N.R. v. B.B. et al., (2009) 266 B.C.A.C. 1 (SCC)

• Judge: McLachlin, C.J.C., Binnie, Deschamps, Fish, Abella, Charron and Rothstein, JJ.
• Court: Supreme Court (Canada)
• Case Date: October 14, 2008
• Jurisdiction: Canada (Federal)
• Citations: (2009), 266 B.C.A.C. 1 (SCC);2009 SCC 10;90 BCLR (4th) 1;JE 2009-352;[2009] 1 SCR 295;[2009] SCJ No 10 (QL);303 DLR (4th) 193;449 WAC 1;62 RFL (6th) 239;[2009] 5 WWR 191;385 NR 85;266 BCAC 1;EYB 2009-154704

N.R. v. B.B. (2009), 266 B.C.A.C. 1 (SCC);

    449 W.A.C. 1

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2009] B.C.A.C. TBEd. FE.050

N.R. (appellant) v. B.B. and B.F. Ltd. (respondents) and Women's Legal Education and Action Fund (intervenor)

(32098; 2009 SCC 10; 2009 CSC 10)

Indexed As: N.R. v. B.B. et al.

Supreme Court of Canada

McLachlin, C.J.C., Binnie, Deschamps, Fish, Abella, Charron and Rothstein, JJ.

February 19, 2009.

Summary:

The parties married in 1973 and separated in 2000. In 2001, they signed a separation agreement. They divorced in 2002. In 2003, the wife sought to set aside the separation agreement on the ground of unconscionability. In the alternative, she sought relief under s. 65 of British Columbia's Family Relations Act.

The British Columbia Supreme Court, in a decision reported at [2006] B.C.T.C. 595, held that the agreement was unconscionable. The court found that the wife was mentally unstable at the time the agreement was negotiated and executed, and that the husband's conduct, both in failing to make full and honest disclosure, and in taking advantage of what he knew to be his wife's mental instability, resulted in a finding of unconscionability. The court ordered that the wife be compensated in an amount representing the difference between her negotiated equalization payment and her entitlement under Family Relations Act. The husband appealed.

The British Columbia Court of Appeal, in a decision reported at (2007), 240 B.C.A.C. 31; 398 W.A.C. 31, allowed the appeal. The court concluded that the wife's vulnerabilities did not rise to the level of "mental incapacity", that the wife's vulnerabilities were effectively compensated for by the availability of professional assistance, and that the husband had no obligation to refrain from agreeing to an equalization payment for the wife that was in his own best interests. The wife appealed.

The Supreme Court of Canada allowed the appeal and restored the trial judge's order. The trial judge's findings of fact and conclusion were amply supported by the evidence and the damages awarded by the trial judge were appropriate as equitable compensation.

Editor's Note: Certain names in the following case have been initialized or the case otherwise edited to prevent the disclosure of identities where required by law, publication ban, Maritime Law Book's editorial policy or otherwise.

Contracts - Topic 9350

Unconscionable transactions relief - Conditions for relief - What constitutes harsh and unconscionable - [See Equity - Topic 1122 ].

Equity - Topic 1122

Equitable relief - Contracts - Unconscionability - Unconscionable bargain defined - The parties married in 1973 and separated in 2000 - In 2001, they signed a separation agreement - They divorced in 2002 - In 2003, the wife sought to set aside the separation agreement on the ground of unconscionability - The trial judge found that the wife was mentally unstable at the time that the agreement was negotiated and executed, and that the husband's conduct, both in failing to make full and honest disclosure, and in taking advantage of what he knew to be his wife's mental instability, resulted in a finding that the agreement was unconscionable - The trial judge ordered that the wife be compensated in an amount representing the difference between her negotiated equalization payment and her entitlement under Family Relations Act - The husband appealed - The British Columbia Court of Appeal allowed the appeal - The court concluded that the wife's vulnerabilities did not rise to the level of "mental incapacity", that the wife's vulnerabilities were effectively compensated for by the availability of professional assistance, and that the husband had no obligation to refrain from agreeing to an equalization payment for the wife that was in his own best interests - The wife appealed - The Supreme Court of Canada allowed the appeal and restored the trial judge's order - The combination of misleading informational deficits and psychologically exploitative conduct led the trial judge to conclude that the resulting significant deviation from the wife's statutory entitlement rendered the agreement unconscionable - The trial judge's findings of fact and conclusion were amply supported by the evidence - Further, while it might well be that in a particular case professional assistance would effectively compensate for vulnerabilities, the Court of Appeal appeared to have assumed that the mere presence of professional assistance automatically neutralized the vulnerabilities in this case - That interpretation did not accord with Miglin v. Miglin (SCC 2003) - The damages awarded by the trial judge were appropriate as equitable compensation - See paragraphs 30 to 70.

