



COURT OF APPEAL FOR ONTARIO

CITATION: Zavarella v. Zavarella, 2013
    ONCA 720

DATE: 20131128

DOCKET: C54236

Gillese, Juriansz and Strathy JJ.A.

BETWEEN

Rony Zavarella

Applicant

(Respondent)

and

Filomena Zavarella

Respondent

(Appellant)

Jerry J. Chaimovitz, for the appellant

Deborah Barfknecht, for the respondent

Heard: September 25, 2013

On appeal from the order of Justice Robert B. Reid of the
    Superior Court of Justice, dated August 5, 2011.

Gillese
    J.A.:

[1]

A person made an assignment into bankruptcy shortly before she was
    married.  Within months of the marriage, she was discharged without having made
    any payments on her debt.  How should the debt that she had at the date of marriage
    be treated when calculating her net family property (NFP)?

[2]

Prior to trial, the parties agreed on how they would deal with many of
    the issues arising from the demise of their marriage, including certain NFP calculations. 
    During trial, it became apparent that their agreement in respect of one NFP matter
    rested on a mistake of fact.  One side wanted the matter revisited by the trial
    judge but the other said their agreement governed.  Was it open to the trial
    judge to interfere with their agreed handling of the matter?

[3]

This appeal must answer these two questions, among others.

OVERVIEW

[4]

The parties were married on August 21, 1994, and separated on July 30,
    2009. They have two teenage children.  After separation, they lived separate
    and apart in the matrimonial home until November 12, 2009, when it was sold.

[5]

The parties settled all matters before trial with the exception of a
    number of questions relating to their NFP calculations, as well as Mr. Zavarellas
    claim for spousal support.

[6]

By order dated August 5, 2011 (the Order), among other things, the
    trial judge granted their divorce, ordered Mr. Zavarella to pay Ms. Zavarella
    an equalization payment of $38,955.00, and dismissed Mr. Zavarellas claim for
    spousal support.

[7]

Ms. Zavarella appeals.  She contends that the trial judge erred in his rulings
    on certain of the NFP calculations and that she is entitled to a significantly
    larger equalization payment.

[8]

For the reasons that follow, I would allow the appeal in part.

[9]

For ease of reference, in my reasons I will refer to the parties by
    their names or their status in this proceeding.  Ms. Zavarella is the appellant
    and Mr. Zavarella is the respondent.

BACKGROUND IN BRIEF

[10]

This
    matter was set for trial on July 4, 2011, to commence at 10 am.  When it
    commenced, the parties advised the trial judge that nearly everything was in
    issue. However, based on lengthy negotiations that had taken place over the
    preceding weekend, they thought that if the trial were stood down for a brief
    period, they would be able to resolve most, if not all, of the issues.

[11]

The
    trial judge stood the matter down and the trial commenced at 2 pm.  At that
    point, the parties gave the trial judge partial minutes of settlement (the
    Agreement), which reflected the agreement they had reached.  They advised the
    trial judge that the only issues to be decided at the trial were Mr. Zavarellas
    claim for spousal support and certain aspects of the NFP calculations that bore
    on the question of equalization.

[12]

The
    additional background facts necessary to decide this appeal relate to four
    matters:  (1) Ms. Zavarellas date of marriage debt; (2) the car that Ms. Zavarella
    brought to the marriage, one of the matters on which the parties had reached
    agreement prior to trial; (3) Mr. Zavarellas date of marriage debt; and, (4)
    Ms. Zavarellas use of the parties joint line of credit, in the approximately three-month
    period following separation.

Ms. Zavarellas Date of
    Marriage Debt

[13]

On
    August 12, 1994, about two weeks before the date of marriage, Ms. Zavarella
    made an assignment into bankruptcy.  This was done with Mr. Zavarellas
    knowledge and encouragement.  Ms. Zavarella signed a Statement of Affairs in
    support of the assignment, which disclosed that she had debts of $59,838.70
    (the Debt).
[1]
She received her discharge in bankruptcy approximately nine months later,
    without having made any payment on the Debt.  The question to be decided at
    trial was how much, if any, of the Debt was to be treated as Ms. Zavarellas date
    of marriage debt for the purpose of calculating her NFP.

[14]

The
    trial judge held that Ms. Zavarella had to include the Debt as her date of
    marriage debt.  He accepted the expert evidence that given her age, income, and
    personal circumstances, there was no expectation on the date of marriage that
    Ms. Zavarella would be required to make any payment on the Debt.  He also
    accepted that no payments were ever made on the Debt during the course of the
    marriage.  However, he rejected the argument that the Debt was analogous to a
    contingent liability, saying that whereas a contingent liability may not become
    a debt, the Debt was fixed and existing at the date of marriage.   He  noted
    that the Debt was not extinguished until Ms. Zavarella was discharged and that
    had Ms. Zavarella received an inheritance or won a lottery before she was
    discharged, those assets would have vested in the trustee in bankruptcy and
    been used to pay her creditors.  Further, he expressed the view that if the
    Debt were excluded from the NFP calculation, there would be a benefit to Ms. Zavarella
    in the equalization calculation.

The Car

[15]

At
    the time that the parties married, Ms. Zavarella drove a 1993 Pontiac Sunbird
    car (the car).  Her Statement of Affairs showed a nil value for vehicles
    and a secured debt, valued at $10,000, in favour of GMAC.  It also indicated
    that the car was a pledged asset and that it was leased.  Nonetheless, prior
    to trial, both parties and their lawyers thought that Ms. Zavarella owned the
    car at the date of marriage.  Ms. Zavarella had included the car as an asset in
    her NFP statement because she had located an insurance certificate for it in
    her records and from that, assumed that she had an ownership interest in it.

[16]

As
    previously mentioned, shortly before the trial commenced in earnest, the
    parties entered into the Agreement, which reflected their settlement of a
    number of matters, including the car.  As reflected in the Agreement, the
    parties agreed to treat the car as an asset that Ms. Zavarella brought to the marriage,
    with a value of $10,000.  Accordingly, when counsel gave the trial judge a list
    of the items that had to be decided at trial, the list did not include the car.

