Court File and Parties

Court File No.: FS-24-12632 Date: 2025-09-03 Ontario Superior Court of Justice

Between: Vivienne Diane Stewart, Applicant – and – Nicholaos Karalis, Respondent

Counsel: Jordan McKie, counsel, for the Applicant Erin O'Leary, counsel, for the Respondent

Heard: June 12, 13, 16 & 17, 2025 at Woodstock

Before: Heeney J.

Reasons for Judgment

Introduction

[1] This is an application to set aside a Separation Agreement executed by the parties on October 19, 2023, as well as two schedules and additions to the agreement that were executed on a subsequent date.

[2] The parties have agreed to bifurcate this trial, such that the only issue that will now be addressed will be the threshold issue as to whether the agreement and the ancillary documents should be set aside. If they are set aside, the trial will proceed to a second phase, where the issues, including spousal support and equalization of net family property, will be dealt with on the merits.

Factual Background

The Parties and Marriage

[3] The applicant is currently 72 years of age, and the respondent is 75.

[4] The parties were married on March 15, 1985. They remained together for 38 years, until the applicant moved out of the matrimonial home on March 8, 2023. She had been unhappy for many years and contemplated a separation, but states that the respondent threatened her, saying "if you leave you will have nothing, you will be on the street". She believed him, and was afraid to leave. She finally found the courage to separate after their daughter, Eleni, moved out of the family home in November, 2022.

[5] The respondent denies having made this threat.

Credibility Findings

[6] While the evidence as a whole is not greatly in dispute, there are certain factual issues upon which the parties disagree, and this is one of them. It is therefore necessary to make findings of credibility and reliability, and I will do so now.

[7] I found the applicant to be a witness who was doing her best to recall and recount the facts to the best of her ability. She was not evasive or argumentative during cross-examinations, and readily conceded points of weakness in her evidence when they were pointed out to her. Her testimony was not shaken on cross-examination. I found her to be a credible witness.

[8] As to the respondent, he was, on many occasions, evasive during cross-examination. He had certain themes that he seemingly wished to elaborate on as he testified, rather than responding to the questions that were asked, and I had to remind him on more than one occasion to answer the question.

[9] One issue where the evidence conflicted was with respect to physical abuse by the respondent. The applicant testified that he had a volatile temperament, would slam his hands on the table, and would swear and get very loud. On two occasions he physically threw her onto the floor. The respondent denied this.

[10] However, their daughter Eleni testified, and she has a clear recollection of an incident that occurred when she was 10 years old. She heard very loud voices coming from the sewing room. She entered and saw her mother on the floor, crying, with her father leaning over her. She remembered running in and telling her dad "not to hurt my mom" and getting hold of his arm and trying to pull him off.

[11] She also testified to receiving a phone call from the respondent in June, 2024, in which he said "my lawyer is worried you are going to throw me under the bus in court. If you do throw me under the bus, there will be consequences." The respondent denied making this threat.

[12] I found Eleni to be a very credible witness, who had nothing to gain by fabricating this evidence. With respect to the June, 2024 phone call, she conceded in cross-examination that the respondent did also say "tell the truth" during that conversation, but only did so after having already uttered the threat she described. She had had a good relationship with her father up until that point in time, but it has deteriorated since.

[13] I accept Eleni's evidence, which corroborates that of the applicant, and conclude that the respondent did, indeed, throw the applicant onto the floor, on one occasion at least, and reject the respondent's denials. I also accept her evidence that he made the threat in June, 2024 as described, and reject the contrary evidence of the respondent. Furthermore, I am satisfied that this threat constitutes witness intimidation, notwithstanding the self-serving "tell the truth" utterance that followed the threat, which is a significant mark against the respondent's credibility.

[14] It is also a significant factor regarding credibility that the respondent, by his own admission, effectively lied to the bank when he gave them a Separation Agreement that provided for a full and final release of all claims to spousal support. He did so knowing that this did not represent the true agreement of the parties, and that he fully intended to pay spousal support of at least $1,000 per month, but provided this false document to the bank for the purpose of facilitating the approval of his mortgage application. This issue will be discussed in detail below.

[15] As a general proposition, on points where the testimony of the applicant and respondent conflict, I prefer the evidence of the applicant, unless stated otherwise. Fortunately, most of the interaction between the parties was by email, so I am not dependent on the testimony of the parties to determine what was said when. Most of my findings as to the interactions between the parties are derived from that source.

Employment and Career History

[16] To return to the narrative, the respondent had a successful career in education, starting as a teacher, then a vice-principal and finally a principal. He retired in 2015, but continued to earn income thereafter that supplemented his substantial pension income by teaching part-time at Fanshawe College, up to and including the 2024-25 academic year.

[17] The applicant had worked at a law firm for about 11 years, mostly prior to the marriage, as a collections manager, until about 1987. She then worked at a print craft company for the following four years or so. Their daughter, Eleni, was born in 1991, and was adopted by the parties in February, 1992. Thereafter, the applicant left her job, and stayed at home on a full-time basis to care for their daughter and manage the household. She has been out of the workforce ever since.

Inheritance

[18] On July 13, 2021 the applicant's mother passed away. The applicant was the executor, and received an inheritance worth about $141,000. I mention it here only to observe that is legally irrelevant to the issues at hand, and presumably for that reason it received little or no attention in the closing submissions of counsel. With respect to property issues, it constitutes excluded property. With respect to spousal support, a dependent spouse with a strong entitlement to spousal support, both needs-based and compensatory, should not be compelled to liquidate their capital to provide for their own support, when their spouse has the means to provide that support from monthly income.

The Separation and Initial Negotiations

[19] In 2022 Eleni and her boyfriend were looking for an apartment to move into together, and the applicant saw her opportunity to separate. She advised the respondent of her intentions in the middle of August, 2022, and "he went ballistic". Over the following four months, she looked around for an apartment to move into, and found one on January 4, 2023. She went to the respondent and told him that she was moving out, and he would have to accept that. Her proposal was to leave their accounts and investments as they are, and that she will use the investment account for rent, utilities and to buy some furniture. The respondent agreed.

