BACKGROUND
The Appellant wife and Respondent husband were in a long-term relationship. In March 2019, they bought a house together, both holding title as joint tenants. They separated in 2020.
On August 2, 2020, the parties signed a document (“Document”) that stated that the Respondent would transfer his interest in the house to the Appellant in exchange for $10,000 and a motorcycle that belonged to the Appellant’s father. The Document specified that the Respondent agreed to forfeit “the house and all the assets, equity and so on” and that he would “give up all rights” in exchange for $10,000 and the motorcycle.
Both parties signed the Document, but neither party’s signatures were witnessed by a third party. However, the Appellant video-recorded the Respondent acknowledging that he had signed the Document. After the Document was signed, the Respondent refused to transfer his interest in the home to the Appellant.
At trial, the trial judge found that the Document was not a binding domestic contract because it did not comply with the requirements of section 55(1) of the FLA since it had not been witnessed. The Appellant is appealing this decision.
ISSUES
- Did the trial judge err in determining that the Document was not a binding domestic contract under the Family Law Act (“FLA”)?
ANALYSIS
The video recording confirmed the Respondent’s acknowledgement that he had signed the Document. However, the Court of Appeal determined that the requirements of section 55(1) of the FLA (that a domestic contract be witnessed) goes beyond just providing proof that the document was signed by both parties. Rather, it is meant to ensure that there is a “measure of formality in the execution of a domestic contract.” Essentially, the Court noted that the purpose of section 55(1) is in part to provide some assurance that the parties were deliberate in reaching their agreement and understood the obligations being imposed. Another purpose of section 55(1) is to ensure that domestic contracts are free from undue influence, coercion, or duress.
The Court of Appeal found that despite the Respondent having acknowledged signing the Document and the video recording corroborating same, these were not a substitute for the Document having been properly witnessed. In addition, the video recording was only 20 seconds long, so it did not capture the full extent of the discussions that led up to the Document being drafted and signed.
The Court further noted that the strict requirement of section 55(1) may be relaxed where the Court is satisfied that that the contract was in fact executed by the parties, where the terms are reasonable and where there was no oppression or unfairness in the circumstances surrounding the negotiation and execution of the contract. In this case, neither party received independent legal advice before signing the Document. In addition, the Document itself was overly vague. Ultimately, the Court found that the Respondent did not understand some of the key aspects of the Document.
Thus, given the purpose of section 55(1), the Court of Appeal found that there was no error in the trial judge’s finding that the Document was not a domestic contract.
Even if the Document were a valid domestic contract, it would have been set aside pursuant to section 56(4) of the FLA. A valid domestic contract may be set aside in accordance with section 56(4) on multiple bases, including “when a party did not understand the nature and consequences of the domestic contract.” The trial judge found as fact that the Respondent did not understand precisely what he was giving up, and that neither party reviewed their financial records prior to signing the Document. Further, the trial judge found that the Respondent did not understand the meaning of the term “equity.” The Court of Appeal determined that these findings of fact would have given the trial judge a sufficient basis to set aside the contract under section 56(4)(b), had it been necessary.
CONCLUSION
The Appeal is dismissed. The Document was unenforceable pursuant to section 55(1) and/or section 56(4) of the Family Law Act.