Court File and Parties

COURT FILE NO.: FC-21-245-0000 DATE: 2022/04/28 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JOHN EDWIN GREVE, Applicant AND: KATHERINE JOYCE SHAW, Respondent

BEFORE: Madam Justice J. Breithaupt Smith

COUNSEL: B. Paquette, Counsel for the Applicant/Responding Party to the Motion A. Towlson, Counsel for the Respondent/Moving Party

HEARD: March 2, 2022

Endorsement

Scope, Procedure and Background

[1] This is my substantive endorsement on the motion brought by the Respondent, Katherine Joyce Shaw, alleging the existence of a settlement respecting her purchase of the interest of the Applicant, John Edwin Greve, in the parties’ jointly owned home. The motion was argued on March 2, 2022.

Scope

[2] Ms. Shaw alleges that an agreement was reached that she would pay $145,000 to Mr. Greve in full and final satisfaction of all property claims between them and particularly to transfer ownership of the parties’ jointly owned residence, located at 729 Dolph Street North, Cambridge, Ontario, (“Dolph Street”) into her name alone. In his materials, Mr. Greve denies this and seeks to have Ms. Shaw’s motion dismissed with costs.

[3] The following materials were filed for use on this motion: a. Ms. Shaw’s Notice of Motion dated February 22, 2022; b. Ms. Shaw’s Affidavit dated February 22, 2022; c. Mr. Greve’s Affidavit dated February 24, 2022 (in two parts); d. Ms. Shaw’s Reply Affidavit dated February 25, 2022; e. A Summary of Argument filed by Ms. Towlson on Ms. Shaw’s behalf (with authorities hyperlinked); f. A Factum filed by Mr. Paquette on Mr. Greve’s behalf (with Briefs of Authorities in two parts).

[4] As the question of the existence of a binding agreement regarding the property issues in the dissolution of the parties’ relationship could conclude that aspect of their dispute, Ms. Shaw is effectively seeking summary judgment.

Procedure

[5] Rule 16 of the Family Law Rules applies, and in addition to the trial-like powers set out in Rule 16(6.1), Rule 16(6.2) authorizes the Court to require oral evidence so as to facilitate its determination of the need for a trial. I exercised this option by asking that a gap in the evidence be filled in, as it was not clear to me whether the mortgage on Dolph Street had been renewed in 2020. I sought to know what happened when the existing mortgage on Dolph Street came up for renewal. Mr. Greve was affirmed to answer that question, he was cross-examined by Ms. Towlson, and Mr. Paquette was offered the option of any redirect/reply questioning.

[6] Neither party wishes to prolong this litigation indefinitely. So as to avoid any confusion as to whether the issue needs to be further addressed at trial, the Order will address the substantive issue one way or another by confirming whether a binding contract was or was not formed. Following my conclusion, I will order that the matter be returned to Settlement Conference, before Justice Piccoli if possible, on a date to be scheduled through the Trial Co-ordination Office. This decision is therefore “with prejudice” which I appreciate is a shift away from the approach taken in Justice Osborne’s decision in Gilbert v. Gilbert, rendered forty years ago without the benefit of either Hryniak v. Mauldin, 2014 SCC 7 or of the Family Law Rules. I note that the Court took a similar approach in Gamble v. Longpre, 2016 ONSC 3499 by reaching a conclusion on the substantive issue and referring the file back to further settlement conference.

[7] In support of this approach, I am mindful both of the Court’s duty to manage the case by “identifying the issues, and separating and disposing of those that do not need full investigation and trial” as set out at Rule 2(5)(a) and, although the questions presented here are of mixed fact and law, of the wording of Rule 16(12)(a), which authorizes the court to “decide a question of law before trial, if the decision may dispose of all or part of the case, substantially shorten the trial or save substantial costs.”

