Aubin v. Koerber, 2021 ONSC 5125
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Kimberley Louise Aubin
Applicant
– and –
Timothy Armin Koerber
Respondent
Emily O’Keefe, for the Applicant
Filomena Andrade, for the Respondent
HEARD: April 19, 20, 21, 28 and 30, 2021
D.A. broad, j.
Background
1The applicant and the respondent commenced living together on September 26, 2008, married on January 22, 2013 and separated on August 14, 2019. The marriage was the first marriage for the applicant and the third for the respondent.
2The applicant’s child from a former relationship B.A., now aged 16 (the “child”), resided with the parties during the entire time that they lived together, before and after marriage, in the residence owned by the respondent in the City of Cambridge (the “home”).
3On February 5, 2020 the applicant commenced the within Application seeking, inter alia, spousal support, child support for B.A., equalization of the parties’ net family property, including the matrimonial home, and an order setting aside the Cohabitation Agreement entered into by the parties dated November 14, 2012 (the “Agreement”).
4The matter proceeded as the first stage of a bifurcated trial pursuant to the consent order of Walters, J. dated October 5, 2020 which provided that the trial would be on the sole issue of the validity of the Agreement.
5Following the completion of the evidence at trial, the parties agreed that the scope of the trial should be expanded to seek the ruling of the court on the effect of the Agreement on the applicant’s claim for equalization of net family property, including the matrimonial home, regardless of the finding on its validity. The applicant agreed that the Agreement, if valid, would bar her claim against the respondent for spousal support, subject to the possible application of subsection 33(4) of the Family Law Act, R.S.O. 1990, c. F.3 (the “FLA”).
6At the commencement of the trial, counsel for the respondent acknowledged and agreed that, regardless of the determination on the validity of the Agreement, he is responsible for the payment of child support for B.A. and that the Agreement, if upheld, would not constitute a bar to the applicant’s claim for child support.
7The salient provisions of the Agreement may be summarized as follows:
1(a) Neither party shall acquire any interest in property described as follows (defined as “One Party Property”) throughout the period the parties cohabit, in the event that they cease to cohabit and upon the death of either party:
(i) all real and personal property in which the other party has an interest or owns prior to the date of the Agreement;
(ii) all real and personal property acquired by the other party in his or her name alone after the date of the Agreement;
(iii) all income derived by the other party from any source;
(iv) all gifts acquired by the other party from any source; and
(v) all property received by the other party as damages.
1(b) Neither party shall have a right to a division of any One Party Property , obtain an interest in any One Party Property, or shall have the right to compensation by reason of any direct or indirect contribution of the party not having an interest in the One Party Property whether:
(i) by the assumption of responsibility for childcare, household management or financial provision;
(ii) by reason of circumstances relating to the acquisition, disposition, preservation, maintenance or improvement of any One Party Property;
(iii) by reason of the parties having disproportionate assets or liabilities; or
(iv) by reason of the use of the One Party Property.
1(e) in the event of a breakdown of the relationship or if one party dies, all property, real and personal, acquired during the period the parties cohabited which is not One Party Property shall be divided equally between the parties after taking into account the income tax consequences of any transfer of interest and assets. Otherwise, there shall be no division of property except by legal ownership. Neither party shall be entitled to insert (sic) a trust interest in property owned by the other or contributions made by one party to the other, or to the property of the other, shall be conclusively be deemed to be a gift without expectation or reimbursement or acquisition of interest in the property to the other except as otherwise specifically provided for in the Agreement, and any other kinds of claim that could be based on such contributions are hereby waived and released (sic).
4 (a) Each of the parties releases the other from all obligations to provide support or interim support pursuant to the Family Law Act, and, in the event the parties marry, the Divorce Act.
4(b) no change of any degree whatsoever in either of their lives, even if it is or they are material, profound, radical or catastrophic, foreseeable or otherwise will give either party the right to claim support or interim support pursuant to the Family Law Act, the Divorce Act, or the Succession Law Reform Act.
- (a) the Home shall be used as the home of the parties but shall remain the exclusive property of the respondent who shall pay the property taxes, any financial encumbrances, and the upkeep and maintenance of the Home. The respondent may give the applicant 60 days’ notice to vacate the Home after which she shall leave the respondent in sole and exclusive occupancy of it.
6 (b) the parties understand that should they marry the right to possession under Part II of the Family Law Act shall supersede subparagraph (a) and can only be waived by a term in a Separation Agreement if they separate due to a breakdown of their marriage.
Each party is not responsible for any debt incurred by the other during their relationship unless both parties have acknowledged in writing to be jointly responsible for any such debt. Any debts owed by the respondent as at the date of executing the Agreement shall remain his debt and any debt incurred by the applicant as of the date of execution of the Agreement shall likewise be her debt.
The respondent is maintaining in force on his life the policy of insurance listed in the sum of $500,000 designating the beneficiaries on his death as the applicant to the extent of 50%, B.A. to the extent of 20% and the respondent’s son to the extent of 30%.
Neither party will claim any interest in the estate of the other except as specifically provided for by will or, in the case of intestacy, as specifically provided for by the laws of the governing jurisdiction relating to intestate succession.
If the parties marry, the Agreement shall survive their marriage.
Each of the parties acknowledge that:
(i) Ronald M. Zboril [the lawyer who prepared the Agreement] is the solicitor for the respondent and has provided legal advice only to him;
(ii) the applicant has been encouraged to seek and obtain independent legal advice but has declined to do so;
(iii) the parties understand the nature and consequences of the Agreement;
(iv) the parties are signing the Agreement voluntarily; and
(v) the parties believe that the provisions of the Agreement are fair.
8It is noted that Mr. Zboril was not called as a witness at the trial as it was common ground between the parties that he suffers from dementia and was incapable of testifying.
9The applicant claims that the Agreement should be set aside pursuant to subsection 56(4) of the FLA on the grounds that the respondent failed to disclose to her significant assets existing when the Agreement was made and that she did not understand the nature or consequences of the Agreement, as provided in paragraphs 56(4)(a) and (b). She submits that she received no legal advice and, in particular, no independent legal advice, with respect to the meaning and effect of the Agreement, and the consequences of her entering into it.
10The respondent submits that the Agreement should not be set aside and says that the applicant was aware of his significant assets when the Agreement was made and that he did not therefore fail to disclose his significant assets to her, and that the applicant fully understood the nature and consequences of the Agreement.
Evidence of the Applicant
11The applicant testified that she and the respondent met online in February 2008. At that time, she was residing, along with her daughter B.A., with her parents in Cornwall, Ontario.
12The applicant moved, with B.A., to the respondent’s home in Cambridge on September 26, 2008.
13While the parties were dating the applicant knew that the respondent owned the home, which he had purchased four years prior to her moving in, and that he worked in his family’s business. She stated that his family gifted the business to him later while the parties were cohabitating.
