COURT FILE NO.: FC-19-929-00
DATE: 20210118
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sara Kane
Applicant
– and –
Klayton R. Kane
Respondent
Paul Portman, Counsel as Agent for the Applicant
Shannon L. More, Counsel for the Respondent
HEARD: January 7. 2021 via Zoom
RULING ON MOTION
McDERMOT J.
[1] This was a motion brought by the Applicant for an order setting aside Minutes of Settlement entered into in 2019 and for a sale of the matrimonial home. Although there were other issues in the Applicant’s Notice of Motion, those issues could not be addressed within the one hour time permitted for motions under the most recent Notice to the Profession for Central East Region.
[2] These parties began cohabitation in 1997 and were married in 2005. According to the Applicant, the parties separated in February, 2019 although the parties disagree on the exact date of separation.[^1] There are two children of the marriage, Karissa who is 17 and Kierra who is 14.
[3] On October 1, 2019, the parties entered into final Minutes concerning custody of those children. Those Minutes also purported to settle, at least on an interim basis, the sale of the jointly owned matrimonial home in which the Respondent was residing at the time, and where he continues to reside. Under the Minutes, the Respondent agreed to obtain a mortgage commitment for at least half of the equity in the home within 30 days of October 1, 2019 which would, effectively forestall a sale of the home. The intent was to confirm that the Respondent would be in a position to buy the Applicant’s interest in the home. If Mr. Kane failed to provide the commitment within the time permitted the home would be listed and sold on the terms set out in the Minutes.
[4] It is common ground that the Respondent complied with the Minutes and provided his mortgage commitment on time. Notwithstanding this, the Applicant has now brought a motion for the partition and sale of the home. She says that, prior to the Respondent entering into the Minutes he misrepresented the nature and extent of his assets and liabilities and should therefore not be permitted to rely upon the Minutes. She also says that the disclosure that she has now received, as well as her own research, confirms that because the Applicant has so many more assets than she had thought that he had, he should be made to list and sell the home. She also now thinks that she has a sizeable spousal support claim which would also warrant a sale of the home to pay lump sum spousal support.
Result
[5] For the reasons set out below, I have dismissed the Applicant’s motion for the sale of the home with costs.
Analysis
[6] It has long been recognized that the joint owner of a home has a fairly unqualified entitlement in matrimonial proceedings to request a sale of the home under the Partition Act.[^2] Without more, a sale can only be prevented based upon “malicious, vexatious or oppressive conduct” by the party requesting the sale: see Latcham v. Latcham, 2002 44960 (ON CA), [2002] O.J. No. 2126 (C.A.).
[7] However, other factors can intrude. For example, where a party has an exclusive possession claim or other substantive rights concerning the home under the Family Law Act[^3] to be made out at trial, the sale can be delayed: see Silva v. Silva (1990), 1990 6718 (ON CA), 1 O.R. (3d) 436 (C.A.). As well, as noted in Latcham, an agreement between the parties can affect the rights of a party to a sale of the home: see para. 4 wherein the Court took into account a previous agreement to sell the home.
[8] In argument, it was recognized by counsel that the major issue confronting the Applicant in her claim to sell the home was the effect of the Minutes of Settlement signed on October 1, 2019 and incorporated into the temporary order of Douglas J. on the same date. If they can be set aside or otherwise ignored or discounted, then the home should be listed and sold. If not, then without more, the motion for the sale of the home should be dismissed.
[9] Mr. Portman says that Mr. Kane cannot rely upon that order because he failed to properly disclose his assets and income when signing the Minutes of Settlement. He says that his client is entitled to an order setting those Minutes aside and a corresponding order for sale of the home. Although there was much talk about who had or had not made disclosure of their assets, the crux of Ms. Kane’s argument was that there was an intentional cover-up of the Respondent’s assets for equalization purposes.
[10] As stated above, the Minutes in this matter were specifically designed to address the Respondent’s intention to purchase Ms. Kane’s interest in the matrimonial home. Those Minutes provided, in para. 2:
- The parties agree to list and sell the matrimonial home located at 9015 McKinnon Rd, Angus, Ontario, L0M 1B4 on the following terms:
a. The Respondent shall be provided a period of thirty (30) days (ending November 2, 2019) to provide a firm mortgage commitment for the amount of the buyout (calculated using the mutually agreed upon fair market value of $450,000 for the matrimonial home), which amount at this time is $219,500. If said commitment is provided prior to the deadline then the patties will hold off on the listing and sale of the matrimonial home. This commitment shall be held pending exchange of disclosure and calculation of the patties respective NFP values, the calculation of equalization and final post-separation adjustments, and thus calculation of the total funds payable to the Applicant. Once such funds are calculated and paid to the Applicant, then the Applicant shall execute any required transfer documentation and vacate the home within 30 days of said transfer.
b. On November 2, 2019, should no mortgage commitment be provided, the matrimonial home shall be listed and sold on the following terms: …
[other than as set out below, the following terms are largely irrelevant to this motion].