Background

[8] By way of brief background, the parties were never married. Ms. Shaw purchased Dolph Street in September of 2006 and the parties’ cohabitation started sometime in 2007. They have two daughters together, aged 9 and 10. They had multiple separations and reconciliations, two of which involved Separation Agreements: the first in early 2010 and the second in early 2014. In January of 2015, Ms. Shaw gave birth to her third daughter, half-sister to the parties’ children. The parties have very different perspectives on the (mis)management of finances through their tumultuous relationship. On September 30, 2016, Dolph Street was refinanced and ownership was registered in the parties’ joint names. They separated on a final basis on June 17, 2019.

[9] Counsel jointly submitted that the exchange of correspondence speaks for itself. I agree. I appreciate that many similar cases have summarized the correspondence and its timeline. For reasons that will become obvious in the balance of this decision, namely because I find that as a matter of law it is not possible for an exchange of correspondence between counsel pre-litigation to constitute a domestic contact under section 55(1) of the Family Law Act, I decline to do so as such a review would not add value to, or otherwise facilitate comprehension of, this endorsement.

Parties’ Positions and Evidence

Ms. Shaw (Moving Party)

[10] Ms. Shaw relied primarily upon the correspondence between counsel to support her argument that an agreement had been reached, in advance of the commencement of litigation between the parties, that she would pay Mr. Greve $145,000 in full and final satisfaction of all property issues between them inclusive of the buyout of his interest in Dolph Street. It is clear throughout the correspondence that the parties were ad idem on this specific point, although other primary issues such as parenting and support arrangements for the children had not been finalized.

Mr. Greve (Responding Party)

[11] Mr. Greve’s Affidavit submitted for use on this motion took the position that no agreement could have been reached because many issues remained outstanding. It appears to confirm that he instructed his counsel throughout the negotiation phase of this separation to draft a comprehensive Separation Agreement that dealt with all issues.

[12] However, Mr. Greve’s evidence was quite different at the hearing. As noted, this evidence was provided to address the gap regarding what took place when the mortgage on Dolph Street came up for renewal in 2020. Mr. Greve started his testimony by stating that he and Ms. Shaw had exchanged multiple emails on the topic and that he wanted to settle up the amount so that she could continue the mortgage by herself. He insisted that he did not understand why the mortgage renewal had to be signed, and it soon became apparent that he meant that he did not see the reason why the mortgage had to be renewed at all. The following questions and answers were then received into evidence:

Ms. Towlson: I’m going to suggest to you Sir that the reason that you were signing another mortgage renewal is because you would not agree to resolve the issue... Mr. Greve: No. Ms. Towlson: ... and receive your $145,000 because you wanted an entire Separation Agreement signed? Mr. Greve: No, that is totally wrong, so wrong. Ms. Towlson: You wouldn’t sign anything unless it was a document that dealt with every issue and dealt with it on a final basis? Mr. Greve: No. THE COURT: What Ms. Towlson is asking is ... Whether you would have signed...Whether you required all terms to be included in the Separation Agreement? Mr. Greve: No. No. I wanted to sign off on the home so I could move on with my life, and then we could agree with section 7 expenses and/or whatever issues she had. Ms. Towlson: You wanted a full agreement and you didn’t want to deal with the house in isolation? Mr. Greve: No. That, no...

[13] Mr. Greve’s oral evidence at the hearing was that he was prepared to sign a partial agreement dealing with the transfer of title to the home in exchange for $145,000 in the Summer of 2020 and to address other issues, such as section 7 expenses for the children, in another document on a later date. He did not want to insist upon a complete and fulsome Separation Agreement dealing with all issues. His evidence was quite clear that he did not know why the transaction for Dolph Street had not been concluded such that its financing has had to be renegotiated annually since September of 2020.

Law & Discussion

[14] Rule 16(6) of the Family Law Rules obligates the Court to make a Final Order in response to a summary judgment motion where it concludes that there is no genuine issue requiring a trial. Here, the focus is on a specific claim: Ms. Shaw asks this Court to agree with her contention that a binding contract was formed by the correspondence between counsel wherein she would purchase Mr. Greve’s interest in Dolph Street for $145,000. In fixing this motion argument date from the Case Conference, Justice Piccoli wrote: “A motion has been set to determine whether the parties reached agreement regarding the amount to be paid to the Respondent for his interest in the home.” While Mr. Greve asks that Ms. Shaw’s Motion be dismissed, effectively he is in fact also seeking a clear determination: confirmation that no binding contract was formed. As the Supreme Court of Canada guided us in Hryniak v. Mauldin, 2014 SCC 7, at paragraph 50: “When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective.”