14After they commenced cohabitation, the parties continued to maintain separate bank accounts. They never had a joint account. The applicant agreed that the respondent was responsible for paying all bills associated with the home.
15The applicant stated that the she and the respondent initially discussed getting married in 2011. She mentioned to him that all of her friends were getting married and having kids which prompted the respondent to ask if she wanted to get married. She maintained that he made no mention at that time that he sought to have a cohabitation agreement signed and did not advise her following his marriage proposal that he had retained a lawyer to draft a cohabitation agreement.
16The Agreement was drafted by Ronald Zboril who she described as a “friend” of hers. He acted as her lawyer following her involvement in a motor vehicle accident on August 25, 2012 at the respondent’s suggestion.
17When she attended with Mr. Zboril in September 2012 in relation to the car accident, he did not mention anything about the cohabitation agreement. She received no correspondence from Mr. Zboril advising that he was in the process of drafting a cohabitation agreement.
18The applicant denied that she and the respondent engaged in any discussions about any necessity of signing a cohabitation agreement following his proposal of marriage.
19The applicant testified that she did not understand the meaning of paragraph 1 of the Agreement dealing with the ownership and division of property. Mr. Zboril did not mail her a draft Financial Statement of the respondent nor did the respondent offer any financial disclosure to her. In particular, he did not provide her with a list of his assets and debts.
20Although the applicant and the respondent completed their income tax returns together, she never looked at his returns and never asked to see them as she considered it none of her business. He also never provided her with the income tax returns for his corporations nor Financial Statements for them and she had no means of obtaining that information.
21Although she knew that the respondent had investments, he did not provide her with statement showing their value. Although the investment statements came by mail to the home, she stated that she did not look at them.
22The applicant maintained that she did not have general idea of the value of the respondent’s assets as of the date of the Agreement.
23The applicant claimed that she did not understand the meaning of subparagraph 1(e) of the Agreement respecting the division of property on separation or dissolution of the marriage. She also denied that, contrary to subparagraph 4(a)(i) of the Agreement, she was financially independent of the respondent at the time of the Agreement as he paid all of the household bills. Her annual income at the time was $13-$14,000. However, she was unaware of the respondent’s income in 2012.
24The applicant denied that she understood any aspect of the Agreement at the time that she signed it or that Mr. Zboril ever explained any of the provisions of the Agreement to her.
25Although the respondent did not provide her with an appraisal of the value of the Home, she agreed that she could have independently verified the value but chose not to.
26The applicant testified that the Agreement was signed by the parties on November 14, 2012 in the dining room of the home. She stated that the respondent came home on that date and told her that he had something for her to sign. He called it a “prenuptial agreement” and told her to read it and said “it is your choice if you see somebody but I would like you to sign it right now because I am heading back to Mr. Zboril’s office.”
27She stated that the respondent did not provide her with any time to read and comprehend the document because he was standing over her while she read it briefly. Although she did read the Agreement, she did not really understand anything in it. She stated that she spent less than 10 minutes reading the document before signing it.
28The applicant testified that the respondent kept reassuring her that “it is only a piece of paper, you have to sign it, it’s just protecting my business and do not worry. If something ever had to happen, you will be fine. You and B.A. will be fine.” She stated that the respondent stated that the Agreement had to be signed before the parties were married.
29The applicant confirmed that she received no independent legal advice before signing the Agreement. Mr. Zboril was not present when she signed it and there was no other witness present.
30The applicant explained that she did not obtain independent legal advice when she was presented with the Agreement because she trusted the respondent’s reassurance that it was “just a piece of paper” and that if their marriage broke down she would be “fine” and he would always look after her and B.A. She did not think at the time that her marriage would ever break up
31On cross-examination the applicant confirmed that she and the respondent kept their finances separate throughout their relationship. Her paycheques were deposited to her own bank account, and the respondent’s paycheques to his bank account.
32The respondent agreed that the respondent paid all of the household expenses consisting of utilities, mortgage payments property taxes and insurance and told the applicant many times that it was his house and it was always going to be his house.
33The applicant offered to contribute to the household expenses on numerous occasions, but the respondent declined her offers.
34The applicant acknowledged that she was well aware that the respondent never intended to give her an interest in the home.
35The applicant stated that the respondent raised the issue of a cohabitation agreement with the her several times and she repeatedly told him that it was fine because she did not want his money anyway. However, notwithstanding this, she later maintained that when the respondent showed up at the home with the Agreement she was surprised because she had no idea about it.
36The applicant acknowledged that she was aware that the respondent had already been through two divorces and knew when he asked her to marry him that he did not want to be paying her money after two previous failed marriages.
37The applicant also acknowledged that at the time of the Agreement she knew that the respondent had his business, a building from which his business operated, the home, some vehicles and some investments. She agreed that the respondent had assets to protect whereas she had none to protect.
38The applicant acknowledged that she understood that the purpose of the Agreement was to allow the applicant to protect his assets from her asserting any claim to them - that they would always be his assets. She stated that, although she understood what the respondent advised her about the Agreement, she did not understand what was written in the Agreement.
39The applicant maintained that she did not know the details of the respondent’s assets. Nor did she know the exact value of his corporations. She was aware of all of the assets that he owned but did not know their value.
40When asked what she thought she was signing when she signed the Agreement, she responded “I was just understanding that he was protecting his assets and only for himself.”
41The applicant denied that she was ever shown a draft of the Agreement prior to it being presented to her by the respondent for her signature.
42The applicant steadfastly maintained that she understood none of the individual phrases and sentences in the Agreement that were put to her on cross-examination.
43The applicant stated she had no contact with Mr. Zboril at any time regarding the Agreement. In particular Mr. Zboril never contacted her to ask if she wanted to consult her own lawyer to obtain independent legal advice with respect to it.
44The applicant testified that she did not understand anything about the Agreement and only signed it because the respondent was standing over her and would not leave unless she agreed to do so. She stated that she did not understand when she signed the Agreement that she was releasing all claims to the respondent’s assets. Notwithstanding this she stated that she knew, that by signing the agreement, she was proving to his family that she was not after his money. However, she later reversed this position.
45The applicant denied that she attended with the respondent at Mr. Zboril’s office to sign the Agreement and maintained that she never attended at his office for any other purpose than in relation to her motor vehicle accident.
46The applicant acknowledged having placed her initials in the bottom right-hand corner of each page of the Agreement but stated that it was the respondent and not Mr. Zboril who instructed her to do so.
47The applicant acknowledged that the respondent told her how much he paid for the house however she could not recall when he did so.
48The applicant acknowledged that she never paid for any expenses or renovations for the respondent’s business or any renovations to the house.
49She never asked to see the respondent’s corporate income tax returns or corporate financial statements.
