Saturday, September 10, 2011

SPONSORSHIP OBLIGATIONS AND MARRIAGE CONTRACTS HIGHLIGTED IN LITIGATION

The recent case below highlights the consideration of sponsorship obligations in the context of marriage contracts. Aside from its interesting facts, people should be aware that under immigration legislation, spouses are responsible for supporting a sponsored spouse for three years, and as per a recent Supreme Court of Canada decision, those who default can be exposed to collection proceedings by a Province if the sponsored spouse goes on social assistance.



Petruzziello v. Albert
Between Edmondo Petruzziello, Applicant, and
Viktoria Albert, Respondent

[2011] O.J. No. 3921

2011 ONSC 4182

Court File No. FC-07-00027514-00

Ontario Superior Court of Justice

J.E. Hughes J.


Heard: November 15-18, 22, 24-26, 29, December 1-3, 2010;
January 11, 2011.
Judgment: September 1, 2011.

(92 paras.)



REASONS FOR JUDGMENT

J.E. HUGHES J.:--

THE BACKGROUND

1     The applicant, Edmondo Petruzziello and the respondent, Viktoria Albert, were never married. When they began their relationship, he was a nightclub owner and a mortgage lender/broker, and she was an exotic dancer, recently arrived in Canada from Hungary on a temporary work visa. The length of their cohabitation and whether it was continuous is in dispute. Mr. Petruzziello has taken the position throughout this proceeding that the parties cohabitated for approximately 19 months. Ms. Albert initially did not dispute this position. However, that changed over the course of this action, and at trial she argued that the parties had enjoyed a continuous and conjugal relationship spanning six years.

2     Although many issues remain in dispute between the parties, they do agree on two things: Firstly, that their son, Edmondo ("Ed Jr.") was born during their cohabitation on March 21, 2002, and secondly, that they executed a Cohabitation/Marriage Contract dated April 25, 2006 (the "Contract"). Both parties were represented by counsel at that time; Mr. Petruzziello by David Pomer and Ms. Albert by Rahul Kesarwani.

3     The parties separated on May 1, 2007. On July 13, 2007, Mr. Petruzziello commenced an application primarily for access to his son, Ed Jr. Ms. Albert filed her answer shortly thereafter claiming, among other things, spousal support and in the alternative, that Mr. Petruzziello comply with the provisions of the Contract. At that time she did not challenge the validity of the Contract or seek to have it set aside.

4     On October 26, 2007, a case conference on all issues took place. As a result of meetings between counsel and the parties which occurred at court that day, Minutes of Settlement (the "Minutes") were signed by the applicant and the respondent. During those negotiations Mr. Petruzziello was represented by Mr. David Pomer and Ms. Albert was represented by Mr. Jeremy Dolgin.

5     The Minutes were incorporated into the consent order of Mr. Justice Nelson of the same date. The Minutes and the corresponding order purport to deal with spousal support on a final basis. The remaining issues were dealt with on a temporary basis and adjourned for further consideration.

6     In September 2008, the applicant brought a motion to reduce his child support obligation, on the grounds that he had experienced a reduction in his income. The respondent brought a cross-motion and for the first time raised the validity of the Contract and the Minutes as issues. Ms. Albert subsequently received leave to amend her answer accordingly.

7     The parties, with the assistance of their counsel, have agreed to a bifurcation of the issues, such that a hearing in relation to the validity and enforceability of the Contract and the Minutes would proceed prior to the trial of the spousal support claim. The essence of the trial before me today is: Ms. Albert wants the Contract and Minutes set aside and Mr. Petruzziello wants the Contract and Minutes upheld.

THE ISSUES

8     There are three primary issues for this court to decide:



·       A. What was the nature and duration of the parties' relationship? 

·       B. Should the Cohabitation/Marriage Contract of the parties dated April 25, 2006, be set aside as invalid and unenforceable? 

·       C. Should the Minutes of Settlement incorporated into the consent order of Mr. Justice Nelson dated October 26, 2007, be set aside as invalid and unenforceable? 

THE EVIDENCE AND ANALYSIS



·       A. What was the nature and duration of the parties' relationship?

9     It was the position of Mr. Petruzziello going into the trial:



·       * 

That he and Ms. Albert had commenced an intimate relationship in 2001, which resulted in the birth of their son, Ed Jr., on March 21, 2002; 

·       * 

That the parties had cohabited intermittently from 2001 to 2003, at which time the relationship broke down; and 

·       * 

That the parties reconciled on October 1, 2005, and separated on May 1, 2007, for the final time; that the length of his relationship with Ms. Albert was for a period of approximately 19 months, October 1, 2005 to May 1, 2007. 

10     Both the application issued by Mr. Petruzziello and the Contract at paragraph number 1, recite the commencement of cohabitation as October 1, 2005. However, the bulk of the evidence, including much of Mr. Petruzziello's own oral testimony, did not substantiate his position as to the nature and length of his relationship with Ms. Albert.

11     It was the oral evidence of Mr. Petruzziello that he met Ms. Albert in January or February of 2000 at Diamonds, which was a strip club in Mississauga. She performed a lap dance for him, and he subsequently asked her out to dinner. They eventually started dating regularly, and on or about April 4, 2001, she moved in with him at his condominium. Mr. Petruzziello stated that once she became his girlfriend she had to give up taking off her clothes for money. For purposes of the trial, the parties agreed that Ms. Albert had earned as much as $1,500.00 per week as an exotic dancer.

12     Once the parties moved in together, Ms. Albert began bartending at Mr. Petruzziello's club. He paid her approximately $500.00 per week to cover her miscellaneous expenses. Mr. Petruzziello paid for everything else, and he was prepared to pay for her to go to school to better herself; upgrading her education and obtaining better employment skills were very important to him.

