Court File and Parties

Court File No.: FS-22-00103734 Date: 2024-12-19

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

FERREIRA, Alzira Maria, Applicant

• and -

FERREIRA, Victor Manuel, Respondent

Counsel: Ursula Cebulak, for the Applicant Vincent Ruscitto, for the Respondent

Heard: June 20, 2024

Judgment

Introduction

[1] The issue before me is whether Minutes of Settlement signed by the parties represent a valid agreement between the parties. This trial proceeded by way of affidavits and oral testimony.

[2] For the reasons that follow, I find that the Minutes of Settlement dated December 17, 2021 are valid and enforceable.

Background

[3] The parties separated after over twenty years of marriage. They exchanged disclosure briefs and financial statements. The Applicant, Ms. Ferreira, reported her income as zero on her Financial Statement. The Respondent, Mr. Ferreira, has a reported income in the range of $172,000 on his Financial Statement. Neither party listed income from self-employment on their Financial Statements.

[4] The parties agreed to mediate the issues of equalization, spousal support, and division of assets with mediator Cathryn Paul. There was an agreement that Ms. Paul would conduct a binding arbitration regarding the issues in dispute if the matter did not resolve at the mediation.

[5] The first mediation date was on December 8, 2021. Mr. Ferreira did not accept that Ms. Ferreira’s income was zero, and he wished to impute income to her for her side business, Timeless Creative Décor. Mr. Ferreira insisted that Ms. Ferreira should be producing additional financial documentation pertaining to her business.

[6] At the same time, Ms. Ferreira was seeking to impute income to Mr. Ferreira, whom she claimed carried on a side business installing air conditioners and heaters in addition to the approximately $172,000 gross annual income reported on his Financial Statement.

[7] Both parties therefore claimed that the other had not produced relevant financial documentation regarding their alleged self-employment. Despite the missing information, the parties agreed to participate in the mediation.

[8] The report from Ms. Paul confirms that a final settlement agreement was not reached on the first mediation date, as Mr. Ferreira required some time to consider a proposal made by Ms. Ferreira, and to investigate financing for a lump sum. He also needed to determine if Ms. Ferreira could remain on his benefits plan once the divorce was finalized.

[9] Mr. Ferreira was unable to secure financing for the proposed deal. Mr. Ferreira and his former lawyer, Mr. Clark, made the decision to continue with the mediation on December 16, 2021 to try to reach a more favorable deal than the offer on the table from Ms. Ferreira.

[10] Mr. Ferreira did not ask for additional financial disclosure from Ms. Ferreira in the eight days between the first and second mediation dates.

[11] The second day of mediation on December 16, 2021 was only a half day, as both lawyers had commitments in the afternoon. Mr. Ferreira signed the Minutes of Settlement on December 16, 2021, and Ms. Ferreira signed the Minutes the next day, on December 17, 2021.

[12] The settlement provided for Mr. Ferreira to pay Ms. Ferreira a lump sum payment of $350,000, plus monthly spousal support of $5,700 per month for five years. Mr. Ferreira also agreed to rollover $60,000 from his RRSPs to Ms. Ferreira.

[13] The terms of the Minutes of Settlement confirm at paragraph 22 that both parties had received the financial disclosure they required to arrive at the Minutes of Settlement.

[14] On January 5, 2022, Mr. Ferreria’s former lawyer, Mr. Clark, contacted the mediator and asked if she was going to be preparing the Separation Agreement based upon the Minutes of Settlement.

[15] Mr. Ferreira then hired his current counsel, who takes the position that the settlement was invalid as Mr. Ferreira had not received the financial disclosure he required to enter into a settlement.

Position of the Applicant Ms. Ferreira

[16] Ms. Ferreira submits that the Minutes of Settlement are valid and binding. Each of the parties had a lawyer, and the agreement was negotiated with the assistance of an experienced mediator.

[17] Ms. Ferreira takes the position that prior to the settlement she made adequate disclosure about the details of her business, and that the business was essentially shut down in March 2013, prior to the parties’ separation. She states in her affidavit that Mr. Ferreira asked her to stay home to look after the house, and to assist him with his side cash business installing air conditioners and heaters, which she did from 2013 to 2020. She testified that the parties’ nephew was prepared to give evidence to establish the existence of Mr. Ferreira’s side business.