50The applicant acknowledged that the respondent complied with paragraph 9 of the Agreement respecting the maintenance of a life insurance policy in the sum of $500,000 with her as the beneficiary to the extent of 50% and her daughter B.A.to the extent of 20%.
51On re-examination the applicant testified that at the time of execution of the Agreement she had no understanding of why financial disclosure or a list of assets and debts would have been useful. She had no knowledge at the time that financial disclosure was typically exchanged in relation to domestic contracts. She stated that the respondent did not tell her anything about any of the financial disclosure exchanged in relation to his separation proceedings with his second wife.
Evidence of the Respondent
52After the applicant, with her daughter B.A., moved into the respondent’s residence in Cambridge in September 2008 following which the applicant obtained part-time employment at a long-term care facility serving food, earning $18-$19 per hour. The applicant brought her car, her personal possessions and some furniture with her from Cornwall.
53The respondent stated that it was the applicant’s idea that she be employed part-time so that she could care for B.A. who was four years of age at the time.
54The respondent had assets consisting of his home, two vehicles, the corporation which carried on a flooring business, and a building that the business operated from. He had a mortgage on his home and some credit card debts.
55The respondent stated that the business and the building were gifted to him by his parents in 2006. The respondent told the applicant after they met that he owned the building and business. While they were living together the applicant attended at the business premises and observed the stock and equipment.
56The respondent’s personal income in 2008 was $80,665 and was $20,881 in 2012.
57The respondent stated that, throughout the relationship, he paid the mortgage, taxes, utilities, cable and cell phone bills while the applicant paid her own personal bills. They never shared a joint bank account during their common-law relationship nor after they married.
58The respondent testified that he first raised the issue of a cohabitation agreement with the applicant after they first spoke about getting married.
59The respondent stated that the applicant mentioned that her friends were getting married and that she was never going to get married because he had told her previously that he had no desire to remarry. He asked her if she wanted to get married. After she agreed he told her that they would have to have a pre-nuptial agreement. She agreed that this was fine.
60His stated that his intention in proposing a pre-nuptial agreement was to protect the assets that he had worked for all his life.
61The respondent stated that he paid all the bills for the home as he believed that, if the applicant made any contribution, she would have some sort of claim against his property and he did not want that.
62The respondent raised the issue of a cohabitation agreement with the applicant again in 2012 when they were making arrangements for the wedding. The applicant at no time advised the respondent that she would not agree to enter into a cohabitation agreement.
63The respondent consulted with Mr. Zboril and instructed him to prepare a draft of the Agreement.
64Mr. Zboril prepared a draft and emailed it to the respondent on July 6 or 7, 2012. The respondent testified that he printed the draft and brought it home and discussed it with the applicant. They both read it through and discussed it. He stated that the applicant seemed to understand the draft agreement.
65The respondent testified that his understanding of the draft agreement was that it would protect his property and protect him from paying spousal and child support.
66The respondent stated that he met with Mr. Zboril, without the applicant, to review the draft agreement and to discuss certain changes to it. He subsequently provided Mr. Zboril with a copy of his life insurance policy with the particulars after he met, together with the applicant, with the insurance representative.
67Mr. Zboril forwarded a second draft of the agreement to the respondent by email on October 10, 2012. The respondent printed it at the business premises, brought it home and discussed it with the applicant. He stated that they reviewed it together and he noticed the changes that had been implemented from the initial draft. His understanding of the property provisions of the agreement was that whatever he brought into the marriage would be his and whatever the applicant brought in would be hers. The two of them discussed this and the applicant asked no questions and requested no revisions to the draft.
68The respondent testified that he had no idea how or why paragraph 20 headed “Independent Legal Advice” was added into the second draft of the Agreement. Neither he nor the applicant asked for it be inserted.
69After the parties reviewed the second draft, the respondent set up an appointment with Mr. Zboril for he and the applicant to attend at Mr. Zboril’s office to sign the agreement. They attended at Mr. Zboril’s office at the appointed time. Mr. Zboril went through the entire Agreement with both parties, paragraph by paragraph, and they each initialed the bottom of each page as they went through it, as instructed by Mr. Zboril.
70The parties each signed four copies of the Agreement and Mr. Zboril placed his signature next to each of the respondent’s and the applicant’s signature as witness in the presence of both of them.
71As the parties went through the agreement with Mr. Zboril, neither of them asked any questions nor requested any further explanation of the meaning and effect of the Agreement.
72During the parties’ meeting with Mr. Zboril the applicant gave no indication that she wanted to consult her own lawyer regarding the Agreement.
73The respondent estimated that he had six to eight conversations or meetings with Mr. Zboril in connection with the preparation and execution of the Agreement and stated that Mr. Zboril never mentioned that he needed to make any financial disclosure to the applicant. In particular, Mr. Zboril never suggested that the parties should prepare and exchange Financial Statements. He confirmed that the applicant made no request for financial disclosure from him at any time prior to signing the Agreement.
74The respondent testified that, prior to signing the Agreement, the applicant knew what his income was, that he owned the home, that he had a mortgage on the home and that he owned his companies and the building that he operated his business from.
75The respondent testified that whenever house would come up for sale on the street, she would look it up the listing price on the internet.
76The respondent stated that the applicant had been at the business premises prior to signing the Agreement, and although he did not have direct discussions about the financial condition of his business with her, the applicant knew the business was going down and it was not as busy as it had been previously.
77The respondent denied that he ever hid his assets, income or debts from the applicant during the time they cohabitated.
78The respondent had the life insurance policy referred to in the Agreement for a long time, prior to the applicant moving into the home. He stated that he made changes to the designation of beneficiaries in the policy prior to preparation of the Agreement during a meeting between himself, the applicant and his insurance broker Elaine Mortonson. He stated that he decided to designate the applicant as a 50% beneficiary to permit the mortgage to be paid off in the event of his death and so that she would have some spending money. He designated B.A. as the beneficiary of 20% or $100,000 to cover her post-secondary education and provided for the balance to go to his son.
79Respondent stated that he provided a copy of the policy and the beneficiary designations to Mr. Zboril for his use in preparing the Agreement.
80After the applicant and the respondent signed the Agreement, the applicant told the respondent that she was not interested in his money and she “was not a gold digger.” He understood that to mean that she did not want his assets.
81The respondent testified that at the time that the Agreement was entered into he had a rough idea of the value of the home but did not know the exact value of it nor did he know the exact value of his corporations.
82The respondent stated that Mr. Zboril never discussed with him the prospect of the applicant getting her own lawyer to represent her with respect to the Agreement and specifically never suggested that the applicant should obtain independent legal advice with respect to it. Mr. Zboril also never asked either the respondent or the applicant to provide a list of their respective assets to attach to the Agreement.
83The respondent testified that the applicant had knowledge of all of his assets at the time that the Agreement was signed.
