Skip to content

Posts tagged ‘appeal court’

Busted! Court Relies on Sworn Financial Statements from First Divorce to Value Assets During Second One

Busted! Court Relies on Sworn Financial Statements from First Divorce to Value Assets During Second One

The husband was a 46-year-old, recently-separated businessman who met the 26-year-old wife when she was a junior at the law firm he used for his business matters and litigation. After they moved in together and he got a divorce from his first marriage, the wife left her job at the law firm to take care of the husband’s litigation and related corporate affairs.

They were married for 14 years before they separated, and had three children.

When they split up, the husband forwarded a newly-prepared separation agreement for the wife’s signature. She signed without obtaining independent legal representation.  She was comfortable doing so because she believed that the husband had provided full disclosure, and she trusted his assessment since he had considerable experience valuing businesses.

Using the business valuation information provided by the husband, the separation agreement would have called for the wife to pay the husband just under $1 million as an equalization payment; however, it also provided that the husband would agree to forgo her having to pay that amount.

Sounds like a good deal, right?

However, the wife slowly realized afterwards that the husband had misled her. Rather than her owe him money in equalization (which he waived), the proper calculation was entirely different because he had greatly overstated the value of the corporate assets that he brought into the relationship, most notably the value of his company at the date of marriage. This would inflate the amount she was adjudged to owe him way of an equalization.

She successfully applied to the court to set aside the separation agreement, on the basis that the husband had not given full financial disclosure.  The trial judge adjusted the calculation accordingly.

The husband appealed.  In support of his business valuation figures, he put forth the evidence of an expert, who attested to the fact that the value of the business on the marriage date was over $7 million.  However, the Appeal Court concluded that the expert was partial to the husband and lacked independence, and had given an inflated figure that could not be trusted.

Instead, the court relied on some “smoking gun” evidence:  the sworn financial statements the husband had filed in his first divorce, which showed that he had essentially brought no assets of value into this second marriage to the wife.  The trial judge had relied on this evidence as well in setting the separation agreement aside, and the Appeal Court confirmed that there was nothing improper about the trial judge having done so, even if it was to the husband’s detriment.

In the end, the husband was found to have intentionally misrepresented the value of his corporate assets, by claiming that they were worth $6 million more than their actual (court-determined) value.

The Appeal Court upheld the trial judge’s decision to set aside the separation agreement, and went on to calculate the proper equalization amounts using the true valuation of the husband’s assets.

For the full text of the decision, see:

       Virc v. Blair

At Russell Alexander Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at RussellAlexander.com

Arbitration Clauses in Separation Agreements – Appeal Court Confirms Priority

Arbitration Clauses in Separation Agreements – Appeal Court Confirms Priority

Fairly recently, the Ontario Court of Appeal handed down a decision that provides important clarification on the topic of arbitration clauses contained in negotiated separation agreements.

In Grosman v. Cookson, the spouses had separated in 2001 after 34 years of marriage. They agreed to participate in mediation to settle their issues, and this resulted in a freely- negotiated and comprehensive separation agreement that stipulated that the husband would pay the wife $8,500 per month in spousal support. The agreement also provided that in the event that either of them wanted to vary that particular aspect of the agreement, the issue would be settled through the use of a mutually-appointed mediator/arbitrator, rather than through the intervention of the court. (This is known as an “exclusive arbitration” clause).

After their formal divorce in 2004, the husband paid spousal support to the wife as agreed. However, the husband (who happened to be a lawyer), announced in 2010 that he intended to retire from full partnership at his law firm, but was planning to stay on as counsel to the firm, with a reduced income. This change triggered his desire to vary the support he had been paying to the wife, so a few months later they attended mediation. Unfortunately, they were unable to come to terms.