[18] Ms. Ferreira testified that her business was just a hobby that began when she started making wreaths, and that it never took off financially. She testified that she earned $500 profit in 2016, and approximately $1,500 in 2017. She testified that her daughter was diagnosed with cancer in 2019, which became her focus.

[19] Ms. Ferreira further testified that the last event where she assisted with decorating services was in February 2020. Then COVID-19 shut down the industry. She admits to a social media post from 2020, but states that the business was already closed by that point.

[20] Ms. Ferreira submits that she didn’t provide further documentation of her business income because there was nothing to show. It was a small cash business that never flourished, which sometimes did not generate enough profit to pay the monthly rent of $550 that she paid to share space with a photographer. She stated that the rental payments were paid from the parties’ joint chequing account. She also testified that all her work agreements were verbal, and that there were no written contracts.

[21] Ms. Ferreira confirmed that she previously had $15,000 in a different RRSP than the one disclosed on her Financial Statement, but that she removed those funds in 2013 to pay for her daughter’s wedding.

[22] She also acknowledged that she received a CERB payment unintentionally because she was assisting her daughter with applying for a CERB benefit, and her daughter used the wrong SIN number. Ms. Ferreira testified that she later re-paid the Canada Revenue Agency for the CERB payment sent to her.

[23] Ms. Ferreira relies upon the following evidence as proof that there was sufficient disclosure of her financial documents at the mediation:

i. The issue of her business was discussed in a telephone call between counsels and the mediator that preceded the first day of mediation;

ii. Her mediation brief includes an affidavit from her in which she details information about her business and the income that it generated;

iii. The mediator questioned her about her business during the mediation;

iv. Her income from her business was deposited into the parties’ joint bank account and Mr. Ferreira was able to access this information; and

v. Her Financial Statement sworn September 16, 2021 includes her RRSP information.

[24] Ms. Ferreira disputes that Mr. Ferreira was under any duress during either day of the mediation. She also disputes that he did not understand what he was signing. She argues that if he is now unhappy with the deal that he made, that does not change the fact that the parties have entered into a binding settlement agreement.

Position of the Respondent, Mr. Ferreira

[25] Mr. Ferreira takes the position that the settlement should be set aside for two reasons:

i. Ms. Ferreira did not fully disclose her assets prior to the agreement being reached; and

ii. Mr. Ferreira did not understand the nature of the agreement due to the ineffectiveness of the lawyer representing him.

[26] Mr. Ferreira testified that he asked both his lawyer and the mediator for more financial disclosure from Ms. Ferreira, but that his concerns were dismissed by both of them.

[27] Mr. Ferreira maintains that during the two days of mediation he didn’t understand what was happening, or the impact of the Minutes of Settlement he signed. Mr. Ferreira gave evidence that he believed he was signing a memorandum of understanding as opposed to a settlement agreement. He testified that it was his understanding that further negotiations were going to continue for another half day after the holiday break once Ms. Ferreira produced more documentation about her business.

[28] Mr. Ferreira also testified that he did not understand the paragraph in the Minutes of Settlement that confirms he had received adequate financial disclosure from Ms. Ferreira.

[29] Mr. Ferreira further testified that he was under pressure at the mediation to settle his case. He stated that Mr. Clark had told him that if he did not sign the Minutes of Settlement the mediator would make an order enforcing the agreement in any event without his signature because the parties had entered into a mediation/arbitration agreement with Ms. Paul. Yet he also stated that at the time he did not understand the difference between a mediation and an arbitration.

[30] Mr. Ferreira submits that the agreement signed by him is unconscionable, and ought to be set aside.

Evidence of Justin Clark

[31] Mr. Clark testified that he has been practicing family law for nineteen years, and has handled hundreds of cases.

[32] Mr. Clark testified that he told Mr. Ferreira that any agreements reached in the mediation process were binding, and that he had no reason to believe that Mr. Ferreira did not understand this information.

[33] Mr. Clark disagreed with the suggestion that he did not perform his due diligence by allowing settlement discussions to continue even though Mr. Ferreira had concerns about missing financial documentation. He testified that despite Mr. Ferreira’s concerns, they agreed to carry on with the mediation to see if the issues in dispute between the parties could be resolved. He testified that in his experience with cases involving unreported income and missing documentation, the parties can still sometimes find a pathway forward to resolution.