13     Following the birth of their son, Ed Jr., in March 2002, it was Mr. Petruzziello's evidence that Ms. Albert worked at the club very little, and focused primarily on care for the baby and house. At one point, Mr. Petruzziello actually said, "I worked, and she did nothing." But in cross-examination, he admitted that Ms. Albert "was not a bad cook but could use some sharpening up on the housekeeping." He did disclose that she went to driving school, at his expense, and she successfully got her driver's licence, but he complained that, "she would not go to school to get English and advance herself."

14     Mr. Petruzziello shared that by February 2003, Ms. Albert was becoming extremely frustrated with his long hours of work. On one particular occasion that month, she accused him of arriving home late, impaired, and with lipstick on his collar. A domestic altercation ensued, which resulted in Mr. Petruzziello being charged with assault and being removed from the home. It was Mr. Petruzziello's evidence that his bail conditions prevented him from residing at his home and communicating with Ms. Albert. He stated that Ms. Albert was able to get a variation of his bail conditions, such that he was back home with Ms. Albert and their son, just after Ed Jr.'s birthday on March 21 that year. Based on this evidence, Mr. Petruzziello was out of the house approximately one month. Although the parties were physically apart, I find that there was no evidence that either one of them wished to be separated from the other; it was mandatory due to the bail conditions.

15     Mr. Petruzziello gave evidence that during their relationship the parties travelled together a lot; he mentioned Acapulco, Mexico in the spring of 2001, a Mediterranean cruise in September 2001, Las Vegas in December 2001, Niagara Falls with their son in the summer of 2003; they typically celebrated his birthday by taking a vacation abroad. Mr. Petruzziello recounted that in September 2003, he, Ms. Albert, and Ed Jr. went on a Mediterranean cruise which included Italy, Venice, and Rome but that when they arrived in Barcelona, Spain to return to Canada, Ms. Albert was denied admittance back to Canada because her visa had expired, she had forgotten her driver's licence, and so she had no photo identification verifying her address with Mr. Petruzziello in Canada. Mr. Petruzziello explained that as a result he sent Ms. Albert and Ed Jr. to Hungary to stay with her mother and he flew back to Canada. Mr. Petruzziello stated that, "getting them back to Canada was my priority", and he promptly began a sponsorship application for her to become a landed immigrant. This sponsorship included a contractual obligation whereby Mr. Petruzziello agreed to provide Ms. Albert with significant financial support for a period of three years commencing on the date that she was granted landed immigrant status.

16     Mr. Petruzziello gave evidence that between October 2003 and December 2003, he visited Ms. Albert and Ed Jr. in Hungary twice, and then went on a Caribbean cruise with Ms. Albert in December 2003. He stated that Ms. Albert needed a visa to go on the cruise and when the visa was issued to her, authorities had made a clerical error such that it did not expire for 13 years. As a result, he was able to make arrangements to move Ms. Albert and Ed Jr. to the United States and by April/May 2004 had set Ms. Albert up in rental accommodation in Indian Rock Beach, Florida. In this way, Mr. Petruzziello was able to join Ms. Albert and Ed Jr. every two to three weeks for three to four days. He even registered Ed Jr. in private school while in Florida. Mr. Petruzziello stated that it was at this time that he and Ms. Albert agreed that as soon as she got back to Canada they would start working on a cohabitation agreement.

17     Mr. Petruzziello testified that Ms. Albert received her landed immigrant status, returned to Canada, and resumed living with him on October 1, 2005. I find that it was on this date that the three-year limitation period set out in the sponsorship agreement commenced to run, such that the contractual obligations imposed on Mr. Petruzziello by virtue of the sponsorship agreement were subsisting and relevant to the negotiations of both the Contract and the Minutes.

18     I do not find that there was any breakdown of the relationship between Mr. Petruzziello and Ms. Albert in October 2003, as originally alleged by Mr. Petruzziello in this action. On the contrary, I find that their physical separation was completely involuntary and solely the result of the untimely expiry of her visa. Further, I find that Mr. Petruzziello did everything he could to reunite with Ms. Albert and Ed Jr., as quickly as possible by commencing and diligently pursuing the sponsorship application and by moving Ms. Albert closer to Canada (Florida) as soon as that option was available. As set out at paragraphs 38 and 39 of the statement of agreed facts, jointly filed by the parties in this action, Mr. Petruzziello supported Ms. Albert completely while she was in Hungary and Florida, which further corroborates the ongoing nature of their relationship.

19     I reject Mr. Petruzziello's argument that he did all this for his son, and with little or no interest in Ms. Albert, as self-serving. If he was not interested in continuing their relationship, he would not have been talking about starting the process of obtaining a cohabitation agreement. I further find that Mr. Petruzziello is not above misleading the court; initially his evidence was that he was found not guilty at trial in December 2003 of the assault on Ms. Albert in February 2003, and it was not until he was confronted by the fact that she was in Hungary in December 2003, as a result of her expired visa, that he admitted that the charges were dismissed because she was unavailable to testify.

20     Based on the evidence presented by Mr. Petruzziello, I find that the applicant and the respondent commenced cohabitation on or about April 4, 2001, as argued at trial by Ms. Albert, and that there was no intention on the part of Mr. Petruzziello to separate from Ms. Albert until May 1, 2007, as stated in his application. Ms. Albert agrees that the date of separation was May 1, 2007.



·       B. Should the Cohabitation/Marriage Contract of the parties dated April 25, 2006, be set aside as invalid and unenforceable?

21     Subsection 56(4) of the Family Law Act contains the criteria to be applied when considering the discretionary power to set aside a domestic contract:1



·       SETTING ASIDE DOMESTIC CONTRACT -- A court may, on application, set aside a domestic contract or a provision in it, 



·       (a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made; 

·       (b) if a party did not understand the nature and consequence of the domestic contract; or 

·       (c) otherwise in accordance with the law of contract. 

22     The onus is on the party seeking to set aside the domestic contract to demonstrate that at least one of the circumstances set out in subsection 56(4) has been met; then the court must determine whether the circumstances complained of justified the exercise of the court's discretion in favour of setting aside the contract. See LeVan v. LeVan2.