In early 2011, the husband stopped paying support entirely, and eventually owed her arrears of more than $60,000. The wife reacted by taking several legal steps: she filed the separation agreement with the Court, and asked that its terms be enforced by way of court order. She also took steps to have the agreement enforced by the Family Responsibility Office (“FRO”). Lastly, in response to the husband’s application to vary, the wife went to court to try to have that application dismissed; she asserted that the parties’ rights and obligations to each other in connection with variation disputes were already governed by the separation agreement, specifically by the exclusive arbitration clause.

At first, the judge dismissed the wife’s summary judgment application; however, she appealed to the Court of Appeal, and was successful.

In overturning the initial ruling, the Ontario Court of Appeal found that the negotiated separation agreement governed in this case. Because it clearly and specifically included the exclusive arbitration clause, and because it envisioned the particular circumstances that took place here (i.e. that the wife would file the separation agreement with the FRO), the court had no jurisdiction to hear the variation application at all.

Nothing in the relevant provisions of the Family Law Act (which allowed for the separation agreement to be filed and enforced by the FRO) could be read as intending to oust the right of the spouses to mandate for themselves the use of mediation to solve their variation-of-support disputes. Rather, their decision to include an exclusive arbitration clause in the separation agreement should be given full legal effect, without court interference. Indeed, on policy grounds the court emphasized that such arbitration clauses were an important and worthwhile means by which spouses could mutually agree to resolve their differences without recourse to time-consuming and expensive avenue of the court process.

For the full text of the decision, see:

Grosman v. Cookson, 2012 ONCA 551  http://canlii.ca/t/fspzb

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering legal advice and assisting clients with family-related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Judge Bullied Husband For His “Consent” to Consent Order; Appeal Court Intervenes

Judge Bullied Husband For His “Consent” to Consent Order; Appeal Court Intervenes

The husband, Rastegar, participated in a settlement conference before a conference judge which resulted in what was purportedly a Consent Order.   He was self-represented; the wife was represented by counsel.

However, the husband later challenged the validity of the Order on various grounds, by way of an appeal brought before the court.   This appeal was allowed; the court agreed that the so-called “Consent Order” ostensibly reached between the parties should be overturned.

First of all, while recognizing that the settlement conference was designed to be a more relaxed and informal process, the court noted that the conference judge in this case had crossed the line of what was appropriate judicial comment.  For one thing, the conference judge made reference to his own individual experiences in order to take “judicial notice” of certain facts pertaining to the husband’s Iranian background, and made a comment that he has “some knowledge of Sharia law and we all know how badly woman are treated under Sharia law.”  The conference judge went on to say:

“We don’t have people being stoned to death in this country because they happen to look at a man or they’re not wearing a veil or whatever”.  

Also, before obtaining the husband’s purported consent to the Order, the conference judge also said to him:

“You don’t get to call the shots anymore.  All you get to do, sir, is write a cheque, straight up.  I know that’s not how they work in different countries, and particularly I have some knowledge of Iran.”

In short, the court noted that the husband was “essentially bullied” into agreeing to the Consent Order, and recited the events leading up to that as follows:
Towards the end of the conference, the conference judge asked Mr. Rastegar:  “You will agree to sign the order, is that correct sir?”  The judge was referring to a draft order which had been prepared by the wife’s counsel over the lunch hour.  Mr. Rastegar answered the judge’s question “Yes Your Honour, but there are a couple of them that I was just hearing that we didn’t discuss at all”.  Mr. Rastegar did not actually sign anything.

Even if this equivocal exchange could be construed as consent to the terms being appealed, it was not an informed consent and it was not freely given.  The conference judge misinformed Mr. Rastegar regarding his legal obligations and effectively bullied him into acquiescence.

As such, the conferenced judge had misused his powers to force the husband’s consent to an Order which was drafted by the wife’s lawyer without getting the necessary information from the husband and which (among other things) required the husband to pay spousal support to the wife.  

For the full text of the decision, see:

Siahbazi v. Rastegar, 2012 ONSC 2384  http://canlii.ca/t/fr2dj

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at  www.RussellAlexander.com.