Family Law - Topic 888

Husband and wife - Marital property - Considerations in making distribution orders - Valuation (incl. time for) - The Supreme Court of Canada stated that "In circumstances where it is not clear when, if ever, a property will be sold and taxes incurred, courts have held that entirely speculative disposition costs need not be taken into account in calculating an equalization payment" - The court held that, in the case before it, both the deduction made by the husband in his initial valuation of a dairy farm business and the one presented by his expert witness at trial, reflected the high tax consequences of an immediate sale, a sale which was not contemplated at the time - The court stated that "While it is true that at some point capital gains tax may become payable, in the absence of evidence from the husband of an imminent or eventual sale so as to justify any deduction, the trial judge's decision not to make a deduction was completely supportable" - See paragraphs 54 to 56.

Family Law - Topic 3201

Separation agreements, domestic contracts and marriage contracts - General - The Supreme Court of Canada stated that "This Court has frequently recognized that negotiations following the disintegration of a spousal relationship take place in a uniquely difficult context. The reality of this singularly emotional negotiating environment means that special care must be taken to ensure that, to the extent possible, the assets of the former relationship are distributed through negotiations that are free from informational and psychological exploitation" - See paragraph 1.

Family Law - Topic 3206

Separation agreements, domestic contracts and marriage contracts - General - Application of law of contracts - [See Equity - Topic 1122 ].

Family Law - Topic 3207

Separation agreements, domestic contracts and marriage contracts - General - Financial disclosure - The Supreme Court of Canada stated that "a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances. The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation. Such a duty in matrimonial negotiations anchors the ability of separating spouses to genuinely decide for themselves what constitutes an acceptable bargain. It also helps protect the possibility of finality in agreements. An agreement based on full and honest disclosure is an agreement that, prima facie, is based on the informed consent of both parties. It is, as a result, an agreement that courts are more likely to respect. Where, on the other hand, an agreement is based on misinformation, it cannot be said to be a true bargain which is entitled to judicial deference. Whether a court will, in fact, intervene will clearly depend on the circumstances of each case, including the extent of the defective disclosure and the degree to which it is found to have been deliberately generated. It will also depend on the extent to which the resulting negotiated terms are at variance from the goals of the relevant legislation. As Miglin [SCC 2003] confirmed, the more an agreement complies with the statutory objectives, the less the risk that it will be interfered with. ... In other words, the best way to protect the finality of any negotiated agreement in family law, is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme" - See paragraphs 47 to 50.

Family Law - Topic 3207

Separation agreements, domestic contracts and marriage contracts - General - Financial disclosure - [See Equity - Topic 1122 ].

Family Law - Topic 3382

Separation agreements, domestic contracts and marriage contracts - Grounds for setting aside - Material nondisclosure - [See Equity - Topic 1122 ].

Family Law - Topic 3386

Separation agreements, domestic contracts and marriage contracts - Grounds for setting aside - Unconscionable bargain - [See Equity - Topic 1122 ].

Family Law - Topic 3387

Separation agreements, domestic contracts and marriage contracts - Grounds for setting aside - Lack of capacity - [See Equity - Topic 1122 ].

Cases Noticed:

Miglin v. Miglin, [2003] 1 S.C.R. 303; 302 N.R. 201; 171 O.A.C. 201; 2003 SCC 24, appld. [para. 2].

Stein Estate v. Ship Kathy K, [1976] 2 S.C.R. 802; 6 N.R. 359, refd to. [para. 30].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 333, refd to. [para. 30].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1; 2005 SCC 25, refd to. [para. 30].

Davidson v. Davidson (1986), 2 R.F.L.(3d) 442 (B.C.C.A.), refd to. [para. 36].

Tyler v. Tyler (1996), 78 B.C.A.C. 136; 128 W.A.C. 136; 24 R.F.L.(4th) 51 (C.A.), refd to. [para. 36].

T.L.A.T. v. W.W.T. - see Tyler v. Tyler.

Chen v. Liu - see Chen v. Chen.

Chen v. Chen, [2008] B.C.T.C. Uned. 569; 2008 BCSC 928, refd to. [para. 36].

C.E.W. et al. v. G.D.W. et al., [2007] B.C.T.C. Uned. 288; 31 E.T.R.(3d) 101; 2007 BCSC 550, refd to. [para. 36].

Zhu v. Li, [2007] B.C.T.C. Uned. 609; 33 E.T.R.(3d) 281; 2007 BCSC 1117, refd to. [para. 36].

Elliott v. Elliott, [2007] B.C.T.C. Uned. 10; 2007 BCSC 98, refd to. [para. 36].

Chepil v. Chepil, [2006] B.C.T.C. 15; 2006 BCSC 15, refd to. [para. 36].

Hartshorne v. Hartshorne, [2004] 1 S.C.R. 550; 318 N.R. 1; 194 B.C.A.C. 161; 317 W.A.C. 161; 2004 SCC 22, refd to. [para. 36].

Leopold v. Leopold, [2000] O.T.C. 868; 51 O.R.(3d) 275 (Sup. Ct.), refd to. [para. 41].

Leskun v. Leskun, [2006] 1 S.C.R. 920; 349 N.R. 158; 226 B.C.A.C. 1; 373 W.A.C. 1; 2006 SCC 25, refd to. [para. 46].

Russell v. Russell, [2002] B.C.T.C. 1233; 2002 BCSC 1233, refd to. [para. 55].