[15] The three questions presented here are:

1. Can a binding contract be formed by the exchange of solicitors’ correspondence before litigation is commenced?
2. If so, what are the factors demonstrating that such an agreement has crystallized?
3. Are those factors evident in this matter?

A further question arises, which is: “How is the evidence given by Mr. Greve at this hearing to be handled moving forward?”

Question 1: Can a binding contract be formed by the exchange of solicitors’ correspondence before litigation is commenced?

[16] The jurisprudence is clear in confirming that retained counsel may bind their clients to the settlement of litigation by means of exchanged correspondence. Geropoulos v. Geropoulos (1982), at pp 768-769. There are clear public policy reasons why a strict application of s. 55(1) of the Family Law Act is unwarranted in such matters. Geropoulos v. Geropoulos (1982), quoted in this endorsement at paragraph 21 below.

[17] In contrast, pre-litigation agreements are domestic contracts governed by s. 55(1) of the Family Law Act, which provides:

A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.

[18] Numerous cases have found that the strict requirements of s. 55(1) may be relaxed, but not disregarded completely, for example where: a. two educated and sophisticated parties, who had received independent legal advice, signed a domestic contract but only one signature was witnessed; Gallacher v. Friesen, 2014 ONCA 399; b. a witness was not present at signing but gave uncontradicted evidence that the signatory had confirmed signing the agreement; Gamble v. Longpre, 2016 ONSC 3499; c. a domestic contract was drawn up and signed by one of the parties who accepted its benefit and then sought to overturn it; Virc v. Blair, 2014 ONCA 392; d. a domestic contract was drawn up by one party, who then resiled from it and refused to sign it after the other party and his witness had done so. Pastoor v. Pastoor.

[19] There are significant distinctions between those cases and this matter, here: (1) two Separation Agreements were drafted and neither was signed by either party; (2) neither party has received any benefit arising from the putative agreement regarding the title transfer; and (3) despite paragraph 17 of his Answer, in which he specifically denies the existence of any agreement to transfer his interest in Dolph Street to Ms. Shaw, at this hearing Mr. Greve attested that he did intend to form a contract to sell his interest in Dolph Street to Ms. Shaw for $145,000 in the Summer of 2020.

[20] The first three of the above-listed examples either cure a witnessing abnormality on an otherwise fully signed domestic contract or hold a contracting party responsible for her obligations following her receipt of the contract’s benefit. The equitable principle – that the Court must rebuke a party’s post-signature rejection of a negotiated settlement – is clear throughout these examples.

[21] The last example is the case of Pastoor, which is unique in that Justice Perell chose to extend the reach of the prior jurisprudence to include a domestic contract that had been signed by only one party, with no benefit flowing to either party, before its rejection by the second party. In extending the enforceability of the half-signed contract, His Honour relied upon the following statement from the Court of Appeal in Geropoulos:

[A strict construction of s. 55(1) of the Family Law Act] would be wholly inconsonant with the established policy of encouraging the settlement of disputed claims and recognizing and preserving the validity of settlements freely and properly entered into under advice.

[22] Well aware that Geropoulos involved settlement negotiations in the midst of active litigation, and thus that he was extending an existing principle, Pastoor v. Pastoor, at paragraphs 9 and 10 His Honour wrote: “it is arguable that what Robins, J.A. was saying ... is that the formalities of s. 55(1) of the Family Law Act are not necessary when a settlement is negotiated freely and properly entered into with lawyer’s advice whether or not there was pending litigation.” His Honour went on to quote extensively from Scherer v. Paletta a well-known decision of the Court of Appeal addressing the ability of retained counsel to compromise a client’s position in reaching a binding settlement of active personal injury litigation.