[34] Mr. Clark adamantly denied that Mr. Ferreira was pressured to sign the agreement. He testified that he informed Mr. Ferreira that he could walk away from the mediation and proceed to arbitration if he didn’t like the proposal being made, and that he had no reason to believe that Mr. Ferreira did not understand the advice he was being given. Mr. Clark also denied that he told Mr. Ferreira that the mediator would rule against him in any event if the matter proceeded to an arbitration.

[35] Mr. Clark testified that given the length of the parties’ marriage, Mr. Ferreira was facing the prospect of indefinite spousal support payments. Since he wanted finality with the settlement, Mr. Ferreira made the difficult decision to accept a front-loaded settlement involving a substantial cash payment to Ms. Ferreira, in addition to time-limited monthly support payments.

[36] Mr. Clark stated that there was a cost/benefit consideration to the settlement, as it brought finality to the negotiations, and avoided further scrutiny regarding Mr. Ferreira’s income. He noted that as Mr. Ferreira was ten years younger than Ms. Ferreira, he was facing significant financial exposure. Mr. Clark testified that the resolution was generous to Ms. Ferreira, but justifiable to get the case settled. Mr. Clark was candid in his evidence that he did not tell Mr. Ferreira that the settlement was a great deal for him, but he advised Mr. Ferreira that he needed to consider the cost involved in continuing on with the arbitration. Mr. Clark stated that the settlement ultimately fell within a reasonable range to resolve a difficult problem for Mr. Ferreira.

[37] Mr. Clark testified that he reviewed the agreement with Mr. Ferreira line by line before Mr. Ferreira signed the Minutes of Settlement.

[38] Mr. Clark also testified that once the settlement was reached, the mediation was over, and there was no discussion between the parties regarding a continuation of the mediation. He also stated that once the numbers were agreed upon, the parties may still have needed to finalize the language in the agreement to consider issues such as waivers, releases, and insurance required to secure the support payments.

[39] Mr. Clark testified that Mr. Ferreira contacted him after the Minutes of Settlement were signed and stated that he was not happy with the deal, and he expressed concerns that he would not be able to finance it.

The Law

[40] Section 56(4) of the Family Law Act, R.S.O. 1990, c. F.3, sets out the circumstances in which it is available to a court to set aside a domestic contract:

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.

[41] There is a two-part analysis when determining if an agreement should be set aside under s. 56(4). First, the party seeking to set aside the agreement must show that one or more of the circumstances set out in s. 56(4) apply. Second, the court must determine whether to exercise its discretion to set aside the agreement: LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, at para. 51.

[42] A marriage contract can be set aside like any other contract if it is unconscionable, or if there is evidence of undue influence, mistake, repudiation or misrepresentation. Where the parties are unequal and the agreement is improvident, the party seeking to uphold the contract bears the onus of proving that he or she was scrupulously considerate of the other's interest or that the contract was just, fair and reasonable. The court will also consider if one party preyed upon the other. In the Court of Appeal decision Rosen v. Rosen (1994), 18 O.R. (3d) 641, at p. 645, Grange J.A. summarizes the concept of unconscionability by quoting the words of Professor Bradley E. Crawford as they are quoted in Mundinger v. Mundinger (1968), [1969 1 O.R. 606 (C.A.) at pp.609-610:

If the bargain is fair the fact that the parties were not equally vigilant of their interest is immaterial. Likewise if one was not preyed upon by the other; an improvident or even grossly inadequate consideration is no ground upon which to set aside a contract freely entered into. It is the combination of inequality and improvidence which alone may invoke this jurisdiction. Then the onus is placed upon the party seeking to uphold the contract to show that his conduct throughout was scrupulously considerate of the other's interests.

Analysis

Family Law Act – s.56(4) (a)

[43] Mr. Ferreira does not meet the test to set aside the settlement under s. 56(4) (a) of the Family Law Act. I accept Ms. Ferreira’s evidence that her home décor company had ceased operating by the time the parties separated, and that she has not earned any income through that company since the date of separation. There is no evidence before me as to what sources Ms. Ferreira could have accessed to produce additional information given the cash nature of her business. Mr. Ferreira did not produce any reliable evidence to establish that Ms. Ferreira’s company continues to exist, or that it produced income for her post-separation.