Dowling v. Dowling (1997), 99 B.C.A.C. 77; 162 W.A.C. 77; 43 B.C.L.R.(3d) 59 (C.A.), refd to. [para. 55].

Starkman v. Starkman (1990), 43 O.A.C. 85; 75 O.R.(2d) 19 (C.A.), refd to. [para. 55].

Sengmueller v. Sengmueller (1994), 69 O.A.C. 312; 17 O.R.(3d) 208 (C.A.), refd to. [para. 55].

McCowan v. McCowan (1995), 84 O.A.C. 125; 14 R.F.L.(4th) 325 (C.A.), refd to. [para. 64].

Shackleton v. Shackleton (1999), 131 B.C.A.C. 145; 214 W.A.C. 145; 1 R.F.L.(5th) 459; 1999 BCCA 704, refd to. [para. 64].

Schlenker v. Schlenker et al. (1999), 25 B.C.T.C. 350; 72 B.C.L.R.(3d) 203; 1 R.F.L.(5th) 436 (S.C.), refd to. [para. 64].

McGregor v. Van Tilborg, [2003] B.C.T.C. 918; 2003 BCSC 918, refd to. [para. 64].

Huddersfield Banking Co. v. Lister (Henry) & Son Ltd., [1895] 2 Ch. 273 (C.A.), refd to. [para. 64].

Monarch Construction Ltd. v. Buildevco Ltd. (1988), 26 C.P.C.(2d) 164 (Ont. C.A.), refd to. [para. 64].

R.L.S. v. D.C.M. - see Slaughter v. McCormick.

Slaughter v. McCormick, [2002] B.C.T.C. 1794; 2002 BCSC 1794, refd to. [para. 64].

Dusik v. Newton (1985), 62 B.C.L.R. 1 (C.A.), refd to. [para. 66].

S-244 Holdings Ltd. v. Seymour Building Systems Ltd. (1994), 41 B.C.A.C. 272; 66 W.A.C. 272; 93 B.C.L.R.(2d) 34 (C.A.), refd to. [para. 67].

Treadwell v. Martin (1976), 13 N.B.R.(2d) 137; 13 A.P.R. 137 (C.A.), refd to. [para. 67].

Paris v. Machnick (1972), 7 N.S.R.(2d) 634; 32 D.L.R.(3d) 723 (S.C.), refd to. [para. 67].

Junkin v. Junkin (1978), 20 O.R.(2d) 118 (H.C.), refd to. [para. 67].

Becker v. Pettkus, [1980] 2 S.C.R. 834; 34 N.R. 384, refd to. [para. 68].

Authors and Works Noticed:

Bryan, Penelope Eileen, Women's Freedom to Contract at Divorce: A Mask for Contextual Coercion (1999), 47 Buff. L. Rev. 1153, p. 1177 [para. 46].

Fraser, George Peter, Horn, John W., and Griffin, Susan A., The Conduct of Civil Litigation in British Columbia (2nd Ed. 2007) (2008 Looseleaf Update, Release 2), vol. 2, p. 32-11 [para. 64].

Lange, Donald J., The Doctrine of Res Judicata in Canada (2nd Ed. 2004), p. 329 [para. 64].

Martin, Craig, Unequal Shadows: Negotiation Theory and Spousal Support Under Canadian Divorce Law (1998), 56 U.T. Fac. L. Rev. 135, p. 137 [para. 45].

McCamus, John D., Equitable Compensation and Restitutionary Remedies: Recent Developments, L.S.U.C. Special Lectures 1995: Law of Remedies (1995), p. 295 [para. 67].

McCamus, John D., The Law of Contracts (2005), p. 403 [para. 67].

McLeod, James G., Annotation to Thomsett v. Thomsett (2001), 16 R.F.L.(5th) 427, pp. 428, 429 [para. 64].

Neave, Marcia, Resolving the Dilemma of Difference: A Critique of "The Role of Private Ordering in Family Law" (1994), 44 U.T.L.J. 97, p. 117 [para. 46].

Shaffer, Martha, and Rogerson, Carol, Contracting Spousal Support: Thinking Through Miglin (2003-2004), 21 C.F.L.Q. 49, p. 70 [para. 41].

Waddams, Stephen M., The Law of Contracts (5th Ed. 2005), pp. 302, 303, 391, 392 [para. 68].

Counsel:

Philip Epstein, Q.C., Jack Hittrich, and Janette Kovacs, for the appellant;

Georgialee A. Lang, Benjamin J. Ingram and Heather M. Dale, for the respondents;

Nitya Iyer and Joanna Radbord, for the intervenor.

Solicitors of Record:

Hittrich Lessing, Surrey, B.C., for the appellant;

Georgialee Lang & Associates, Vancouver, B.C., for the respondents;

Heenan Blaikie, Vancouver, B.C., for the intervenor.

This appeal was heard on October 14, 2008, before McLachlin, C.J.C., Binnie, Deschamps, Fish, Abella, Charron and Rothstein, JJ., of the Supreme Court of Canada. The following judgment of the Supreme Court of Canada was delivered in both official languages by Abella, J., on February 19, 2009.