23     The respondent advanced a number of grounds in support of her argument that the Contract should be set aside. In reaching my conclusion, it was necessary to deal with evidence that fell within all three clauses of subsection 56(4): (a), (b), and (c).3

Subsection 56(4) clause (a): Failure to Disclose

24     The failure to make disclosure under this clause does not necessarily render a domestic contract a nullity; the nondisclosure must be "significant". See LeVan, supra and Currey v. Currey.4

25     I agree with Justice Quinn where in Bruni v. Bruni, at paragraph [101], he states that, "Use of the word 'failure' in clause 56(4)(a) implies that proof of intent or mala fides is unnecessary" and further at paragraph [102], "A breach of s. 56(4)(a) should not be considered in isolation from all of the surrounding circumstances."5

26     In the case at hand, Mr. Petruzziello did not disclose his income in the Contract, or produce his income tax returns; nor did he include his vehicles and their value in his list of assets attached to the Contract. However, Ms. Albert gave evidence that he had informed her that his income was approximately $180,000.00 to $200,000.00 per year, and she knew the nature of the vehicles he owned. When Mr. Petruzziello's income tax returns were ultimately produced in the course of this litigation, they confirmed that the information he had provided to Ms. Albert as to his income was reasonably accurate, given the nature of his employment. As Ms. Albert was aware of this information at the time the Contract was being negotiated, I do not consider Mr. Petruzziello's failures to provide a precise annual income figure, to attach his actual income tax returns, or to include his vehicles in his list of assets to the Contract, material failures that would engage clause 56(4)(a).

27     However, Mr. Petruzziello also failed to disclose the details of the sponsorship agreement which he had entered into in 2003, in order that Ms. Albert and Ed Jr. could rejoin him in Canada, the particulars of which read as follows:



·       The sponsor ... must, before a sponsorship undertaking can be approved, enter into a written agreement with the person to be sponsored ... if this person is 22 years of age or older or ... is the sponsor's spouse, common-law partner, or conjugal partner. 



·       This agreement lists the obligations and responsibilities that fall onto the sponsor ... As sponsor I promise to provide for the sponsored person and his or her family members basic requirements ... Basic requirements include food, shelter, clothing, fuel, utilities, household supplies, personal requirements and health care not provided by public health, including dental care and eye care. 

28     I find that this obligation, in accordance with the terms of the sponsorship agreement, was in force for a period of three years; from the date Ms. Albert arrived back in Canada on October 1, 2005 until its expiry on September 30, 2008. I find that the sponsorship agreement was relevant and material to the negotiations of the Contract in April 2006 and to the negotiations of the Minutes in October 2007.

29     Ms. Albert was in Hungary on November 30, 2003, when Mr. Petruzziello signed the sponsorship agreement and she did not become aware of the particulars of the sponsorship agreement until the immigration file was produced in the course of this litigation.

30     I find the failure of Mr. Petruzziello to disclose this liability, which was an ongoing obligation to Ms. Albert, was a significant and material failure and thereby engages clause 56(4)(a).



·       Subsection 56(4) clause (b): Understanding the nature or consequences of the contract.

31     It is necessary to consider the circumstances leading up to the signing of the Contract and the individual circumstances of the parties.

32     By the time Ed Jr. was born to Mr. Petruzziello and Ms. Albert in March 2002, Mr. Petruzziello had been married and divorced twice, once to Christina Bernachi, a marriage that lasted from May 2, 1987 until separation in March 1988, once to Retha Dykes, a marriage that lasted from April 13, 1999 until separation in April 2000; he had five children by five different mothers. He was a hardworking, successful businessman; both as a nightclub owner/manager and as a mortgage broker. Mr. Petruzziello stated that he wanted a cohabitation/marriage contract to protect his assets for his five children, and to clearly set out Ms. Albert's entitlement in the event of a breakdown in the relationship. He also wanted to specify in the contract her obligation to educate herself and equip herself with the skills necessary to support herself and their child. He expressed his concern for their age difference and what would become of her and Ed Jr. if anything happened to him. I find it probable, given Mr. Petruzziello's past experience in resolving issues which arise when a relationship breaks down, that he would be aware of the factors to be considered when determining child and spousal support, including, as it relates to spousal support, the duration of the relationship, the roles assumed during the cohabitation, and the economic impact on the parties in the event of a breakdown in the relationship. This may explain his eagerness to reduce Ms. Albert's economic dependency on him.

33     Mr. Pomer, a lawyer retained by Mr. Petruzziello, gave evidence that Mr. Petruzziello instructed him to prepare a cohabitation/marriage contract and he did so. Mr. Pomer believed that the parties had commenced their relationship on October 1, 2005, as this was the information provided by Mr. Petruzziello and he had no reason to question it. He was unaware of Mr. Petruzziello's ongoing and subsisting contractual obligations pursuant to the sponsorship agreement or that Ms. Albert had given up a $1,500.00 per week job at Mr. Petruzziello's request. Mr. Pomer confirmed that he had given Mr. Petruzziello instructions to disclose all of his assets, less his debts, and that this disclosure was necessary; otherwise, there would be problems enforcing the contract. Mr. Pomer did not verify the information Mr. Petruzziello provided in this regard and he stated he was never requested by Ms. Albert or any of her lawyers at any time to obtain verification.