[17]

However,
    during Ms. Zavarellas cross-examination at trial, it became apparent that at
    the date of marriage she had been leasing the car and did not own it.  Counsel
    for Mr. Zavarella argued that because the parties negotiations in respect of
    the car were based on the mistaken view that Ms. Zavarella owned the car, the
    trial judge should take into account the fact that the car was leased when
    deciding whether to respect that provision in the Agreement.  Counsel for Ms. Zavarella
    argued that the parties agreed-upon manner of dealing with the car was the
    product of good faith negotiations about numerous items and that one item could
    not be taken out of the Agreement without affecting the resolution reached on
    other items.

[18]

The
    trial judge recognized the significant policy interest in enforcing settlements
    made during the course of litigation.  He noted, however, that in reaching
    agreement about the car, both parties were operating under the misapprehension
    that Ms. Zavarella owned the car.  In his view, a common mistake as to a
    fundamental fact made the Agreement voidable by either party. Consequently, he
    removed $10,000  the value the parties had attributed to the car  from Ms. Zavarellas
    date of marriage assets.

Mr. Zavarellas Date of
    Marriage Debt

[19]

At
    the time the parties were married, Mr. Zavarella also had debts.  One source of
    his debts was an ongoing custody and access dispute involving two children from
    his previous marriage.  Both parties in this proceeding agreed that on the date
    of marriage, Mr. Zavarella had a substantial amount of debt relating to that
    litigation, and that his debt continued to increase after the marriage until
    the custody and access proceeding concluded some two years thereafter.  Because
    the parties could not agree on how much debt Mr. Zavarella owed at the date of
    marriage, however, they left that matter to be decided by the trial judge.

[20]

The
    trial judge was faced with conflicting evidence on the matter.  A financial
    statement that Mr. Zavarella filed in the custody and access litigation with
    his former spouse showed that on December 5, 1996, he had debts of
    approximately $98,800, exclusive of his mortgage debt.  There was also evidence
    from the assignment into bankruptcy that Mr. Zavarella made on August 8, 1997, approximately
    three years into the marriage.  His debt at that time, as disclosed in his
    Statement of Affairs, was just short of $125,000.  Further, at para. 2 of Mr. Zavarellas
    trial management conference brief, dated March 21, 2011, Mr. Zavarella stated
    that [b]oth parties brought over $100,000.00 of debt into the marriage.  Finally,
    there was Mr. Zavarellas financial statement filed in these proceedings, and
    his trial testimony, both to the effect that he had debts totalling $30,000 on
    the date of marriage.

[21]

The
    trial judge referred to the conflicting evidence in relation to Mr. Zavarellas
    date of marriage debts.  He found para. 2 of Mr. Zavarellas unsworn trial
    management conference brief ambiguous and not persuasive evidence of Mr. Zavarellas
    date of marriage debt.  After noting that each party bears the onus of proving
    the assets and debts on which they rely in their respective NFP statements, he found
    that Mr. Zavarellas pre-marriage debt was $30,000.  In making this finding, he
    stated that Mr. Zavarellas date of marriage debt has not been sufficiently
    established beyond the $30,000 which he admitted for me to determine on a
    balance of probabilities that the debt was in some greater amount (the
    impugned statement).

Use of the Joint Line of Credit
    Post-Separation

[22]

In
    November of 2009, after selling the matrimonial home, the parties paid off
    their joint line of credit.  They accepted equal responsibility for the total
    amount owing on the line of credit to the agreed date of separation of July 30,
    2009.  However, there were disputes about the withdrawals made in the approximately
    three-month period between separation and sale of the matrimonial home.  The
    focus on this appeal is on Ms. Zavarellas withdrawals of approximately
    $155,000, made during that period.

[23]

Ms.
    Zavarella acknowledged that of the approximately $155,000, she had used $100,000
    for a down payment on a new home for her and the children.  She did not dispute
    that $100,000 had to be added back into the net proceeds of sale of the
    matrimonial home in determining equalization.

[24]

Of
    the remaining approximately $55,000, Ms. Zavarella testified that only $12,086
    had been used to pay her business expenses.  She acknowledged that she was
    responsible for this sum, as well.  She testified that the balance had been
    used for household expenses and brought records to support her position.

[25]

The
    trial judge found that Ms. Zavarella used $2,401.53 to pay off a different line
    of credit, $588.70 to pay off the MBNA Visa debt, and $24,405 for family
    expenses.  In his view, however, after the separation Ms. Zavarella was
    attempting to use the line of credit as much as possible, drawing all
    available funds rather than use her own commission income to pay family and
    business expenses.  He found that she had withdrawn $27,662 more than was
    needed for family expenses and to pay off the other line of credit and credit
    cards.  He concluded that sum had been used for her business expenses.

THE ISSUES

[26]

The
    appellant submits that the trial judge erred in:

(1)

including the Debt as her date of
    marriage debt;

(2)

deducting $10,000 from her date
    of marriage assets for the car;

(3)

finding that Mr. Zavarella had
    only $30,000 in date of marriage debt; and

(4)

finding that after separation,
    she used $27,662 from the parties joint line of credit to pay for her business
    expenses.

ANALYSIS

Issue #1:     What was Ms. Zavarellas
    Date of Marriage Debt?

[27]

The
    appellant submits that the trial judge erred in treating the Debt as her date
    of marriage debt for the purpose of the NFP calculations.  She points out that when
    the parties married, she had already filed for bankruptcy and they had no expectation
    that she would be required to make any payment on the Debt.  Further, she
    notes, no payments were ever made on the Debt.  In these circumstances, she
    submits, the trial judge should have discounted the value of the Debt to $0.