[20] The next day she withdrew $115,000 from the investment account at TD Bank, which effectively cleaned out that account, and put it into her account at the Bank of Nova Scotia. There were no discussions as to repayment.

[21] The applicant moved into her apartment on March 8, 2023. She took very little of the household contents with her, limited to two side tables, a lamp and a small curio cabinet. He says that the respondent wouldn't let her take anything more than that, because he would be selling the home and said it would look better if all of the furniture remained. The respondent denies saying that, but does admit that the applicant did indeed take very few items with her from the matrimonial home.

[22] As a result, the applicant had to purchase almost everything she needed to set up her own household, using the money from the investment account.

The Matrimonial Home and Buyout Negotiations

[23] The matrimonial home had been built by the parties in 1989, on Blackfoot Place in Woodstock, and they resided there together until the separation. The respondent continued to reside in the home thereafter, mortgage-free and paying no occupation rent. Prior to moving into her apartment, the applicant discussed with the respondent what to do with their home. The real estate market was in a slump at the time, and they discussed waiting one year and listing it for sale in March, 2024.

[24] However, on May 21, 2023 the respondent called her and asked her to come to the house to talk about financial matters, which they had not discussed until then, and she did so. She said that the respondent had obtained an appraisal of the matrimonial home, of just over one million dollars, and told her "that's all I'll pay you", i.e. one-half of that appraised amount. The applicant had been told by her friend, Pat Bonn, who is a real estate agent, that the house was worth $1.2 million in a normal market, so she considered the respondent's appraisal to be too low.

[25] She said the respondent continued to badger her for the next 2 ½ hours to accept his buyout offer, until she said she would go home and think about it. She then sent him an email on June 2, 2023 saying she has decided not to go for his buyout plan. She did not want to go looking for a house until her one-year lease converted to a month-to-month lease in February, 2024. At that time Blackfoot could be listed for sale and she would begin the hunt for her own house.

[26] The respondent did not accept this, and immediately replied to her email saying he wanted another face-to-face conversation to discuss the issue further. She responded by saying "I have made my decision. I am not interested in talking about it further".

[27] On June 16, 2023, the respondent pursued the matter again via email, having sent two more appraisals, and proposed that they average all three to arrive at a buyout figure. The applicant responded that she was not interested in a buyout at those low values, and in fact was not interested in a buyout at all. She said she will only agree to "selling the house and receiving my ½ fair share of the house sale proceeds whatever amount that turns out to be". She said she had seen a lawyer and was aware that he could not force her to take a buyout.

[28] Several emails were exchanged in the hours that followed, where the respondent commented negatively on the fact that she had received some legal advice, and offered various reasons why him buying the applicant out was a good idea, including having a house for Eleni to own. The applicant repeatedly indicated that she was not interested in a buyout at a low figure, and did not want to sell until her one-year lease was up.

[29] Finally, the applicant decided she could not stand the harassment anymore. She called her friend Pat Bonn and asked if it was reasonable to ask for a buyout at $600,000, being one-half of a total value of $1.2 million. Pat Bonn said it was. The applicant then called the respondent and told him that she agreed to a buyout at $600,000, and confirmed it via email. The respondent confirmed in cross-examination that this was the agreement they came to in June, 2023.

The October 12, 2023 Meeting

[30] There were no further communications between them until the respondent sent an email on October 2, 2023, stating that they had to attend to two issues before the year end, which were the disposition of the minimum payment from the RRIF, and whether or not they would file a joint income tax return to split his pension for tax purposes. The applicant responded that she saw no urgency to those issues, and described a multitude of health issues she was dealing with at the time including TMJ, constant headaches, ringing in her ear, nightmares, shoulder and knee pain.

[31] The applicant, by this point in time, had just begun her search for a new home, and had found a condo that was exactly what she was looking for. She wrote to the respondent on October 9, 2023 to advise him that she has the opportunity to purchase this condo, and proposed meeting some evening that week "to settle our financial matters so I can put in an Offer to Purchase". She advised that she had to move quickly on this as there could be a possible closing at the end of November.

[32] They agreed to meet on October 12, 2023 at the house. According to both parties, Eleni was present as well, although she testified that she was not. Nothing turns on this. The applicant had prepared a "Financial Accounts Summary – October 12, 2023" in advance, where she looked at all of their various accounts and investments, and put some into the respondent's column and some into her own, such that they would each receive about $333,198. She was quite familiar with all of their accounts because it was she who took care of all of the family bookkeeping and paid all the bills. She was unaware how equalization of net family property worked, but thought that this summary would create an equal division of their financial assets. Significantly, there was no mention of the respondent's Ontario Teachers' Pension Plan in this summary, because the applicant did not think of it as an asset to be divided, but only as a source of the bulk of the respondent's income. The respondent admitted in cross-examination that he knew his pension had value as an asset, but did not raise this in their discussions.

[33] Among the assets in the respondent's column was a RRIF in the amount of $253,681.88 that was to be changed from a joint fund to one in the respondent's name alone. Among the assets in the applicant's column was a TFSA in the amount of $104,012.43, which was in the respondent's name but was to be redeemed and transferred to the applicant. Under the subtitle "Total funds to come to Diane", this transfer of the TFSA to her was reflected, as well as "$600,000 – Buyout regarding house (bank draft to Diane)", along with $989 representing funds from a Scotiabank joint account. This meant that, on this proposed equal division of the assets (which did not include the respondent's pension), the applicant would receive a transfer of $705,001.43 as part of her share. The respondent would receive the house and the transfer of the RRIF in the amount of $253,681.88 as part of his share.

[34] The applicant's summary also stated " I will need $2,000 per month from you to live on , as I only receive an income of approx. $1,200 per month from OAS and CPP". Given that the respondent's total income for 2023 was $141,015, that was an exceedingly modest request.

[35] The respondent's reaction, when he saw this document, was to tell the applicant that he was only giving her $1,000 per month, not $2,000. He also told her that he was not going to get a $600,000 mortgage to finance the buyout, but only a $400,000 mortgage, and would fund the balance from the other accounts.