34     Mr. Pomer testified that he specifically advised Mr. Petruzziello that a paralegal was not sufficient, that Ms. Albert would have to see a lawyer who could explain the proposed terms of the contract to her. On March 2, 2006, Mr. Petruzziello took Ms. Albert to see Peter A. Grunwald for independent legal advice related to the contract drafted by Mr. Pomer. Mr. Grunwald was a well-seasoned family lawyer and fluent in Ms. Albert's mother tongue which was Hungarian. Mr. Grunwald gave evidence that he would not permit Ms. Albert to sign the contract because, in his words, "it was so one-sided I thought I would be negligent to do so." He also advised that the contract had already been signed by Mr. Petruzziello. Mr. Grunwald handwrote a list of amendments that were necessary before he would permit Ms. Albert to sign the contract and provided the list to Mr. Petruzziello. It was clear from the affidavit prepared by Mr. Grunwald for Ms. Albert, just a few days later on March 9, 2006, that Mr. Grunwald was aware of the length of the relationship despite what was stated on the face of the contract, that Mr. Petruzziello had obligations to Ms. Albert arising as a result of the immigration sponsorship agreement, and that she had given up lucrative employment as a result of Mr. Petruzziello's demand that she do so. There was no evidence, however, that Mr. Grunwald had actually explained to Ms. Albert what she would be giving up by signing the contract in the form that had already been signed by Mr. Petruzziello.

35     Some of the changes -- but not all of them -- demanded by Mr. Grunwald were consented to by Mr. Petruzziello and incorporated into the Contract by Mr. Pomer. When questioned on the amendments sought by Mr. Grunwald, Mr. Petruzziello responded, "Mr. Grunwald was not God; he was not the final say." Mr. Grunwald was never given the opportunity to review the amended Contract with Ms. Albert.

36     Instead, the following month, Mr. Petruzziello took Ms. Albert to see Rahul Kesarwani for independent legal advice on the Contract. It was the evidence of Mr. Kesarwani, Ms. Albert, and Mr. Petruzziello that Mr. Petruzziello waited in the reception area of Mr. Kesarwani's open concept office, while Mr. Kesarwani and Ms. Albert reviewed the Contract; there were no walls dividing Mr. Kesarwani's office from the workspace or from the reception area where Mr. Petruzziello awaited the conclusion of the meeting. Further, the invoice for Mr. Kesarwani's services was made out to Mr. Petruzziello and paid for by Mr. Petruzziello. When Mr. Kesarwani met Ms. Albert on April 25, 2006, he was a relatively new lawyer (called to the bar in 2004) and was an associate in a storefront location, where he was practicing one-third corporate, one-third real estate, and one-third family law. He was certainly not as experienced as Mr. Grunwald and was not fluent in Hungarian. In addition, it was clear he was unaware of the obligations Mr. Petruzziello had to Ms. Albert pursuant to the sponsorship agreement or that the relationship between the parties had in fact commenced April 2001 and not October 2005, as recited on the face of the Contract. It also appears that it was never communicated to Mr. Kesarwani that Ms. Albert had given up her employment at the request of Mr. Petruzziello, where she had been earning approximately $1,500.00 per week.

37     Without this information I find that it was impossible for Mr. Kesarwani to evaluate the adequacy of the spousal support provisions contained in the Contract or to properly advise Ms. Albert on what she was giving up by signing the Contract; he could not reasonably assess her entitlement to compensatory support, support based on dependency, or contractual support pursuant to the sponsorship agreement, although, it appears now that she may have been entitled to all three. It was all within Mr. Petruzziello's knowledge and he was the one insisting on execution of the Contract and intending to rely on the Contract. He had an obligation to disclose information necessary to Mr. Kesarwani's evaluation. Otherwise, Ms. Albert had no chance of understanding what she was giving up when she signed the Contract.

38     It is not enough to say that this information was all within Ms. Albert's knowledge, and I find that she did not understand the significance of this information, or was not able to communicate this information to Mr. Kesarwani for purposes of his review of the Contract.

39     Ms. Albert did not have the same experience with family law as Mr. Petruzziello had, and I find that she was not likely aware of the factors relevant when considering a reasonable amount and duration of spousal support. Further, she had a language barrier to contend with; these were complex concepts and contractual language -- not the everyday language she had been learning since her arrival in Canada from Hungary. In contrast, she had been able to make Mr. Grunwald, who was fluent in her first language, aware of this information; no doubt Mr. Grunwald, being an experienced family law lawyer, knew what questions to ask, and was able to do so in Ms. Albert's mother tongue.

40     I find that Mr. Petruzziello effectively changed Ms. Albert's legal representation in the middle of negotiations because he did not approve of all the changes requested by Mr. Grunwald in order to make the Contract "fair" to Ms. Albert.

41     I find Mr. Petruzziello's behaviour was calculated, he was intent on getting the Contract signed without further concessions and with terms that would minimize his exposure to a spousal support claim.

42     I find that by his conduct, Mr. Petruzziello made it impossible for Ms. Albert to obtain meaningful independent legal advice, such that she did not understand the nature or consequences of the Contract, which thereby engages clause 56(4)(b).



·       Subsection 56(4) clause (c): Otherwise in accordance with the Law of Contract.

43     Under the law of contract, domestic contracts require the utmost good faith on the part of the parties negotiating. See Saul v. Himel.6 Justice Sachs has said in D'Andrade v. Schrage, at paragraph [82]:7



·       ... When negotiating such a contact couples have an absolute obligation to disclose anything that would be relevant to the purpose of the contract. ... 

44     The reason the law demands open and honest disclosure during these negotiations is to ensure that parties know what they are giving up if they decide to compromise their positions in a domestic contract; full disclosure must be given for it to be an informed choice.

45     I find that Mr. Petruzziello failed in his obligation to negotiate in good faith by not disclosing everything relevant to the purpose of the Contract; particularly the true nature of the relationship between the parties, and his contractual support obligations pursuant to the sponsorship agreement. I find that this non-disclosure was deliberate and intended to mislead Ms. Albert and the lawyers involved in both the negotiation of the Contract and the Minutes, and on whom Ms. Albert relied. This failure on the part of Mr. Petruzziello to negotiate in good faith engages clause 56(4)(c).

46     In addition, however, clause 56(4)(c) includes the common-law grounds for setting aside contracts, such as fraud, duress, undue influence, material misrepresentation, and unconscionability.

