



COURT OF APPEAL FOR ONTARIO

CITATION: Knight v. Knight-Kerr, 2021 ONCA
    686

DATE: 20211007

DOCKET: C69063

Feldman, Paciocco and Nordheimer
    JJ.A.

BETWEEN

Randal Allan Knight

Applicant

(Appellant)

and

Mary Lynne Isobel Louise Knight-Kerr

Respondent

(Respondent)

Lorrie Stojni-Kassik and Emily F.
    Metcalfe, for the appellant

Mary Lynne Isobel Louise Knight-Kerr, acting
    in person

Heard: September 2, 2021 by video conference

On appeal from the order of Justice
    Russell M. Raikes of the Superior Court of Justice, dated January 4, 2021, with
    reasons reported at 2021 ONSC 55.

Feldman J.A.:

A.

Background

[1]

The parties married on March 14, 2009, after
    signing a domestic contract, the Family Agreement, that the wife prepared.
    Neither party had the assistance of a lawyer. They separated in July 2017.

[2]

The wife brought the original matrimonial home
    into the marriage. The parties lived in that home for a few years, then sold it
    and purchased a second home, where they lived at the date of separation. The Family
    Agreement contains the following provision regarding the treatment of the
    matrimonial home on marriage break-up:

Louise will receive the first $45,000
    (repayment of the original house deposit). This continues forward should they
    move to another location. Randy and Louise shall benefit equally from the
    remainder of house profits.

[3]

In this action to determine equalization of net
    family property (NFP), the husband denied that he had signed the Family
    Agreement and claimed that the wife forged his signature. That claim was
    rejected by the trial judge. The other issue that took significant time at
    trial was custody of the family dog, which was awarded to the husband. Neither
    of those findings is challenged on the appeal.

[4]

The sole issue raised by the husband on the
    appeal is the calculation of the NFP in respect of the treatment of the two
    homes, and the interpretation and application of the Family Agreement provision
    regarding the $45,000.

B.

The Trial Judges Decision

[5]

The trial judge found that the husband did sign
    the Family Agreement, and that it was a valid and binding domestic contract.
    The trial judge then dealt with equalization, including the wifes entitlement
    to the $45,000 pursuant to the Family Agreement. He did so by reference to the
    form of the NFP statement and what should be included in each Part of the form.

[6]

With respect to the value of assets owned on the
    valuation date, under Part 4(a): Land, the trial judge found that the second
    home, known as the Jackson property, was purchased in 2012 for $250,000 and
    sold in 2018 for $572,000. At paras. 87-88, he stated:

[87]    The first $45,000 should be deducted
    pursuant to the terms of the Family Agreement. Those funds belong to the
    Respondent [wife] and come off the top of the sale proceeds. The net amount is
    $527,000. That amount is divided equally: $263,500 each.

[88]    For equalization purposes, Part 4(a)
    should show the following: Applicant [husband] $263,500, Respondent [wife]
    $308,500. In order to ensure that the $45,000 is neutral and not counted in her
    net family property, a corresponding exclusion is necessary in Part 7 (see
    below) pursuant to s. 4(2) item 6 of the
Family Law Act
.

[7]

In other words, because the parties agreed that
    the wife was entitled to $45,000 more than the husband out of the valuation-date
    value of the matrimonial home, his share of the value of the Jackson property
    is $263,500, while hers is $308,500. At the same time, the $45,000 is shown as
    an exclusion from the wifes NFP because, pursuant to the Family Agreement, the
    $45,000 deposit belongs exclusively to her and is not shared with the husband.
    The wife receives that amount over and above any equalization payment. That is
    the correct way to account for an exclusion on an NFP statement.

[8]

The next relevant section of the NFP form is Part
    6: Property, Debts, and Other Liabilities on Date of Marriage. On the wifes
    side of the ledger, the trial judge included the value of the first home, known
    as the Kroeger property, of $250,000, and deducted the mortgage of $157,715,
    noting there was no dispute regarding these figures. He thereby included the
    full amount of the equity in the Kroeger property at the date of marriage,
    namely $92,285, as a deduction on the wifes side of the ledger.