84Following the execution of the Agreement in Mr. Zboril’s office, the respondent says that he gave them to the applicant and told her to file them in his filing cabinet. He found two signed copies, with original signatures, in an envelope in his filing cabinet in March of 2020. He stated that Mr. Zboril had dropped off the envelope with the two copies of the Agreement with the applicant at the home in October 2018 while he was in Mexico. Until he found the two copies in his filing cabinet, he was using for the purpose of the litigation the copy that Mr. Zboril had given to the applicant
85The respondent testified that he would not have married the applicant if the Agreement had not been executed.
86The respondent said he had no idea personally what was necessary in order to have a full and binding cohabitation agreement and he relied upon Mr. Zboril to ensure that it would be completed properly.
87During the respondent’s testimony he made reference to certain notes that were obtained during the course of the litigation from Mr. Zboril’s file which were marked as Exhibit 9. The respondent stated his belief that from their context that the notes were made by the applicant during a meeting she had with Mr. Zboril in October 2018 and were given by her to Mr. Zboril. The applicant denied that the notes were made in her handwriting and denied any knowledge of them. I invited counsel to address the admissibility of the notes during final submissions. Neither counsel did so. It was therefore unnecessary for a ruling to be made as to the admissibility of the notes and they formed no part of the court’s determination.
The Legal Framework
88Many of the legal principles governing the setting aside of domestic contracts were usefully summarized by McGee, J. in the case of Harnett v. Harnett, 2014 ONSC 359 (S.C.J.) at paras. 85-96 as follows:
85 Section 53(2) of the Family Law Act provides that regardless of whether contemplated at the time, when parties to a cohabitation agreement marry, the agreement shall be deemed to be a marriage contract.
86 Per section 56(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. R.S.O. 1990, c. F.3, s. 56 (4).
87 As a general rule, courts will uphold the terms of a valid enforceable domestic contract: Hartshorne v. Hartshorne, 2004 SCC 22, 2004 CarswellBC 603 (S.C.C.)
88 It is desirable that parties settle their own affairs: Farquar v. Farquar (1983), 1983 1946 (ON CA), 35 R.F.L. (2d) 287 (Ont. C.A.) and courts are generally loathe to set aside domestic contracts. See page 297:
the settlement of matrimonial disputes can only be encouraged if the parties can expect that the terms of such settlement will be binding and will be recognized by the courts ... as a general rule ... courts should enforce the agreement arrived at between the parties.... The parties to the agreement need to be able to rely on [them] as final in the planning and arranging of their own future affairs
89Parties are expected to use due diligence in ascertaining the facts underlying their agreements. A party cannot fail to ask the correct questions and then rely on a lack of disclosure: Clayton v. Clayton, 1998 14840 (ON SC), 1998 CarswellOnt 2088 (Ont. Gen. Div.).
90A domestic contract will be set aside when a party was unable to protect his or herself. Such cases are generally predicated upon a finding that one party has preyed upon the other, or acted in a manner to deprive the other of the ability to understand the circumstances of the agreement.
91The court is less likely to interfere when the party seeking to set aside the agreement is not the victim of the other, but rather his or her own failure to self-protect. The Ontario Court of Appeal in Mundinger v. Mundinger (1968), 1968 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.) says that the court will step in to "protect him, not against his own folly or carelessness, but against his being taken advantage of by those in a position to do so because of their position."
92The court must look not at which party made the better bargain but rather, to whether one party took advantage of their ability to make a better bargain. In that taking of advantage is to be found the possibility of unconscionability. See Rosen v. Rosen (1994), 1994 2769 (ON CA), 3 R.F.L. (4th) 267 (Ont. C.A.)
93The test for unconscionability is not weighing the end result, but rather the taking advantage of any party due to the unequal positions of the parties. See Mundinger v. Mundinger (1968), 1968 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.); Rosen v. Rosen (1994), 1994 2769 (ON CA), 3 R.F.L. (4th) 267 (Ont. C.A.).
94The onus is on the party seeking to set aside the domestic contract to demonstrate that at least one of the circumstances set out in subsection 56(4) has been met; then the court must determine whether the circumstances complained of justify the exercise of the court's discretion in favour of setting aside the contract. It is a discretionary exercise. See LeVan v. LeVan, 2008 ONCA 388, 2008 CarswellOnt 2738 (Ont. C.A.).
95A finding that a party violated a provision of s. 56(4) of the FLA does not automatically render the contract a nullity. Rather, a trial judge must determine whether it is appropriate, in the circumstances, to order that the contract be set aside. It is a discretionary exercise: LeVan paragraph 33.
96The lack of independent legal advice is not by itself determinative. It is only one factor: Dougherty v. Dougherty, 2008 ONCA 302, 2008 CarswellOnt 2203 (Ont. C.A.); Raaymakers v. Green, 2004 CarswellOnt 2712 (Ont. S.C.J.)
89The law concerning a failure to disclose significant assets or debts as a ground for setting aside a domestic contract was summarized by D.M. Brown, J. (as he then was) in Quinn v. Epstein Cole LLP, 2007 45714 (ON SC), [2007 O.J. No. 4169 (S.C.J.) (aff’d 2008 ONCA 662 (C.A.)) at para. 46-48 as follows:
46 Section 56(4)(a) of the Family Law Act provides that a court may set aside a domestic contract, or a provision in it, "if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made."
47 The case law indicates that a court should employ a two-stage analysis when considering a claim to set aside a domestic contract for non-disclosure:
(i) First, the party seeking to set aside the agreement must demonstrate that the other party failed to discharge its duty to disclose significant assets. The failure to disclose significant assets includes the making of a material misrepresentation about the true value of assets, and the failure to disclose changes in income. The significance of an asset is assessed by measuring the value of the asset against a party's disclosed net assets. To conclude that a party has failed to disclose a significant asset, there must be some evidence to verify the value or extent of the party's assets either at the date of marriage or the date of the agreement;
(ii) If a court finds that a party has failed to disclose a significant asset, the court must determine, in light of the facts of each case, whether it should exercise its discretion to rescind the domestic contract. The burden of proof lies on the party seeking to set aside the contract to persuade the court to exercise its discretion in its favour. The court will take into account a variety of factors in exercising its discretion:
i. whether the party who did not make full disclosure was asked or refused to do so; whether that party misrepresented or concealed financial facts; whether the other party had full financial information in any event; and, whether the other party would have signed the contract even if the disclosure had occurred;
ii. whether the party relied on the non-disclosure or misrepresentations in entering into the separation agreement in the sense that the party would not have entered the agreement had she known the true value of the assets;
iii. whether a party consented to incomplete disclosure, or was otherwise aware of the asset and had the means to ascertain its value;
iv. whether one party took benefits under the contract and then moved to set it aside; and,
v. whether there had been duress, or unconscionable circumstances; whether the petitioning party neglected to pursue full legal disclosure; whether she moved expeditiously to have the agreement set aside; and whether the other party had fulfilled his obligations under the agreement.