47     Although Ms. Albert argued duress and undue influence as grounds for setting aside the Contract, I find it unnecessary to deal with the conflicting evidence on those points, because I find the spousal support provisions/special provisions of the Contract to be such an extreme departure from Ms. Albert's statutory entitlement (see Family Law Act, sections 30, 33, and the Spousal Support Advisory Guidelines), as to be unconscionable.8 More specifically, the payment of $100,000.00 contemplated in paragraph 7.8 of the Contract related to business start-up costs, is at Mr. Petruzziello's complete discretion, and therefore cannot be considered spousal support at all. Further, paragraph 7.7 obligates Ms. Albert to be in full-time school as a condition of "obtaining any form of spousal support". This, despite the fact that at the time she signed the Contract she had given up lucrative employment at Mr. Petruzziello's request, thereby becoming completely financially dependent on him for over five years, and had a child with him for whom she provided primary care.

48     Again, clause 56(4)(c) has been engaged. Based on my findings as previously set out herein, I find that Ms. Albert has met the evidentiary onus imposed on her, and I find it appropriate based on the particular facts of this case, to exercise the court's discretion set out at subsection 56(4) of the Family Law Act and I hereby set aside the Contract as invalid and unenforceable.



·       C. Should the Minutes of Settlement incorporated into the consent order of Mr. Justice Nelson dated October 26, 2007, be set aside as invalid and unenforceable?

49     Following the final separation of the parties on May 1, 2007, Mr. Petruzziello, with the assistance of his lawyer, David Pomer, issued an application dated June 13, 2007, in which he sought access to their son, and other relief related to the parenting issues. Ms. Albert in turn retained her own counsel, Jeremy Dolgin, and on or about August 31, 2007, her answer and claim in the proceeding were served and filed with the court.

50     The parties and their counsel attended court for a case conference on October 26, 2007, and on that date the Minutes of Settlement were signed by Mr. Petruzziello and Ms. Albert, and witnessed by their respective lawyers. The Minutes and attached schedule, as they relate to spousal support, read as follows:



·       [Preamble] The parties agree that spousal support shall be in full compliance with the Cohabitation/Marriage Contract. The parties acknowledge their rights and responsibilities with respect to the sections concerning spousal support including sections 7.1, 7.3, 7.5, 7.6, 7.7, 7.8. This acknowledgment premises that the schedule of payments is followed and clears the bank. 



·       1. $5,000.00 per week to be deposited by the applicant in the respondent's solicitor's bank account at CIBC Account Number 7600917, Transit Number 00006, Bank 010, at Sparks Street. 

·       2. The first weekly amount of $5,000.00 shall commence on the week of the 29th October 2007 and thereafter the $5,000.00 weekly payment shall continue to the cover the agreed upon amount of $22,150.00. [sic



·       The paid $22,150.00 shall be in full and final satisfaction of paragraphs 7.1, 7.3, 7.5, 7.6 of the Cohab./Marriage Agreement. Ed acknowledges that he is still responsible for paragraphs 7.7 only and no other payments. [sic ] and are declared to be final. As previously stated herein, these Minutes formed the basis for the consent order of Mr. Justice Nelson dated October 26, 2007. 

51     Ms. Albert has similar complaints with regard to the Minutes as she had regarding the Contract: Mr. Petruzziello failed to make the financial disclosure required by law, she did not understand the nature and consequence of the Minutes, and Mr. Petruzziello negotiated in bad faith. However, I find that the situation regarding the negotiation and execution of the Minutes is very different from the circumstances regarding the negotiations and execution of the Contract.

52     As a general rule, settlements of pending litigation between counsel acting within the scope of their retainer will be upheld by the court in order to maintain the integrity of the settlement process, regardless of whether the agreement meets the formal requirements under the local domestic contract legislation.9 It would have been helpful to the court had counsel submitted authority on this point. In Geropoulos v. Geropoulos,10 the Ontario Court of Appeal held that if litigation has been commenced, then compliance with subsection 55(1) of the Family Law Act is not required and minutes of settlement, freely and properly entered into by parties assisted by independent legal advice, are enforceable pursuant to the principles established in Scherer v. Paletta,11 also a decision of the Ontario Court of Appeal. The ratio in Scherer v. Paletta is set out in the reasons of Evans, J.A. at page 526 to 527 as follows:



·       The authority of a solicitor arises from his retainer and as far as his client is concerned it is confined to transacting the business to which the retainer extends and is subject to the restrictions set out in the retainer. The same situation, however, does not exist with respect to others with whom the solicitor may deal. The authority of a solicitor to compromise may be implied from a retainer to conduct litigation unless a limitation of authority is communicated to the opposite party. A client, having retained a solicitor in a particular matter, holds that solicitor out as his agent to conduct the matter in which the solicitor is retained. In general, the solicitor is the client's authorized agent in all matters that may reasonably be expected to rise for a decision in the particular proceedings for which he has been retained. Where a principal gives an agent general authority to conduct any business on his behalf, he is bound as regards third persons by every act done by the agent which is incidental to the ordinary course of such business or which falls within the apparent scope of the agent's authority. As between principal and agent, the authority may be limited by agreement or special instructions but as regards third parties the authority which the agent has is that which he is reasonably believed to have, having regard to all the circumstances, and which is reasonably to be gathered from the nature of his employment and duties ... 



·       A solicitor whose retainer is established in the particular proceedings may bind his client by a compromise of those proceedings unless his client has limited his authority and the opposing side has knowledge of the limitation, subject always to the discretionary power of the Court, if its intervention by the making of an order is required, to enquire into the circumstances and grant or withhold its intervention if it sees fit; and, subject also to the disability of the client. It follows accordingly, that while a solicitor or counsel may have apparent authority to bind and contract his client to a particular compromise, neither solicitor nor counsel have power to bind the Court to act in a particular way, so that, if the compromise is one that involves the Court in making an order, the want of authority may be brought to the notice of the Court at any time before the grant of its intervention is perfected and the Court may refuse to permit the order to be perfected. If, however, the parties are of full age and capacity, the Court, in practice, where there is no dispute as to the fact that a retainer exists, and no dispute as to the terms agreed upon between the solicitors, does not embark upon any enquiry as to the limitation of authority imposed by the client upon the solicitor. 