[11] Para. 2(b)(iii) provides that the “net proceeds of sale shall be held in a mutually agreed upon real estate solicitor's trust account pending further court order or agreement between the parties.”
[12] Paragraph 3 provided for extensive disclosure to be made between the parties, including, in respect of the Respondent in para. 3(b), “[a] full and comprehensive Form 13.1 Financial Statement listing all missing sole and joint assets and debts in an appropriate manner (including but not limited to the guitars, drum set, etc.), including disclosure with respect to proving the fair market value used for such amounts in the statement.”
Material Misrepresentation
[13] Although the Applicant complains about the failure to make disclosure on a timely basis, she says that the Respondent misrepresented his assets as of the date of the agreement; the Applicant states that at the time of the signing of the Minutes, “I did not know how much the Respondent had absconded, hidden, divested, dissipated or otherwise disposed of significant personal assets.”[^4] Later, the Applicant says that the Respondent “deliberately or recklessly excluded the significant assets which I re-inserted into the NFP Statement at Exhibit “A” herein.”[^5]
[14] In her claim to set aside the Minutes, the Applicant relies upon s. 56(4) of the Family Law Act which reads as follows:
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.
[15] She also relies upon Virc v. Blair, 2014 ONCA 392, which addressed this subsection and the criteria under which material misrepresentations can be relied upon by a claimant under s. 56(4). Pepall J.A. says in the case that a material misrepresentation by a party to a domestic contract as to his or her assets is not excused by the other spouse’s ability to ferret out the correct information. At para. 58, she states:
In the face of a deliberate material misrepresentation, the onus is not appropriately placed on the recipient spouse. Rather, the burden is on the party disclosing to establish actual knowledge of the falsehood by the recipient. The respondent could point to no authority for the proposition that the suggested duty of a spouse receiving financial disclosure in a matrimonial case, to investigate or test the veracity of the information provided, overtakes deliberate material non-disclosure by the other spouse.
[16] It appears from argument that there is no other contractual basis in this case (for example, duress, or mutual mistake) to set aside the agreement under s. 56(4)(c) of the FLA. Therefore, the first question to be answered is whether there was material non-disclosure warranting the agreement being set aside under s. 56(4) of the FLA. The fact that the Respondent could have found out about these prior to the agreement being signed is no answer under Virc v. Blair.
[17] There have been significant delays in addressing these issues since the Minutes were done. The parties accuse each other of not providing the disclosure on a timely basis. Covid held things up after March of 2020, and the parties are not there yet: they cannot agree on the date of separation or what assets the Respondent had and the Applicant accuses the Respondent of hiding assets as set out in her net family property statement filed with her affidavit sworn in support of the motion on September 24, 2020.[^6] The Respondent responds to those allegations in his own net family property statement filed with his affidavit sworn January 4, 2021.[^7]
[18] Specifically, the Applicant complains about the following:
a. 1977 Pontiac Firebird
[19] The Applicant says that the Respondent failed to disclose a 1977 Pontiac Firebird worth $40,000 that the Respondent owned on the date of separation.
[20] The Respondent denies that he owned that asset on the date of separation and says that it was sold prior to separation. He says that the funds were used to pay household expenses and that the Applicant was well aware that the Firebird was sold prior to separation on agreement of the parties.
b. Skidoos
[21] The Applicant noted in her affidavit a number of snowmobiles being sold by the Respondent on Kijiji. She says that all of these snowmobiles were undisclosed assets owned on the date of separation and “absconded by the Respondent.”
[22] The Respondent denies this to be the case. His evidence as set out in his net family property statement is that these skidoos were all purchased by him subsequent to separation and were sold by him after being restored.
c. Musical Instruments
[23] The Applicant inserted into her NFP statement a drum kit and guitars that were not in the Respondent’s financial statement sworn prior to the Minutes being entered into.
