Court File and Parties

Court File No.: FS-21-23094 Date: 2023-11-27 Ontario Superior Court of Justice

Between: Ivan Tsarynny, Applicant – and – Yelyzaveta Topchiy, Respondent

Counsel: S. Philbert, for the Applicant G. Pribytkova, for the Respondent

Heard: May 23-26, 2023

Reasons for Decision

P.T. Sugunasiri, J.:

Overview:

[1] The parties married in Kiev, Ukraine on May 10, 2003. The Applicant had come to Canada with his parents when he was seventeen. After he married the Respondent, he sponsored her to come to Canada. They were twenty-four and twenty respectively at the time. Two years later, the couple had their first child born July 18, 2005, and their second child on April 5, 2007. On March 15, 2016, after the Applicant found out about an affair, the parties signed a separation agreement (“SA”) that they had downloaded from the internet. Neither received independent legal advice. The SA waives equalization, fixes nominal spousal support, and provides for zero or table child support from only the Applicant despite 50-50 parenting time.

[2] On May 4, 2021, the Applicant commenced his family law application to address, among other things, the primary residence and care of the children, to enforce the sale of the matrimonial home and to address support as set out in the SA. In her Answer and up until March 30, 2022, the Respondent agreed to the date of separation but implicitly challenged the validity of the SA. Post-financial disclosure, she now challenges both, submitting that the real date of separation for the purpose of equalization, is July 31, 2018. Of note is that in April of 2016, the Applicant’s company, PostBeyond, once described as “insolvent”, was flushed with investor funds. According to the Applicant, the SA excludes inclusion of his company in the matrimonial proceedings. The sole purpose of this bifurcated “stop-watch” trial is to fix the date of separation and assess the validity of the SA. I set aside the SA and fix the separation date as July 31, 2018.

Analysis:

The SA is set aside

[3] The SA is a domestic contract and subject to s. 56(4) of the Family Law Act (“FLA”). That section 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 or if a party did not disclose significant assets, debts or other liabilities existing when the domestic contract was made. To apply s. 56(4) of the FLA, I conduct a two-stage analysis: a) Can the Respondent demonstrate that she did not understand the nature or consequence of the contract or that she did not have financial disclosure; and b) is it appropriate to set aside the SA: M.O. v. F.S., 2019 ONSC 5091, at para. 11, citing LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 51.

[4] The Applicant attests, and I accept, that he found out about the Respondent’s extra-marital affair in November of 2015 and in December of 2015, requested a divorce. There was much debate and evidence about whether the Respondent was having a physical or emotional affair. The distinction is without a difference. On December 13, 2015, the Applicant removed the parties’ wedding photos from around the house. In the new year, the parties downloaded a pro forma separation agreement from the internet and reviewed it together. I accept that both had input as they worked on the form. They planned to meet with a lawyer regarding the SA on March 3, 2016, but went on March 15, 2016. Neither obtained independent legal advice. At the time of signing, the parties had access to all their joint bank accounts and assets, information on joint liabilities and previous years tax return information.

[5] The Respondent wants to set aside the SA because: The Applicant failed to make any financial disclosure before the parties signed; and the Applicant did not understand the consequences of the SA. Satisfying one or the other meets the first stage of the analysis. I agree that the Applicant failed to disclose relevant information about PostBeyond which is a significant asset. In addition to the Respondent having equal access to tax information and information concerning joint assets and liabilities, the Applicant showed his bank account balances to the Respondent through his mobile application. This is not proper disclosure. Even if it was, the Applicant did not provide disclosure about PostBeyond which I find is a significant asset.

[6] In April of 2016, PostBeyond received an investment of approximately $4,000,000. The Applicant testified that he did not know of these investors at the time he signed the SA. I reject his evidence. Instead, I infer that by March of 2016, the Applicant knew that two potential investors were on the horizon who could flush PostBeyond with cash. I do not accept the Applicant’s evidence that he had no idea this investment was on the horizon. Common sense suggests that no one invests in a company without due diligence where the potential investor would inquire about the financial health of the company and a request to review books and records. The Applicant acknowledged on cross-examination that the due diligence process usually takes several weeks to several months. As the principal of PostBeyond, I infer that the Applicant would have known of such inquiries. Despite such knowledge, the Applicant allowed the Respondent to rely on prior information that PostBeyond was struggling and on the verge of bankruptcy.