[9]

The last part of the NFP form is Part 7: Value
    of Property Excluded under Subs. 4(2) of Family Law Act. With respect to
    exclusions, the trial judge stated:

The Family Agreement applies at this stage.
    First, the Respondent [wife] is entitled to exclude $45,000 representing her
    deposit from the Kroeger Crescent home.

[10]

By applying the inclusions, deductions, and the
    exclusion as part of the overall calculation, the trial judge found that the
    husband owed the wife an equalization payment of $43,547. He concluded, at
    para. 149, that from the sale proceeds of the Jackson property that were (and
    still are) being held in trust:

Based on my findings above, the Respondent
    [wife] is entitled to $45,000 from the sale of the home per the Family
    Agreement less $19,000 already received ($26,000), $43,547 for equalization,
    and prejudgment interest on both amounts. Those amounts should be paid to her
    from funds held in trust. The balance of any monies held in trust, regardless
    where and by whom held, should be divided equally between the parties.

[11]

The trial judge added at the conclusion of his
    reasons that, if there was an arithmetic error, the parties should notify the
    trial coordinator to schedule a remote hearing with the trial judge to deal
    with it.

C.

Issue

[12]

The appellants position on this appeal is that
    the trial judge erred in his approach to the equalization payment by double
    counting the respondent wifes $45,000 deposit in the Kroeger property.
    Specifically, he argues that the trial judge gave the wife the benefit of the
    $45,000 both as part of the equity she brought into the marriage that entitled
    her to a marriage-date deduction, and then again in satisfaction of the Family
    Agreement, and possibly yet again in the overall effect of the final order. He
    submits this constituted an error by the trial judge in interpreting the Family
    Agreement and/or in applying it to the equalization of net family properties under
    the
Family Law Act
, R.S.O. 1990, c. F.3 (the 
FLA
).

D.

Analysis

[13]

The Family Agreement must be interpreted in the
    legislative context of Part I of the
FLA
, which deals with family
    property on marriage breakdown.

(1)

Division of Family Property under the
FLA

[14]

Under s. 4(1) of the

FLA
, net
    family property is defined as:

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 marriage.

[15]

Section 5(1) then provides that on marriage
    breakdown, the spouse whose net family property is the lesser of the two net
    family properties is entitled to one-half the difference between them. This is
    also referred to as the equalization of net family properties.

[16]

The matrimonial home is given special treatment
    under the
FLA
in the calculation of net family property. In accordance
    with the definition of net family property in s. 4(1)(b), while a spouse can
    ordinarily deduct the value of property that they brought into the marriage in
    calculating the NFP, deductions connected to the matrimonial home are not
    allowed.

[17]

Section 18 defines the matrimonial home as:

18(1)  Every property in which a
    person has an interest and that is or, if the spouses have separated, was at
    the time of separation ordinarily occupied by the person and his or her spouse
    as their family residence is their matrimonial home.

[18]

The effect of these sections, read together, is
    that where a person brings a property into the marriage that becomes and remains
    the couples matrimonial home on the date of separation, the spouse who brought
    the property into the marriage may not deduct the marriage-date value of that
    property from their net family property to be equalized. But if the original
    property is no longer a matrimonial home within the definition in s. 18 at the
    date of separation  for example, if it was sold during the marriage  then the
    value of the original property on the date of marriage is a deduction for the spouse
    who brought it into the marriage.

[19]

However, s. 2(10) of the
FLA
allows the
    parties to agree to different arrangements, subject to ss. 52(1) and (2), by
    entering into a marriage contract.

[20]

In this case, by their Family Agreement, the
    parties agreed to specific treatment of $45,000 representing the deposit that
    the wife paid to purchase the Kroeger property, which became the parties
    matrimonial home. The Family Agreement specified that the wife would preserve
    her entitlement to this $45,000 from the sale proceeds of whatever home they
    were living in in the event of marriage breakdown, whether the parties still
    lived in the Kroeger property or had moved to another home.

(2)

Application to this Case

[21]

The issue raised by the appellant husband is
    whether the trial judge erred in his interpretation of the Family Agreement
    and/or in applying it to the equalization of net family properties under the
FLA
.

