Court Upholds Separation Agreement in High-Net Worth Divorce

GeorgiaLeeLang009Lawyers are often asked whether Canadian courts uphold agreements between separated spouses. The quick answer is yes, they do, unless the agreement is substantially unfair, or where one party fails to provide full financial disclosure. Other reasons to set aside an agreement include duress or coercion.

In a recent B.C. case a couple settled all the financial and parenting aspects of their union, arising after a 22-year marriage, preceded by two years of cohabitation. They signed a separation agreement in October 2015 and divorced in April 2016. (TAN v. MAN 2019 BCSC 352)

A most fortunate couple, they equally shared assets valued at approximately $16 million dollars, which included business assets worth $11 million. They agreed to share equally the costs of raising their children until each had completed university and the husband agreed to pay spousal support of $2,150 per month for six years.

Her earned income was said to be $130,000 per annum, while his salary was $230,000. The agreement also provided that the husband’s company would pay his wife the sum of $567,000 a year for six years (with 5% interest) as compensation for her share of the business, which he would retain. She incorporated a holding company to receive the funds through a “butterfly” transaction, a common method of transferring funds to her on a more tax-efficient basis, and settled a family trust.

Each party had experienced family law counsel and a family law mediator assisted in their negotiations. An accountant/business valuator was also retained.

The agreement purported to be final and binding and included the following clause:

“The balance of the parties’ claims are hereby dismissed as though tried on their own merits without costs to any party.”

However, the wife became concerned that her future was not as secure as her ex-husband’s and in 2018 she brought applications for child support and increased spousal support, citing the following reasons:

1. Although she had legal advice she was vulnerable and relied on her husband’s superior knowledge of financial matters;
2. There was a material change in circumstance because she failed to understand or anticipate that her future income and her husband’s would be markedly different;
3. A change in Canada Revenue Agency policy regarding family trusts limited her to receiving taxable dividends from her holding company rather than the “income sprinkling” she expected;
4. The agreement did not comply with the spousal support objectives of the Divorce Act; a fact she only recognized after the agreement was signed.

The Court rejected her arguments and dismissed her spousal support application with the following remarks:

a) Her personal 2016 and 2017 income from employment, dividends, and miscellaneous income amounted to $197,000 and $225,000 respectively and in 2016 her holding company’s income was approximately $169,000.

b) While the husband was drawing large bonuses from his company, the funds were withdrawn to pay the wife’s annual compensation payment of $567,000 per annum. The husband’s ability to receive bonus income was no different during the marriage and was known to the wife.

c) The quantum of spousal support payable pursuant to the agreement was in line with other high income/high net worth cases, such as Hodgkinson v. Hodgkinson 2006 BCCA 158; Chutter v. Chutter 2008 BCCA 507 and MacDonald v. MacDonald 2005 BCCA 23.

The Court also declined to change the child support provisions of the agreement, adopting the husband’s argument and agreeing that the arrangements reached, whereby neither party would pay child support but that all of the children’s reasonable educational expenses and living expenses would be shared equally, was reasonable in the circumstances.

Lawdiva aka Georgialee Lang

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$70,000 Fee For a Case Conference and One Application Criticized by Court

GeorgiaLeeLang100In a case from Ontario, the Claimant wife applied to the court for an order that her husband provide her with funds to pay for her lawyer and other legal expenses arising from the parties’ family law action. (Ord v. Ord, 2019 ONSC 1563)

The evidence disclosed that since the date of separation Ms. Ord had spent most of her only asset, a $218,500 RRSP on moving expenses, living expenses, withholding tax on the withdrawal of RRSP funds, and the purchase of furniture and a new car; a sum amounting to approximately $150,000. At the time of her application she said she had only $15,000 left.

She asked the court to order her husband pay her the sum of $150,000 as an interim advance, which she broke down as follows:

Disclosure Motions/Motion for Disclosure $7,500
Motion for Interim Support $5,000
Questioning $7,500
Settlement Conference $5,000
Trial Management Conference $10,000
10 day trial $100,000
TOTAL $135,000

The Court remarked that to succeed the wife must prove impecuniosity and justify the advance she requests. The Court must also be satisfied that its award is not a “free license to litigate”, particularly where there is no requirement that she be in a position to repay the funds if unsuccessful at trial.

