Court File and Parties
COURT FILE NO.: FS-21-23910 DATE: 20231013 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: Viviana Garibello, Applicant – and – Jairo Alexander Garzon, Respondent
Counsel: Munera, A. and Lansana, N., for the Applicant Toor, R., for the Respondent
HEARD: February 27 – March 10, 2023
REASONS FOR DECISION
Overview:
1The parties began their relationship on August 3, 2012, and separated in 2020. Prior to cohabiting, they signed a Cohabitation Agreement (“CA”) on April 17, 2013, after each received independent legal advice (“ILA”). The parties had two children – the first born in 2013 and the second in 2016. Ultimately the family lived at 7 Almington Street in North York (“family home”) until the Respondent left due to an alleged domestic assault incident. The family home is solely held by the Respondent. Prior to the parties cohabiting, the Respondent owned a property at 270 Roywood Drive in Toronto (“Roywood”) and 518 Whitmore Avenue in Toronto (“Whitmore”). Roywood and Whitmore were used at various times to pay for the family home and other debts through various transfers in what the Applicant believes was a joint family venture. She claims a 50% interest in the family home. However, this claim is precluded by the CA if found valid and binding because the CA states that in the event of the breakdown of the relationship, division of property is solely according to legal ownership. The Applicant contests its validity because of duress, undue influence, unconscionability, misrepresentation and the absence of meaningful ILA.
2The sole issues directed to trial by Justice Nakonechny are the validity of the CA, and if not valid, the Applicant’s constructive trust claim over the family property, and the Respondent’s trust claim over a condo unit that parties purchased in the Applicant’s name at 6456 Confederation Avenue in Mississauga.
3I find that the Applicant was not under duress or undue influence when she signed the CA. The agreement as it pertains to property rights is not unconscionable. The parties did not repudiate the property provisions of the CA through their conduct. The Applicant understood that property should be divided according to legal ownership and now benefits from that agreement having a condo solely in her name. It is for another day to determine if the other parts of the CA relating to spousal support are valid and binding on the parties.
Analysis:
The Cohabitation Agreement is valid and binding
4The CA was prepared by a lawyer that the Respondent found, named Nav Rai. The purpose of the CA is “to set out their respective rights and obligations with respect to their relationship and cohabitation in any event of a breakdown of the relationship. In particular the parties intend as follows: (a) to set out their rights to ownership and possession of assets, and to elect and affirm that none of the property of either party is to be divided between them except according to legal ownership, and to avoid any rights or obligations relating to the property which may arise at law or in equity from their cohabitation and/or common law spousal relationship” (Part 3). Part 4.1, and 4.2(a),(b),(c),and (d) and Part 5 expand on the notion that neither party shall have trust claims against the property of the other. The term “property” is as defined in the Family Law Act (“FLA”). The other parts of the agreement largely deal with equalization, spousal support, personal property and debt and liability attribution.
5The parties agrees that section 56(4)(b) of the Family Law Act (“FLA”) permits the court to set aside a domestic contract or a provision under it if a party did not understand the nature or consequences of the contract. Section 54(4)(c) further states that a court can set aside a contract otherwise in accordance with the law of contract. In this case, the Applicant submits four arguments:
i. The contract was not signed in accordance with the law of contract, namely, without duress, undue influence, or misrepresentation; ii. The Applicant did not understand the consequences of the CA because she did not receive proper ILA; iii. The CA is unconscionable; and iv. The parties repudiated the CA through their conduct.
6To apply s. 56(4) of the FLA in this case, I must engage a two-stage analysis: a) Can the Applicant demonstrate that she did not understand the nature or consequence of the contract or that it is not in accordance with contract law; and b) is it appropriate to set aside the agreement ((M.O. v. F.S., 2019 ONSC 5091 at para. 11, citing LeVan v. LeVan, 2008 ONCA 388). I find that the Applicant has not met the threshold test of demonstrating that she did not understand the nature and consequence of the property division provisions or that those provisions are contrary to contract law.
The Applicant was reluctant but not under duress, not unduly influenced
7The Applicant is a university educated woman who moved to Canada from Colombia with little savings. She had previously been married in Colombia and divorced in 2012 before meeting the Respondent at a baby shower. She began a relationship with him and moved into his home at 272 Roywood in or around August 1, 2012. At this time, the Applicant was employed at Shoppers Home Health Care earning approximately $24,000 annually, owned a car and had an outstanding OSAP loan. The Applicant testified that in September of 2012, she became pregnant with their first daughter and the Respondent raised his desire to have a cohabitation agreement to protect his assets. The Applicant testified, and I accept that she was reluctant to have such an agreement. I accept that she came from a very happy family with shared bank accounts and a willingness to help each other. She did not see a need for an agreement. She also testified that the Respondent threatened her, her family, and threatened to take their daughter away from the Applicant if she did not comply. The Applicant testified that one night in February the Respondent grabbed her by her hair, and again threatened to take away her daughter if she did not sign. The Applicant claims that because of her fear of losing her daughter and his aggression, she agreed to sign the proposed CA.