[24] The Respondent acknowledges that the drum kit was not included but says it has a nominal value of $150.[^8] He also acknowledges that the guitars were not included but says that these would not have been included in any equalization calculation as they were either inheritances or gifts.
[25] I note that this was not a material omission in the Respondent’s financial disclosure prior to the agreement: these items were specifically considered in paragraph 3(b) of the Minutes which provides that the Respondent would provide a fresh Financial Statement including disclosure concerning the fair market value of the “guitars, drum set, etc.” When she signed the Minutes, the Applicant was aware of the existence of the musical instruments, and that the values were not included in the Respondent’s original financial statement.
d. Miscellaneous Items
[26] The Applicant says that the Applicant failed to insert a Marshall stereo system worth $2,000 and a driving simulator for PlayStation that she says is worth $589. As with the guitars, the Respondent says that these were gifts and excluded property.
e. Cash
[27] The Applicant complains that the Respondent had $18,000 in cash socked away in the matrimonial home which he has failed to include in his net family property. She provides a photograph that she took of the cash on September 2, 2019.[^9]
[28] This is not a material misrepresentation as the Applicant was obviously aware of the cash prior to the signing of the Minutes on October 1, 2019.
Conclusion re Material Misrepresentation
[29] The Applicant seeks to set aside the Minutes signed by the parties in this matter on October 1, 2019. She needs to do this to obtain an order for the sale of the home.
[30] The evidence as to material misrepresentation as to the Respondent’s assets is set out in the Applicant’s net family property statement. Proof of that failure to disclose on the balance of probabilities is required to set aside the Minutes under s. 56(4)(a) of the FLA.
[31] The Respondent’s financial statement in which he is said to have made those misrepresentations was not provided to me on this motion and I was not referred to it in the Applicant’s confirmation. However, the Respondent acknowledges leaving out certain assets because they were either already sold on the date of separation or were not owned by him on the Valuation Date. Other assets were left out because they were excluded assets.
[32] There is a conflict on the evidence as to the existence of these assets on the date of separation. There is also a conflict on the issue of whether certain assets, such as the musical instruments, were properly excluded assets: the Applicant says in her net family property statement that the guitars were “improperly excluded” without explaining that statement.
[33] The court recalls that Virc v. Blair is not only a case about the duty to inquire as to misrepresentations prior the execution of a domestic contract. It is also an evidentiary case considering the husband’s motion for summary judgment that was appealed to the Court of Appeal. The case is authority for the proposition that, on a contested motion the court cannot easily make evidentiary findings on conflicting affidavit evidence concerning the setting aside of a domestic contract. At para. 63, Pepall J.A. stated:
The motion judge erred by making a determination in the absence of a resolution of these key factors. The appellant and the respondent disagreed on the magnitude and extent of the defective disclosure. Moreover, the motion judge herself conceded that she could not make a finding as to whether the respondent's inaccurate disclosure was deliberate given her understanding of the constraints on her ability to evaluate credibility in the context of the Rule 16 motion, and that this was therefore a genuine issue for trial…
[34] Later, at para. 73, Pepall J.A. stated that, “it was inappropriate for the motion judge to make a determination about the validity of the agreement in the absence of findings of actual knowledge, the extent of the respondent's defective disclosure and the degree to which it was deliberate.”
[35] The same would apply to the present case. The evidence about the assets in the Respondent’s hands at the date of separation is contradictory and incapable of resolution on the motion. I note that the Applicant says that she is entitled to an equalization payment which would require more funds than the mortgage that he received approval for, but the her own evidence as to the equalization payment is inconsistent: in her affidavit of September 25, 2020, she says that she is entitled to an equalization payment of “at least $62,475.11”[^10] but in a later affidavit, she amends this amount to $47,076.32.[^11] In the meantime, the Respondent says that, if the home is placed on his side of the ledger (as he is intent upon buying the Applicant out), he only owes the Applicant $168,162.45,[^12] significantly less than his mortgage commitment of $220,000 that he provided pursuant to the Minutes. The parties disagree on the date of separation, further complicating the equalization calculation and disclosure. A contested one hour motion is not the place to undergo a detailed analysis of the equalization payment that is owed to the Respondent or the nature and intent of the alleged misrepresentations by the Applicant and it is apparent that this cannot be done with any sort of accuracy on the record provided.