In considering these factors, a court should not narrowly construe the obligation of spouses to make full disclosure because the Family Law Act imposes a positive duty on both parties to disclose.
48 Finally, formal disclosure by way of sworn financial statements prior to executing an agreement is not necessary to meet the obligation to disclose. A general awareness of the assets of the other party may be sufficient to avoid setting aside an agreement. Parties are expected to use due diligence in ascertaining the facts underlying their agreements; a party cannot fail to ask the correct questions and then rely on a lack of disclosure. One must inquire whether the responding party withheld information or whether the information was available to the party seeking to set aside the agreement.
90In the case of S.(J.) v. S.(D.B.). 2016 ONSC 1704 (S.C.J.) Skarica J. made the following pertinent observations at paras. 34-41 respecting the issue of non-disclosure (citations omitted):
(a) non-disclosure must relate to “significant” assets. The court must determine whether the disclosure was “significant” such that its financial effect would have caused the party alleging non-disclosure to rethink her or his position. The term “significant” must refer to and be measured in the context of the entire relationship between the parties (para. 34);
(b) disclosure must include not merely the existence of significant assets but also their extent or value. However, the court must consider whether the party alleging non-disclosure had just as much ability to value the assets in question as the opposing party. In addition, a general awareness of the other party’s assets may be sufficient to avoid setting aside the contract (para. 35);
(c) there is a distinction between disclosing assets and liabilities and their values believing the disclosure to be true, and deliberately misrepresenting the values of assets and liabilities knowing them to be untrue. However, the use of the term “failure” in s. 56(4) implies that proof of intent or mala fides is unnecessary (para.36);
(d) every spouse has a positive duty to make complete, fair and frank disclosure of all financial affairs before the contract is entered into regardless of whether or not there has been a request for information and this obligation is not to be construed narrowly. However, disclosure may be adequate in reasonably setting out the nature and value of the assets and debts of the parties, even though it may not have been perfect. If this is the case, the court may find that non-disclosure is an insufficient ground to set aside the agreement. Sworn financial statements may not be necessary for marriage contracts and cohabitation agreements; statements of net worth with an indication of how value was arrived at may be sufficient (para. 37);
(e) parties must be diligent in ascertaining the facts underlying their agreements and they cannot fail to ask reasonable questions and then complain about a lack of disclosure from the other side (para. 39);
(f) even where party’s non-disclosure was wilful, may not be sufficient to set aside the agreement if the other party was not completely misled and could have made further inquiries (para. 41).
91Skarica, J. added the following observations respecting the lack of independent legal advice at paras. 42-46:
(a) the fact that a party did not receive independent legal advice does not necessarily result in an agreement being set aside. It is only one factor the Court must consider where the challenge to the agreement is based on some other contractual grounds. The absence of ILA can support the claim that a party did not understand the nature and consequences of a contract (para. 43);
(b) it is incumbent on the parties to read the agreement carefully before signing it and to obtain ILA if he or she did not understand it. If, on the balance of probabilities, the court finds that the party understood the nature and consequences of the agreement even though he or she did not have legal advice, and he or she chose not to obtain ILA then s.56(4(b) is not satisfied;
(c) the fact that a party appreciates that a domestic contract is not good for him or her does not mean that he or she understood the nature or consequences of the domestic contract.
Discussion
(a) Credibility of the parties
92The evidence of the parties conflicted on a number of issues including:
whether the respondent mentioned his insistence that the parties enter into a pre-nuptial agreement at the time when they first discussed marriage or shortly thereafter;
the degree to which documents respecting the respondent’s financial affairs, both personal and business, including tax returns, bills and invoices, bank and investment statements and documents pertaining to the mortgage on the home were disclosed to or available to the applicant;
whether the respondent showed the first and second drafts of the Agreement received from Mr. Zboril to the applicant and reviewed them with her;
whether the parties attended together to meet with Mr. Zboril at his office to review and execute the Agreement or whether it was signed by the parties in the dining room of the home, without Mr. Zboril being present;
the circumstances of the execution of the Agreement including the placement by the parties of their initials on the bottom right-hand corner of each page and the signing of the Agreement by Mr. Zboril as witness to each party’s signature;
the circumstances respecting the delivery and retention of original copies of the signed Agreement.
93I find that the applicant testified in a manner designed to advance her firm position that she understood nothing about the Agreement and not necessarily to respond truthfully to the questions put to her. She refused to acknowledge that she understood even the simplest sentences and phrases in the Agreement because she evidently thought to do so would undermine her case.
94In a number of instances, the applicant was evasive and refused to answer straightforward questions on cross-examination and had to be directed by the court to do so.
95The applicant’s evidence was also inconsistent in a number of respects. She initially testified that the respondent hid his assets and financial information from her, however she later retreated from that position but alleged that she could not believe what the respondent was telling her regarding his assets in any event because he was untruthful. She initially denied that she collected the parties’ mail, however on cross-examination she was forced to acknowledge that, due to the respondent’s hours of work, she was indeed the one who regularly collected and opened the mail. The applicant throughout her testimony refused to admit facts which called for admission in circumstances when she thought that to do so might be detrimental to her position that she understood nothing about the Agreement.
96In contrast, I found the respondent to have been forthright throughout his testimony. He readily acknowledged facts that were not necessarily helpful to his position. His evidence was not undermined on cross-examination.
97Where the evidence of the applicant and the respondent differed, I prefer the evidence of the respondent.