[22]

The trial judge did not discuss the possible
    interpretations of the $45,000 provision of the Family Agreement in his
    reasons. The wife was unrepresented at trial. The NFP statement filed by the
    husband was based on his main position that he had not signed the Family
    Agreement, and therefore he did not include any treatment of the $45,000 in his
    NFP. During closing submissions, counsel for the husband (not appeal counsel) and
    the trial judge had a brief colloquy regarding the treatment of the $45,000 in
    the event he found that the husband had in fact signed the Family Agreement,
    but there was no detailed discussion of alternative treatments to take into
    account the combined effect of the Family Agreement and the
FLA
.

[23]

In order to give effect to the Family Agreement,
    the trial judge treated the first $45,000 of the proceeds of sale of the
    Jackson property as an exclusion from the wifes net family property under s.
    4(2), and ordered that $45,000 be paid to the wife out of those proceeds. Item
    6 of s. 4(2) provides:

4(2)    The value of the following
    property that a spouse owns on the valuation date does not form part of the
    spouses net family property:



6.       Property that the
    spouses have agreed by a domestic contract is not to be included in the
    spouses net family property.

[24]

I see no error in the trial judges approach to
    the treatment of the $45,000 as agreed by the parties. The proceeds of the
    Jackson property were jointly owned on the valuation date and the Family
    Agreement provides that $45,000 of the proceeds of the sale are to be treated
    as belonging to the wife. The
FLA

provides that that amount is
    an exclusion from her net family property.

[25]

Because the parties had sold the Kroeger
    property, it was no longer their matrimonial home at the date of separation,
    and therefore its marriage date value was deductible by the wife. However, the trial
    judge allowed the wife to deduct the full marriage-date value of the Kroeger
    property in the amount of $92,285, which included the value of the $45,000
    deposit. In other words, he allowed an excluded property (the $45,000 deposit)
    to also be deducted. This was an error because the same property cannot be both
    an exclusion and a marriage-date deduction. The effect of this error was to
    double count the $45,000 in the wifes favour.

[26]

The appellant has argued, in the alternative,
    that the trial judges error was allowing the wife any deduction for her equity
    in the Kroeger property. He says the Family Agreement should be interpreted to
    mean that, while under the
FLA
the wife would have been entitled to
    deduct her entire date of marriage equity in the first home as it was no longer
    the matrimonial home at the valuation date, the effect of the Family Agreement
    was that she gave up that benefit.

[27]

I would not give effect to this argument. While
    it represents one possible interpretation of the agreement, other reasonable
    interpretations are that the word profits in the clause benefit equally from
    the remainder of the house profits refers to proceeds of the sale of the house
    over and above the existing equity, or it could be referring only to profits in
    a subsequent house if they bought one. In addition, there is no language in the
    Family Agreement that suggests that the parties intended to contract out of the
FLA
other than preserving for the wife her original deposit of $45,000
    on the Kroeger property.

[28]

In my view, the only error made by the trial
    judge occurred at the intersection of the effect of the contract and the operation
    of the net family property provisions of the
FLA
. That is, having
    correctly characterized the agreement between the parties as an agreement to
    exclude the wifes $45,000, when considering the appropriate amount to include as
    the wifes marriage-date deduction, it was necessary not to again count the
    same $45,000 deposit that was part of the value of the Kroeger property.

[29]

I would allow the appeal to the extent that I
    would subtract $45,000 from the wifes date of marriage deduction of $92,285, representing
    her equity in the Kroeger property, and then recalculate the equalization
    payment owed by the husband to the wife.

[30]

The result is that instead of owing the wife an
    equalization payment of $43,547, the husband owes the wife an equalization
    payment of $38,924.

E.

Conclusion

[31]

I would change para. 4 of the order dated
    January 4, 2021, to read as follows:

4.       The Applicant, Randal Allan Knight,
    shall pay to the Respondent $38,924 for equalization.

[32]

I would dismiss the rest of the appeal, leaving
    the remainder of the order in full force and effect.

[33]

The husbands success on the appeal has been
    extremely limited: he has succeeded in reducing his payment to the respondent
    by $4,623 in total. In addition, the husband could have avoided the appeal
    process by accepting the invitation of the trial judge to bring any arithmetic
    errors to his attention for correction. I would therefore not make any order
    for the costs of the appeal.

Released: October 7, 2021 K.F.

K. Feldman J.A.

I agree. David M. Paciocco J.A.

I agree. I.V.B. N
ordheimer J.A.


