A recent Ontario decision highlights the importance of obtaining independent legal advice prior to signing any legal documents in a family law dispute. Failure to do so can have a significant impact on your legal rights and on your finances post-separation or divorce.
The parties separated in 2005, after eight years of marriage, and were ultimately divorced in 2008.
The parties had first met in 1994 at the hospital where they both worked. At the time the husband was midway through his medical residency. The parties married in April 1997, after the husband had moved to Chicago to pursue an internship in cardiac surgery. The marriage facilitated the wife’s immigration to the U.S. to be with him. The parties moved back to Canada in 1999. In 2000, the husband was recruited into a new cardiac program at Trillium Health Centre as one of the founding physicians of that unit. At the time of the court decision, he was still employed there. While the wife completed her Ph.D., she did not work after the marriage.
The husband’s income skyrocketed after he joined the cardiac surgery department. The couple purchased a $1.6 million home, drove expensive cars, went on expensive vacations. In the words of the judge presiding over their dispute, “life was good”.
Husband Promises Wife He Will “Take Care of Her Always”
The parties June 2005 separation was triggered by the husband. Evidence suggested that he felt conflicted and guilty about his decision to leave and that he promised the wife that he would “take care of her always”.
After the separation, the wife changed the locks on the matrimonial home, effectively excluding the husband from it, to which he did not protest. The husband bought a condo, and moved out, but took no steps towards obtaining a divorce. He continued to deposit his full income into their joint RBC account. The wife continued to manage the money of both parties, and continued to pay all the bills.
The husband started a new relationship in July 2005. His new partner became concerned that the husband had not cut ties with the wife, and pressured him to get a divorce, eventually issuing an ultimatum. In late 2007, the husband told the wife that he needed to get a divorce. The wife agreed to cooperate, but insisted on getting a separation agreement first.
The Separation Agreement
In April 2008, the parties entered into a Separation Agreement which was drafted by the wife’s lawyer and provided, among other things, that:
- The parties would sell the matrimonial home and divide the profits from the sale;
- Following the sale of the matrimonial home, the husband would pay the wife monthly spousal support of $29,000, indefinitely;
- Remarriage by the wife would not be deemed a material change of circumstances;
- The husband would continue to deposit his income into the RBC joint account, both parties would have their expenses paid from that account, and the wife would manage money for both parties, pending the sale of the matrimonial home.
In addition to the above, the Separation Agreement was silent on any obligations for the wife, and did not include a provision that the wife would take any steps to provide for herself.
The husband did not obtain any independent legal advice before signing the agreement, despite being advised to do so by the wife’s lawyer.
Wife Assists Husband with Refinancing
Once the Separation Agreement was signed, the wife continued to live in the matrimonial home, as it had not been sold.
In 2010, two years after the divorce, the husband wanted to use his equity in the matrimonial home to secure a loan needed to finish construction on a new home that he was having built. The husband did not have a good relationship with his lending institution and in order to receive the financing needed, he required security. The wife agreed to help him, but insisted on first amending the Separation Agreement to address some alleged non-compliance by the husband with respect to insurance.
The parties re-affirmed the terms of the Separation Agreement, and signed an Amending Agreement in November 10. The Amending Agreement stated that if the husband failed to comply with his insurance obligations, he would pay the wife $50,000. Once again, the husband did not obtain independent legal advice.
The matrimonial home remained unsold following the husband’s refinancing. Per the terms of the Separation Agreement, the husband continued to deposit his income into the parties’ joint RBC account, and the wife continued the manage their finances. This continued until 2012, when the husband retained a lawyer. In December 2012, the husband stopped depositing money into the joint account. The matrimonial home was eventually sold in September 2013.
From the date of separation in June 2005, until the husband stopped depositing money into the joint account in December 2012, the wife had been able to spend what she liked, and the husband had also been able to do so. Between the two of them, they spent almost all of what the husband deposited into the account, averaging $825,000 annually for the period in question.
The Positions of the Parties
At trial, the wife sought enforcement of the Separation Agreement, and wanted to be awarded $29,000 a month, indefinitely.
The husband asked that the spousal support provisions in the Separation Agreement be set aside or overridden, and sought a court order forcing the wife to repay him “up to $1,370,000 in money that she spent for her own benefit from the RBC joint account in excess of the reasonable spousal support to which she was entitled over the period of 2005-2012”.
He asked the court to find the Separation Agreement and the Amending Agreement to be invalid and unenforceable due to:
- Undue influence and duress;
- Failure to make required disclosure;
- Lack of independent legal advice.