[36] The applicant didn't agree to this proposal, but simply shrugged. Her main concern was getting the $600,000 she needed for the condo purchase. Her view was that after the condo purchase had closed, they would discuss those other issues.

The Condo Purchase Commitment

[37] On October 14, 2023, there was an email exchange between the parties. The applicant questioned why the respondent hadn't arranged for the necessary funds for the buyout, given that they had agreed to the price the preceding June. She also queried why she was being required to sign a Separation Agreement simply to transfer ownership of the house to the respondent, particularly when she would not be receiving the full buyout of $600,000 until later, and wondered "what else is it you were going to have in the Agreement". She advised that she didn't want to lose the opportunity to purchase this particular condo, and had decided to present an Offer to Purchase during the coming weekend, and hoped that she would not be outbid by another party. She said, "I'm scared and honestly quite nervous about this whole financial situation with you".

[38] On October 17, 2023, the applicant did sign an unconditional Offer to Purchase the condo, which was accepted. The closing date was November 15, 2023. She testified that the purchase price was $670,000, plus $10,000 in Land Transfer Tax and $5,000 in lawyers' fees, so she needed $685,000 to close. Her plan was to fund that purchase with $600,000 from the respondent from the buyout, and take the other $85,000 out of the TFSA. She did not plan to get a mortgage to finance any part of the purchase, because she believed she would not qualify, given that her income was limited to CPP and OAS.

The Separation Agreement Preparation

[39] On that same day the respondent sent an email to her, stating that he had met the mortgage broker that day, and was informed "that the lenders will not approve a mortgage where there are equitable assets involved, i.e. our situation. This can be rectified and straightened out with the use of a Separation Agreement between the parties. I can be approved for the mortgage and the funds can be available to you. However the Agreement will be signed before the funds shift over to you. I have a skeletal Separation Agreement available and we can get together to craft it."

[40] As it turns out, the draft agreement that the respondent prepared was not "skeletal" at all. It contained the three most contentious provisions that are central to this case: a full and final release of all claims to spousal support; a full and final release of all claims to the respondent's pension; and a full and final release of all property claims, in exchange for the payment of $600,000 to the applicant. Regarding the latter, this meant that this payment was not just for the buyout of the matrimonial home, at the agreed upon price, it was consideration for "a full and final settlement of all matters of property, both real and personal".

[41] Also, as it turns out, the applicant took no part in "crafting" the agreement. I accept the testimony of the applicant and Eleni, which the respondent did not deny, that the applicant had no input into the drafting of the agreement. Instead, the respondent dictated what additional clauses needed to be added to what was already in the document, and Eleni typed.

[42] I should note that the respondent's evidence was that this exercise in drafting the agreement took place on October 19, 2023, the same evening that it was executed, and prior to the arrival of Pat Bonn, who was to witness their signatures. Both the applicant and Eleni testified that all three of them met the day before, on October 18, 2023, for the purpose of drafting the agreement, which was executed the following evening. I prefer the evidence of the applicant and Eleni.

[43] Eleni testified that she attended the matrimonial home with her mother on October 18, 2023, when the respondent showed them a draft agreement on his laptop that he had put together from precedents he found on the internet. There were some portions of the agreement that needed to be completed, and the respondent told Eleni what to type and she typed it. A complete release of all spousal support claims was already in the agreement. When she came to the financial part of the agreement, Eleni wanted to type in what they had agreed on, which was that the respondent would pay $1,000 per month in support, and $600,000 for the buyout of the house. However, the respondent stopped her, and said that the mortgage broker had told him it would be better just to say that all financial matters were settled. Eleni did not understand fully what "all financial matters" meant.

[44] Eleni attended again on October 19, 2023, when the agreement was signed by her parents and witnessed by Pat Bonn. She described the applicant as being very scared, shaking, and expressing great fear that she was worried that the respondent wouldn't acknowledge his verbal commitment to give her $1,000 per month in support and pay her $600,000 for the buyout. Eleni wanted there to be some "paper trail" to confirm what the respondent was verbally agreeing to do, so she prepared a hand-written acknowledgment dated October 19, 2023, which says "Nick said he would pay $1,000 spousal support per month". It also confirmed that the respondent will continue to allow the applicant to "grab" her personal items from the house, and that he will continue to store her tires and provide health and car insurance. This document was prepared by Eleni, on her own initiative, with no request from the applicant. Only the respondent and Eleni signed it. The applicant never signed it, nor was it witnessed.

[45] Eleni testified that, during the meeting, the respondent assured the applicant many times that he would get her the $600,000 and pay the $1,000 in spousal support.

[46] When Eleni and the applicant left the meeting after signing the agreement, the applicant was very upset, and cried all the way home. She said "oh my god, Eleni, what have I done? I've signed away everything". When the applicant pulled into her underground parking lot, she hit one of the pillars and scratched her car. This was the first and only car accident of her life.

[47] The applicant testified that she was not surprised to see the releases in the Separation Agreement. She said that this is what the respondent wanted, and he was "in control". For that reason, she asked no questions and made no suggestions. She felt that she had no choice but to sign the agreement so that the respondent could get the buyout funds through his mortgage. She was extremely worried that she would get sued by the vendors if she was unable to come up with the money needed to close the transaction.

[48] Pat Bonn testified about the evening of October 19, 2023. She said she was upset because, having acted as a witness many times before, her normal practice is to go through the agreement before it is signed and witnessed. However, the applicant insisted that she just witness the agreement and get it over with. The applicant was very upset when Ms. Bonn got there, and throughout. After the agreement was signed, the applicant wanted to get out of there, so they left. She described the applicant as "very upset, she couldn't even talk" when she left.

The Mortgage and Payment Issues

[49] The respondent was questioned on cross-examination about the spousal support waiver, which said that no support would be payable by one party to the other, as compared to the document he and Eleni signed, which provided that he would pay $1,000 per month, and was asked which was the real agreement? His answer was that he was always prepared to pay the applicant support, and is still of that mind. He admitted that he put the release into the agreement in order for the mortgage application to go through, with the intention of taking care of the applicant financially down the road.