(b) Findings of fact
98Based upon an assessment of the evidence I make the following findings of fact on a balance of probabilities:
(a) in response to the applicant’s comment that many of her friends were getting married the respondent asked her to marry him but stipulated, either on that occasion or shortly thereafter, that he would agree to marry on the basis that the parties would enter into a “pre-nuptial agreement.” However, the respondent did not provide to the applicant any further details or elaboration at that time on what such an agreement would entail;
(b) while the parties were cohabiting prior to marriage they each had their personal income tax returns prepared annually by the respondent’s accountant, received their returns in unsealed file folders, and reviewed their returns together, specifically with respect to the amount of their respective refunds;
(c) during the parties’ cohabitation prior to and after marriage the respondent paid all expenses associated with the home and refused any offers of the applicant to contribute to those expenses. In his mind this was necessary in order to prevent the applicant from advancing a claim to an interest in the home in the future;
(d) the parties never maintained any joint bank accounts, credit cards or joint debts prior to or after marriage;
(e) during their cohabitation, both prior to and after marriage, all personal financial documents of the parties respectively were received by mail at the home. The applicant would customarily pick up and open the mail. Certain documents relating to the respondent’s business may have been received at the home, such as investment statements, but most of the business documents were received by mail at the business premises. The respondent kept his business documents in filing cabinets at the business premises. The applicant was frequently at the business premises. There is no evidence that the respondent took active steps to hide or shield personal and business documents from being reviewed by the applicant;
(f) the respondent had both a professional and personal/social relationship with Mr. Zboril. After the parties decided to get married and the respondent told the applicant that he required a “pre-nuptial agreement,” the respondent consulted, without the applicant, with Mr. Zboril and instructed him to prepare a draft cohabitation agreement. He instructed Mr. Zboril that he wanted the cohabitation agreement to protect his assets from any claims by the applicant upon separation or dissolution of the marriage, and to bar the applicant from making any claim for spousal support or child support for the applicant’s child B.A.;
(g) the respondent received no advice from Mr. Zboril that he was required to or should provide any financial disclosure to the applicant in connection with the proposed agreement beyond the information to which the applicant was already privy. The respondent had no information from any other source that he was required to make financial disclosure to the applicant in connection with the proposed agreement;
(h) the applicant had no understanding from her own knowledge that the parties were obliged to make financial disclosure to each other in connection with the proposed agreement;
(i) the respondent did not advise the applicant, prior to showing her the first draft of the agreement, that he had instructed Mr. Zboril to prepare a draft cohabitation agreement;
(j) Mr. Zboril prepared an initial draft cohabitation agreement and emailed it to the respondent on July 6 or 7, 2012. He did not send a copy directly to the applicant;
(k) the respondent reviewed the initial draft cohabitation agreement with the applicant, and instructed Mr. Zboril with respect to certain revisions that they had discussed;
(l) at some time prior to the preparation by Mr. Zboril of a revised draft agreement, the parties met with the respondent’s insurance representative to confirm the beneficiary designations on the respondent’s life insurance policy to be included in the agreement, and the respondent delivered a copy of the policy with the particulars to Mr. Zboril;
(m) Mr. Zboril prepared a revised draft cohabitation agreement and emailed it to the respondent on October 10, 2012. He did not send a copy directly to the applicant;
(n) Paragraph 20 respecting “Independent Legal Advice” had been added to the second draft agreement. However, the respondent did not know why or how it had been added;
(o) the respondent printed a copy of the revised draft cohabitation agreement at his business premises, brought it home and showed it to the applicant. The applicant and the respondent reviewed the revised draft. They discussed that the draft agreement provided that whatever each party brought into the upcoming marriage would remain his or hers. The revised draft agreement was also left on the kitchen counter of the home where it was available for review by the applicant;
(p) the applicant did not ask any questions or make any comments respecting the revised draft agreement and she took no steps to contact Mr. Zboril directly with respect to the draft. She made no requests of the applicant for any financial disclosure;
(q) at the time that she was reviewing the revised draft agreement, the applicant was aware that the respondent owned the home, the amount that he had paid to purchase it, that the home was subject to a mortgage, that he owned, through a corporation, a carpeting and flooring business that had been gifted to him by his parents, that the corporation that operated the business had inventory and equipment, and that he owned, through a corporation the building that the business was operated from. She had been in the building and had an appreciation of its size and configuration. She knew that one or both of the corporations had investments. She also had an understanding of the amount of personal income the respondent reported to CRA but not necessarily the annual income of the respondent’s corporations. She was not in receipt of any financial statements of the corporations, or any information respecting any investments held by either corporation;
(r) the respondent provided no documentation to the applicant respecting his assets and debts, the value of his assets or the amount of his debts. Specifically the respondent provided no appraisals of the home or the building in which the business was operated, details of encumbrances against those properties, financial statements (including balance sheets) of his corporations or statements respecting investments held within one or both of the corporations;
(s) at the time of her review of the revised draft agreement, the applicant had been in the habit of researching on the internet the listing prices of homes listed for sale on the street where the respondent’s home was located;
(t) the applicant knew that the purpose of the Agreement was to release any claim that she might have to the respondent’s assets, as she knew that he wanted to protect his assets. After the Agreement was executed the applicant confirmed to the respondent that she did not want his property and that she was “not a gold digger;”
(u) following the parties’ review of the revised draft agreement, the respondent contacted Mr. Zboril’s office to arrange an appointment for the parties to meet with him to review and execute the agreement;
(v) the applicant and the respondent met with Mr. Zboril in his office in November 14, 2012. No one else was present in the room. Mr. Zboril had four copies of the draft agreement and went through the document with the parties, paragraph by paragraph. However, the evidence did not disclose the depth with which the Mr. Zboril reviewed the draft with the parties. The applicant had no questions for Mr. Zboril. Each of the parties and Mr. Zboril placed their initials on the bottom right-hand corner of each page as they went through the document, and each party signed on the last page (pg. 8) in front of Mr. Zboril. Mr. Zboril signed as witness for each party under the statement “Signed, Sealed and Delivered by Tim or Kim in the presence of…”
(w) at least two copies of the executed Agreement, with original signatures thereon, were placed in an envelope and dropped off by Mr. Zboril with the applicant at the home in October 2018 while the respondent was away in Mexico. The envelope with the two copies was located by the respondent at the bottom of the drawer in his filing cabinet in March 2020;
(c) Application of the legal principles to the facts
99The first stage of the analysis referred to in Harnett relates to whether the applicant has satisfied the onus on her of demonstrating that at least one of the circumstances set out in subsection 56(4) of the FLA has been met. The applicant in this case relies upon paragraphs 56(4)(a) concerning a failure by the respondent to disclose significant assets, and 56(4)(b) on the basis that she did not understand the nature or consequences of the Agreement.
100In my view the applicant has failed to discharge this onus.
101With respect to alleged non-disclosure, I find that the applicant was fully aware of the nature of the respondent’s assets at the time that the Agreement was entered into. Specifically she was aware that the respondent owned the home, its purchase price, that the home was subject to a mortgage, that he owned a carpet supply and installation business gifted to him by his parents, including the building from which the business operated, inventory and equipment. She also knew that one of both of the respondent’s corporations (one of which operated the business and one of which owned the building) held certain investments. She was also aware of the respondent’s vehicles.
102The home, business and business premises had not been appraised and the applicant therefore did not know their precise values. However as stated in S.(J.) v. S. (D.B.), under paragraph 56(4)(a) the non-disclosure relied upon must relate to “significant” assets such that their financial effect would have caused the applicant to rethink her or his position and be measured in the context of the entire relationship between the parties.
103I find that, in the context of the parties’ entire relationship, disclosure by the respondent of precise values of his assets supported by appraisals or other supporting documentation would not have caused the applicant to rethink her position regarding whether to enter into the Agreement. She led no evidence to this effect. The applicant had not contributed anything to the acquisition or maintenance of the respondent’ s assets and, in the context of a cohabitation agreement, the values of the assets on the date of the Agreement would have no an effect on her future right to an equalization of net family property in the absence of the Agreement as she would only have a claim to equalization of any increase in value of such assets during the marriage.
