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Epstein’s This Week in Family Law | Unconscionability

Separation agreement set aside for unconscionability and essential unfairness in recent summary judgment.

Epstein’s This Week in Family Law

By: Philip Epstein

The Dangers of Making too Good a Deal - Separation Agreement Set Aside for Unconscionability and Essential Unfairness Butler v. Butler, 68 R.F.L. (7th) 309 (Ont. S.C.J.) - Vogelsang, J.

This is a summary judgment motion under the new Ontario Family Law Rule 16 to set aside a separation agreement. It is very unusual for a court to set aside a separation agreement by way of summary judgment when the action is defended, but then again, this case has overwhelming facts in favour of the wife. Justice Vogelsang proceeded with summary judgment because he was satisfied that the case was driven by the documents, that there was very little disagreement about the facts and that each party had been subjected to a rigorous cross-examination under oath on the affidavits filed. In addition, the issue involved only one transaction and that is the execution of the separation agreement and its terms.

Very simply put, the wife decided to leave the husband for another man. This was a 34-year marriage and the wife had been a stay-at-home mother who looked after two children. While the children were adult children, they had some financial difficulties and that was causing some stress for the family. The husband went to a lawyer and ultimately presented the wife with a completely one-sided separation agreement. The terms of that separation agreement included the wife giving up an equalization payment in excess of $150,000, giving up the right to share in the husband’s valuable pension, and accepting about $40,000 in lieu of what would have been indefinite spousal support of at least $2,500 per month. The husband had a lawyer draft the agreement, and the wife signed it without independent legal advice relying on the husband’s advice to her that because she left the marriage and had not worked during the marriage outside of the home, she was not entitled to anything. It is hard to believe in this day and age that the wife could be so naïve, but perhaps her feelings of guilt over leaving the marriage for another man outweighed any sense of entitlement.

I wonder if the lawyer for the husband would have told him that “I can prepare the agreement and your wife may sign it, but sooner or later if she wakes up she is going to successfully move to set it aside.”

This agreement was grossly improvident. It is true that the wife took no steps to protect herself and declined independent legal advice. Nevertheless, she relied upon her husband even though, in the negotiation of a separation agreement, he did not have a fiduciary duty to protect her. Nevertheless, Justice Vogelsang found that the husband had engaged in predatory behaviour, was out to protect his own self interest and crossed the line. Justice Vogelsang finds that:

In my view, Mr. Butler exerted his will over Ms. Butler and was in a demonstrably stronger position which had the result of a real disadvantage to Ms. Butler. His telling her what the result would be, in the context of her trust in him that he would be fair, represented a pressure on her will that left her no realistic ability to freely decide.

The Court canvasses the cases on the consequences of lack of independent legal advice and makes it clear that the lack of independent legal advice is not by itself determinative. As Justice Vogelsang concludes:

When the obvious unfairness of the contract is viewed against a backdrop of her lack of legal advice, her unsophistication and the fact that, even without malicious intent, Mr. Butler was acting very much in self-preservation as he took advantage of his wife, it is clear to me that the agreement must be set aside.

This was an agreement that had no chance of being upheld. The bargaining power was demonstrably unequal. The concessions made by the wife were beyond ludicrous and this is an object lesson about not trying to cut oneself too good a deal.

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