[50] Over the following few weeks, the applicant was increasingly anxious about getting the money she needed to close the condo purchase, and asked the respondent several times when the buyout money would be forthcoming. The respondent gave no firm answer, but did demand, on October 31, 2023, that the applicant immediately sign over the RRIF to him, and threatened to withdraw his mortgage application if she did not. He said that he would simultaneously sign over the TFSA. The applicant complied with his demand, and signed over the RRIF the following day. However, it was not until later that it became clear that the respondent intended to transfer the TFSA as part of the $600,000 buyout amount, instead of in addition to it, as contemplated in the Financial Summary of October 12, 2023.

[51] This started to become clear when the applicant was told that she had to sign a document entitled "Schedule B – Additions to the Separation Agreement", dated November 6, 2023. This document is almost incomprehensible, but appears to deal with the composition of the sum of $200,000 that would be added to the mortgage funds of $400,000 to make up the total amount of $600,000 to fund the buyout. In effect, it deemed the sum of $58,000, representing one-half of the investment account at TD Bank referred to above, which the applicant had withdrawn in order to pay her rent, purchase furniture and meet other expenses when she moved out of the matrimonial home, to constitute a part payment of the monies owed to the applicant for the buyout. It also designated that the TFSA money to be transferred to the applicant was now to be included in the $600,000 buyout, as opposed to being in addition to it, as contemplated by the Financial Summary.

[52] This was formalized in more coherent fashion in a subsequent document entitled "Addendum to Separation Agreement", which both parties executed on November 7, 2023. It showed that one-half of the funds withdrawn from the investment account ($58,109.95), would be notionally added to $400,000 in mortgage funds, as well as various TFSA transfers, leading to a "total equalization payment of $600,000". This was the first introduction of the term "equalization payment" into the contract, and meant that the payment of $600,000 was, as provided in the Separation Agreement itself, being paid in full settlement of all property claims, which would include claims for equalization of net family property. It was no longer simply the buyout figure for the applicant's interest in the matrimonial home that the parties had agreed to.

[53] The applicant testified that she signed both of these documents because she had no other choice but to do so. She was told that if she did not do so, there would be no mortgage forthcoming to the respondent, and therefore no buyout, and she would be unable to close the purchase of her condo, with the legal implications that would flow from that.

[54] The net result, therefore, is that the applicant received only $542,000 in new money in return for her half-interest in the matrimonial home, not the $600,000 the parties had agreed to. Furthermore, she did not receive the $104,102 TFSA that she had calculated, in the Financial Summary, was to be paid to her in order to divide their investments equally, over and above the buyout amount of $600,000. Instead, the payment of that TFSA money was credited to the respondent as part of that buyout.

[55] When the applicant asked the respondent why he was going to "short her" by $58,000 by giving her only $542,000 when they had agreed on $600,000, her unchallenged evidence is that he responded: "because you left".

[56] To add insult to injury, the applicant was made to credit the respondent for every penny of the respondent's half-share of the money she withdrew from the investment account at the time of the separation, despite the fact that she needed that money to purchase furniture and otherwise set herself up in her new apartment (since the respondent had retained almost all of the household contents), pay rent, and provide for her own needs. All of this despite the fact that the respondent was residing in the matrimonial home, free of any mortgage, paying no occupation rent to the applicant for this privilege, and paying nothing to the applicant toward spousal support despite a clear and obvious entitlement on her part.

Lack of Independent Legal Advice

[57] The applicant had no independent legal advice when she signed the Separation Agreement, Schedule B and the Addendum. Her meeting with a lawyer in June, 2023 was five minutes long, and the advice she received was confined to the fact that the respondent could not force a buyout of the matrimonial home. They did not discuss spousal support, equalization of net family property, or issues relating to the respondent's pension. When the lawyer told her that he would require a retainer of $5,000 to represent her further, she said "that was it", and received no further legal advice.

The Law

Statutory Framework

[58] In order for a domestic contract, such as a separation agreement, to be enforceable, it must comply with the requirements of s. 55(1) of the Family Law Act, R.S.O. 1990, c. 32 ("the Act"), which provides as follows:

55 (1) 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.

[59] Subsection 56(4) of the Act sets out the circumstances whereby a domestic contract may be set aside by the court:

(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.

Two-Stage Analysis

[60] The Court of Appeal in LeVan v. LeVan, 2008 ONCA 388 at para. 51 set out the analysis to be undertaken by the court in determining whether a domestic contract should be set aside under this subsection:

The analysis undertaken under s. 56(4) is essentially comprised of a two-part process: Demchuk v. Demchuk (1986), 1 R.F.L. (3d) 176 (Ont. H.C.). First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.

Issues for Determination

[61] The following issues therefore arise for determination:

1. Did the respondent fail to disclose significant assets (i.e. the present value of his pension) existing when the contract was made?
2. Did the applicant not understand the nature or consequences of the contract?
3. Are there circumstances where the domestic contract could be otherwise set in accordance with the law of contract?
4. If so, should this court exercise its discretion to set aside the Separation Agreement, Schedule B and the Addendum?

Failure to Disclose

[62] At issue is whether the respondent failed to disclose the value of his teacher's pension, which clearly existed at the time the contract was made.

[63] In Virc v. Blair, 2017 ONCA 394 at para. 59, Benotto J.A., speaking for the court, outlined what is required to comply with the duty to disclose:

Inherent in the duty to disclose is the duty of the titled spouse to fairly value the asset. This is a basic principle of disclosure. The onus is on the party asserting the value of an asset that he or she controls to provide credible evidence as to its value: Menage v. Hedges (1987), 8 R.F.L. (3d) 225 (Ont. U.F.C.), at para. 44; Homsi v. Zaya, 2009 ONCA 322, 65 R.F.L. (6th) 17 (Ont. C.A.), at para. 38.

[64] Thus, it is not the mere existence of the asset that must be disclosed, but also credible evidence as to its value.