[23] For clarity, Justice Perell was being asked to cure the absence of the signature of one party and a witness on a half-signed domestic contract. His Honour did so on the basis that the terms of settlement had been negotiated freely and with the benefit of legal advice. I am being asked to extend that judicial involvement even further. I am being asked to deem an exchange of correspondence between counsel, pre-litigation, to be a valid and enforceable domestic contract. I conclude that I cannot do so for the following reasons:

a. Statutory Construction

A first principle of statutory construction is the presumption that the parliamentary body enacting the legislation crafted its language carefully.

Section 55(1) of the Family Law Act is clearly exclusive in nature. It provides three requirements that must be met in order for a document to be a “domestic contract.” The three requirements are that the document be in writing, signed by the parties and witnessed. In the absence of these three requirements, the document is not a domestic contract.

Further, section 56(4) sets out three situations in which a domestic contract may be set aside:

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.

Notably, there is no mention of legal advice being a necessary prerequisite to the existence of a contract or of its absence being a trigger for the setting aside of a domestic contract.

b. Scope of Retainer – Negotiation vs. Litigation

There is an important distinction between the involvement of counsel retained to negotiate pre-litigation and counsel retained to conduct litigation. This distinction is evident in the rules of court in all areas of practice. Litigation counsel are served with court documents and regularly attend court in the absence of their clients. This is true even in serious criminal matters, where a Designation of Counsel form may be filed with the Court under section 650.01 of the Criminal Code of Canada which alleviates the need for the accused to be present at all court appearances.

c. Requirement of Legal Advice

In my view, relaxing the Family Law Act formalities to deem an exchange of pre-litigation correspondence to be a domestic contract as a result of the availability of legal advice actually exacerbates the uncertainty in family litigation. The foundation upon which such a principle would be based – the availability of legal advice – is unstable. Questions come to mind such as:

(1) What does “legal advice” look like, exactly? Is there a demarcation point compelling the announcement of the involvement of the advising lawyers if parties are otherwise negotiating smoothly between themselves? Do the advising lawyers have to communicate with one another in writing? Will this cause a chilling effect on the provision of “unbundled” legal services?

(2) Are retainer agreements regarding the scope of pre-litigation counsel to automatically become material evidence when an alleged correspondence-based settlement is disputed? Does this mean that pre-litigation counsel must refer the client to another lawyer in every case of failed settlement negotiation lest he or she become a potential witness in the litigation? A lawyer cannot be both advocate and witness, per Rule 5.2-1 of the Law Society of Ontario’s Rules of Professional Conduct.

(3) What if only one party has legal advice? In Dougherty v. Dougherty, 2008 ONCA 302, the Court of Appeal confirmed that, while legal advice may form part of the analysis of whether a party understood a domestic contract, it is not determinative (i.e. its absence is not fatal). What is the assessment process around the other party’s need for legal advice? In Gold v. Rosenberg, Sopinka, J. for the majority of the Supreme Court wrote: “Whether or not someone requires independent legal advice will depend on two principal concerns: whether they understand what is proposed to them and whether they are free to decide according to their own will. The first is a function of information and intellect, while the second will depend, among other things, on whether there is undue influence.” Note that both of these concepts are addressed by the Legislature at section 56(4) (b) and (c).

(4) What if a party’s unique vulnerabilities are not compensated for by legal advice? This was the situation in Rick v. Brandsema, 2009 SCC 10, at paragraphs 60-62 wherein the Supreme Court of Canada pointed out that “exploitation is not rendered anodyne merely because a spouse has access to professional advice.”

(5) What if a party alleges that he or she received bad advice? See Harnett v. Harnett, 2014 ONSC 359, where Justice McGee found that one party’s legal advice was “woefully deficient” but that the party understood the domestic contract and that its terms were not unconscionable. Her Honour confirmed that a party’s grievance against his or her lawyer cannot be addressed by section 56(4) of the Family Law Act.