8The Respondent is also divorced having been married in Colombia around 2000. At the time he and the Applicant got together, he believed his financial situation was better than hers and he wanted to protect his properties. Although Roywood and Whitmore were heavily encumbered, the Respondent was hoping to build equity and wanted to protect them should his relationship with the Applicant end. His intent in part was to avoid this very dispute. For him, the CA was necessary to move forward with the relationship. It was, in other words, a deal-breaker. The Respondent agreed at trial that the Applicant was reluctant to sign the document, objecting to the Respondent putting the agreement as a condition of his love. He testified that he downloaded information from the internet and discussed the pros and cons of such an agreement with her. The Respondent denies that he threatened the Applicant or any family member to sign the agreement. The Respondent denies assaulting the Applicant to coerce her to sign. Ultimately, if she did not sign, he was willing to leave her even though he was happy that the Applicant was pregnant with his first child. His plan was that she could move back in with her parents or with a friend, and the Respondent would support her during the pregnancy and after. In or April 17, 2013, the Applicant agreed to sign the proposed CA, so he arranged for an appointment with Mr. Rai.
9The Applicant states that they drove to Mr. Rai’s office together and that she waited in the reception area for 1-2 hours while the Respondent spoke to Mr. Rai. The Respondent then came out and told her that they had to sign and that she needed to go to her own lawyer. According to the Applicant, the Respondent and his lawyer set up everything. The Respondent gave her cash to pay her ILA lawyer who was in the same building. As far as she knew, the Respondent retained Mr. Palleschi to provide the Applicant with ILA. After 20-30 minutes with Mr. Palleschi, the Applicant signed the CA, paid Mr. Palleschi cash and then returned to the Respondent. In the lobby she started crying. The Respondent started laughing and calling her an idiot.
10The Respondent gave quite a different account. After she agreed to a CA to move forward with their relationship, they both went to see Mr. Rai. He agrees that he found Mr. Rai through his real estate agent, Ms. Molina. Mr. Rai drafted the CA in front of them including obtaining a list of assets as found in a schedule to the CA. The Respondent testified that Mr. Rai went through the draft CA and discussed any issues. He then suggested three or four lawyers in the building for the Applicant to obtain ILA. Mr. Rai suggested Mr. Palleschi as one of the options. The Applicant went to Mr. Palleschi and returned after about 1 hour.
11I find the Respondent’s account of the period leading up to the signing of the CA more plausible. The parties were early in their relationship, and I accept that the Respondent was willing to walk away and support his daughter if the Applicant was not willing to sign the CA. It is not uncommon for propertied people to seek a cohabitation agreement to protect their assets should the relationship breakdown in the future. There may have been heated discussions about the topic and words may have been exchanged but I do not find that the Applicant truly felt threatened and coerced into moving forward with the CA. She was not happy with it, as many are not, but she admitted on cross-examination, more than once, that she understood that the purpose of the agreement was to protect the Respondent’s assets that he owned at the time. I say this with great caution to not fetter the findings of the trial judge who will be dealing with the spousal support claim and the allegations of intimate partner violence. I am not ruling that the violence that the Applicant complains of happened or did not happen – that is for another day. I am finding instead that it is more likely than not that any such violence did not happen at the beginning of the relationship when the Applicant was moving in with the Respondent and pregnant with their first child. In other words, I do not accept the Applicant’s evidence on the timing of the alleged assaults or that any such assaults impacted on her decision to sign.
12The fact that the Applicant was unhappy signing the agreement or that the Respondent was making it a “condition of his love” does not mean that there was duress or undue influence. I find there was not. Duress involves a coercion of the will or situation in which one party has no realistic alternative but to submit to pressure. The person claiming duress to set aside a domestic contract must show that she was compelled by fear of actual or threatened harm – Ludmer v. Ludmer, 2013 ONSC 784 at para. 53. In this case, despite the Applicant’s testimony that her family was close and helped each other, her parents both testified that neither had knowledge of the CA until after separation. The Applicant stated that she had no one to turn to – I do not accept her testimony. A harmonious interpretation of the evidence is that though reluctant, the Applicant was fine enough with the CA to not talk to her parents about it. She decided to continue her relationship with the Respondent, and with that came the CA. She has not persuaded me on a balance of probabilities that there was something animating her decision more than stress associated with a possible breakdown of her familial relations with the Respondent or that she was subject to intimidation or illegitimate pressure (Ludmer, at para. 53).
