in the Property to A.R. was a breach of the TOE mortgage because A.R. would be able to force the sale of the Property, undermining TOE’s interest. TOE further submits that because I.S. could only qualify for the Scotiabank mortgage with A.R. as co-signor, she would not have been in a position to refinance.
[361] The transfer of a one percent interest in the Property to A.R. would have no impact on the TOE mortgage. TOE did not challenge the order of events that would result in the redemption of its mortgage and refinancing by Scotiabank, as described by D.R.L. From TOE’s perspective, its mortgage would have been paid from the funds advanced by Scotiabank, and the mortgage discharged before the one percent transfer to A.R. was registered. The transfer of one percent to A.R. would have no impact on TOE because by that point, it would no longer have had a mortgage over the Property.
[362] Finally, TOE argues that I.S.’s attempt to redeem the mortgage was no more than a “race to the finish line” before M.S. terminated the Agreement because it made no sense for I.S. to redeem in September 2017 when the mortgage was interest-free until June 2018. While that might be accurate from a purely financial perspective, by then the parties’ relationship was so dysfunctional that it would not be unreasonable for I.S. to want to be free of the TOE mortgage. Moreover, the Agreement specifically permitted her to redeem any time before June 30, 2018.
What Are the Appropriate Remedies?
To What Relief is I.S. Entitled?
Is I.S. Entitled to Exercise Option 2?
[363] Based on my findings above, that I.S. was not in default of the mortgage and that she was entitled to exercise Option 2 in September 2017, she ought to have the opportunity to exercise the option.
[364] TOE’s position is that I.S. would not qualify for financing and would not be able to retain the property as required under the Agreement. As stated above, I.S. is not required to retain the Property under Option 2. There is insufficient evidence before me to determine whether or not I.S. would qualify for mortgage financing at this time.
[365] As a result, in fairness to both parties, I.S. ought to be provided with a reasonable time to exercise Option 2, failing which the Property ought to be sold under Option 1. It would also be in J.’s interest that I.S. be given a reasonable opportunity to stay in the Property, which is the only home he has known.
[366] While I.S. submits that she ought to be provided with 180 days to obtain financing and to redeem, in my view, this is too long. The parties have been faced with litigation and uncertainty for a long time and must bring matters to an end so they may both move forward.
[367] Therefore, I.S. shall have 60 days from the date of the release of these Reasons to obtain financing and to exercise Option 2. If she cannot secure financing in this time, the Property shall be sold pursuant to Option 1, and the proceeds divided as specified in Clause 62(c)(i) of the Agreement.
[368] TOE seeks a provision in the order preventing I.S. from transferring an interest in the Property for the purposes of securing financing. Based on my reasoning on the one percent issue above, there would be no basis for such an order.
[369] Given that the mortgage matured on June 30, 2018, TOE is entitled to interest on the mortgage from the date of maturity to present. TOE submits that interest should be calculated at the rate of 7.99 percent, which represents the interest rate of a private mortgage for which I.S. was approved in June 2018. TOE’s position is that that represents the interest it would have been able to earn on the money, had the mortgage been repaid. In my view, the appropriate rate of interest is that provided in s. 3 of the Interest Act, which applies where no interest rate has been fixed by an agreement or by law, or five percent per annum.
[370] Pursuant to the consent order of Goodman J. dated February 21, 2019, beginning in March 2019, I.S. paid $2,750 per month in interest on the mortgage, which was later increased to $3,800 per month. TOE shall provide an accounting as to all amounts owing on account of interest and all amounts paid on the mortgage, as calculated in accordance with the interest rate. It would make most sense for any balance is addressed when either Option 1 or Option 2 is exercised.
Other relief
[371] Based on M.S.’s position that the Agreement was terminated, he ceased making payments under the Agreement, other than child support and s. 7 expenses. As a result of the Agreement not being set aside, there will be amounts due in accordance with its terms. For example, M.S. stopped paying his two-thirds share of the expenses on the Property, as specified under the Agreement. I will accept submissions on the amount owing under the Agreement, as further detailed below.
[372] In closing submissions, I.S.’s counsel requested, for the first time, an order requiring that the parties seek professional help in respect of the handling of the circumstances of J.’s birth, as contemplated by Clause 22 of the Agreement. No such mandatory relief was sought in I.S.’s Answer. There is no basis upon which I can order this relief.
To What Relief are M.S. and TOE Entitled?
[373] In McVeetors v. McVeetors (1985), 1985 2168 (ON CA), 49 O.R. (2d) 225 (C.A.), the Court of Appeal considered whether damages at large are available as a remedy for breach of a separation agreement. The Court found that there would be no basis to object to such an award because domestic contracts are enforced as any other contract would be. In that case, however, the monetary award was found to be based on the husband’s failure to pay lump sum maintenance, and not damages for breach of the agreement.
[374] At trial, counsel submitted that M.S. seeks $150,432.47 in “liquidated damages” in the event the Agreement is set aside. The damages table provided by M.S. at trial is premised on the Agreement being set aside and seeks a return of all amounts paid under the Agreement. Because the Agreement was not set aside, the quantification does not assist me in determining what, if any, damages should be awarded.
[375] Counsel for M.S. submitted that the breach of the access provisions had been addressed by previous court orders. I was not made aware of any other damages being claimed as a consequence of I.S.’s breaches of the Agreement. The Agreement provides for declaratory relief for a breach of the Confidentiality Provision.
[376] In his Amended Application, M.S. seeks damages for intentional infliction of emotional distress, as well as punitive damages. The tort of intentional infliction of emotional distress, and any consequential damages, was not pursued at trial.
[377] While both M.S. and I.S. sought punitive damages in their pleadings, no submissions on punitive damages were made at trial. As such, I have not been provided with any cases in which punitive damages were awarded for breach of a domestic contract. I accept that, as is the case for breach of contract generally, punitive damages may be available where there is an independent actionable wrong: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595.