Counsel for the husband argued that his client’s wife had squandered her RRSP and that it was her fault that she had no funds to pay her lawyer, but the Court was not receptive to that argument stating that the wife had left the marriage after signing an agreement that she would not receive any share of family property or spousal support. The Court stated:

“However, I also find that Mr. Winnitoy’s suggestion that the Applicant “squandered” her funds to be less than helpful. The money that she has spent on her living expenses, her move to Alberta and to furnish her apartment and purchase a vehicle are expenditures about which she had little choice. What else was she to do when she had determined that she would leave the marriage and had signed an agreement three weeks previously which gave her nothing? Was Mr. Winnitoy suggesting that the Applicant go onto public assistance and enter public housing and thereby preserve that asset? I note that it is questionable that she could have received public assistance when she had an asset of more than $200,000.”

Calculating the funds she had, what she spent, and what should have been left over, the Court queried where the remaining funds were, and was advised that she had already spent $70,000 on legal fees and disbursements to date. The Court noted that the proceedings thus far consisted of one case conference and the present application before the Court, and declared the fees excessive.

Counsel for the wife advised the judge that a significant portion of the fees to date was spent reviewing nine volumes of documents provided by the respondent husband. The Court was not impressed, noting that the first hurdle for the wife was to persuade the Court of the invalidity of an amending agreement to the parties’ marriage agreement, which argument would consume 5 of the 10 days scheduled for a bifurcated trial. If she succeeded there would be 5 additional days of trial at a later date. It was only if she succeeded that the documents would be relevant.

The Court held that the first portion of the trial should not take more than three or four days, and that a disclosure application was unnecessary. The Court agreed that she would need to seek spousal support but that was the only pretrial application that would be required. Having reviewed the numbers the Court ordered a payment of $40,000 to the wife to be paid from the husband’s $1 million dollars of RRSP’s.

Lawdiva aka Georgialee Lang

22-Year-Old Daughter Not Entitled to Child Support

In a refreshing decision from the Alberta Court of Appeal, the father of an adult daughter, who dropped out of university, lived with her boyfriend, and then returned to her mother’s home and started back at college, was successful in resisting his ex-wife’s claim that he should be paying child support and contributing to the costs of her university expenses. The reason this case is refreshing is because more often than not, adult children are “babied”, found to be “dependent”, and never expected to face the reality of their new grown-up world.

In Taggart v. Taggart 2019 ABCA 78 the parties’ daughter graduated from high school in 2013, took the balance of 2013 off and enrolled in Mount Royal University in January 2014. She attended for two years, all expenses paid, but failed to complete her course of studies. In August of 2016 she moved in with her boyfriend and lived with him for one year, after which she resumed living at her mother’s home at the age of 22, 4 years past high school graduation.

In October 2017 she enrolled in a career college and to her credit, obtained a student loan and a grant award which paid for the costs. She also found part-time employment to assist with her expenses. However, when her mother learned that she had taken out a loan, she brought a court application seeking orders for child support and university expenses from her ex-husband.

Relying on a well-known British Columbia case, Farden v. Farden 1993 BCSC 2570 Canlii, the court dismissed the mother’s application, whereupon she appealed.

On appeal Ms. Taggart argued that where parents have higher incomes, as they did, there was less of a requirement that an adult child need look to student loans to finance post-secondary education. She also argued that the lower court judge focussed excessively on the year that her daughter was out of school and living with her boyfriend.

While the court agreed that children of wealthier parents are not necessarily required to finance their own educations, the appeal court noted that the judge below found that the adult daughter’s circumstances could not be characterized as a financial dependency. The appeal court also confirmed that decisions of lower court judges are entitled to considerable deference.

Lawdiva aka Georgialee Lang

Appeal Court Says Two Counsel Unnecessary to Defend Meritless Appeal

In Marchese v. Marchese 2019 ONCA 116 the appellant wife brought an appeal from an order that the family home be sold. She argued that the court failed to consider the best interests of the children who were ages 22, 19, and 16 at the time of the trial order.