Setting Aside the Separation Agreement
With respect to setting aside the Separation Agreement, the Court noted that:
- Both parties had acquiesced to the husband depositing his full income into the joint RBC account, with both parties spending what they liked, and the wife managing both of their finances;
- The wife had her lawyer draft up a Separation Agreement, which both parties then signed;
- The husband did not obtain independent legal advice;
- This arrangement “more than satisfied” any spousal support claim the wife may have had during the period in question;
- The arrangement was voluntary, and neither party objected to it until after it was concluded;
- The wife relied on the arrangement in making her own spending decisions;
- Not only did the husband not challenge the terms of the Separation Agreement, he later signed the Amending Agreement, which affirmed the terms of the Separation Agreement;
- If the husband had felt he had been treated unfairly in the negotiation and signing of the Separation Agreement he had 2.5 years to raise any such issues before he signed the Amending Agreement, but had not done so;
- The husband had not established that the wife had “dominated his will” through “manipulation, coercion or outright but subtle abuse of power”, and therefore there was no undue influence and duress;
- There had been no unconscionability, it had been the husband who wanted a divorce, and the wife had requested the Separation Agreement as a “price of her cooperation”- the parties had been bargaining with each other from the start of their discussions. The circumstances of the case “did not come close to establishing the kind of predatory preying that is required for a finding of unconscionability”;
- The parties had equalized their property already, and any alleged non-disclosure would not have affected spousal support. Non-disclosure was not a proper basis to set aside the Separation Agreement;
- The wife had not talked the husband out of retaining a lawyer;
- The wife’s lawyer advised the husband to obtain independent legal advice.
The Importance of Obtaining Independent Legal Advice
With respect to independent legal advice specifically, the court noted that:
- Independent legal advice about a Separation Agreement may provide prima facie evidence that the person receiving the advice understood the nature and consequences of that agreement;
- The lack of legal advice does not create a presumption that the person who did not receive the advice did not understand the nature and consequences of that agreement (though it is a factor to consider);
- The husband understood the Separation Agreement, and specifically the spousal support obligations in it.
The court went on to say:
[The husband] testified that he did not understand his legal position when he signed the Separation Agreement. I accept that evidence. That is why he should have gone to a lawyer, of course. It was suggested to him that, if he was able to conduct intricate surgery, he surely could understand the terms of the agreement. He responded by saying, in effect, he is trained to do the surgery and understands it – a legal document like the Separation Agreement “is a lot more complicated than what I do.” I accept that general point that [the husband] finds it easier to do things within his area of particular expertise. However, if he did not understand the Separation Agreement, then he should have obtained legal advice. He did not. That is his own fault. He must live with the consequences.
The court concluded that while the husband did not understand that the spousal support terms in the Separation Agreement were a “bad deal” for him, he did understand that they required him to pay $29,000 in monthly support after the matrimonial home was sold. The agreement was enforceable.
Final Conclusions of the Court
Ultimately, the court:
- Dismissed the husband’s request to set aside the Separation Agreement and the Amending Agreement;
- Dismissed the wife’s request that spousal support in the amount of $29,000 per month be ordered to be paid indefinitely;
Despite finding the Agreements enforceable, the court found that the amount and duration of the spousal support to be unfair and ordered the husband to pay the wife $43,000 in settlement of his spousal support obligations towards her for good.
Even if your relationship with your former spouse or partner ended on relatively good terms, and you are involved in an amicable separation, as was the case here, it is crucial for each of you to obtain advice from your own separate lawyers. Seeking the advice of a lawyer, or having a lawyer represent you in negotiations over a separation agreement or other legal document does not mean that the negotiations or discussions will become adversarial or unpleasant. Instead, a lawyer will simply help you understand all your rights and obligations in a given situation, and will help ensure that you are protected going forward.
Failure to seek advice will only harm you in the end. As this case illustrates, if you do not consult with a lawyer and obtain independent legal advice before taking legally binding steps in your family law dispute and you later regret your decision or want to make changes to a legal document, you may not be able to do so. Relying on the fact that you did not know the true implication of what you were signing, or that you were coerced into doing so will likely not be accepted by the court. As the court noted in this case:
The principles of unconscionability will not rescue [the husband] from his own folly and carelessness in failing to retain a solicitor or take reasonable care safeguarding his own interests while negotiating the Separation Agreement.
At Gelman & Associates, our family lawyers can provide you with the expert counsel you need to fully understand the nature of your dispute, any contracts or documents that you may have to sign, and ensure that your rights are protected. With six offices throughout Aurora, Barrie, Downtown Toronto, Mississauga North York and Scarborough, we are just a short distance away in any direction. Call us at (416) 736-0200 or 1-844-736-0200 or contact us online for a confidential initial consultation.