[28]

The
    respondent says that the appellants submission is based on the flawed
    assumption that Ms. Zavarellas discharge in bankruptcy worked retroactively to
    make the Debt non-existent at the date of marriage.  He argues that the trial
    judge correctly viewed the Debt as fixed and existing at the date of marriage. 
    Were it otherwise, the respondent contends, Ms. Zavarella could not have filed
    for bankruptcy.  He argued that the Debt continued until Ms. Zavarella was discharged,
    an event which occurred after the date of marriage.  Therefore, even though
    there was very little likelihood at the date of marriage that Ms. Zavarella
    would be called upon to pay the Debt, the Debt was not a contingent liability
    and the trial judge correctly treated it as Ms. Zavarellas date of marriage
    debt.

[29]

I
    would accept the appellants submission on this ground of appeal.  In my view,
    Ms. Zavarellas date of marriage debt should be valued at $0.

[30]

It
    is important to begin by placing this issue in context.  Valuation of the Debt relates
    to equalization, the process mandated by s. 5 of the
Family Law Act
,
    R.S.O. 1990, c. F.3 (
FLA
).  Section 5 provides that spouses are to share
    equally in any increase in the value of family property between marriage and
    the date of separation: see
Greenglass v. Greenglass
, 2010 ONCA 675,
    R.F.L. (6th) 271, at para. 25.  Specifically, s. 5 stipulates that when a marriage
    ends, the spouse with the lesser of the two NFPs is entitled to one-half the
    difference between the two.  In short, the spouse with the lesser NFP is
    entitled to an equalization payment.

[31]

Thus,
    to determine the amount of the equalization payment, the court must consider
    each partys NFP.  NFP is defined in s. 4 of the
FLA
as:

the value of all the property,  that a spouse owns
    on the valuation date, after deducting,

the spouses debts and other liabilities, and

the value of property, other than a matrimonial home,
    that the spouse owned on the date of the marriage, after deducting the spouses
    debts and other liabilities, , calculated as of the date of the marriage[.]

[32]

It
    will be readily apparent that the debt a spouse brings to the marriage will affect
    that spouses entitlement in the equalization calculation.  This makes sense
    because it can be assumed that the spouses paid off that debt during the course
    of the marriage and the family assets were diminished accordingly.

[33]

However,
    if the evidence does not support this assumption, the court cannot simply
    insert the face value of the debt into the NFP calculation.  To do so could undermine
    the objective of equalization, which is to divide equally between the spouses
    the net wealth accumulated from the date of marriage to the date of separation. 
    Instead, in my view, the court must make a meaningful determination of the
    value to attribute to the date of marriage debt.  In determining how to do
    that, I will consider caselaw that has developed in respect of contingent
    liabilities because there are no cases directly on point.

[34]

Greenglass
,
    a recent case of this court involving contingent liabilities, is illustrative. 
    In
Greenglass
, at the valuation date the husband faced contingent
    legal costs associated with litigation that had begun during the marriage.  In
    determining how to value this contingent liability, Epstein J.A., writing for
    the court, made the following observations.  Contingent liabilities are to be
    taken into consideration when it is reasonably foreseeable that they will be
    paid (para. 26).  When the courts have found that at the valuation date there
    is no, or a very low risk that a guarantee would be called on, the value of
    that contingent liability has been held to be nil (para. 27).  In the end, the
    courts task is to make its best assessment of the reasonably foreseeable
    amount of the contingent liability and use that figure for purposes of NFP
    calculations (para. 31).  Using that approach, this court valued the husbands contingent
    legal costs at $300,000.

[35]

In
Poole v. Poole
(2001), 16 R.F.L. (5th) 397 (Ont. S.C.), Heeney J. used a
    similar approach when determining the value of a debt acquired during the
    marriage.  In
Poole
, the husbands parents lent the parties over
    $80,000.  The debt was evidenced by promissory notes.  After the parties
    separated, the parents began legal proceedings to recover the money from both
    of the spouses.

[36]

At
    para. 32 of
Poole
, Heeney J. wrestled with the question of how to value
    the debt for NFP purposes.  He observed that having found the promissory notes
    constituted a debt, one might think it would be a simple matter to insert the
    face value of the debt into the appropriate place in each partys NFP
    calculation.

However, the process is not so simple.  Just because an asset
    or a debt has a certain face value, it does not automatically follow that the court
    must insert that face value in the net family property calculation.  There may
    well be a valuation issue to be resolved, in situations where the face value of
    an asset or debt does not necessarily equate with its real value.

[37]

He
    went on to value the debt based on the probability that it would be collected. 
    As there was no question that the parents would enforce judgment as against the
    wife, 50% of the face value of the debt was used for her NFP calculation.  However,
    as it was highly improbable (para. 40) that the parents would call on the
    husband to pay his half share of the debt, Heeney J. discounted the husbands
    debt to 10% of its face value.

[38]

This
    court has expressly endorsed Heeney J.s approach in
Poole
, saying that
    the courts are frequently called upon to assess the actual worth of a claim,
    asset or liability, by discounting its face value where the evidence indicates
    it is unlikely that the promissor will ever be called upon to pay:  see
Cade
    v. Rotstein
, 50 R.F.L. (5
th
) 280 (Ont. C.A.), at para. 8.

[39]

Greenglass

is about contingent liabilities at the end of the marriage.
Poole
is
    about debt acquired during the marriage.  Both cases demonstrate that in order
    to fairly calculate equalization, the court must make a realistic determination
    of the value of debt in an NFP calculation, and that determination is based on
    the reasonable likelihood that the debt will ever be paid.

[40]

Just
    so in the present case.  Although this case is about debt brought to the marriage,
    the same principle operates: the debt is to be valued based on the reasonable
    likelihood that the debt will ever be paid.  The expert evidence led by both
    parties showed that there was a very low risk that Ms. Zavarella would ever be
    called upon to pay the Debt.  On that basis alone, the Debt should have been
    seriously discounted.  But the evidence in this case made it unnecessary to resort
    to an estimate of the reasonable likelihood that the Debt would be paid.  The
    evidence showed that the Debt was extinguished without any payments ever having
    been made on it.  In the circumstances, it was an error to attribute any value
    to Ms. Zavarellas date of marriage debt.