Mrs. Marchese had lived with the children in the home for a period of six years since the date of separation, however, the Appeal Court found that she had not advanced any legal basis for the Court to reverse the order. The Court noted that in the absence of demonstrating malicious, vexatious, or oppressive conduct on her husband’s part, related to the sale, there were no grounds for her appeal. Further, both parties were unemployed and unable to manage the costs of maintaining the property. The appeal was dismissed.

However, the matter of costs to the successful husband was not straight forward, as the Court commented that it was unreasonable that he be represented by two lawyers, given the lack of merit in the appeal. The Court also remarked that the cost to bring the husband’s new lawyer up to speed was something that ought not to be paid for by his wife.

Finally, in awarding the husband $10,000 all in, the Court considered that the wife had succeeded on her stay motion and successfully defended a motion for dismissal. The husband could have a “Cadillac” defence, but not at the expense of his wife.

Lawdiva aka Georgialee Lang

Appeal Court Says Divorce Based on Mental Cruelty is Stigmatizing

DSC00275_1This week the Ontario Court of Appeal considered a divorce appeal where a judge in a pretrial conference granted a divorce based on each spouses’ allegations of mental cruelty against the other.

In Baraz v. Vorobyev, 2019 ONCA 90 the parties married in January 2018, but encountered problems in their relationship almost immediately and never lived together. In May 2018 Ms. Baraz sued her husband for divorce alleging physical and mental cruelty. Mr. Vorobyev denied the cruelty alleged and counter-sued for divorce alleging mental cruelty against his wife. The Court noted that the wife provided no factual foundation for her claim of physical cruelty.

The pretrial conference judge apparently accepted the cruelty pleadings of the parties, treating the circumstances as if the parties had agreed to a divorce on the basis of mental cruelty. He granted a divorce to the parties based on “Mr. Vorobyev’s mental cruelty”, a finding that disturbed Mr. Vorobyev and led to his appeal.

The Appeal Court held that “cross-allegations of mental cruelty do not establish an agreement” between the parties and that the unfair finding was stigmatizing to the husband.

The Appeal Court relied on Knoll v. Knoll 1970 Canlii 469 (Ont. CA) where the Court stated:

“Cruelty is not a trivial act but one of a ‘grave and weighty’ nature”.

The Appeal Court found the pretrial conference judge’s order to be pragmatic but ultimately unfair, set aside the divorce order, and remitted the matter back to the trial court.

Lawdiva aka Georgialee Lang

Lawyer Disciplined for Articling Student’s Conduct

GEO CASUALIn order to become a member of the legal profession, a law graduate must “article” with a practicing lawyer and study and write the bar exam. At large firms it is not unusual to have a dozen or two articling students, but for a sole practitioner it can be an onerous responsibility to supervise a lawyer-to-be.

In a recent Ontario case, 10-year criminal lawyer, Marco Forte, hired his first articling student, Nadia Guo, but was unprepared for the challenges she brought to his practice. Mr. Forte was also a social media novice, who found himself embroiled in controversy with Ms. Guo’s social media habits.

Despite his best efforts, he failed to adequately supervise Ms. Guo, who got off to a bad start when she flipped her middle finger at staff at Toronto’s Superior Court intake counter during a verbal altercation. She was escorted off the premises by court house security, but returned nonetheless and was arrested for her behaviour, although never charged.

She then posted messages on Twitter, Craigslist, and Reddit identifying herself as an articling student at Mr. Forte’s law firm and complaining of her illegal arrest.

She also posted questions and comments on the Criminal Lawyer’s Association listserve, which other members found disparaging and offensive. Some of her posts breached client confidentiality and eventually her privileges were suspended.

After her suspension from the listserve she assured Mr. Forte that she would refrain from posting inappropriate material but her promises were short-lived, as she began posting derogatory comments on Twitter about unnamed Justices of the Peace, Crown Attorneys, and clients from Mr. Forte’s practice.