Succinctly put, where a lawyer is retained in the face of pending litigation, as in the case at bar, that lawyer has apparent authority to bind his client. The case law establishes a policy of encouraging the settlement of disputed claims by recognizing and preserving the validity of settlements freely and properly entered into with legal advice.

53     For the reasons set out below I find that, vis-à-vis Mr. Pomer and Mr. Petruzziello, Mr. Dolgin's actions in negotiating a final resolution of the spousal support issue were wholly within the scope of his retainer, and therefore, the Minutes are valid and enforceable. In addition, I find that Ms. Albert has failed to meet the onus imposed on her by subsection 56(4) of the Family Law Act to demonstrate that at least one of the circumstances set out in that subsection has been engaged, and as a result, I find that the court has no jurisdiction to exercise its discretion in favour of setting aside the Minutes.

The Scope of Mr. Dolgin's Retainer

54     To understand the scope of Mr. Dolgin's retainer from Mr. Pomer and Mr. Petruzziello's perspective, it is necessary to review the documents he assisted Ms. Albert in filing with the court prior to the Minutes being negotiated and executed on October 26, 2007; her answer and claim in the proceeding, which was served and filed on or about August 31, 2007, and her case conference brief served and filed prior to the conference held on October 26, 2007.

55     From these documents, Mr. Pomer and Mr. Petruzziello would be able to determine what Ms. Albert's demands were, and what information she was relying on to form the basis of those demands.

The Answer and Claim

56     In Ms. Albert's answer and claim she sought the following order from the court [her demands]:



·       1. An order for spousal support in the amount of $7,500.00 per month for a period of five years; and 

·       2. In the alternative, an order that the applicant comply with the support provisions as provided for in the Cohabitation Agreement signed by the parties on April 25, 2006, in a manner whereby he provides the respondent, one lump-sum payment, all amounts owing under that agreement. 

57     Nowhere in her answer and claim does Ms. Albert seek to set aside the Contract or challenge its validity.

58     As set out on page 4 of her answer under, "Important Facts Supporting My Claims" it is clear that Mr. Dolgin was aware of the following information and would be taking it into account in determining how to proceed with Ms. Albert's case:



·       1.That Mr. Petruzziello and Ms. Albert had been a couple for a period of approximately five years, during which she had been financially dependent on him; 

·       2. That they had lived together for two years immediately preceding the separation, during which time Mr. Petruzziello provided the family income and Ms. Albert was the homemaker and provided childcare to their son, Ed Jr., and 

·       3. That Ms. Albert was unemployed, had limited employment skills, and planned on returning to school. 

59     A review of Ms. Albert's case conference brief confirms that Mr. Dolgin was also aware of the following:



·       1. That Mr. Petruzziello claimed to Ms. Albert that he earned approximately $200,000.00 per year; and 

·       2. Ms. Albert's immigration status which is mentioned, as is her employment history in Canada as an exotic dancer, and her current state of unemployment. 

60     Finally, in her brief, Ms. Albert recites that the parties entered into a cohabitation agreement which sets out a specific spousal support agreement. She goes on in the brief to complain that, "to date [Mr. Petruzziello] has failed to comply with that agreement".

61     Nowhere in her case conference brief does Ms. Albert seek to set aside the Contract or challenge its validity.

62     It was the evidence of Mr. Pomer and Mr. Dolgin that in negotiating the spousal support terms of the Minutes, they basically went through the Contract and calculated on a paragraph-by-paragraph basis the amounts owed by Mr. Petruzziello to Ms. Albert in accordance with the terms of the Contract. A comparison of the Contract to the Minutes corroborates that this was the approach taken. It appears then that Mr. Petruzziello gave in to the demand of Ms. Albert, as set out at paragraph 2 in her answer and claim, that Mr. Petruzziello comply with the Contract by providing her with a lump-sum payment of all amounts owing under the Contract.

63     There was no evidence before the court that information was imparted to Mr. Pomer and Mr. Petruzziello by Ms. Albert, or anyone else, that Mr. Dolgin did not have her authorization to negotiate and resolve the issue of spousal support, on a final basis. I find as a fact that Mr. Dolgin did indeed have that authorization. I accept Mr. Dolgin's evidence that he and Ms. Albert had discussed in detail the risks and benefits of trying to set aside or vary the spousal support provisions of the Contract, including without limitation, the following concerns:



·       1. It would be time consuming and expensive to attempt to set aside the Contract, particularly given that Ms. Albert had received independent legal advice, and at least some financial disclosure before she signed it. 

·       2. There were no guarantees; even if she were successful in setting aside the Contract, she might not be entitled to significantly more spousal support, given her particular circumstances and the unusual history of the relationship. And, if she were unsuccessful there could be significant costs consequences. 

·       3. Even if she was successful, there could be significant problems collecting on a periodic spousal support order, particularly if Mr. Petruzziello went to jail as a result of the outstanding assault charges, which had been laid as a result of her complaint. This would have appeared at that time to be a real probability given that Mr. Petruzziello had previously been convicted of domestic assault on another intimate partner and had served time in jail as a result of those charges. 

64     It was also the evidence of Ms. Albert that Mr. Petruzziello was involved in illegal activities, including the trafficking of cocaine and that the nature of his employment was such that he could easily manipulate his income. All these factors would make enforcement of periodic spousal support a challenge.