[41]

I
    would conclude on this issue by rejecting the respondents contention that this
    approach to valuing date of marriage debt circumvents the
Bankruptcy and
    Insolvency Act
, R.S.C. 1985, c. B-3 (
BIA
) and its specific
    requirements relating to the discharge of debts.  This approach to the valuation
    of the Debt is to be understood in the appropriate legislative context, namely,
    the equalization scheme in the
FLA
.  How the Debt is treated, when
    being considered for the purposes of the
BIA
, is a different question,
    to be resolved by reference to the applicable
BIA

provisions.

[42]

Accordingly,
    I would set aside the trial judges determination of Ms. Zavarellas date of
    marriage debt and fix her date of marriage debt at $0 for purposes of the NFP
    calculations.

Issue #2:     How should the Car
    be treated for NFP purposes?

[43]

The
    appellant submits that it was an error for the trial judge to have gone behind
    the parties agreement in respect of the car and reduced her date of marriage
    assets by $10,000.  She also contends that the respondent should have been
    barred from withdrawing his pre-trial agreement in respect of the car.  She says
    that she relied on the Agreement in her conduct of the trial and that the
    respondent has not demonstrated a common mistake that would justify the trial
    courts interference with the Agreement.

[44]

The
    respondent submits that he only made the concession in respect of the car
    because of the appellants factual representation of ownership.  When that
    representation was undermined at trial, he says that their pre-trial agreement regarding
    the car was also undermined and justified a change in his position.

[45]

In
    any event, he argues, the pre-trial agreement on the car was void for common mistake. 
    Relying on
Miller Paving Ltd. v. B. Gottardo Construction Ltd.
, 2007
    ONCA 422, 86 O.R. (3d) 161, he submits that the court had the power to set
    aside the agreement in respect of the car because the parties were under a
    common misapprehension as to the fact of the car ownership and he, the party
    seeking to set aside the agreement, was not at fault.  Furthermore, he says, there
    was no evidence that Ms. Zavarella made any concession in exchange for his concession
    in respect of the car.  Therefore, the trial judges ruling on the car should
    stand.

[46]

I
    accept the appellants submission on this ground of appeal.  In my view, the
    trial judge erred in going behind the parties agreement in respect of the car. 
    I reach this conclusion because the doctrine of common mistake was neither
    available nor properly applied, in the circumstances of this case.

[47]

Where
    the doctrine of common mistake applies, the court has the power to set aside an
    agreement.  However, in ruling on the car, the trial judge did not consider the
    Agreement as a whole.  Instead, he considered only that part of the Agreement
    which related to the car.  In doing so, he erred.  If he were to consider the
    terms of the Agreement, he had to consider them all and not simply the one part
    of the Agreement that related to the car.

[48]

Similarly,
    it was not open to the respondent, during the course of the trial, to withdraw
    his consent to a single term of the Agreement.  If he wished to challenge the
    validity of the concession he made about the car, he had to challenge the
    validity of the Agreement as a whole.  He could not pick and choose among its
    terms, for the purposes of such a challenge.  It does not matter that the
    appellant could not point to any particular concession and say that she made it
    in response to the respondents concession about the car.  The Agreement in
    this case reflected give and take by both parties on a number of matters. 
    The appellant was entitled to rely on the Agreement in her conduct of the trial,
    unless the Agreement was properly set aside.

[49]

Further,
    while the trial judge said that he was alive to the important policy reasons
    for enforcing pre-trial settlements, in my view, he failed to respect them.  Fairness
    and finality considerations, along with the need to encourage parties to settle
    their affairs with the confidence that their settlement will not be interfered
    with lightly, favour enforcement of the Agreement.  Agreements should not be
    interfered with, except in very narrowly circumscribed circumstances.  And, to
    reiterate, if an agreement is to be considered by the court, it is the
    agreement as a whole that must be reviewed, not some isolated part of it.

[50]

In
    any event, in my view the respondent could not have successfully invoked the doctrine
    of common mistake.  I reach this conclusion for two reasons.

[51]

First,
    the mistake about the car did not go to the root of the Agreement.  While the
    Agreement does not form part of the record before this court, a review of the
    trial transcript shows that its terms govern a large number of disputed matters,
    including custody and access, as well as various matters related to the
    parties NFP statements and equalization.  In the circumstances, the car  a
    single item with a relatively small dollar value attached to it  cannot be
    seen to be the root of the Agreement.  That is, the mistaken assumption about
    the car did not change the subject matter of the Agreement so that it became
    something essentially different from what it was believed to be.  The parties
    believed the Agreement to be the resolution of a host of matters relating to
    the demise of their familial relationship.  The essential nature of the
    Agreement remained.

[52]

Second,
    for the doctrine of common mistake to apply, the respondent would have had to
    have shown that the mistake as to ownership of the car was not his fault.  In
    the circumstances of this case, he could not have discharged that burden.

[53]

As
    the respondent properly acknowledges, both parties had access to the
    appellants bankruptcy documents, including her Statement of Affairs, during
    the pre-trial negotiations.  The Statement of Affairs clearly indicates that
    the car was leased at the date of marriage.  It was sheer inadvertence that
    caused this matter to be missed.  Such an oversight is understandable.  The
    parties and their lawyers had a large number of important matters to attempt to
    resolve in a short period of time and they did an admirable job in that
    regard.  The car was a small matter, considered in the context of all the
    matters that divided the parties.  This is not a situation where there was
    inadequate or untimely disclosure, or where one party took advantage of the
    other.  Nor was there misrepresentation.  It is true that Ms. Zavarella
    believed she owned the car and prepared her NFP statement on that basis.  But
    that document was prepared a great many years after the date of marriage, when
    memories had faded.  Both parties also had her Statement of Affairs, a document
    contemporaneous to the date of marriage, which showed that she was leasing the
    car at that time.

[54]

The
    respondents concession in respect of the car was made within the context of
    full disclosure, which showed the true state of affairs in respect of the car,
    good faith negotiations, and lots of give and take by both sides on many matters. 
    In these circumstances, in my view, the respondent would not have discharged
    his burden to show that the mistake was not his fault.  Both sides bear
    responsibility for the mistaken assumption.

