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More on Do-It-Yourself Agreements: What Not To Do

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More on Do-It-Yourself Agreements: What Not To Do

Recently I wrote about the case of Cramer v. Cramer in The Dangers of “Kitchen Table” Separation Agreements – Court Does a Re-Write where a court essentially re-wrote parts of a divorcing couple’s “kitchen table” separation agreement. They had prepared it with the help of an office-supply store kit; unfortunately it not only overlooked some very key provisions, it also ran afoul of Ontario family law.

Another recent case, Demaine v. Racine, provides further illustration of how a couple’s attempt to minimize legal fees actually ended up with a costly day in court.

There, the couple had drafted their own cohabitation agreement in 2005, based on a sample they found on the Internet. Once again, the agreement was created without benefit of independent legal advice on either side. (This was an attempt to save money: They had both recently ended prior relationships, and had spent substantial funds to extricate themselves). The goal was to protect their respective pre-relationship assets in advance of their 2006 marriage, which consisted mainly of the wife’s cottage, and the husband’s military pension. It was signed at their Ottawa home in presence of the wife’s friend, who served as the witness.

But when they separated in 2011, the husband denied ever signing the agreement at all. He applied to the court to have it set aside, and claimed that even if he did sign it, it was not fair or reasonable. Not surprisingly, the wife asked to have it declared enforceable.

The court found in the wife’s favour: The agreement was a valid domestic contract.

For one thing, the court found the husband’s claim that he was even in town at the time to be unconvincing, and found his evidence lacking:

17 The [husband] testified that he may not have even been at home in Ottawa on the date the Cohabitation Agreement was allegedly signed as he had been away a lot in Petawawa, in Toronto and in other locations at that time on pre-deployment training. He stated that he could have requested proof of his travel expenses submitted to the military for that time period but that it would have taken considerable time to get them just as it apparently took 13 months to get his pension information. However, the [husband] testified that he did not request the travel expense information until 3 months ago even though the [husband] has been aware of this issue for over 18 months. The [husband] stated that he could have called people who were on course with him to testify regarding the dates but he didn’t want to put them in a difficult position as they also know the [wife]. In summary, the [husband] produced no proof that he was away from Ottawa at that time and I am unable to find that he was away from Ottawa at that time.

(In fact, the court concluded the signature matched certain sample documents that had been signed by the husband.)

Next, the court concluded that there were no legal grounds for setting aside the agreement at all: the couple had each adequately (though not perfectly) disclosed their financial information to the other prior to signing the agreement; there was no evidence of duress; and no misrepresentations on either side. It complied with all the legal formalities required by Ontario law (i.e. an agreement in writing, signed by both parties, and witnessed). Both parties benefited under the agreement; it was not tilted in anyone’s favour.

Finally, the court dismissed the husband’s claim that he did not understand the nature or consequences of the agreement because he did not have independent legal advice. This was the husband’s choice, as he was keen to save legal costs. (In any case, the court found that the husband understood the agreement and its ramifications even without a lawyer). This alone was not a reason to set aside the agreement, absent other factors. The agreement was fair, freely-negotiated, and valid.

For the full text of the decision, see
Demaine v. Racine, 2013 ONSC 2940 (CanLII) http://canlii.ca/t/fxj2f

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. To learn more visit us at www.RussellAlexander.com

 

The Dangers of “Kitchen Table” Separation Agreements – Court Does a Re-Write

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The Dangers of “Kitchen Table” Separation Agreements – Court Does a Re-Write

I’ve cautioned before in Court Strikes Down Homemade “Kitchen Table” Separation Agreement about the pitfalls of a do-it-yourself approach to drafting a separation agreement. The recent Ontario decision of Cramer v. Cramer serves as yet another lesson on why it’s a bad idea: disputes often arise, both spouses end up having to hire lawyers anyway, and it takes a judge to re-draft the agreement to bring it in line with the law and the parties’ true wishes.

The couple had separated after 19 years of marriage. The husband, who insisted that lawyers should not be involved – went to an office-supply store and purchased a separation agreement “kit”. He and the wife sat down at their kitchen table and prepared a draft agreement while having coffee and tea. After some revisions, they prepared subsequent drafts and then went through the agreement on a clause-by-clause, page-by-page basis. They made a few more initialed changes before creating a final version, which they signed in the presence of two witnesses. The agreement stated on its fact that it was intended to be a “full and final settlement”.

Although the agreement covered certain necessary items (such as a listing of the couple’s assets, bank accounts and insurance policies, division of household contents, etc.), it unfortunately omitted several very important ones: for example it neglected to deal with spousal support for the wife, and did not provide for a fair division of the husband’s pension.

When the wife later realized that she had likely not received a fair settlement under this do-it-yourself agreement, she brought the matter to court to have it remedied and brought into line with her proper legal entitlements.

The court reviewed the document, as well as the circumstances in which it was negotiated and signed. Both spouses had participated equally in settling the agreement’s terms; neither of them was attempting to take advantage of the other; and both thought the agreement was fair at the time. Moreover, both had received the benefits of the separation agreement, and both had fulfilled their respective obligations.

But the spouses had lacked some very fundamental information at the time, and neither had an accurate understanding of the agreement or its ramifications. The court explained:

When the husband told the wife that she was not entitled to any part of his pension if they were no longer together, and she accepted that fact, it reflects their mutual misunderstanding of its nature. Neither was aware of its characterization as an asset having value prior to retirement. Neither party appears to have any degree of sophistication when it comes to financial affairs …

They had misunderstood the nature of the husband’s pension, and had overlooked the wife’s right to be compensated for the economic disadvantages she had suffered as a result of the marriage, arising from her role as caretaker to the children. From a legal standpoint, the agreement did not comply with the statutory scheme of property division and support that was envisioned by the Ontario Family Law Act.

In light of this fundamental misunderstanding and a mutual mistake, the court had authority to correct the agreement’s terms. It ordered the man to assign and transfer about $80,000 to his wife from his pension, with interest. (As it turned out on the specific facts, however, no adjustment for spousal support was needed since the wife had been living with a new partner since 2009 and married him in 2012. She did not need spousal support at the present time).

In this case, the couple went the do-it-yourself route in order to save money. Instead, they each had to hire lawyers and spend a costly day in court.

For the full text of the decision, see:

Cramer v. Cramer, 2013 ONSC 4182  http://canlii.ca/t/fz79j

Thinking about drafting a separation agreement? We can help. 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.

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