[36] And, as can be seen by the conflicting evidence noted above, the record in this case was extremely sparse. The parties made their assertions as to misrepresentation and lack of disclosure in their respective net family property statements without any attempt to explain those assertions or provide evidence upon which those assertions were based. The Kijiji listings were evidence that the Respondent was selling snowmobiles, but not that he owned those snowmobiles on the date of separation, whatever date that was. The parties make statements that are conflicting and cannot be resolved without findings of credibility, impossible to achieve on a motion such as this. There is no possible way that the court may make the necessary determinations for the setting aside of the Minutes of Settlement on the evidentiary record that I was supplied with.
[37] I therefore do not find that there was material misrepresentation of assets necessary to set aside the Minutes of Settlement dated October 1, 2019 under s. 56(4)(a) of the FLA.
Spousal Support
[38] The Respondent says that his income is nominal because he is unable to work due to injuries and damage to his business caused by covid. He says that his income is based upon government assistance because of covid. He was ordered at the case conference to pay child support based upon minimum wage income of $30,000 per annum and there was insufficient time to review child support at the motion.
[39] The Applicant says that the Respondent should be imputed with income in the amount of $100,000 per year and that she is owed lump sum spousal support in an amount somewhere between $43,029 to $94,437. She says that, taking into account the equalization payment that she thinks she is entitled to in addition to the lump sum spousal support that she would receive, there is little equity in the home left for the Respondent.
[40] The Applicant says that the Respondent should make at least $50,000 per annum as an auto detailer. She also notes that the Respondent is a qualified gas fitter and that he can make up to $102,000 annually as a gas fitter. She also notes that the Respondent has cash income and that in March, 2020, he made cash deposits in an amount of about $1,500.
[41] All of these may be a basis for a finding of “intentional underemployment” or non-disclosure of income within the meaning of s. 19(1) of the Child Support Guidelines.[^13] However, again, an interim one hour motion is no place to undertake a detailed analysis of imputation of income especially in the face of the Respondent’s conflicting evidence as to income: he says that he was injured at work and suffers from Meniere’s disease, has not been able to work as a gas fitter since 2014 and covid-19 has hurt his car detailing business especially during the various shut downs that have affected non-essential businesses in this province.
[42] More importantly, the Applicant has not addressed the criteria for lump sum spousal support in her materials. It is clear that lump sum spousal support should not be used for a redistribution of property, and can only be ordered under certain circumstances, for example where it is proven that the payor would be unlikely to pay periodic spousal support: see Mannarino v. Mannarino, 1992 14022 (ON CA), 1992 CarwellOnt 308, 43 R.F.L. (3d) 309 (Ont. C.A.). Those issues have not been addressed by the Applicant, and there is no guarantee that she will be entitled to lump sum spousal support even if she succeeds in imputing the income that she claims the Respondent to make.
[43] I do not find that lump sum spousal support is a factor to be taken into account in the claim to set aside the Minutes or that this is a basis under s. 56(4) of the FLA or otherwise at common law.
Lack of Disclosure
[44] Both parties complain about lack of disclosure. However, the Applicant claims that the disclosure since provided by the Respondent now demonstrates to her that the matrimonial home should be sold contrary to the Minutes. She accuses the Respondent of delaying disclosure until December 11, 2019[^14] or of providing any legal reason why the home should not be sold. She says that she has been trying to get the home sold since July, 2019 and accuses the Respondent of “bad faith and intent to delay the sale of the home.”[^15] However, the crux of the Applicant’s claim is that:
Now that the Respondent and I have exchanged full disclosure (as of December 11, 2019) it has become clear that the Respondent has much lower equity in the matrimonial home than originally anticipated and that the home must be sold.
[45] The Minutes provided that the sale of the home would be delayed where the Respondent obtained a mortgage commitment for at least half of the equity in the home. He has done so. For the Respondent to rely upon this term in the Minutes cannot possibly be described as bad faith behaviour intended to unreasonably delay the sale of the home; he simply relies upon an agreement that was negotiated with the assistance of counsel and about which the Applicant has had second thoughts because of disclosure she did not then have but was yet to come. I note that the Applicant said in her affidavit that she has been trying to sell the home since July, 2019 but three months later agreed to defer the sale if the Respondent had a mortgage commitment for half of the equity in the home. The sale of the home was on the table on October 1, 2019 and was addressed in the Minutes.