[55]

I
    am fortified in my view of this ground of appeal by a consideration of this
    courts decision in
Miller Paving
.

[56]

In
Miller Paving
, Miller Paving Limited (Miller) contracted to supply
    aggregate materials to B. Gottardo Construction Ltd. (Gottardo).  Gottardo
    used the materials to build a highway extension.  On December 20, 2001, Miller
    and Gottardo signed a memorandum of release (the Contract) in which Miller acknowledged
    it had been paid in full for all the materials it had supplied to Gottardo. 
    When Miller later discovered that it had failed to bill Gottardo for some
    materials, it rendered a further invoice.  Gottardo resisted the claim for
    additional payment, even though it had been paid by the highway owner for the materials
    in question.

[57]

At
    trial, the court refused to apply the doctrine of common mistake and set aside
    the Contract.  This court dismissed Millers appeal.

[58]

Goudge
    J.A., writing for this court, held that Miller could not avail itself of the
    doctrine of common mistake because it had agreed to bear the risk of a mistake
    of the sort in question.  In this regard, he noted the terms of the Contract in
    which Miller acknowledged that it had been paid in full for all materials
    supplied.

[59]

Goudge
    J.A. went further, however, holding that Miller could not have succeeded in any
    event.  Under the common law doctrine of common mistake, the subject matter of
    the Contract would have had to become something essentially different from what
    it was believed to be.  The Contract was the release of all further claims by
    Miller.  Nothing about the mistaken assumption changed the Contracts subject
    matter.  Moreover, to engage the equitable doctrine of common mistake, Miller
    would have to have shown that it was not at fault.  In light of the trial judges
    finding that the mistake was due to unexplained errors in Millers procedures, it
    could not have discharged that burden.

[60]

Unlike
Miller Paving
, there is no suggestion in the present case that in the
    Agreement, one party agreed to bear the risk of the mistake in question. 
    However, just as in
Miller Paving
, the mistake in this case did not
    cause the Agreement to become something essentially different from that which
    the parties believed it to be.  Indeed, no one contends that the essence of the
    Agreement related to the car.  And, for the reasons already given, I do not see
    that the respondent could discharge his burden to show that he was not at
    fault.

[61]

Accordingly,
    I would allow this ground of appeal and permit the appellant to maintain a
    figure of $10,000, in respect of the car, in her date of marriage assets.

Issue #3:     What was Mr. Zavarellas
    Date of Marriage Debt?

[62]


The
    appellant submits that while the extent of Mr. Zavarellas indebtedness on the
    date of marriage was unclear, the bulk of the evidence showed that it was much
    in excess of $30,000, and the trial judge erred in finding it to be limited to that
    sum.

[63]

I
    would reject this submission.

[64]

The
    trial judge was faced with conflicting evidence on this matter and chose to
    accept Mr. Zavarellas trial testimony.  As his reasons show, the trial judge
    was expressly alive to the legal principle that each party bears the onus of
    proving his or her assets and debts at the time of marriage.  I do not accept
    that the impugned statement, set out above in the background portion of these
    reasons, amounted to the trial judge impermissibly shifting the burden to Ms. Zavarella
    to disprove Mr. Zavarellas proposed figure of his date of marriage debt.  The
    impugned statement is awkwardly worded.  However, it follows quickly after the
    trial judges correct statement as to the burden of proof in respect of date of
    marriage assets and debts.  In that context, I understand the trial judge to be
    saying, in the impugned statement, that he found Mr. Zavarellas date of
    marriage debt to be $30,000, based on Mr. Zavarellas testimony to that effect.

[65]

The
    trial judge sifted through the conflicting evidence and made a finding of fact
    as to the amount of Mr. Zavarellas date of marriage debt.  As an appellate
    court, this court is not to interfere with that finding, absent palpable and
    overriding error.  In
Fletcher v. Manitoba Public Insurance Corp.
,
    [1990] 3 S.C.R. 191, at p. 204, the Supreme Court explained the need for
    appellate deference in relation to findings of fact, saying:

The very structure of our judicial system requires this
    deference to the trier of fact.  Substantial resources are allocated to the
    process of adducing evidence at first instance and we entrust the crucial task
    of sorting through and weighing that evidence to the person best placed to
    accomplish it.

[66]

I
    see no palpable and overriding error in the trial judges finding of fact on
    Mr. Zavarellas date of marriage debt.  Accordingly, I would dismiss this
    ground of appeal.

Issue #4:     How was the joint line of credit
    used post-Separation?

[67]

It
    will be recalled that the trial judge found that Ms. Zavarella used $27,662
    from the parties joint line of credit for her business expenses.

[68]

On
    appeal, Ms. Zavarella essentially argues that the trial judge was bound to
    accept her trial evidence that she spent only $12,086 for her business
    expenses.  Her argument can be summarized as follows.  She managed the
    household finances when the parties were married.  Until the matrimonial home
    was sold, they continued to live in the home, although separate and apart, in
    much the same style as they had during the marriage.  She kept meticulous
    records in relation to her spending of funds during that period.  She asserts
    that her trial testimony on this matter was never challenged or contradicted.  Therefore,
    the trial judge made a palpable and overriding error in finding that she used
    $27,662 to pay for her business expenses.

[69]

I
    would not accept this submission.

[70]

The
    trial judge had the opportunity to hear Ms. Zavarellas testimony and
    cross-examination on that testimony.  As well, he examined the parties
    financial documentation, including their banking records.  The trial judges finding
    that Ms. Zavarella used $27,662 to pay for her business expenses is a finding
    of fact to which deference is owed.  As noted above in relation to the third
    issue, this court is not to interfere with a trial judges finding of fact, absent
    a palpable and overriding error.  In my view, the appellant has not demonstrated
    such an error.

[71]

Thus,
    I would dismiss this ground of appeal.

