Tailor reconciliation clauses to ensure parties’ intentions are reflected


Tailor reconciliation clauses to ensure parties’ intentions are reflected
Posted in Michael Stangarone Posted on June 04, 2020

Splitting spouses must take care when using standard reconciliation clauses in separation agreements, says Toronto family lawyer Michael Stangarone.

In the recent case of Miaskowski v. MacIntyre, the Court of Appeal for Ontario considered a twice-separated couple’s dispute regarding the wife’s claim over the husband’s Canada Post pension.

The unanimous three-judge panel sided with the wife, granting her an equalization payment based on the value of the pension from the start of their marriage, rather than from the date of their reconciliation some nine years later.

In doing so, the appeal court overturned the ruling of the trial judge, whose decision, the panel found, failed to give effect to a clause voiding the provisions of the separation agreement once the parties had reconciled for more than 90 days.  

Stangarone, a partner with MacDonald & Partners LLP – who acted for the successful wife on the appeal along with firm associate Stephen Kirby – notes that the reconciliation clause at the heart of the case has been in common usage for several decades.

 

Reconciliation Clause

“The biggest takeaway here is you’ve got to be really careful when dealing with these standard clauses to ensure that they reflect the intent of the those involved,” he says. “If the parties have ideas about what they want to occur with respect to specifically contemplated payments on reconciliation, and whether certain specific property should be excluded from the net family property calculation, then they should be explicitly set out in the separation agreement.”

The couple originally split in 1999, less than two years after their 1997 marriage, before entering into a separation agreement in 2002 that included a release of the wife’s interest in her husband’s pension.

The reconciliation clause, which kicked in when the parties got back together in 2006, contained an exception leaving in place “any payment, conveyance or act” done under the agreement.

Following their final split in 2014, the couple’s legal dispute boiled down to the wife’s interest in the husband’s pension and the size of the payment she was due under the equalization of net family property.

To simplify matters, they asked the judge to pick between two commencement dates for the valuation of the pension: the first from the date of their reconciliation in 2006, and the second from the date of their marriage in 1997, which would have the effect of almost doubling the size of the equalization payment to the wife, from around $139,000 to $272,000.

 

Sydor v. Sydor

Relying on the Court of Appeal’s landmark 2003 judgment in Sydor v. Sydor, the trial judge found that the “specific release” of the wife’s pension rights contained in the separation agreement survived reconciliation, and that the exception contained in the reconciliation clause applied to an equalization payment made under the agreement.

However, Appeal Court Justice Kathryn Feldman, writing for the panel, found that the trial judge made two key errors in his approach:

“The first was that he misapprehended the evidence regarding whether there was any ‘payment’ for the value of the pension to carry out the terms of the separation agreement. In fact, there was no such payment and therefore the exception to the voiding provision did not apply,” she wrote, noting that no portion of the original equalization payment related directly to the husband’s pension, which was too small at the time of the 1999 separation to justify a formal valuation.   

According to Justice Feldman’s judgment, the second error was the trial judge’s failure to give effect “to the express term of the reconciliation clause that provides that the separation agreement becomes void if the parties reconcile for more than 90 days.”

Unlike in Sydor, where the separation agreement at issue contained no mention of reconciliation, the parties in this case had provided for what would happen in the event they resumed their marriage.  

“The language of the voiding clause in the separation agreement in this appeal clearly demonstrates the intent on reconciliation to return the parties to the position they were in prior to separation,” Justice Feldman concluded. “The bargain they made on separation, whereby they released each other from future rights and obligations, is set aside and becomes void. The parties are meant to regain all the rights they had as spouses that were bargained away in the separation agreement.”

 

Separation Agreement

While labelled in the separation agreement as a “specific release,” the wife’s waiving of the pension claim was in fact part of the “general release of rights given as part of the overall bargain between the parties,” Feldman wrote, declaring the release void.

Acknowledging the possibility for unfairness under the terms of a reconciliation clause, Justice Feldman went on to write that such situations arise exceptionally and should be dealt with on a case-by-case basis.

“There is no shortage of tools at the court’s disposal to give effect to the spouses’ intentions and address consequences that were clearly unintended,” she added. “Importantly, there is no unfairness in this case. The husband’s position is that the wife should not be entitled to share in the value of his Canada Post pension for the roughly seven-year period during which they were living separate and apart and with other spouses.”

“However, the alleged unfairness does not arise from any transfer completed under the agreement. Instead, it arises from the operation of the FLA [Ontario’s Family Law Act], which entitles married spouses to share in net family property so long as they remain legally married,” Justice Feldman concluded.

Ultimately, the panel allowed the appeal, finding that “no transfer or conveyance was made respecting any entitlement by the appellant to the value of the respondent’s Canada Post pension, the exception to the voiding clause in the separation agreement does not apply, and the release of the appellant’s right to share in the pension is void.”

“As a result, of the two choices proposed by the parties, the appellant is entitled to receive a share of the respondent’s pension from the date of marriage to the date of the second separation,” the decision reads.

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