Setting Aside a Cohabitation Agreement
Moses Estate v Metzer 2017 ONCA 767
The parties were in a common law relationship for seven years and separated before Ms. Moses passed away. The parties signed a cohabitation agreement in 2007, which stated that rights of ownership would govern property division, that the parties waived claims to beneficial ownership, that the parties agreed to deal with their property as unmarried, and that that the parties’ waived their rights to the other’s property.
The issue before the Court was the broadly worded waivers of property rights in the Couple’s Cohabitation Agreement as applied to three development properties.
The trial judge found that although never formalized, there had been a property development agreement between the parties. The trial judge found that despite the express wording of the waivers in the cohabitation agreement, there was convincing evidence that the property development agreement, and not the cohabitation agreement, governed the development properties, in which the couple invested.
The trial judge held that the property development agreement was not an enforceable agreement to amend the Cohabitation Agreement because it did not comply with section 55(1) of the Family Law Act. That is, the property development agreement was not in writing, not signed by the parties, and not witnessed.
The trial judge granted Mr. Metzer $3,325,000 for the amount owning under the property development agreement as well as pre and post judgement interest and costs. Ms. Moses’s estate appealed.
Section 56(4)(b) of the Family Law Act permits a court, to set aside a domestic contract or a provision under it “if a party did not understand the nature or consequences of the domestic contract”.
The Court of Appeal reviewed the legal principles surrounding the setting aside of a cohabitation agreement. The Court of Appeal found that the trial judge correctly applied the principles in Levan v Levan. Further, the Court held that there was overwhelming evidence that neither party to the cohabitation agreement understood its consequences in regard to the property development agreement.
The Court of Appeal held that the trial judge set aside the Cohabitation Agreement as it applied to the development properties, because in her view, “it would be a failure of justice to broadly enforce the property clauses in the Cohabitation Agreement in the circumstances of this case” (para 11).
While the Court of Appeal agreed that enforcing the property clauses in the Cohabitation Agreement would be a “failure of justice”, the Court of Appeal nonetheless found that the trial judge erred in setting aside the property wavier clause of the Cohabitation Agreement only in as much as it related to the developmental properties. That is to say, section 56(4) of the Family Law Act permits the court to set aside the entirety of the domestic contract or a provision under it, it does not permit the court to limit the circumstances in which a term applies.
Ultimately, the Court of Appeal set aside the trial judge’s decision. The Court of Appeal set aside the entirety of the contention clauses in the Cohabitation Agreement. The courts did not set aside the entirety of the Cohabitation Agreement, however, because they did not find any unfairness arising from the waiver of spousal support.