DISPOSITION

[72]

Accordingly,
    I would allow the appeal in part and direct the parties to calculate the equalization
    payment using a figure of $0 for Ms. Zavarellas date of marriage debt and
    retaining the figure of $10,000 for the car as a date of marriage asset.  I
    would order that para. 21 of the Order be varied to reflect the new
    equalization payment.

[73]

If
    the parties are unable to reach agreement on costs of the appeal, I would
    permit them to file brief written submissions on the matter, to a maximum of
    three pages in length, such submissions to be filed with the court no later
    than fourteen days from the date of release of these reasons.

[74]

At
    the conclusion of the oral hearing of the appeal, the parties alluded to the
    fact that the result on appeal might have an impact on the costs award at
    trial.  I would permit the parties to include submissions on this matter in
    their written submissions on the costs of the appeal.

E.E. Gillese J.A.

I agree
    G.R. Strathy J.A.




Juriansz
    J.A. (dissenting):

[75]

I
    have read my colleagues reasons and, with respect, I am unable to agree that
    the trial judge committed a reversible error by strictly applying the
    equalization formula set out in the
Family Law Act
, R.S.O. 1990, c.
    F.3 (
FLA
). In my view, this case invites a return to first
    principles, especially the basic proposition that the legislature adopted a
    formulaic approach to equalization of family property to minimize the exercise
    of judicial discretion.

[76]

It
    is undisputed that on the date of marriage the wife had debts to a number of
    credit card companies, retailers, and government bodies totalling approximately
    $49,000. Unlike my colleague, I do not consider it appropriate to pose the
    question of how this debt should be treated when calculating her net family
    property. In my opinion, the trial judge was correct in ending the inquiry with
    the finding that the debt in question existed at the date of marriage and then
    applying the statutory formula.

The Formulaic Approach

[77]

Ontarios
FLA
creates a rigid formula for dividing property on marriage
    breakdown. Section 5(1) provides that upon a designated trigger (
e.g.
,
    divorce or separation), the spouse whose net family property is the lesser of
    the two net family properties is entitled to one-half the difference between
    them. The definitions provided in s. 4(1) flesh out how this payment is
    calculated, and effectively create a mathematical formula to determine property
    division.

[78]

This
    formulaic approach with defined inputs was not accidental. The
FLA
was
    specifically designed to reduce family law litigation by wringing judicial
    discretion out of the system: see
FLA
, Preamble;
Family Law Rules
,
    O. Reg. 114/99, Rule 2. T.W. Hainsworth, author of the
Ontario Family Law
    Act Manual
, loose-leaf, 2nd ed. (Toronto: Thomson Reuters Canada, 2009),
    at para. 5-1.02, states conclusively that the
FLA
property rules
    eliminate judicial discretion.

[79]

For
    this proposition, Hainsworth relies on
Skrlj v. Skrlj
(1986), 2 R.F.L.
    (3d) 305 (Ont. H.C.) and
Serra v. Serra
, 2009 ONCA 105, 93 O.R. (3d)
    161. In
Skrlj
, Galligan J. observed that the marital property regimes
    equalization formula left the court with no discretion to decide spouses
    affairs in accordance with the presiding judges sense of fairness. He said, at
    p. 309:

Before dealing with the property issues, I want to make a very
    brief observation about the new regime of family law in Ontario. As I read the
    Family Law Act 1986, it leaves the court with no discretion to decide spouses
    affairs in accordance with a particular Court's sense of fairness. Subject to a
    discretion if it finds unconscionability, under s. 5(6), the courts must decide
    the rights of separating spouses in strict compliance with the terms of the
    Act, even if in an individual case, a judge may feel that the result does not
    appear fair according to that particular judge's sense of fairness. I think the
    Legislature has clearly expressed its intent to remove judicial discretion from
    property disputes between separating spouses.

[80]

Galligan
    J. stressed this point by adding, colourfully, that the new scheme put an end
    to Palm Tree Justice in Ontario. He said, at p. 309:

In this case certain suggestions were put to the court about
    how this dispute could be resolved by transferring assets to discharge
    corresponding liabilities. In my view, that is the stuff of settlement.
    Separating spouses can settle their differences as they see fit but if they do
    not settle them and decide to come to trial, they are entitled to, and should
    expect to get, adjudication, not mediation. I think that any remnants of
    "Palm Tree Justice" have now disappeared from Ontario.

I intend to decide this case, and other cases, strictly
    according to the Family Law Act, as I interpret it. The chips will fall where
    they may.
[2]

[81]

In
Serra
, Blair J.A. echoed this sentiment when he observed, at para. 56,
    that the design of the legislation, i.e. the adoption of the equalization
    formula, is to promote the goals of certainty, predictability and finality in
    the resolution of property matters following the breakdown of marriage. The certainty,
    predictability and finality of outcomes make the disposition of family property
    cases immeasurably more efficient. The equalization formula, with its certain,
    predictable and final results, dissuades parties from litigating.

[82]

The
    issue in
Serra
was the application of s. 5(6) of the
FLA
. Section
    5(6) authorizes the court to depart from the outcome of the statutory formula
    if the result would be unconscionable. While Blair J.A.s reasons focus on the
    scope of s. 5(6), his clear premise is that the statutory formula must be
    applied unless unconscionability is established. In this provision, unconscionability
    sets an exceptionally high threshold: the application of the statutory
    formula in the circumstances must shock the conscience of the court (at
    paras. 47, 71). Blair J.A. observed that [j]udicial discretion with respect to
    equalization payments is therefore severely restricted, by statutory design
    (at para. 57).

[83]

Hainsworth
    points out that the unconscionability threshold was a change from the former
    property regime, which permitted judicial intervention if equal division was
    inequitable. He notes, at para. 5-4.02, that the change in language
    demonstrated that the legislature intended to afford the equalization regime additional
    protection from judicial interference.

[84]

In
    contrast to the
FLA
property rules, judicial discretion leads to
    trials. Its exercise requires detailed evidence about the unique circumstances,
    histories and expectations of the particular spouses. These finely-tuned
    results come at a cost most often disproportionate to what is at stake. Litigation
    of property issues in family law not only saddles the parties with
    disproportionate financial and emotional costs, but allowing property issues to
    fester while awaiting trial and appeal detrimentally affects the other family
    law issues the parties must resolve.

