Get Your Agreements Right the First Time
As I’ve written before about kitchen table agreements, or do-it-yourself and pre-packaged Will kits have their allure, but they also have their pitfalls. In family law for example, well-intentioned couples often try to draft their own separation agreements, hoping to save the cost of hiring lawyers (ideally one independent lawyer for each spouse) to draft or even simply to review them. But despite the desire to save money, it sometimes actually costs a great deal financially and in terms of time and aggravation to legally untangle the unintended consequences of a poorly-drafted agreement — and all the anticipated benefits are wiped out.
In some cases, the agreement a couple reaches turns out to be unclear even as to its meaning, intention and scope, and they may actually have to ask a court to interpret it, and to make a ruling on what the parties themselves must have intended. This is yet another unwanted and unexpected trip to court that costs more than expected.
This is precisely what happened in the recent case of Clarke v. Clarke. After negotiating an agreement, the couple formalized it by entering into Minutes of Settlement. They got a court order which confirmed, in virtually identical terms, the final agreement that they thought they had mutually reached.
However, what they did not realize at the time was that they neglected to deal with certain issues that were necessary to finalize their separation and divorce – namely how the company they ran was to be wound up, and how capital gains tax would be paid. They also failed to address how the recapture and HST would be dealt with in connection with the transfer of two properties owned by the company and worth about $1.75 million. Finally, there was also considerable confusion over the agreement’s precise meaning in certain respects relating to the company and divisional of assets, and how it was to be interpreted and applied.
The couple therefore went back before the court, to get directions on how the terms of the court judgment was to be implemented, and as an alternative solution asked the court to amend the terms of the consent judgment.
After settling the contentious issues, the court saw fit to have each of the spouses pay their own costs of the motion, which in the wife’s case was $150,000 (the husband’s costs were not mentioned in the judgment). Essentially, the court found fault with both of the spouses for their inattention to detail on the agreements, and pointed to the fact that both of them had signed the Minutes of Settlement and had agreed to the consent judgment, which indicated that both of them had been equally at fault for the oversight. The court wrote:
I find that because the Consent Judgment was unclear on how it was to be implemented, and both parties failed to include terms on how to implement the Judgment, the Motion to implement the Judgment was ultimately necessary. I further find that both parties would reasonably expect to pay their own costs in implementing the terms of the Judgment, which was silent on several required terms.
What’s the lesson to be learned? A poorly-drafted “do-it-yourself” can cost a lot more than you think.
Clarke v. Clarke (2013), 2013 ONSC 6924, http://canlii.ca/t/g1wgb, additional reasons to 2013 ONSC 5352.