104With respect to paragraph 56(4)(b) I find that the applicant has failed to discharge her onus of showing that she did not understand the nature or consequences of the Agreement.
105The respondent reviewed the second draft of the Agreement prepared by Mr. Zboril with the applicant following its receipt on October 10, 2012. The draft Agreement remained on the kitchen counter at the home for the approximate one-month period prior to the parties attending with Mr. Zboril for its execution. Although she did not receive independent legal advice in the relation of the Agreement, she made no effort to seek it nor to enlist Mr. Zboril’s assistance in arranging for it, notwithstanding that she had a professional relationship with him in relation to her motor vehicle accident claim. Moreover, as confirmed in Harnett, a lack of independent legal advice is not by itself determinative. As indicated above, I accept that Mr. Zboril did review the Agreement with both parties and had them initial each page as he went through it with them and the applicant had no questions of Mr. Zboril.
106I find on a balance of probabilities that the applicant knew and understood that by entering into the Agreement she was waiving, in the event of separation, any claim to an interest in or division of the respondent’s existing or after-acquired property and any claim for spousal support.
107In the event that I am wrong in finding that the applicant has not discharged her onus at the first stage of the analysis, I find that she has failed to discharge her onus of showing why the court should exercise its discretion to set aside the Agreement at the second stage of the analysis.
108I find that none of the factors to be taken into account identified by Brown, J. in Quinn favour the exercise of the court’s discretion to set aside the Agreement. The respondent was not asked for more disclosure and did not refuse to provide it, he did not misrepresent or conceal financial facts, and the applicant had significant financial information in any event. I also find that applicant would have signed the Agreement even if full and complete disclosure by the respondent had taken place. I also find that there was no duress nor any unconscionable circumstances. Moreover, the respondent fulfilled his obligations under the Agreement including, in particular, assuming the responsibility for the payment of household expenses and naming the applicant and B.A. as beneficiaries on his life insurance policy.
109I therefore find that the Agreement should not be set aside pursuant to s. 56(4) of the FLA.
(d) Is the applicant’s equalization claim barred by the Agreement?
110As indicated above the parties have sought a ruling from the court on whether the Agreement has the effect of barring a claim by the applicant for equalization of the parties’ net family properties pursuant to the FLA.
111S. 2(10 of the FLA provides:
(10) a domestic contract dealing with a matter that is also dealt with in this Act prevails unless this Act provides otherwise.
112S. 5(1) of the FLA provides as follows:
(1) When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.
113Section 4(2)6. which provides that parties may agree in a domestic contract to exclude property from the equalization process has no application and the respondent did not argue that the parties agreed to do so.
114The issue for determination is therefore whether the Agreement deals with the “matter,” that is equalization of net family properties, dealt with by s. 5(1).
115Section 53(1) of the FLA provides as follows
53 (1) Two persons who are cohabiting or intend to cohabit and who are not married to each other may enter into an agreement in which they agree on their respective rights and obligations during cohabitation, or on ceasing to cohabit or on death, including,
(a) ownership in or division of property;
(b) support obligations;
(c) the right to direct the education and moral training of their children, but not the right to decision-making responsibility or parenting time with respect to their children; and
(d) any other matter in the settlement of their affairs.
116Subsection 53() provides that if the parties to a cohabitation agreement marry each other, the agreement shall be deemed to be a marriage contract.
117In MacDonald, Family Law Act of Ontario, at para. 52§3.1 headed “Ownership in or Division of Property,” the authors made the following important observations:
The parties may create a marriage contract to opt out of the equalization formula in the Family Law Act, or to exclude a particular asset, such as a matrimonial home, from the operation of the formula.
Particular assets may be excluded from the equalization process by having the marriage contract supplement the list of exclusions set out in s. 4(2) of the Act.
If the parties want to exclude the application of s. 5 altogether, or Part I altogether, they must provide a substitute division formula. A substitute formula which is acceptable is to provide that property will be distributed according to ownership. This means that what is owned by her is distributed to her upon a separation; what is owned by him is distributed to him; and what is owned by both of them is distributed to both. Sharing in the value of their property under s. 5 is thereby avoided. It is not sufficient to avoid sharing by providing that the parties are to be “separate as to property.” In Ontario, they live under a separate property regime; that is, they are already separate as to property. The Family Law Act operates on this regime to share the values of separate property according to the s. 5 formula. It is important, therefore, not to confuse “ownership” with being “separate as to property.”
118In the case of Bosch v. Bosch, 1991 7177 (ON CA), [1991] O.J. No. 1694 (C.A.) the parties entered into a marriage contract in the Netherlands prior to the wife immigrating to Ontario where the husband resided and owned property. The contract was entered into prior to the enactment of the FLA in 1986 and during the currency of its predecessor the Family Law Reform Act, R.S.O. 1980, c. 152.
119The contract in Bosch was intended by the parties to protect the interest of the husband in the Ontario property and provided that that all property of the parties whether held at the time of the marriage or obtained afterwards, shall remain the property of the respective parties.
120The parties separated after the coming into effect of the FLA and the issue was whether the marriage contract had the effect of barring the wife’s claim to include the subject property owned by the husband in the equalization calculation under the FLA. Arbour, J.A., writing for the majority held that the wife’s equalization claim was not barred by the contract, stating as follows at paras. 39-40:
Under the Family Law Act, 1986, neither ownership nor any interest in the property of the title-holding spouse need be interfered with, as it is only the value of assets that is equalized. Therefore, provisions in a marriage contract dealing with ownership of property during marriage or even after its dissolution may not be sufficient to prevail over the equalization provisions of the Family Law Act, 1986. For instance, a provision which merely said that a particular spouse would continue to own the car after separation, while the other would continue to own the boat, does not address, and may not be adequate to displace, the provisions of the Act which contemplated a valuation of all things owned by each spouse on valuation date in order to equalize, by the payment of money, their economic posture as they come out of the marriage.
The entitlement of spouses in Ontario to equalization under the Family Law Act, 1986 is a new substantive right, quite independent from any right of ownership, which can be ousted by a domestic contract, even one that pre-existed the Act. However, in order for a pre-existing contract to have that effect, it must deal, explicitly or by necessary implication, with "a matter" akin to the equalization provisions of the Act. An agreement as to ownership of property, without more, is insufficient. For the marriage contract to prevail over the equalization provisions of the Act, the contract must contain provisions which address, in their intent if not in their explicit language, the relative economic position of the parties upon the dissolution of the marriage, through the distribution of assets between them on the basis of ownership or otherwise. This can be done either through an agreement that a given property be excluded from a spouse's net family property, under s. 4(2)6 of the Act, or through an agreement in a domestic contract which deals with equalization-type rights so as to bring s. 2(10) into effect.