Further interventions by Mr. Forte fell on deaf ears, as a month or so later she posted a series of tweets criticizing the “inefficient” court system, suggesting that court clerks should be abolished as “futile and outdated” and replaced by robots. She later apologized and deleted her twitter account, but her offensive activities only carried on as she used Mr. Forte’s twitter account, unbeknownst to him. Not to mention her website, linked to her principal’s, where she identified 50 “Bad Cops”, “Bad Crown Counsel” and “Bad Judges”

She also, at Mr. Forte’s direction, put together a firm website which, contrary to Law Society policy, suggested she was a part of the “team” at his firm, with no suggestion that she was an articling student. Later it became apparent that Mr. Forte had not reviewed or approved of the website content because he had been too busy to look at it. Other comments on the website could be construed as disparaging or misleading to third parties.

Eight months into her articles Ms. Guo was finally fired and Mr. Forte was facing a disciplinary hearing for failing to supervise his student and permitting advertising that breached Law Society policy.

The Law Society of Ontario found that Mr. Forte failed to properly supervise Ms. Guo, despite many conversations he had with her regarding her intemperate and uncivil communications. He had also arranged for her to meet with a number of female lawyers but their influence was also ineffective.

When he ordered her to take down her Twitter account, she did so, but shortly thereafter opened a new account, and later simply used the firm twitter account, an account that Mr. Forte failed to monitor.

A significant factor was Mr. Forte’s lack of familiarity with social media. The Law Society also remarked that he seemed to believe that what she wrote in her personal capacity was not his concern. He failed to recognize that what she did, reflected on him and his practice.

He was found to have professionally misconducted himself but with excellent character references and because he had no prior discipline history he was reprimanded, ordered to complete a coaching program and take two continuing education programs. He was also ordered to pay costs of $3,500.00.

Unfortunately, his well-intentioned efforts to provide legal training for a student backfired and cost him professionally.

Lawdiva aka Georgialee Lang

Scam Marriage Annulled by Court

GeorgiaLeeLang057Occasionally I will get a call from a potential client who wants to know whether he or she has grounds to obtain an annulment. A legally valid marriage can only be terminated by a divorce, however, if a marriage was never legally valid, an annulment may be possible.

Grounds for an annulment include the following:

1. Where one or both spouses do not have the capacity to marry. For example, where one spouse is already legally married or where one spouse was not of a sufficient age to enter into to matrimony;

2. If spouses are related to each other through blood or adoption;

3. Where one spouse is mentally incapacitated;

4. Where one spouse enters into the marriage under duress, fear or fraud.

When duress is submitted as a ground for anulment a court will consider the following factors:

a) The emotional state of the applicant at the time of the ceremony; and,
b) The vulnerability of the applicant; and,
c) The time between the coercive conduct and the ceremony; and,
d) Whether the marriage was consummated; and,
e) Where the spouses resided during the marriage; and,
f) The time taken to initiate annulment proceedings.

In a recent case in British Columbia the Supreme Court granted an annulment to a young woman who believed her boss would fire her if she did not agree to marry one of his relatives who lived in India. Kaur v. Jhamb 2019 BCSC 67. Ms. Kaur was told by her employer that her job security would be at risk if she refused to comply with his request.

Her boss gave her one day to think about it and the following day she agreed to comply with his request. She told the court of her intense stress and her fear of losing her job. A civil marriage ceremony was attended by the bride and groom and several of her employer’s friends. After the ceremony she went home alone and never saw her husband again.

Each of the parties belonged to the Sikh religion and were Punjabi by ethnicity. In accordance with the Sikh religion in order for the marriage to be completed, a religious ceremony conducted in front of the holy book Shri Guru Granth, was also required. Ms. Kaur declined to move forward with a religious ceremony and was promptly fired by her employer.

The Court held that the marriage was a sham and granted an annulment:

“The evidence before me is overwhelming that the civil marriage ceremony the parties participated in on August 21, 2018 was a sham and was entered into solely for immigration purposes. I am satisfied that the claimant did not enter into the agreement to participate in this sham of her own free will, but did so because of the threat of losing her job. I find that she was coerced into marrying the respondent and participated in the civil ceremony under duress.”

Lawdiva aka Georgialee Lang