[65] Here, the applicant was aware that the respondent's pension plan existed, but considered it to be an income stream, as opposed to an asset that could be valued and divided. The respondent, however, admitted in cross-examination that he was aware it was both. When the parties met on October 12, 2023, the basis for their discussion was the Financial Accounts Summary, prepared by the applicant, which listed all of the various financial assets that she believed the parties owned and needed to be divided between them. The respondent's pension was not listed on that document. The respondent failed to disclose to the applicant that his pension was a financial asset, and should have been included on the summary. He also failed to obtain and disclose a valuation as to the present value of the pension plan as at the date of separation.

[66] The only time the respondent brought up the topic of a pension was in the draft Separation Agreement that he prepared, where para. 10 provided for the waiver of any and all rights or claims to any retirement pension plan. The net result of that is that the applicant was, by executing the Separation Agreement, giving up any claim to an asset that she did not know to exist as a divisible asset, and that she did not know the value of.

[67] In order to run afoul of ss. 56(4)(a), the non-disclosure must relate to a "significant" asset. Here, no valuation of the respondent's pension plan was put into evidence. However, the pension plan paid the respondent $90,952 in 2023, and has paid, or will pay, that much annually, plus whatever indexing factor is applicable, for the rest of the respondent's life. By the end of this year alone, this pension plan will have paid the respondent close to $280,000 just since the date of separation in 2023. Without doubt, a pension that generates such a substantial income stream must have had a substantial present value on the date of separation, and is a significant asset.

[68] I find that the respondent has failed to disclose a significant asset existing at the time the Separation Agreement was made, within the meaning of ss. 56(4)(a), such that the court has discretion to set the agreement aside.

Did the Applicant Fail to Understand the Nature or Consequences of the Contract?

[69] This issue can be quickly dealt with.

[70] The applicant testified, and I accept, that she did not understand how equalization of net family property worked, and she did not have the benefit of independent legal advice that could have explained it to her. As already noted, the respondent, in his drafting of the Separation Agreement and the Schedule B and Addendum that followed it, transformed what was supposed to be a buyout of the applicant's interest in the matrimonial home for $600,000 into an "equalization payment" in that amount, which the applicant was supposedly receiving in full satisfaction of all of her property claims.

[71] The applicant's lack of understanding as to the meaning and process of equalization of net family property means that she consequently did not understand the nature and consequences of receiving an equalization payment in full satisfaction of her property claims. I am satisfied that this constitutes grounds to set the agreement aside, pursuant to ss. 56(4)(b) of the Act, although this is not a particularly strong factor on its own.

Other Grounds to Set the Agreement Aside

[72] Although the failure to disclose the value of the respondent's pension could be enough, on its own, to justify the setting aside of the Separation Agreement, there are other circumstances existing that could lead to the same result under the law of contract.

Duress

[73] One circumstance whereby an agreement may be set aside under the law of contract is where one party signed the agreement while under duress.

[74] In Turk v. Turk, 2015 ONSC 5845 at para. 93, Kitely J. quoted with approval from Keough v. Keough, [2005] N.J. No. 328 (N.L.T.D.) the following description of duress:

Duress is said to occur where there is such pressure placed on one of the parties that any consent by that party is not sufficient to uphold the agreement. There exists an absence of choice which in effect vitiates any ability to lawfully consent. However, duress sufficient to void an agreement does not arise based only upon a lack of will to proceed but rather it must be based upon a resolution on the part of the submitting party that there is no other practical choice but to perform the act in question. Duress can be established based upon actual or threatened violence or upon economic considerations.

[75] Additional guidance on the meaning of this term can be found in the decision of Hatton J. in Ernyes v. Rachlin, 2002 CarswellOnt 5633, [2002] O.J. No. 2278 (S.C.J.), at paras. 33-35:

Duress exists where actual or threatened violence is used to induce a contract. In P. (M.L.) v. P. (G.W.) (2000), 12 R.F.L. (5th) 434 (Ont. S.C.J.) Justice Linbares de Souse of the Ontario Superior Court of Justice summarized the law on duress. The existence of duress eliminates a party's ability to freely and voluntarily consent to an agreement, which consent is an essential element to a binding contract. Duress does not necessarily deprive a person of all choice but it pressures the person into choosing between two evils. The court also discusses the wider concept of duress as including not only violence or threats of violence to a person, but other forms of intimidation such as economic duress, that may coerce the will of another.

In Colafranceschi v. Colafranceschi (2001), 15 R.F.L. (5th) 294 (Ont. S.C.J.) the court set aside a marriage contract in part because the wife had been subject to physical and emotional pressure to sign an agreement. The abuse consisted of him arguing with her at length and pulling her hair. In Bennett v. Bennett (1997), 34 R.F.L. (4th) 290 (Ont. Gen. Div.) the court set aside provisions of a marriage contract on the basis of undue influence and emotional duress. The court relied on the definition of undue influence as the ability of one person to dominate the will of the other through coercion, manipulation, or outright but subtle abuse of power. In that case, no direct violence was used, but the court found both a perceived degree of coercion and duress. The wife had the benefit of independent legal advice and signed the agreement against the advice of her lawyer.

In B. (J.F.) v. B. (M.A.) (1999), 1 R.F.L. (5th) 339 (Ont. S.C.J.), upheld (2001), 14 R.F.L. (5th) 1 (Ont. C.A.) the court set aside terms of a separation agreement in part based on duress. The duress arose from the wife's serious psychiatric problems. The court also found duress from the fact that the wife was not exercising her free will but signing the agreement because she felt she had no choice. She was in desperate financial circumstances and in an unequal bargaining position. The husband used her precarious financial situation to further his own financial position to her detriment. The wife had her own lawyer who had cautioned her against signing the agreement without adequate disclosure.

[76] I am satisfied that the applicant signed the Separation Agreement and ancillary documents under economic duress. She had committed herself to an unconditional purchase of her condo, and needed the buyout of her interest in the matrimonial home to go through in order to have the funds to close the transaction and avoid being sued by the vendors.