(6) Is there a strong public policy reason to add a legal advice factor to alleged settlements when Courts routinely uphold fully-compliant domestic contracts where no legal advice was obtained? See for example Gamble v. Longpre, 2016 ONSC 3499, in which both parties signed waivers of Independent Legal Advice and the Separation Agreement was upheld.

d. General Uncertainty

Separation and divorce are characterized by uncertainty at the outset and often by a continuing absence of closure as the litigation unfolds. This can be the case even where spouses understand themselves to be bound by Court Orders, which may be appealed or subsequently altered due to a material change in circumstances. If Court oversight is not a guarantee of closure, it is essential to avoid any confusion regarding the specific requirements of pre-litigation settlement so as to allow separating spouses to move forward with their lives. To raise an exchange of correspondence to the level of a binding domestic contract, absent clear legislative authority, would be to extend judicial involvement too far and contribute to increased uncertainty in matrimonial settlement negotiations.

Question 2: If so, what are the factors demonstrating that such an agreement has crystallized?

Question 3: Are those factors evidence in this matter?

[24] Having regard to my comments above, it is not necessary to answer either of these questions.

Additional Question: What is the Impact of Mr. Greve’s Evidence?

[25] Mr. Greve’s testimony at this hearing, namely that in the Summer of 2020 he wanted to sell his interest in Dolph Street to Ms. Shaw for $145,000 without requiring the completion of a comprehensive Separation Agreement, is quite unusual. It clearly impacts the overall landscape of this litigation. It appears that the issue of property division between these unmarried parties is the main barrier to a complete settlement. I get the impression that all involved are hopeful that this litigation will settle.

[26] At paragraph 50(f) of her Answer, Ms. Shaw articulates her unjust enrichment claim thus: “The Respondent takes the position that the Applicant would be unjustly enriched if he were able to benefit from the significant increase in the market value of the home in the particular circumstances of this particular case.”

[27] In order to determine the increase in the market value of Dolph Street, a marker of its value at separation is necessary. It is clear that both parties believed that the value of Mr. Greve’s equity interest (being half of the equity in Dolph Street at that time) was $145,000. Mr. Greve confirmed this in attesting that he did not understand why an agreement to that effect had not been reached by September of 2020. I therefore find as a fact that the value of Mr. Greve’s interest in Dolph Street at separation was $145,000. It will be up to the parties and, potentially, the Trial Judge, to determine whether any increase in Mr. Greve’s equity interest in Dolph Street is payable to him or whether some or all of it is subject to a constructive trust arising from Ms. Shaw’s unjust enrichment claim. Although it is a relatively small point, I am hopeful that this finding will be of assistance in settling or streamlining this litigation.

[28] Relatedly, the transcript of Mr. Greve’s testimony on March 2, 2022 may be entered into evidence at trial, if necessary, pursuant to Rules 1(7.2)(g) and 23(18) of the Family Law Rules.

Conclusion & Order

[29] Having regard to the foregoing analysis, I conclude that a binding domestic contract regarding the purchase of Mr. Greve’s interest in Dolph Street for $145,000 was not formed by the exchange of pre-litigation correspondence between then-retained counsel. No contract was formed.

[30] I further conclude, and find as a fact, that the value of Mr. Greve’s equity interest in Dolph Street at separation was $145,000.

[31] Temporary Order to go:

1. This Court declares that no binding domestic contract exists which compels the Applicant, John Greve, to sell his interest in the parties’ jointly-registered property, 729 Dolph Street North, Cambridge, Ontario, to the Respondent, Katherine Shaw, for the sum of $145,000.
2. This Court further declares and finds as a fact that the value of the equity interest of the Applicant, John Greve, in the parties’ jointly-registered property, 729 Dolph Street North, Cambridge, Ontario, was $145,000 at separation.
3. Matter is to be scheduled for Settlement Conference, before Piccoli, J. if at all possible, with the exact date to be arranged through the Trial Co-ordination Office. Briefs to be served and filed in accordance with the Superior Court of Justice Central South Region Notice to the Public and Profession effective April 19, 2022.
4. If required in the discretion of the Trial Judge, a transcript of the testimony given by the Applicant, John Greve, to this Court on March 2, 2022 may be entered into evidence at trial per Rules 1(7.2)(g) and 23(18) of the Family Law Rules.
5. Having regard to the unique circumstances of this motion, each party shall bear his or her own costs.

J. Breithaupt Smith J. DATE: April 28, 2022