[7] The Applicant testified that he did not have to provide financial disclosure because of a release that the parties signed on April 17, 2013. The release purports to release the Applicant from all claims and demands for, or by reason of any damages, loss or injury to person and property, which has been or may be sustained in the future as a result of the Applicant’s shareholdings in that company. This argument does not assist the Applicant. First, this release does not release him from the disclosure required when negotiating a domestic contract. Second, the release has nothing to do with whether PostBeyond should be equalized upon marriage breakdown. On a plain reading of the release, the Applicant is protected as a shareholder from any claims by the Respondent for damages, loss or injury to her or her property. Equalization of assets is neither “damage” nor “loss or injury to person and property”. Much more would be needed for the parties to contract out of the legislative requirement that married couples equalize their assets upon marriage breakdown. If anything, the release exemplifies the parties’ understandable lack of sophistication on contract formation and interpretation.

[8] The lack of financial disclosure by the Applicant of a significant asset is sufficient for the Respondent to meet the first requirement of s. 54(1) of the FLA. Further, failing to provide that financial disclosure is fatal to the SA. In so concluding, I apply the non-exhaustive factors in Dochuk v. Dochuk (1999), 44 R.F.L. (4th) 97 (Ont. C.J.). The SA purports to resolve property and child and spousal support. It implicitly waives equalization and excludes PostBeyond from being equalized. Proper financial disclosure is crucial for any party to a separation agreement negotiation when they consider what rights to give up. Neither party was appropriately equipped to make informed decisions. I adopt Justice Mesbur’s comments when she states in Dubin v. Dubin (2003), 34 R.F.L. (5th) 227 (Ont. S.C.), at para. 32:

Marriage contracts are a device by which parties can opt out of most or part of the Family Law Act, its property provisions, its support provisions, or both. Fundamental to a choice to opt out of the legislative scheme is a clear understanding of what one’s rights and obligations might be if there was no contract. It is in this context that financial disclosure is critical, in that knowing assets and liabilities at the date of the agreement is fundamental to an eventual calculation of net family property. A party needs to know what asset base might potentially grow, in order to determine what he or she is being asked to give up in the agreement.

[9] At best, the Applicant, was negligent in his material misrepresentation about PostBeyond and, at worse, purposeful. Either way, I accept the Applicant’s position that her approach to the negotiations would have been different had she thought that there was more to PostBeyond than the Applicant had represented.

[10] While the Respondent did not move to set aside the SA, her Answer on this point has been consistent – she contests the SA in her original Answer a when she pleads that she did not receive legal advice nor financial disclosure at the time she signed the SA. It was not until the Applicant commenced his Application that the Respondent contested the SA. As seen from my discussion below, it is more likely than not that there was no reason to contest the SA or anything in it because post-signing, life largely continued as usual. I elaborate on this point below. Given such circumstances, it would be unfair to the Respondent to hold her to a bargain that she made without relevant information: LeVan, at para. 60.

The date of separation is July 31, 2018

[11] This takes me to the dispute over the date of separation as that word is understood in family law. The date of separation is significant because it provides the valuation date required for equalization purposes and the date after which child and/or spousal support would be due. Section 4 of the FLA defines the “valuation date” for equalization purposes as the date the spouses separate and there is no reasonable prospect that they will resume cohabitation. The separation date may be established when there is an unequivocal act by the separating spouse indicating that he or she wishes to separate without possibility of reconciliation: O’Brien v. O’Brien, 2013 ONSC 5750, at para. 52. The issue is whether a reasonable person, knowing all the circumstances, would believe that the parties had a prospect of resuming cohabitation. A determination of a reasonable prospect of the resumption of cohabitation, or reconciliation, is based on the intention of the parties. The true intention of the parties requires a consideration of objective factors and may differ from stated intentions: Warren v. Warren, 2019 ONSC 1751, at para. 6. The factors include:

(a) Physical separation, including occupying separate bedrooms, maintaining separate residences and reasons for maintaining separate residences;

(b) Withdrawing from the matrimonial obligation with the intent of destroying the matrimonial consortium;

(c) Presence or absence of sexual intimacy, although acts of intercourse do not necessarily imply periods of cohabitation with reconciliation as their purpose;