[77] While it must be said that she was, to some extent, the author of her own misfortune in committing herself to an unconditional transaction, that course of action was not entirely unreasonable. The respondent had agreed to purchase her interest in the matrimonial home at an agreed price many months before, which would provide the bulk of the funds she needed, and there was no reason to believe that those funds would not be forthcoming.

[78] The respondent relies on Cuffe v. Desjardin, 2013 ONSC 4044 at para. 39, where the wife was under pressure to sign the contract in order to obtain a payment she needed to purchase her new home. The court found that this was a situation she created herself, and did not constitute duress or undue influence. However, that case is clearly distinguishable from the case at bar because, in that case, the husband did not pressure the wife by making the signing of the contract a precondition to receiving her money.

[79] MacKinnon J. said this, at para. 39, which is the paragraph relied upon by the respondent:

I find that Ms. Desjardins was under pressure to sign the contract in order to obtain the payment of $130,000 which was essential for her purchase of her new home. She created this situation herself. Mr. Cuffe did not pressure her in this regard by saying she would not get the money unless she signed the agreement first.

[80] By contrast, in the case at bar the respondent made it absolutely clear that the applicant must sign the Separation Agreement, as well as Schedule B and the Addendum, or he would not proceed to obtain a mortgage and buy out her interest.

[81] The respondent knew that she wanted this condo and was legally obligated to close the transaction, and took advantage of the applicant's vulnerable position to get her to sign a contract and two ancillary documents that were grossly one-sided in his favour. His threat, by email on October 31, 2023, confirms his knowledge of this vulnerability and his willingness to take advantage of it. He threatened to withdraw his mortgage application if she did not immediately sign over the RRIF, knowing the pressure she was under to obtain the funds necessary to close. Predictably, the threat worked, and she signed over the RRIF the following day.

[82] The applicant's duress is illustrated and confirmed by her emotional state at the time the Separation Agreement was signed, as described above. She testified that she felt she had no choice but to sign the agreement, and I believe her. She did not waive her entitlement to spousal support and accept a lower buyout price than had been agreed to out of an exercise of free will, but because she had no choice but to agree to whatever terms the respondent demanded, so that he would proceed to obtain the mortgage that would largely fund the buyout.

[83] I am satisfied that the Separation Agreement and ancillary documents may, in the discretion of the court, be set aside on this basis.

Uncertainty and Lack of Consensus Ad Idem

[84] In Fridman's The Law of Contract in Canada, 7th ed., (Toronto: Thomson Reuters Canada Limited, 2024), at §2:1, the authors describe two elements that are essential to the formation of a contract (footnotes omitted):

Agreement is the essence of contract. That requirement is often expressed in terms of a consensus ad idem— a "meeting of the minds". Unless the parties have agreed to be bound by the same set of terms, they will not have a legally enforceable agreement. It is not necessary for each right and obligation to be individually stated—terms may be express or implied —but the parties must be agreed on the essential elements.

Finally, the terms of the parties' contract must be certain. That requirement serves a practical function. If the terms are not sufficiently certain—if it is not clear how each party is to perform—then it will not be possible for a judge to determine whether a party is in breach or, in the event of liability, to calculate expectation damages.

[85] Here, there was clearly no meeting of the minds on the issue of spousal support. The Separation Agreement, in para. 3, specifies that both parties expressly waive any claim to spousal support now and in the future, regardless of any change in circumstances by either party. I find that this term did not reflect a meeting of the minds of the parties on this issue, because both parties testified that this is not what they intended to happen.

[86] The respondent said that this term was put in solely in order to satisfy the bank, and facilitate obtaining a mortgage to fund the buyout. In other words, the respondent deliberately misled the bank by drafting and executing an agreement that said there would be no spousal support, when he fully intended to pay spousal support, and signed a document committing himself to paying $1,000 per month. He also testified that it was his intention to provide further financial support to the applicant down the road, once he saw how things were going.

[87] Paragraph 3 of the Separation Agreement did not accord with the applicant's intentions either, because she expected to receive at least $1,000 per month in spousal support from the respondent, and anticipated seeking more once the condo purchase was closed.

[88] Thus, the Separation Agreement, as written, did not reflect a meeting of the minds of the parties on the spousal support issue, and neither party intended or agreed to be bound by it. It is therefore both lacking in a consensus ad idem and is also uncertain, since the parties had different intentions as to what would actually happen regarding spousal support in the future.

[89] It should be pointed out that the unenforceability of the spousal support release in the Separation Agreement does not mean that the hand-written document signed by the respondent on October 19, 2023 can fill the gap to determine the issue of spousal support. As already pointed out, it is unenforceable pursuant to ss. 55(1) of the Act, because it was not signed by both parties and witnessed. It is not a "side-deal", as characterized by counsel for the respondent, it is no deal at all. It is an amount that the respondent grudgingly deigned to give to the applicant by way of support, not an enforceable resolution of the spousal support issue. Thus, if the Separation Agreement is set aside, the issue as to spousal support is entirely unresolved, and becomes open to be determined by the court.

[90] The Separation Agreement did not reflect a meeting of the minds of the parties on the resolution of the property issues either. The only property transaction that was provided for in the agreement was the transfer of the applicant's interest in the matrimonial home to the respondent, after the payment of $600,000 to the applicant. Otherwise, para. 4 provided that "[t]he Parties are in possession of all of those assets to which each is respectively entitled. Accordingly, neither makes any claim to any assets in the possession of the other."

[91] Furthermore, para. 11 provided for a General Release of all claims to the property of the other. Both of these clauses would have been effective as of the date of execution of the agreement, October 19, 2023.

[92] However, as already noted, the respondent demanded on October 31, 2023 that the applicant transfer the RRIF into his name. Such a transaction was not provided for in the Separation Agreement, and he had already released all claims to the applicant's property, which would include her interest in the RRIF. He was therefore precluded by the terms of the agreement from making such a demand. Nevertheless, he testified that he felt he was entitled to this transfer, because it had been contemplated in the Financial Summary prepared by the applicant on October 12, 2023. Thus, according to his own evidence, the Separation Agreement did not reflect the true meeting of the minds of the parties on this issue.