65     Although, it was not mentioned by Mr. Dolgin as a consideration, paragraph 17 of the parties' statement of agreed facts states:



·       The parties agree as of August 29, 2008, the applicant [Mr. Petruzziello] financially supported four of his five children including Ed Jr. and I find it probable that Ms. Albert was also concerned that Mr. Petruzziello's pre-existing child support obligations would take priority over her claim to periodic spousal support. 

66     Mr. Pomer, being an experienced family lawyer would be aware in a general sense that these would be the risks being assessed by Mr. Dolgin and his client in negotiating a settlement of the litigation.

67     I find that Mr. Petruzziello and Mr. Pomer reasonably believed that Mr. Dolgin had authority to negotiate the spousal support entitlement on a final basis; that is sufficient to make the Minutes binding, whether or not Ms. Albert actually gave him those instructions. As such I find the Minutes of Settlement dated October 26, 2007, are valid and enforceable as is the consent order of Mr. Justice Nelson dated October 26, 2007. Any complaint Ms. Albert may have with regard to Mr. Dolgin acting outside the scope of his retainer is strictly between Ms. Albert and Mr. Dolgin.

68     If I am wrong on this point, then for the reasons set out below I find the Minutes meet the formal requirements of section 55 of the Family Law Act and that Ms. Albert has failed in her attempt to set them aside pursuant to subsection 56(4) of the Family Law Act.



·       The Formal Requirements under Domestic Contract Legislation -- Subsection 56(4) of the Family Law Act

69     As previously stated at paragraph [20] herein, subsection 56(4) contains the criteria to be applied when considering the discretionary power to set aside a domestic contract or agreement such as the Minutes:


·       SETTING ASIDE DOMESTIC CONTRACT -- A court may, on application, set aside a domestic contract or a provision in it, 


·       (a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made; 

·       (b) if a party did not understand the nature and consequence of the domestic contract; or 

·       (c) 

otherwise in accordance with the law of contract. 

And the onus is on Ms. Albert, who wishes to set the Minutes aside, to demonstrate that at least one of the circumstances set out in subsection 56(4) has been engaged and that her grievance justifies the court's exercise of its discretion in favour of setting aside the Minutes.

Subsection 56(4) clause (a): Failure to disclose.

70     Ms. Albert argues that because Mr. Petruzziello failed to provide to her a sworn financial statement (including the attachment of his income tax returns) prior to the Minutes being executed, that this clause is engaged, and the nondisclosure is so significant, that the court must exercise its discretion by setting aside the spousal support provisions set out in the Minutes.

71     As previously stated herein, a breach of clause 56(4)(a) should not be considered in isolation from all the surrounding circumstances, and I find the relevant surrounding circumstances in this case to be as follows:



·       1. Mr. Petruzziello disclosed his income in the Minutes to be $180,000.00. When his actual income tax returns were completed, his income was determined to be substantially less. As set out in paragraphs 56 and 57 of the statement of agreed facts, that information was relied on by Madam Justice Quinlan when she ordered a reduction in Mr. Petruzziello's monthly child support payment, in consideration of his evidence of reduced income. That order made on February 25, 2009, has neither been varied nor appealed to date. It appears therefore that in disclosing his income for purposes of negotiating the Minutes Mr. Petruzziello in fact overestimated his income. 

·       2. At paragraph 13 of Ms. Albert's case conference brief, she requests an order that Mr. Petruzziello provide a financial statement with all required attachments, within seven days. I take judicial notice of the fact that such disclosure orders are commonly made by the court at the case conference stage of family law proceedings. It should be noted that Mr. Petruzziello was not required to file a sworn financial statement at the time he issued his application, because his claim related to access and parenting issues only. 

·       3. As stated at paragraph 49 of the statement of agreed facts, the Minutes were not conditional on further disclosure from Mr. Petruzziello. Notwithstanding the request for further disclosure set out in her case conference brief, I find that Ms. Albert chose not to pursue further disclosure from Mr. Petruzziello prior to entering into the Minutes nor did she make the Minutes conditional on further disclosure from Mr. Petruzziello, despite having the benefit of independent legal advice throughout the negotiations. 

72     Although, Ms. Albert has now commenced an action against Mr. Dolgin, alleging, among other things, incompetence, I find that as between herself and Mr. Petruzziello, she chose to relieve him of any further disclosure obligations, as it related to her spousal support claim.

73     Further, there is nothing in section 56 of the Family Law Act that precludes a litigant from entering into a final and binding settlement where only partial financial disclosure has been made; where a litigant chooses to enter into a final and binding settlement, without seeking to compel further financial disclosure from the other party, that litigant cannot resile from the consequences of that decision unless that litigant can demonstrate that the other party's financial disclosure (partial though it may be) was inaccurate, misleading, or false. See Quinn v. Keiper.12

74     In the case at hand, it could be argued that Mr. Petruzziello's disclosure with regard to his income was inaccurate, misleading, and false. However, I find that Mr. Petruzziello's over estimation of his income during the negotiation and execution of the Minutes in this case, did not cause Ms. Albert to compromise, reduce, or limit her spousal support claim in any way, and accordingly, did not cause any prejudice to Ms. Albert.

75     As a result of my consideration of the surrounding circumstances, I do not find Mr. Petruzziello's failure to provide a sworn financial statement and supporting documents to Ms. Albert prior to the execution of the Minutes to be a material failure that would engage clause 56(4)(a) of the Family Law Act.



·       Subsection 56(4) clause (b): Understanding the nature and consequences of the contract.

76     Ms. Albert argues that she did not understand the nature and consequences of the Minutes; that the Minutes were negotiated privately between Mr. Petruzziello, his lawyer Mr. Pomer, and Mr. Dolgin, and that she was excluded from the negotiating room. She alleges that without reviewing the Minutes with her, Mr. Dolgin told her to execute the document and she did so, in the belief that the spousal support provisions were temporary and would be reviewed again on the next court date scheduled for January 16, 2008.