13Similarly, I do not find that the Respondent exercised undue influence on the Applicant at this early stage of their relationship. He was candid in saying that the CA was a deal breaker for him – there is nothing wrong with that. The Applicant had choices at the time, coming from a close family and with parents in the Greater Toronto Area. She was gainfully employed and educated. I do not find that at this point the Respondent had the ability to dominate the Applicant’s will through manipulation, coercion, or outright subtle abuse of power (Geffen v. Goodman Estate, 1991 SCC 69). Even if the Respondent said, “you’re overreacting, you’re a rat. I’m going to leave you if you don’t sign…” – this does not amount to undue influence or duress. I do not accept that the Applicant was stuck. These are unkind words. Insisting on a CA to continue the relationship may be cold, harsh and morally blameworthy for some. But legally there was nothing wrong with the continued relationship being contingent on the CA. In the circumstances of this case, it did not vitiate the Applicant’s consent to sign. Ultimately, she chose to stay with the Respondent which entailed agreeing to sign the CA.
14Whether the Respondent was abusive, coercive, dominating, manipulative, and gaslighting the Applicant later in their relationship is not the issue for this trial. The question for this trial is whether at the beginning of their relationship any of these conditions existed that vitiated the Applicant’s signature on the CA. The answer is no.
The limitation of each party’s property interests to what they legally own is not unconscionable
15In Koster v. Koster, the Court found a cohabitation agreement that forced a wife to give up her rights to a matrimonial home to be unconscionable. The parties had separated and reconciled, but on the husband’s condition that the wife sign a cohabitation agreement. The court found a marked imbalance of bargaining power because the wife was emotionally vulnerable at the time due to a miscarriage. The Court found that the husband preyed on the wife’s vulnerability. This is not that case. The Applicant suggests that being seven months pregnant when she signed the CA was a weakened or vulnerable state. I reject the inference that pregnant women are inherently vulnerable. One would think that it depends on the type of pregnancy it is. There was no plausible evidence, beyond the Applicant’s self-serving statement, that there was anything about her pregnancy that made her particularly vulnerable.
16In M.O. v. F.S., the court applied the principle in Miglin v. Miglin, 2003 SCC 24 that to decide if an agreement is unconscionable, the court must focus on the circumstances of negotiation and execution of the agreement and not the result of it (Miglin at para. 4, M.O. at para 181). The Applicant suggests that she was economically weaker than the Respondent because of her lower income. A mere difference in income does not lead to a finding of unconscionability. That bar is simply too low and describes the situation of hundreds, if not thousands of domestic couples. The Applicant reiterates that she was “very pregnant” and worried that the Respondent would take the child away if she did not sign the CA. I do not accept that being very pregnant made the Applicant vulnerable. I also do not accept that the Respondent threatened to take the child away, but if he did, I reject the Applicant’s evidence that she felt so intimidated and threatened by this that she signed. As I stated before, the Applicant had options. Even if the Respondent in a heated moment said that he would take the child away, it is implausible that the Applicant thought this was a real possibility or was sincerely concerned about it.
17In sum, the Applicant was acting on her own free will when she signed the CA. The real issue is whether she understood what CA meant. In broad strokes, the CA addresses property rights, equalization (relevant only if the parties married, which they did not) and spousal support. This trial is only about property rights. In my view, the Applicant understood that the purpose and intent of the agreement was to protect Roywood and Whitmore in the event that there was a breakdown in the relationship and that each of them would only be entitled to whatever they legally owned at the time of separation. I make no findings on whether the Applicant understood the implications of waiving spousal support. That is for the trial judge dealing with her claim for spousal support to decide. In other words, while I have ruled that the CA is generally valid and binding pursuant to contract principles, I make no ruling on whether, pursuant to section 56(4) of the FLA, the Applicant understood the nature or consequence of the spousal support waiver or any other provisions in the CA unrelated to property rights.
The Applicant understood the parties’ property rights in the CA
18The Applicant claims that she did not understand the CA or its implications either before or after she met with Mr. Palleschi. To bolster her submission she called Mr. Palleschi as a witness. He testified that he did not have an independent recollection of the Applicant nor could he find her file. His testimony was based on his standard procedure for ILAs. He stated that he would have gone section by section, explained it to the Applicant and had her recount back to him, her understanding of each section. He was not associated in any way with Mr. Rai except practicing in the same building. After being shown Part 4 of the CA relating to property rights, Mr. Palleschi testified that he would have explained to the Applicant that if the relationship broke down, that property division would be based on legal ownership. The Applicant denied that Mr. Palleschi explained each section to her.