(d) Communication between the spouses and discussion of family problems as well as planning for the future;

(e) Presence of absence of joint social activities, celebrating social occasions together, gifts, helping each other through difficult times, vacations together;

(f) The relationship and conduct of each of them toward members of their respective families and their friends, and how the friends and families behaved towards the parties;

(g) The financial arrangements between the parties regarding the provision of or contribution toward the necessaries of life (food, clothing, shelter, recreation, etc.) and the sharing of assets. This includes a consideration of whether steps were taken to separate the parties’ assets, the continued use of a joint safety deposit box, joint credit cards and bank accounts, spousal RRSP contributions, use of shared vehicles, and making plans for his or her assets as a separated person;

(h) How the parties referred to themselves in documents, including income tax returns, and to friends and families;

(i) Steps taken towards the legal termination of their relationship;

(j) Meal patterns, including eating meals together and performance of household tasks, including washing clothes, cleaning, and shopping; and

(k) Efforts to resume cohabitation (mediation, counselling, property purchase or lease, “meaningful discussions…as to if, how or when their marriage might be put back together”): O’Brien, at paras. 54, 61; Warren, at para. 7.

[12] The Applicant contends that the date of separation was March 15, 2016, when they entered into a separation agreement. The Respondent argues that the date of separation was July 31, 2018, when they stopped being intimate and the Applicant moved out of their bedroom and soon after, out of the house. In considering these factors, a reasonable person would not believe that as of March 15, 2016, the parties had no prospect of reconciliation. Rather, a reasonable person would believe that the parties separated on July 31, 2018. It is more likely than not that the March 15, 2016, separation was the “beginning of the end” but not the end itself, with the Applicant reacting to the Respondent’s infidelity and wanting to protect his assets. Once the asset was protected by the SA, the parties lived a version of the life they had led before. Notwithstanding the Applicant’s stated intention that he was separated and did not want to reconcile with the Respondent, the evidence of their interactions would lead a reasonable person to conclude that the separation had not legally crystallized at that time and that there was a reasonable prospect that the parties might reconcile.

[13] Sometime shortly after March 15, 2016, the Applicant temporarily moved out of the matrimonial home. On May 30, 2016, the Respondent texted the Applicant asking them to come up with a plan to live together. The Respondent’s text reveals that by this time the Applicant was not in the home, and she was teaching their kids how to do more of the house chores. The text also reveals, however, that the parties were going to occupy the matrimonial home together going forward, and indeed, they did. The parties agree that they occupied the same bedroom until July of 2018, with the Applicant stating that it was until December of 2018. The Respondent tendered photos of the parties travelling together, and as a family. The Respondent testified that they agreed not to tell the kids and continue in their eyes as a family. The parties filed their 2016 and 2017 taxes as a married couple, and it was the Applicant who continued to liaise with the accountant to prepare both sets of returns. The parties continued to have joint accounts, and they attended parties and events together. For example, the Applicant forwarded an invitation from the CEO of his company for a dinner with spouses event on August 31, 2017, and another invitation to a friend’s birthday party for November 18, 2017, asking, “Are we free on the 18th?” The parties also travelled to Ukraine to visit the Respondent’s mother. I accept the mother’s evidence that she did not know they were separated when they visited in the summer of 2017. The parties went to therapy in March of 2018 – the Applicant stated it was to work on co-parenting their children; the Respondent attests that it was for couples’ therapy. I find it was likely both. The counsellor canvassed the possibility of reconciliation with each party – the Respondent said the likelihood was three out of ten and the Applicant said zero.

[14] The parties also did not act on the SA. The SA contemplated joint parenting time, but the parties remained together in the home and did not parent separately. The SA contemplated selling the matrimonial home, but no one moved to do so until the Applicant commenced his Application in May of 2021. The Applicant was to commence spousal support payments after they signed the SA, but he did not make a payment until August of 2018. At trial, the Applicant testified that at first, it was in the form of a blended payment that was lumped together with the deposit of his payroll into their joint account. However, in his Answers to Undertakings, he stated that spousal support was paid August 1, 2018, August 23, 2018, September 17, 2018, October 29, 2018, January 7, 2019, and April 15, 2019. I prefer the Respondent’s evidence on this point and find that no clear spousal support payment was made until August of 2018.