[85]

In
    any event, it is not for the courts to weigh the relative costs and benefits of
    the two approaches. The legislature has chosen the formulaic approach over the
    judicial discretion approach. This choice necessarily entails that the strict
    application of the rules may lead to a result different from what a court might
    order, short of unconscionability.

The Authorities Relied Upon

[86]

The
    primary authorities on which the appellant relies in this appeal are this
    courts decision in
Greenglass v. Greenglass
, 2010 ONCA 675, 99 R.F.L.
    (6th) 271, and Heeney J.s decision in
Poole v. Poole
(2001), 16
    R.F.L. (5th) 397 (Ont. S.C.).

[87]

In
Greenglass
, Epstein J.A. recognized the courts ability to include
    contingent debts in a spouses NFP calculation, when those debts were
    foreseeable at the valuation date, even if they are not yet liquidated. In that
    case, the contingent debts were legal fees for litigation related to actions
    taken during the marriage for a claim that had crystallized before the date of
    separation.

[88]

The
    present case, as both counsel recognized, is different because the wifes date
    of marriage debts were not contingent but actual. Indeed, the definition of
    property in s. 4(1) of the
FLA
includes contingent interests,
    which indicates a jurisdiction to include them in the calculation. The
    appellant seeks to extend the treatment of contingent debts to the
    circumstances of this case.

[89]

Poole
concerned money that the husbands parents had lent the married couple, which
    they sought to collect when the marriage ended. The trial judge discounted the
    husbands share of the debt because he found the parents were very unlikely to
    collect it from their son

[90]

Poole
is one of a line of cases dealing with money advanced to married adult children
    by their parents: see,
e.g.
,
Da Silva v. Da Silva
(2004), 1
    R.F.L. (6th) 108 (Ont. S.C.), at para. 46; and
Seneshen v. Seneshen
,
    [2006] O.J. No. 2104 (S.C.), at paras. 12-27. In my view, the question that
    arises in these cases is whether the transfer of property from a parent to a
    married adult child or couple should be characterized as a gift or loan. The
    court is given the jurisdiction to consider whether a transfer is a gift by
    s. 4(2)1 of the
FLA
. Under s. 4(2), parties bear the onus to establish
    that a particular piece of property should be excluded from their NFP because
    it was a gift. The nature of the provision requires factual findings from
    judges.

[91]

As
    I read her reasons, my colleague would extend the
Poole
approach
    beyond money advanced from parents, or as gifts, to apply to all debts. She
    says that in order to fairly calculate equalization, the court must make a
    realistic determination of the value of debt in an NFP calculation, and that
    determination is based on the reasonable likelihood that the debt will ever be
    paid.

[92]

I
    have grave reservations about extending the
Poole
approach. Unlike
    with gifts, there is no suggestion in the
FLA
formula that certain
    debts will not be included in the NFP calculation. To repeat, unlike gifts,
    which are excluded under s. 4(2)1, s. 4 does not contemplate characterizing
    particular liquidated debts as real or illusory, nor does it mention the
    possibility of discounting them.

[93]

Having
    concluded the trial judge erred by not departing from the equalization formula,
    my colleague relies on the following evidence called by the parties to conclude
    that the wifes date of marriage debts should be set at $0: the two expert
    opinions, the parties testimony about their conversations before marriage, and
    the fact that the wife was eventually discharged without making any payments.
    In another case, the economic affairs and prospects of the bankrupt spouse
    might be different; the expert opinion about whether some payment would likely
    be required might be different; the parties would have had different
    pre-marriage conversations; and the subsequent events might be different. A
    court exercising this discretionary approach in another case may set the date
    of marriage debts at some value other than $0, depending on the evidence.

[94]

My
    larger concern is that my colleagues reasoning cannot be confined to cases in
    which one spouse has made an assignment in bankruptcy. The principle that
    courts have the discretion to determine, for NFP purposes, a liquidated debts
    true value while disregarding its face value could apply to many kinds of
    debt, whether owed by or to a spouse. In my opinion, recognizing judicial
    jurisdiction to value particular debts raises the spectre of family law
    litigants looking to the court to rate the quality of all of the debts they owe
    or are owed. Not only would the outcomes be uncertain and unpredictable, but
    the resolution of each case would require evidence about the particular
    circumstances. Expert opinion would be required in a great many cases.

[95]

The
    certainty and predictability provided by the statutory equalization formula
    would be undermined. The result would be greatly expanded scope for litigation
    in the already overburdened family courts.

Applying the Formula

[96]

In
    the circumstances of this case, I would agree with the trial judges approach.
    That is, I believe the correct approach is to simply apply the computations set
    out in s. 4(1) of the
FLA
and let the chips fall where they may.

[97]

Section
    4(1) defines net family property as follows:

net family property means the value of all the
    property, except property described in subsection (2), that a spouse owns on
    the valuation date, after deducting,

(a) the spouses debts and other liabilities, and

(b) the value of property, other than a
    matrimonial home, that the spouse owned on the date of the marriage, after
    deducting the spouses debts and other liabilities, other than debts or
    liabilities related directly to the acquisition or significant improvement of a
    matrimonial home,
calculated as of the date of the marriage
[.]
    [Emphasis added.]

[98]

This
    definition clearly provides that one must deduct the spouses debts calculated
    as of the date of the marriage. As of the date of marriage, the wife in this
    case had debts in the amount of $49,838.70. These were actual, liquidated
    debts, not contingent debts as in
Greenglass
. Nor is there an issue
    whether these funds were a gift. Indeed, unlike assets or debts about whose
    value there could be disagreement among experts, such as art or real property,
    these were liquidated amounts owing to arms-length creditors.

[99]

No
    one disputes these facts. As the trial judge concluded, at para. 12:

a contingent liability which may or may not become a debt
    obligation is different from an actual debt. In the case at bar, the debts were
    fixed and existing at the date of marriage.