[378] In the circumstances of this case, I would decline to award punitive damages. While I.S. showed a lack of good faith, as well as a disdain for her contractual obligations, M.S. has not demonstrated an independent actionable wrong. As noted earlier in these Reasons, there was a lack of specifics regarding some of the behaviour alleged by M.S., such as the threats and harassment. Moreover, an award of punitive damages would serve only to deepen the division and animosity between the parties.
[379] While it might be too optimistic to hope that the outcome of this litigation would put an end to the hostility between the parties, a reaffirmation of the parenting principles they agreed to ought to assist them in putting it aside in J.’s best interest.
Conclusion
[380] Based on the foregoing analysis, I dismiss M.S.’s application to set aside the Agreement. The Agreement remains in full force and effect.
[381] I.S.’s claim for breach of the Agreement is dismissed.
[382] TOE’s claim for default on the mortgage is dismissed.
[383] The following terms are ordered:
(a) M.S. and I.S. shall adhere to all the terms of the Agreement and shall at all times perform their obligations in good faith and in J.’s best interest;
(b) I.S. shall have 60 days from today’s date to exercise Option 2 under Clause 62(c)(ii) of the Agreement;
(c) M.S., I.S. and TOE shall cooperate to facilitate the exercise of Option 2;
(d) If I.S. is unable to exercise Option 2 within 60 days, the Property shall be sold according to Option 1 under Clause 62(c)(i) of the Agreement; and
(e) M.S., I.S. and TOE shall cooperate to facilitate the sale of the Property under Option 1.
[384] In addition, as a result of my findings, I will provide an opportunity for both parties to make submissions on the relief/orders flowing from these Reasons. To be clear, this is not an opportunity to expand the record or to raise new claims or relief that were not pleaded. The parties were given more than ample opportunity to adduce evidence of damages at trial.
[385] The following process shall apply. By no later than June 18, 2021:
(a) I.S. shall provide M.S. an accounting of all amounts due in accordance with the terms of the Agreement from June 14, 2017, the date on which M.S. ceased paying on the basis that the Agreement had been repudiated, to May 21, 2021, including supporting documents. Amounts that were addressed by previous motions, such as the motion for childcare expenses, shall not be included;
(b) M.S. shall provide I.S. an accounting of amounts claimed, if any, as a result of the breaches found above, including supporting documents which shall be limited to documents entered into evidence at trial;
(c) TOE shall submit an accounting of outstanding interest on the mortgage, from July 1, 2018 to May 21, 2021, as specified above;
(d) The parties shall first attempt to resolve the financial issues based on the exchange above;
(e) In the event that no resolution is reached, the parties may make written submissions on the relief flowing from these Reasons, only to the extent that such relief was pleaded and addressed at trial; and
(f) The written submissions shall be submitted no later than July 9, 2021 and shall not exceed 10 double-spaced pages.
[386] The parties submitted bills of costs after the conclusion of the trial. I note that neither party was entirely successful on the family law application. The parties are encouraged to resolve the issue of costs. In the event they are unable, I will accept written submissions on costs, including any relevant offers to settle, from both parties to be submitted by July 7, 2021. Cost submissions shall not exceed five double-spaced pages, excluding a costs outline and any relevant offers to settle. No other attachments are permitted. All case law shall be hyperlinked. The parties should specifically note costs of any procedural steps that were specifically reserved to the trial judge.
[387] There shall be no reply submissions without leave. All submissions may be sent by email to Ms. Johnson at roxanne.johnson@ontario.ca.
Nishikawa J.
Date: May 21, 2021
COURT FILE NOS.: FS-17-21818
CV-18-00607821
DATE: 20210521
ONTARIO
SUPERIOR COURT OF JUSTICE
M.S.
Applicant
– and –
I.S.
Respondent
TOE
Applicant
-and-
I.S.
Respondent
REASONS FOR DECISION
Nishikawa J.
Released: May 21, 2021
[^1]: Mr. Hassell appeared as agent for the Respondent to argue closing submissions only.
[^2]: All names are italicized pursuant to the Order of Paisley J. dated October 10, 2017.
[^3]: I specifically decline to address some of the salacious or inflammatory allegations and evidence raised by the parties, not only because they have no bearing on the issues before the court, but because it is not inconceivable that the child, J., might one day read these Reasons. All involved, including the parties and counsel, must be mindful of the potential damaging impact of their conduct, including their conduct of the litigation, on the child and refrain from unnecessary harm.
[^4]: While the Applicants seek an adverse inference on the basis of I.S.’s failure to call A.R. and J.M.M. as witnesses, I see no basis for an adverse inference when the Applicants were able to examine them fully at trial.
[^5]: For reasons that were not made known to me, Mr. Peterson did not appear at the trial subsequently.
[^6]: The terms appear to be used interchangeably and a fundamental breach is also often referred to as a “repudiatory breach.”
[^7]: In Gieshardt v. Ahmed, 2017 ONSC 5513, Corbett J. considered but rejected the husband’s argument that the wife repudiated their separation agreement by failing to cooperate in the sale of the matrimonial home.
[^8]: The case was provided to the parties before closing submissions.
[^9]: I further note that while I.S. alleged that M.S. yelled, spat at and called her names in front of the neighbours during access exchanges, none of her witnesses were asked whether they had ever observed such behaviour.
[^10]: The Court of Appeal has held that commencing a proceeding may constitute an election to treat the contract as terminated: Place Concorde.
[^11]: In its motion, TOE sought payment of two-thirds of the principal amount, $791,325.24, and to postpone its mortgage in the principal amount of $1,187,000 in favour of I.S.’s new lender.