[44] I also accept Ms. Ferreira’s evidence that she has disclosed her only available RRSP investments on the Financial Statement that she signed. I also accept her evidence that when she was assisting her daughter in applying for CERB benefits her own social insurance number was inadvertently used, and that she has now repaid CRA for the benefits incorrectly paid to her.

[45] In addition, I find that both parties are entitled to rely upon paragraph 22 of the Minutes of Settlement, in which each party acknowledges that they have received sufficient financial disclosure from the other to enter into a settlement agreement. I do not accept that Mr. Ferreira’s evidence that he did not understand the content of paragraph 22 when he signed the Minutes of Settlement. The paragraph is straight forward, and easy to understand.

Family Law Act – s.56(4) (b)

[46] Mr. Ferreira does not meet the test to aside the settlement under s. 56(4) (b) of the Family Law Act, as he has failed to establish that he did not understand the nature or consequences of the settlement agreement that he signed. I reject his evidence that he believed he was signing a memorandum of understanding for the following reasons:

a) Mr. Ferreira is not an unsophisticated person. He has no difficulty reading or understanding the English language. The Minutes of Settlement are clearly identified as relating to a “settlement”;

b) I accept Mr. Clark’s evidence that he had reviewed the Minutes of Settlement line by line with Mr. Ferreira, and he had no reason to believe that Mr. Ferreira did not understand the contents of the agreement; and

c) There were eight days between the two mediation dates for Mr. Ferreira to consider and respond to the offer made by Ms. Ferreira on the first day of mediation. There was ample time in this eight-day period for Mr. Ferreira to speak to his lawyer, and ensure he understood the terms and implications of the proposed settlement.

[47] Mr. Ferreira has not established that the settlement agreement was unconscionable, and should be set aside under s. 56(4) (c) of the Family Law Act. There is no evidence before me that the parties had unequal bargaining power, that Ms. Ferreira preyed upon Mr. Ferreira, or that he was under duress at the time that the Minutes of Settlement were signed. Both parties had experienced counsel. The mediator was experienced. Mr. Ferreira had eight days to consider Ms. Ferreira’s settlement proposal before responding. The fact that Mr. Ferriera made a counterproposal to Ms. Ferreira’s offer and was able to negotiate a better deal on the second day of mediation suggests he was not pressured into accepting a settlement imposed upon him.

[48] A domestic contract will be set aside when a party was unable to protect his or herself. McGee J. considered this issue in Harnett v. Harnett, 2014 ONSC 359, 43 R.F.L. (7th) 464, and confirmed that the end result of a negotiation is not what determines unconscionability at para. 93:

The 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), [1969] 1 O.R. 606 (Ont. C.A.); [Additional citations removed].

[49] I accept the evidence of Mr. Clark that Mr. Ferreira was advised that he had the right to walk away from the settlement discussions and to proceed with the arbitration, and that neither he nor the mediator pressured Mr. Ferreira into settling his case. Mr. Clark was candid in his testimony that Mr. Ferreira had to make a difficult decision when he agreed to pay a significant sum to Ms. Ferreira to resolve the case, and that Mr. Ferreira was not happy about the amount he was paying.

[50] If Mr. Ferreira is now unhappy about the settlement that he negotiated, that is an issue between him and his former lawyer. There is insufficient evidence before me to justify a finding that the settlement agreement reached was unconscionable.

Conclusion

[51] The Minutes of Settlement dated December 17, 2021, are valid, and in force and effect as a domestic contract pursuant to section 54 of the Family Law Act. The parties may forward a draft order in Word format to my judicial assistant at Bihara.wijewardena@ontario.ca, which contains the terms of the agreement signed by the parties, and is approved as to form and content.

Costs

[52] The parties are encouraged to resolve costs as between themselves. I note that the Applicant’s Bill of Costs for this trial totals $23,642.63 on a partial indemnity basis, and the Respondent’s Bill of Costs for the trial totals $47,905.15 on a partial indemnity basis. The Applicant was successful at this trial. Absent any relevant offers to settle, the Applicant’s proposed Bill of Costs for recovery on a partial indemnity basis is in a reasonable range. In the event they are not able to resolve the issues of costs, the parties may contact my judicial assistant at the email address above to schedule an appearance before me to address costs.

Wilkinson J. Released: December 19, 2024