[100]

I would attach
    no significance to the wifes application for an assignment in bankruptcy
    before marriage. It did not change the legal character of her debts. This
    court, in
Thibodeau v. Thibodeau
, 2011 ONCA 110, 104 O.R. (3d) 161, dealt
    with the application of bankruptcy principles to family law disputes. Blair
    J.A. rejected the notion that equalization payments should receive special
    treatment in a bankruptcy, except for those orders explicitly made pursuant to
    s. 9(1) of the
FLA
. The court held that the bankruptcy regime applies
    strictly to family law property disputes, unless the statute provides
    otherwise. See also
Schreyer v. Schreyer
, 2011 SCC 35, [2011] 2 S.C.R.
    605, at paras. 37-41.

[101]

In this case,
    the bankruptcy discharge was granted during the marriage. As such, it should be
    treated like any other financial benefit received by one spouse during the
    marriage and the parties should share its benefit equally. Receipt by one
    spouse of a financial benefit during the marriage that then accrues to both
    spouses upon marriage dissolution is in no way unique to these circumstances.

[102]

I would also pay
    no heed to the parties pre-marriage conversations in which the husband advised
    the wife to make an assignment in bankruptcy. While s. 52(1) of the
FLA
allows prospective spouses to enter into an agreement in which they agree on
    their respective rights and obligations under the marriage or on separation,
    s. 55(1) provides that such a contract is unenforceable unless made in
    writing, signed by the parties and witnessed.

[103]

These provisions
    are consistent with the overall scheme of Part I of the
FLA
. They
    encourage the certain, predictable and final resolution of family property
    disputes by shrinking the scope for the calling of evidence and circumscribing
    the discretion of courts.

[104]

Finally, I would
    attach no significance to the evidence that the wife eventually received a
    discharge without making any payment towards her debts. The character of the
    wifes interests on the date of marriage should not change with the unfolding
    of subsequent events. I restate the closing phrase of s. 4(1) that a spouses
    debts are to be calculated as of the date of the marriage.

[105]

The clarity of
    this phrase was recognized by this court in
Dembeck v. Wright
, 2012
    ONCA 852, 114 O.R. (3d) 44. In that case, the 62-year-old husband received a
    $190,000 termination package from his employer shortly before separating from
    his wife, whom he had married when he was 53. The husband unsuccessfully argued
    that most of the value of the package had accumulated before marriage and
    should be excluded from the calculation of his NFP.

[106]

Writing for the
    court, Epstein J.A. also rejected the husbands alternative argument that the
    part of the package that had fully accumulated prior to marriage retroactively
    became date-of-marriage property when his entitlement to the amount
    crystallized before the date of separation. She looked to the
FLA
and
    found nothing in [the definition of property] that gives the court
    jurisdiction to reclassify an interest as circumstances change (at para. 56).
    She added, at para. 57, that to reclassify an interest when circumstances
    change

would be contrary to Ontario's mechanism for giving effect to
    the policy underlying modern family law legislation. This would permit
    on-going adjustments as to what is and what is not property, destroying the
    "fixed date valuation" identified by Blair J.A. in
Serra
.

[107]

In coming to
    this conclusion, at paras. 58, 59, she emphasized the purpose of the
FLA
of promoting settlement through certainty of outcomes:

In my view, expanding the definition of property in
    proceedings under the
FLA
to allow for retroactive reclassification
    would be contrary to the statutory intent. This intent has been expressed in
    many ways, but for the purposes of making this point I go to the preamble of
    the Act itself. The preamble identifies the Acts purpose as to provide in law
    for the orderly and equitable settlement of the affairs of spouses upon the
    breakdown of the partnership.

To allow retroactive reclassification of property would be
    anything but orderly. It would inject a substantial dose of uncertainty into a
    statutory framework in want of none. It would also increase the consumption of
    limited resources of time, money and emotional energy that accompany the
    resolution of matrimonial disputes.

[108]

If there was any
FLA
by establishing that
[109]

While
Dembeck
is not on all fours with this case, I would employ similar reasoning and refuse
    to revisit the characterization of the wifes date of marriage debts because of
    the subsequent event that she made no payment towards them.
[110]

I would
    therefore conclude that the trial judge was correct to include the debts the
    wife owed at the date of marriage in her date of marriage debts. I would not
    consider whether this result was unfair, harsh or unjust. The threshold
    for departure from the statutory formula, as this court has decided, is whether
    the result shocks the conscience of the court. In my view, it does not.
The Car
[111]

I respectfully
    agree with the legal principles that my colleague applies in allowing the
    appeal with respect to the carboth with respect to pre-trial settlements and
    the doctrine of common mistake. However, I would dismiss the appeal on this
    issue because of the state of the record.
[112]

It seems to me
    that when this court is asked to review a trial judges treatment of a $10,000
    piece of property in a family law case, at a minimum, the appellant should be
    expected to place a record before the court with a proper foundation for the
    relief sought. The standard to intervene on an issue of this kind is high and
    in part 
designed to promote finality in family law
    litigation
:
Juvatopolos v. Juvatopolos
(2005), 19 R.F.L. (6th)
    76 (Ont. C.A.), at para. 13. In this case, the appellant has not filed in the
    appeal record any settlement agreement upon which she relies.
Other Issues
[113]

I agree with my
    colleagues disposition of the other two issues on appeal.
Released: November 28, 2013 (E.E.G.)
R.G. Juriansz J.A.

[1]
The trial judge excluded the secured debt of $10,000 from the Debt because
    there was no evidence that the value of the car was inadequate to offset its
    associated debt.  There was no appeal taken from this finding of fact and the
    appeal proceeded on the basis that the Debt was $49,838.70, rather than
    $59,838.70.


[2]
This court has approved Galligan J.s remarks in
Skrlj
. See, most
    recently,
Buttar v. Buttar
, 2013 ONCA 517, 116 O.R. (3d) 481, at
    paras. 50-53.