77     On that basis, Ms. Albert asked the court to exercise its discretion and set aside the spousal support provisions, as set out in the Minutes. However, I find that the evidence presented at trial does not support Ms. Albert's version of events. Firstly, Ms. Albert was free, following separation, to retain any lawyer she wished. If she had any concerns about understanding the process, the law, or her rights, because of language and literacy issues, she could have retained a lawyer fluent in Hungarian, but she did not do so. It is therefore reasonable to conclude that by October 2007 she had enough confidence in her English language fluency to proceed with the litigation without the assistance of a lawyer fluent in Hungarian or a Hungarian interpreter.

78     Secondly, when pressed in cross-examination regarding her allegation that she was excluded from the negotiating room, Ms. Albert acknowledged that Mr. Petruzziello's bail conditions precluded Mr. Petruzziello and Ms. Albert from being in the same room, and that in order to make any progress at the case conference, Mr. Dolgin and Mr. Pomer had to negotiate while keeping Mr. Petruzziello and Ms. Albert apart.

79     Thirdly, although Ms. Albert's initial position was that Mr. Dolgin had directed her to sign the Minutes without reviewing the terms with her and she followed his direction, she went on to give evidence that during the negotiations she objected to the provision in the Minutes that she be required to submit to drug testing, without Mr. Petruzziello being subject to the same obligation. This flies in the face of her evidence that Mr. Dolgin did not review the specific terms of the Minutes with her, and I find it more probable that he reviewed all the terms, but that the drug testing was the only one she took exception to, at that time.

80     Finally, it was the evidence of both Mr. Pomer and Mr. Dolgin that from their arrival at court that day (October 26, 2007) detailed negotiations took place between the two lawyers and their respective clients, which were wholly authorized by Mr. Petruzziello and Ms. Albert. It was the evidence of Mr. Dolgin that he reviewed in detail, with Ms. Albert, each provision of the Minutes, that she understood that the spousal support provisions were final, and that the only issues coming back to court related to access, child support, and Mr. Petruzziello's financial disclosure as it related specifically to child support.

81     Indeed, Ms. Albert had no motion for spousal support before the court that was capable of being adjourned to January 16, 2008.

82     When Ms. Albert was cross-examined and directly asked about the truthfulness of Mr. Dolgin's evidence (given under oath at his questioning), she would not say that he was not telling the truth. To be clear, she would not swear under oath that Mr. Dolgin was lying when he said he reviewed all the terms of the Minutes with her.

83     Given this evidence, I find on a balance of probabilities that Ms. Albert did understand the nature and consequence of the Minutes when she executed them on October 26, 2007.



·       Subsection 56(4) clause (c): Otherwise in accordance with the law of contract.

84     Again it is important to keep in mind that the circumstances surrounding the negotiations and execution of the Minutes were very different from the circumstances surrounding the negotiations and execution of the Contract. More specifically, Mr. Dolgin was aware of Ms. Albert's immigration status and makes specific reference to it in the court documents he prepared on her behalf. In addition, in negotiating the spousal support provisions set out in the Minutes, the parties' then counsel ignored paragraph 7.7 of the Contract, which obligated Ms. Albert to be in fulltime school as a condition of "obtaining any form of spousal support", (a provision that I found to be unconscionable) and preserved in the Minutes Mr. Petruzziello's obligation in paragraph 7.7 to pay the costs of Ms. Albert obtaining a post-secondary degree. In Rick v. Brandsema, Justice Abella, at paragraph 45, states that:13



·       Parties shall generally be free to decide for themselves what bargain they are prepared to make. 

85     Justice Abella expanded on that concept in paragraph 46, when she stated as follows:



·       This contractual autonomy, however, depends on the integrity of the bargaining process. Decisions about what constitutes an acceptable bargain can only authoritatively be made if both parties come to the negotiating table with the information needed to consider what concessions to accept or offer. 

86     In the case at hand, I find that both Mr. Petruzziello and Ms. Albert had effective independent legal advice, and that the Minutes reflect their genuine mutual desire to finalize the spousal support arrangements between them. I find there is no evidence of exploitation or material misinformation.

87     Finally, although I do not find the Minutes to be overly generous, I do not find them to be unconscionable. As set out at paragraph 42 of the statement of agreed facts, Mr. Petruzziello did pay Ms. Albert directly, or through her lawyer, or designated third party:


·       42. 

The parties agree that ... 


·       i. All of the $22,1580.00 [sic -- should read $22,150.00] under the terms of the said October 26, 2007 settlement. 

·       ii. Approximately $3,870.00 to the Respondent in compliance with the terms of the Immigration Sponsorship Agreement; 

·       iii. All of the Respondent's housing rent for the period of June 1, 2007 to May 31, 2008 in the amount of $1,290 per month, in compliance with the terms of the said Sponsorship Agreement. 

88     In addition to receiving the benefit of the Minutes, I accept the evidence of Ms. Albert that she also received $13,425.00 from a spousal RRSP contributed to by Mr. Petruzziello on her behalf.

89     Based on my findings, as previously set out herein, I find that Ms. Albert has failed to meet the evidentiary onus imposed on her, such that clause 56(4)(c) has not been engaged, nor has clause 56(4)(a) or (b).

90     As a result, I have no jurisdiction to set aside the Minutes entered into by Mr. Petruzziello and Ms. Albert on October 26, 2007. As a consequence I find the Minutes remain valid and enforceable.

COSTS

91     If the parties cannot agree on costs, costs may be spoken to by counsel. A date for oral submissions may be obtained from the trial coordinator.

ORDER

92     For the reasons set out above, order to go as follows.


·       1. The Cohabitation/Marriage Contract between the parties dated April 25, 2006, is hereby set aside as invalid and unenforceable; 

·       2. The Minutes of Settlement entered into by the parties on October 26, 2007, are valid and enforceable; 

·       3. The validity and enforceability of the consent order of Mr. Justice Nelson dated October 26, 2007, is hereby affirmed. 

J.E. HUGHES J.

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