[46] The Applicant complains that she did not have adequate disclosure and that disclosure has now changed things. That is not a basis for setting aside the Minutes when those Minutes contemplated further disclosure, and everyone knew at the time the Minutes were negotiated that disclosure by both parties was incomplete. The agreement specifically provided that the “commitment shall be held pending exchange of disclosure and calculation of the parties respective NFP values, the calculation of equalization and final post-separation adjustments, and thus calculation of the total funds payable to the Applicant.” Both parties agreed to provide fresh Form 13.1 Financial Statements. The Applicant must have contemplated that she might be entitled to an equalization payment beyond her equity in the home, and yet she agreed to the terms of the Minutes which provided for the commitment as to only one half of the equity in the home. Unfortunately, the parties have had difficulty in negotiating the equalization payment and the Applicant now raises lump sum spousal support; however, negotiation problems are no basis for ignoring the agreement. Ms. Kane is not entitled to now change her mind, and resile on the Minutes, demanding an immediate sale of the home.
[47] Moreover, one of the delays in disclosure, thereby delaying the sale, is the valuation of Ms. Kane’s pension although the parties disagree as to who is to blame for those particular delays.
[48] The disclosure issues and the changes that disclosure might have made to the payment are not a valid ground for an immediate sale of the home when the Applicant went into this with her eyes open as to the need for further disclosure and acknowledged this possibility when she signed the agreement.
Hardship Issues
[49] The Applicant complains that she is suffering from severe financial hardship and needs her equity from the home to alleviate that hardship.
[50] I firstly have some concerns over the veracity of that hardship. Firstly, she says in her affidavit that she continues to pay one half of the expenses of the home.[^16] This has turned out to be untrue; she only pays the Rogers bill which is in her name and which she can cancel at any time.
[51] Secondly, there is no guarantee that the equity from the home will be released to her if the home is sold. The Minutes provide in para. 2(b)(iii) that, if the home is sold, the funds shall be held in trust pending further court order or agreement between the parties. This provision echoes Rule 66.03 of the Rules of Civil Procedure[^17] which provides that funds from the sale of a home shall be paid into court subject to agreement or court order. Considering the difficulties that the parties have had in negotiating the equalization payment, it also seems unlikely that there will be an early agreement as to the distribution of the funds from trust.
[52] Finally, the Applicant is now receiving some child support and is now no longer on disability. This may have alleviated any financial stresses being suffered by the Applicant.
[53] There is no guarantee that the Applicant’s hardship will be necessarily alleviated by the sale of the home considering the agreement that the funds will remain in trust pending order or agreement.
Result
[54] For the reasons set out above, I am not willing to set aside the Minutes of Settlement dated October 1, 2019 which defer the sale of the home pending negotiation of an equalization payment. The parties would have been better served by attempting to negotiate those issues and moving the matter toward a trial rather than concentrating on this motion which was obviously a long motion, and which had to be resolved by arguing only limited issues.
[55] The Applicant’s motion for a sale of the home is therefore dismissed with costs which will be deducted from her share of net proceeds of the sale of the home payable to her by the Respondent.
[56] If the parties cannot agree on the amount of the costs, the parties may make submissions as to costs, first the Respondent and then the Applicant, on a ten day turnaround. No reply is permitted. Costs submissions are to be submitted to the Judicial Assistant and shall be no more than 4 pages in length, not including offers to settle and bills of costs.
Justice J.P.L. McDermot
Released: January 18, 2021
[^1]: The Respondent says it was a month earlier. [^2]: R.S.O. 1990, c. P.4 [^3]: R.S.O. 1990, c. F.3 [^4]: Affidavit of the Applicant sworn September 25, 2020, para. 35. [^5]: Ibid., para. 36. [^6]: Ex. E to the Applicant’s affidavit sworn September 24, 2020 [not Ex. A as stated in para. 36 of the affidavit]. [^7]: Ex. A to the Respondent’s affidavit sworn January 4, 2021. [^8]: The Applicant says it is worth $949. [^9]: Ex. N to the affidavit sworn by the Applicant on September 25, 2020. [^10]: Ibid., para. 20. [^11]: Applicant’s Supplementary affidavit sworn December 29, 2020, para. 8. [^12]: Respondent’s supplementary affidavit sworn January 4, 2021, Ex. A. [^13]: SOR/95-175 [^14]: Applicant’s affidavit sworn September 25, 2020, para. 40 [^15]: Ibid., para. 43. [^16]: Ibid., para. 47 [^17]: R.R.O. 1990, Reg. 194