Petruzziello v. Albert
Between
Edmondo Petruzziello, Applicant, and
Viktoria Albert, Respondent
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.
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:
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,
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.
· 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]:
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:
59 A
review of Ms. Albert's case conference brief confirms that Mr. Dolgin was also
aware of the following:
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:
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,
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:
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:
The parties agree that
...
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.
J.E. HUGHES J.
1 comment:
Nice article. We should consult with good cohabitation agreement solicitors for better understanding.
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