[93] The respondent's reliance on the Financial Summary was decidedly selective, in his favour, in that he simultaneously rejected the applicant's claim that she was entitled to the TFSA of $104,012.43 that was in the respondent's name in addition to the $600,000 buyout figure for her interest in the matrimonial home. He did so despite admitting that that is precisely what the Financial Summary provided for, and which would, along with the transfer of the RRIF to him, have resulted in an equal division of the listed financial assets.

[94] I am satisfied that the Separation Agreement may, in the discretion of the court, be set aside on this ground as well.

Unconscionability

[95] The respondent relies heavily on the argument that parties should be held to the bargains that they make. Indeed, in Rosen v. Rosen, [1994] O.J. No. 1160, 3 R.F.L. (4th) 267 (C.A.), Grange J.A., speaking for the court, commented upon the desirability of leaving parties free to settle their own affairs if possible, which thus encourages the enforcement of agreements arrived upon between the parties. However, at para. 10 he noted that these comments "do not, of course, purport to apply to unconscionable agreements."

[96] At para. 11 Grange J.A. cites Mundinger v. Mundinger (1968), [1969] 1 O.R. 606 (C.A.) which sets out the governing principles regarding when an agreement may be set aside for unconscionability. That citation included the following passage from a commentary written by Professor Bradley E. Crawford at 44 Can. Bar Rev. 142 (1966) at p. 143 which concisely distills the approach to be taken:

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.

[97] Grange J.A. restated this approach in different terms at para. 13:

We must always remember that it is not the ability of one party to make a better bargain that counts. Seldom are contracting parties equal. It is the taking advantage of that ability to prey upon the other party that produces the unconscionability.

[98] Here there is no question that the Separation Agreement was grossly improvident insofar as the applicant was concerned. This was a traditional long-term marriage of 38 years' duration, where the applicant stayed at home for the bulk of their marriage to manage the household and raise the child of the marriage, while the respondent was free to pursue his career in education, rising to the level of principal. The applicant had been out of the workforce, and dependent upon the respondent, since 1991. At the time the agreement was entered into, the applicant had an income from CPP and OAS of about $1,200 per month, while the respondent had total annual income of $141,015.

[99] As I have already concluded, I am satisfied that the applicant was in a vulnerable position, because she had committed herself to the condo purchase, and needed the buyout of her interest in the matrimonial home to be completed so that she could close the transaction and avoid being sued by the vendor. The respondent took advantage of that vulnerability to craft an agreement that was decidedly one-sided in his favour, knowing that the applicant had no choice but to sign.

[100] In those circumstances, an agreement whereby the applicant waives all rights to claim spousal support shocks the conscious of the court. It is far beyond merely improvident, it is unconscionable.

[101] To his credit, the respondent agreed in cross-examination that the $1,000 per month in spousal support that he is paying is "inadequate". When asked in re-examination by his counsel by what standard is it inadequate, he responded "by the standard she was used to". It is obvious that if $1,000 per month is inadequate, then a total release of spousal support, as provided for in the Separation Agreement, easily meets the definition of improvident.

[102] Furthermore, it is grossly improvident that the agreement provided for a waiver of all claims to the respondent's pension plan, which would include claims by way of equalization of net family property. This pension plan was part of the compensation the respondent was able to gain through pursuing his successful career in education, which was made possible, in large part, by reason of the fact that the applicant gave up any career of her own, and stayed home to raise their child and manage their household. I have already concluded that it must have had a substantial present value as of the valuation date.

[103] In arriving at the conclusion that the Separation Agreement is unconscionable, I am cognizant of the general rule against double recovery, as described by Major J. for the majority in Boston v. Boston, 2001 SCC 43. That rule, which is subject to certain exceptions, holds that it is generally unfair for a spouse to reap the benefit of the other spouse's pension through equalization of net family property, and then look to the pension holder's income stream as a source of spousal support. The inequity in the Separation Agreement here, as written, is that the applicant is denied access to the pension both as an asset to be equalized and as an income stream to be shared by way of spousal support.

[104] I conclude that the agreement may be set aside by this court on the ground of unconscionability.

Should the Court Exercise Its Discretion to Set Aside the Separation Agreement and Ancillary Documents?

[105] Having found a multiplicity of grounds upon which the Separation Agreement, Schedule B and the Addendum may be set aside, the remaining question is whether I should exercise my discretion to do so. There are no hard and fast rules as to the considerations that should be brought to bear in exercising that discretion, but we can draw guidance from relevant caselaw.

[106] In LeVan, supra, the trial judge considered a total of twelve factors in determining that it was appropriate to set aside the separation agreement. As in the present case, those factors included not only a failure to disclose, but other factors as well, such as the lack of effective independent legal advice. These are summarized at paras. 34 and 35 of the appeal decision of Borins J.A.:

The trial judge relied upon the following findings to set aside the marriage contract apart from the husband's failure to disclose the value of his significant assets:

(1) The husband failed to disclose his income tax returns.

(2) The husband failed to disclose shares that he held in Grannyco and RWL.

(3) The footnote to Schedule A was inaccurate and did not contain sufficient information to be meaningful.

(4) The disclosure provided was misleading. For example, the husband's lawyer stated that his interest in the Family Trust had a very "minimal value".

(5) The husband's lawyer failed to disclose that he had three siblings, and that the four LeVan children had always been treated equally under the Family Trust.

(6) The financial statements for RWL, Grannyco and the Family Trust were not provided.

(7) The husband's lawyer failed to disclose that, in addition to being a capital beneficiary of the Trust, the husband was also an income beneficiary.

The trial judge recognized each of these factors in support of her determination that the husband had failed to comply with his disclosure obligation under s. 56(4)(a) of the FLA. In exercising her discretion to set aside the marriage contract, the trial judge further identified the following factors:

(1) The wife did not receive effective independent legal advice and some advice provided was wrong.