121In the case of Berdette v Berdette, 1991 7061 (ON CA), [1991] O.J. No. 788 (C.A.) Galligan, J.A., writing for the panel, emphasized at para. 31 the distinction under the FLA between the sharing of the value of the assets accumulated during the marriage by an order for equalization of net family properties and the sharing of the assets themselves:
The intent of this legislation is to establish partnership and equal sharing of property accumulated during marriage. That intent is not effected, however, by the sharing of the assets themselves as was done under the Family Law Reform Act, R.S.O. 1980, c. 152, which preceded the F.L.A. It is done by the sharing of the value of the assets. The distinction is crucial and is one that is not infrequently overlooked. For example, in his Annotation to Rawluk v. Rawluk, 1990 152 (SCC), [1990] 1 S.C.R. 70, 23 R.F.L. (3d) 337, 65 D.L.R. (4th) 161, 36 E.T.R. 1, 103 N.R. 321, 71 O.R. (2d) 480, 38 O.A.C. 81, at p. 345 [R.F.L.], Professor McLeod speaks of "a statute that, by its terms, provides for the equitable distribution of property." In my view, the definition of "net family property" contained in s. 4(1), the opening words of s. 4(2), s. 5(1), and s. 5(6), all show that the F.L.A. does not provide for the distribution of property. Rather, it provides for the payment of money when the net family property of one spouse is less than that of the other.
122In the case of Webster v. Webster Estate (2006) 28 R.F.L. (6th) (S.C.J.) the parties married in 1974 (prior to the enactment of both the Ontario F.L.R.A. and the F.L.A.) in the Province of Quebec and entered into a marriage contract which provided that "upon the dissolution of the marriage by death or divorce" Mr. and Mrs. Webster would be "separate as to property in conformity with the provisions of Civil Code of Lower Canada."
123Robertson, J. at para. 22 observed that case law discloses a high threshold that must be met before finding that an out of jurisdiction marriage contract, prevails over the equalization provisions of the FLA. At para. 23 Justice Robertson held:
The Webster's marriage contract does not provide for the distribution of wealth between the Websters on a basis other than in accordance with ownership. Further, it contains no renunciation of equalization or similar rights. Section 2(10) is applicable only when a matter in the domestic contract is also "dealt with" under the FLA. However, I find that the content of the marriage contract in question does not specifically "deal" with or release equalization claims or election issues upon the death of one of the spouses.
124If there is a high threshold which must be met before finding that an out of jurisdiction marriage contract prevails over the equalization provisions of the FLA, a high threshold should also apply to a marriage contract entered into in Ontario after, as in the case at bar, the enactment of the FLA.
125At para. 1(e) of the Agreement in the case at bar entitled “Division of Property on Separation or Dissolution” provides that:
“in the event of breakdown of the relationship or if one party dies, all property…acquired during the period the parties cohabited which is not One Party Property shall be divided equally… after taking into account the income tax consequences of any transfer of interest and assets. Otherwise there shall be no division of property except by legal ownership.”
(underlining added)
126The question for determination is whether the phrase “otherwise there shall be no division of property except by legal ownership” evidenced an intention on the part of the parties to substitute, on separation, a division of property formula based on ownership of property for the equalization formula provided by section 5 of the FLA.
127In the case of Frye v. Frye, [1992] O.J. No. 942 (Ont. Ct. (Gen. Div.)) Lissaman, J. considered, at para. 14, the dissenting and majority reasons in Bosch in reference to the approach to be taken by the Court in answering this question as follows:
The dissenting judgment of Mr. Justice Finalyson in the Bosch case makes it clear that trial judges should not be reluctant to permit the terms of a domestic contract to prevail over the distributive scheme of the Family Law Act, 1986. Madam Justice Arbour, also in the Bosch case, giving the majority decision of the court, stated that every effort should be made to give effect to the intention of the parties expressed in a domestic contract. Bosch stands for the proposition that whether a domestic contract prevails over the equalization provisions of the Family Law Act, 1986 will depend on whether the parties turned their minds to the division of their assets, or to other forms of economic redress, upon the dissolution of their marriage.
128The Supreme Court of Canada in the case of Creston Moly Corp. v. Sattva Capital Corp, 2014 SCC 53 reviewed the modern principles governing the interpretation of contracts, stating at para. 47,
the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine "the intent of the parties and the scope of their understanding" (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744 (S.C.C.), at para. 27 per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4, [2010] 1 S.C.R. 69 (S.C.C.), at paras. 64-65 per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning
129The phrase in the Agreement providing that “there shall be no division of property except by legal ownership,” although expressed negatively, is sufficient in my view to meet the high threshold required to show that the parties intended to substitute a division of property scheme which would prevail over the equalization provisions of the FLA.
130In order to read the contract as a whole it is necessary to give effect to the words “except by legal ownership.” An interpretation that the parties intended to substitute a division of property scheme by legal ownership rather than by an equalization of value under section 5 of the FLA is consistent with the surrounding circumstances, including the facts that the applicant knew that that the respondent wanted to protect the assets that he had brought into the relationship as a condition of entering into marriage with her and that the Agreement was a formal legal document designed to have a legal effect on her entitlement to advance a future claim in relation to the respondent’s property.
131I find that the claim of the applicant for equalization of the parties’ net family properties is barred by the terms of the Agreement.
Disposition
132For the reasons set forth above it is ordered as follows:
(a) The applicant’s application to set aside the Cohabitation Agreement dated November 14, 2021 (the “Agreement”) pursuant to s. 56(4) of the Family Law Act is dismissed;
(b) The applicant’s application for spousal support is barred by the terms of the Agreement, subject to the possible application of subsection 33(4) of the FLA;
(c) The applicant’s application for equalization of the parties’ net family property is barred by the terms of the Agreement;
(d) On consent, the applicant’s application for child support of the child B.A. is not barred by the terms of the Agreement.
Costs
133The parties are strongly urged to agree on the question of costs.
134If the parties are unable to do so, the respondent may make written submissions as to the costs of the trial within 14 days of the release of these Reasons. The applicant has 14 days after receipt of the respondent’s submissions to respond. The respondent shall have 7 days following receipt of the applicant’s submissions to reply. The initial written submissions of each party shall not exceed five (5) double-spaced pages exclusive of Bills of Costs or Costs Outlines, offers to settle and authorities. The reply submissions, if any, of the respondent shall not exceed three (3) pages. All such written submissions are to be forwarded to me via email to the Trial Coordinator at Brantford at the same email address as utilized for the release of these Reasons.
135If the parties are able to settle the question of costs or if a party does not intend to deliver written submissions, counsel or the party are requested to advise the court accordingly.
D.A. Broad, J.
Released: August 3, 2021