19After calling Mr. Palleschi as a witness, the Applicant submitted in closing that he failed to give proper ILA such that she did not understand what she was signing. On this basis, the Applicant asks the court to set aside the CA, or at least the provisions that set out the property rights. I decline to do so. The property provisions of the CA are straightforward – they limit property rights to legal ownership at the time of the relationship breakdown. Even if Mr. Palleschi did not provide proper ILA on this issue, this is not fatal to the CA. There is no authority to suggest that ILA’s are mandatory. The Applicant testified that she understood the CA protected the Respondent’s properties. If there was anything she understood about the CA, it was that property rights would be based on legal title. I reject her testimony that this was not clear to her at the time she signed it.
Conduct during the relationship did not repudiate the CA
20The Applicant argues that during the relationship the parties moved property around in a manner that was contrary to the CA and the Respondent’s stated intent to protect his assets. For example, in April of 2013 when the CA was signed, the Respondent owned Roywood and Whitmore. Towards the end of 2013 both parties testified that they wanted to move into a bigger home to accommodate their growing family. To purchase the family home, the Respondent transferred the Roywood property to the Applicant so that he could qualify for a mortgage to purchase the family home. To “buy” Roywood, the Applicant obtained a $360,000 mortgage from Equity Financial plus paid $27,875 from her own funds. On December 17, 2013, the Respondent purchased the family home for $640,000 with a mortgage of $587,520, funds from a private second mortgage against Roywood, and secured by Whitmore. The Applicant argues that this is but one transaction showing that the Respondent was willing to “sell” her Roywood, the very property he stated he was trying to protect when he insisted on the CA. His willingness to transfer Roywood to the Applicant and later Whitmore, demonstrates that the Respondent was acting contrary to the agreement. In Guarantee Co. of North America v. Gordon Capital Corp., 1999 SCC 664, the Supreme Court of Canada defined repudiation as occurring when a party, by words or conduct, and without justification, shows an intention to refuse the performance of the contract and not be bound by it.
21The transfer of Roywood and Whitmore does not amount to repudiation. First, the CA governs the party’s relationship in the event of breakdown as set out in Part 3, not property transactions during it. In fact, the CA contemplates the possibility of either party contributing in some way to property legally owned by the other and prohibits either one of them from using that fact to make a trust claim upon breakdown of the relationship. Second, the Applicant was a straw purchaser of those properties to allow the Respondent to take on the mortgage required for the family home and later, for another property (Geddes). There is no reliable evidence that the Applicant actually transferred her own funds to the Respondent to “buy” these properties, or that she alone serviced the mortgage loans that were in her name to effect the transfers. There is a bank draft payable to the Applicant in the amount of $25,875 to help “buy” Roywood from the Respondent. At trial, the Applicant’s parents testified that it might have come from them because they had an account at the Royal Bank at the time but it was also possible that the money came from the Respondent. After cross-examination, it was clear that the money did not come from them because the bank draft was from an RBC in Whitby and they did not bank there. Neither did the Applicant. The Respondent testified, and I accept that when it came to applying for a mortgage, the Respondent flushed the Applicant’s account with cash to demonstrate to the mortgagor that she was eligible. It was the Respondent who made the mortgage payments either himself or from rents collected from tenants at those properties. Technically it might have been the Applicant who was owed the rent as the titled owner but that is of no moment given the grand scheme of the transactions. They do not show repudiation – quite the contrary – they show the Respondent leveraging his properties with the assistance of the Applicant as a straw title holder from time to time.
The Applicant benefits from the CA
22Ultimately, both Roywood and Whitmore were sold to third parties. This allowed the Respondent to have funds to purchase the Confederation condo solely in the Applicant’s name. When the Applicant moved into Roywood and signed the CA, she owned nothing but a car. As a result of the property division provisions in the CA, the Applicant leaves the relationship with a condo appraised at $595,000. This too counters the Applicant’s unconscionability argument.
Misrepresentation is not relevant to property rights
23The Applicant argued that the Respondent misrepresented the nature of the CA. There was no misrepresentation relating to property rights. Most of her arguments relate to spousal support – an issue that is not the subject of this trial.
Conclusion:
24For these reasons, I dismiss the Applicant’s claims in this trial. The property rights sections of the CA are valid and binding. Neither party has a claim to the other’s property and all property shall be divided according to legal title at the date of separation.
Costs:
25The Respondent was successful and is entitled to costs. The parties should resolve costs. If after meaningful attempts, they cannot, Mr. Toor can deliver an updated Bill of Costs and costs submissions no longer that five pages, double spaced with no more than three cases. Counsel for the Applicant shall deliver their updated Bill of Costs and responding submissions with the same parameters within 14 days of service of Mr. Toor’s submissions. All should be filed with the family office and uploaded to caselines. If that is the route the parties take, they should inform my assistants, Roxanne.Johnson@ontario.ca and Jessica.Perri@ontario.ca that the submissions have been uploaded to caselines. Coming to the court to adjudicate costs is a remedy of last resort.
Justice P. Tamara Sugunasiri Released: October 13, 2023