(2) The wife did not understand the nature and consequence of the marriage contract.

(3) The husband misrepresented the nature and terms of the marriage contract to the wife.

(4) The husband's failure to disclose his entire assets to his wife was deliberate.

(5) The husband interfered with the wife's receipt of legal assistance from her first lawyer, Mr. Ross.

[107] At para. 60, Borins J.A. found that the trial judge had properly exercised her discretion to set aside the contract, based upon these twelve findings of fact. He went on to say that it was entirely appropriate for the trial judge to consider the fairness of the contract along with these factors:

Although there is nothing in the governing legislation that suggests that fairness is a consideration in deciding whether or not to set aside a marriage contract, I do not see why fairness is not an appropriate consideration in the exercise of the court's discretion in the second stage of the s. 56(4)(a) analysis. In my view, once a judge has found one of statutory preconditions to exist, he or she should be entitled to consider the fairness of the contract together with other factors in the exercise of his or her discretion. It seems to me that a judge would be more inclined to set aside a clearly unfair contract than one that treated the parties fairly.

[108] While many of those factors are case-specific, the following factors in the case at bar are, in my view, of the same general nature of those considered by the trial judge, and approved of by the Court of Appeal:

1. The respondent failed to disclose the existence of his pension as an asset, despite the fact that one of the purposes of the meeting on October 12, 2023 was to discuss a division of their financial assets. The applicant had not included the pension on the list of assets she had prepared because she did not understand it to be an asset, but the respondent was under no such misapprehension.

2. The respondent failed to disclose the substantial value of his pension as an asset.

3. The only mention of a pension was in the Separation Agreement prepared by the respondent, and then only for the purpose of having the applicant release any claim to it.

4. The applicant had no independent legal advice, and the respondent commented negatively on the fact that the applicant had received some brief legal advice the preceding June in his email of June 16, 2023, stating "You are telling me you went to a lawyer? You were the one who wanted to stay away from lawyers."

5. The applicant did not understand the meaning or process of equalization of net family property.

6. The applicant signed the Separation Agreement and ancillary documents under duress, because she felt she had "no choice" but to sign, in order to ensure that the respondent got his mortgage and she got her buyout money, and would be able to close the purchase of her condo and avoid being sued.

7. The respondent was aware of the pressure on the applicant and took advantage of the situation by insisting that she sign a Separation Agreement before he would complete the buyout, and then inserting grossly unfair terms into that agreement, including a final release of spousal support claims and a release of all claims to his pension.

8. The respondent effectively reneged on his agreement to buy out the applicant's interest in the matrimonial home for $600,000 by claiming a credit of $58,000 that had never been discussed before as against the buyout figure, while also including the $104,012.43 TFSA transfer as part of the buyout figure, instead of being in addition to it as contemplated by the Financial Summary. He did this through insisting that the applicant sign "Schedule B – Additions to the Separation Agreement" and the "Addendum to the Separation Agreement", at a time when the closing date for the condo purchase of November 15, 2023 was looming and the pressure on the applicant to obtain the funds needed to close the transaction was intense. At that point in time, I find that the applicant would have signed anything the respondent put before her, if she was told it was needed to get her buyout money.

9. The respondent has admitted that the spousal support release provision in the Separation Agreement did not reflect the true agreement of the parties, and that he fully intended to pay spousal support of at least $1,000 per month. Given this admission, it is difficult to see how the court could do otherwise than set aside the agreement.

10. The respondent admitted that the $1,000 per month he does pay in spousal support, pursuant to his written undertaking (which is not an enforceable domestic contract), is "inadequate".

[109] In exercising my discretion, it is open to me to consider all of these factors, along with the overall fairness of the contract. In that regard, I have already concluded that the contract is not merely unfair, it is unconscionable.

[110] I have no hesitation in exercising my discretion such that the Separation Agreement, including Schedule B and the Addendum, must be set aside, and an order will go in that regard. That order is, however, subject to the following qualification.

[111] At the conclusion of argument, both parties confirmed on the record that if these agreements are set aside, they do not wish to undo the buyout of the applicant's interest in the matrimonial home. In other words, they both agree that the sale of the applicant's interest to the respondent, at a purchase price of $600,000, should not be disturbed. The manner in which the respondent purported to pay this purchase price remains, however, a live issue. This transaction will, therefore, be considered as a post-separation adjustment, and the consideration to be paid will follow upon a determination as to what is due from one party to the other through the equalization of their net family property, with the matrimonial home having a v-day value of $1.2 million. The issue as to what credit, if any, the respondent is entitled to arising from the applicant's withdrawal of $115,000 from the TD investment account at the time of separation will be considered at that time, along with any competing claims of the applicant to interim spousal support and occupation rent, if any.

[112] There is one other loose end to be tied up. During the course of the evidence, it became clear that the applicant had been advised, by the person she saw when she signed over the RRIF to the respondent, that there was a $12,000 dividend which would carry a tax liability which she would have to pay. She did so. However, the respondent admits that it was he who actually received the dividend, and agreed, on the record, that he would pay over to the applicant the net value of the dividend, in the approximate amount of $8,000. An order will go to that effect.

Costs and Next Steps

[113] Given that this step of the litigation is concluded, it is necessary to deal with the issue of costs. I am hopeful that the parties will resolve this issue, now that this threshold issue has been determined by the court. Indeed, my hope and expectation is that all of the issues that are, in view of the setting aside of the Separation Agreement, now outstanding, will be settled. If either party is of the view that a further Settlement Conference or Trial Management Conference might be of assistance in that regard, they are at liberty to make those arrangements with the Trial Coordinator, before a judge other than me.

[114] If the parties cannot resolve the issue of costs, the applicant shall serve and file written submissions in that regard within 20 days, with the respondent's responding submissions to follow within 10 days thereafter, and any reply within 5 days thereafter.

[115] The case is otherwise adjourned to Assignment Court, October 9th at 2:00 p.m., to set a date for the continuation of this trial before me, if it does not resolve in the meantime.

T. A. Heeney J.

Released: September 3, 2025