Lerners’ Weekly Family Caselaw Review #5
Every week, the Courts in Ontario and across Canada deliver judicial decisions that shape the area and practice of family law. The Lerners Family Law lawyers present one of the most interesting cases from the week of October 12, 2020:
Justice Faieta recently provided a clear and detailed reminder to counsel and parties alike that the bar to setting aside marriage contracts is high.
The parties in Gorman. v. Sadja, 2020 ONSC 6192 had been married for 27 years. Following a short engagement and only a few days prior to the marriage, they had entered into a marriage contract which released certain rights on separation, including the right to seek an interest in any property owned by the other spouse. The contract had been presented 10 days before the wedding but each party had independent legal advice.
Upon separation, the husband sought to set aside the marriage contract in order for him to be able to claim an interest in the increased value of the matrimonial home that the wife brought into the marriage. The husband sought to set aside the marriage contract on grounds that he: (1) received inadequate financial disclosure; (2) did not understand the marriage contract; and (3) signed the marriage contract under duress. Alternatively, he sought to rectify the marriage contract in order to permit him to claim an interest in the matrimonial home.
Following a trial, Justice Faieta dismissed the husband’s claim to set the marriage contract aside and to rectify it.
A domestic contract, such as the marriage contract at issue in this case, or any provision in it, can be set aside pursuant to subsection 56(4) of the Family Law Act:
(a) If a spouse failed to disclose significant assets, significant debts or other liabilities when the domestic contract was made;
(b) If a spouse did not understand the nature or consequences of the domestic contract; or,
(c) Otherwise in accordance with the law of contract.
The application of this section involves a two-step analysis: first, the party seeking to set aside must demonstrate that at least one of the listed circumstances within s. 56(4) has been engaged, and second, if at least one of the circumstances is engaged, the Court must then consider whether it is appropriate to exercise discretion in favour of setting aside the contract or any provision in it. The party who seeks to set aside the contract has the burden of proof at both steps of the analysis.
First, the husband argued that he did not have complete disclosure. Complete disclosure was not exchanged at the time of signing, but Justice Faieta found that the husband had been aware of the wife’s assets and liabilities. The husband chose not to pursue further disclosure at the time, had the benefit of counsel, so he could not now resile from his contract absent proof that the information he had about his spouse’s finances at the time of the contract was inaccurate, misleading or false.
Second, the husband argued he did not understand that the contract only entitled him to a 50% interest in the matrimonial home in the event of the wife’s death. He said he had not read it carefully, but had signed each page. Justice Faieta rejected this ground too, for a number of reasons but importantly the condition dealing with the interest in the home was plain on the face of the Marriage Contract, and the husband had independent legal advice.
Third, the husband argued the contract should be set aside as unconscionable and was signed under duress.
With respect to duress - the mere fact of the timing of the contract, which was presented ten days before the wedding, is not enough to amount to a coercion of the will.
With respect to unconsionability – Justice Faieta reviewed the standard for unconscionability in the context of the execution of domestic contracts, as expressed by the Court of Appeal in Tadayon v. Mohtashami, 2015 ONCA 777, which requires: “… circumstances of oppression, pressure, or other vulnerabilities and evidence of one party's exploitation of such vulnerabilities during the negotiation process, with the result that the domestic contract deviates substantially from the legislation, the contract need not be enforced.” There were no exploited vulnerabilities on the facts of this case.
In the alternative to setting aside the contract, the husband also sought to rectify – “correct” – the contract to remove the paragraph dealing with the rights in the home as he claimed it was included in error. To achieve rectification, an equitable remedy, the correction must give effect to the true intention of both parties, or where the mistake is by one party only, allowing the other party to take advantage of the mistake must be tantamount to fraud. Rectification is a remedy which is to be “used with great caution”. The husband’s claim for rectification of the marriage contract was dismissed.
As to the second step of the analysis, Justice Faieta held that even if any of the applicable circumstances had been proven by the husband, he would not have exercised his discretion to set aside the marriage contract “as it would have been, in all the circumstances, unfair to do so.”
This case provides us with a reminder that caution should be exercised by parties seeking to challenge a marriage contract, absent clear and strong evidence about the deficiencies in its creation. These contracts should not be entered into lightly as they cannot be set aside easily.
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