[15] The Applicant’s other counter factors do not persuade me that date of separation was March 15, 2016. The Applicant denies regular intimacy and alleges that the Respondent was in a relationship with another man after March 15, 2016. The Applicant argues that the fact that the counsellor spoke of reconciliation presumes that the parties were separated. This does not assist the Applicant because it conflates the regular meaning of separation from the legal definition of separation. I agree that it is more likely than not that the parties were living as an estranged couple when they went to counselling. However, the legal test requires not only that the parties be separated but that there is no reasonable prospect of reconciliation. In my view, this latter piece did not fall into place until July 31, 2018. It was not until this time that a reasonable person would conclude that there was no reasonable prospect of reconciliation.

[16] Another counterpoint offered by the Applicant is that on May 7, 2018, the Respondent sent the Applicant a text attaching an article from psychology today about “Bird’s Nest” Co-Parenting Arrangements. This is before the date the Respondent claims the parties were separated. The Applicant also points to behaviours after July 18, 2018, that are similar to those after his proposed separation date; namely sleeping in the same bed, attending social events, a Halloween party, a New Year’s Eve party and New Year’s Dinner with the Applicant’s parents on January 1, 2019. The Applicant argues that these, and the events the Respondent has pointed to, simply show an amicable break up. Taken as a whole, I find that similar behaviours can lead a reasonable person to draw different conclusions for the different time periods. The patterns after March 15, 2016, reflected a couple that had not yet fully separated in the legal sense. The behaviours in the summer of 2018 reflected a couple who had come to terms with separation, separated in the legal sense, and did so amicably. I accept that the unequivocal event was the Respondent telling the Applicant in July of 2018 that she wanted a final end to their relationship, the Applicant moving out of the couple’s bedroom soon after July of 2018 and the Respondent being in an established relationship with Mr. Wyld. It makes sense that the Respondent discussed nesting as an option to parent their children in May of 2018 as the Applicant was preparing for final separation. The Applicant attests that he moved out the bedroom in December of 2018 and out of the home with the children in around March of 2019. This bolsters rather than undermines the Respondent’s position that it was in 2018 that the parties truly separated, not March 15, 2016. It is more likely than not that after July 31, 2018, the parties were working to find new accommodation for the Applicant elsewhere in the home to recognize the finality of separation. He ended up moving to the basement some time after July 31, 2018, and was certainly sleeping there by December 12, 2018.

[17] The wrinkle lies in the Respondent’s change of separation date from her initial Answer filed on June 11, 2021, and the Amended Answer filed on consent on March 30, 2022, after Justice Steele had ordered the exchange of financial disclosure. The first Answer accepts the March 15, 2016, separation date, and the second asserts that it is July 31, 2018. The Applicant’s theory is that the change of date came with the financial disclosure and the realization that PostBeyond was flushed with cash in April of 2016. When asked what caused the Respondent to withdraw her admission, she indicated that she did not understand what separated meant, despite having the benefit of counsel. It is indeed tempting to accept the Applicant’s suspicion that the change of date was to be able to include the growth of PostBeyond in the calculation of the Applicant’s net family property. However, the most harmonious and sensible way to reconcile the Respondent’s initial pleading position with the evidence that shows strong factors against fixing March 15, 2016 as the valuation date is to recognize that there is a difference between separation as a lay term, and separation as a concept of law. When the Applicant stated in her testimony that she did not understand what “separated” meant, I infer that means she did not understand the legal definition. I find this plausible for a lay person even though counsel represented her. Further, an admission made in a pleading cannot outweigh the evidence tendered at trial and the application of the test for separation, to that evidence. Even if the Respondent first thought she and the Applicant were separated even for family law purposes on March 15, 2016, a reasonable person looking at the circumstances would believe that as at March 15, 2016, there was still a reasonable prospect of reconciliation.

Disposition:

[18] The parties’ valuation date, or date of separation, is July 31, 2018. I set aside the SA signed March 15, 2016.

Costs:

[19] The parties should resolve costs. If they cannot, the Respondent can provide her Bill of Costs, any offers to settle, and costs submissions of no more than three pages double-spaced, to the Applicant and my assistant, Jessica.Crispo@ontario.ca no later than December 15, 2023. The Applicant can respond in kind by December 30, 2023.

Justice P. Tamara Sugunasiri

Released: November 27, 2023