



COURT OF APPEAL FOR ONTARIO

CITATION: Krebs v. Cote, 2021 ONCA 467

DATE: 20210625

DOCKET: C68993

Tulloch, Pardu and Roberts JJ.A.

BETWEEN

Gary George Krebs

Applicant (Appellant)

and

Stephanie Valerie Cote

Respondent (Respondent)

David Goodman, for the appellant

Ashley Gibson and Anthony Reitboeck,
    for the respondent

Heard: June 16, 2021 by videoconference

On appeal from the order of Justice David
    L. Edwards of the Superior Court of Justice, dated December 22, 2020.

Pardu J.A.:

A.

INTRODUCTION

[1]

The appellant, Mr. Krebs, appeals from a decision of a motion judge
    declaring that a cohabitation agreement with the respondent, Ms. Cote, was of
    no force and effect.

[2]

The appellant submits that the motion judge erred (i) in concluding that
    a reconciliation terminates a cohabitation agreement, (ii) in failing to
    interpret the whole of the plain language of the contract in the factual
    context existing when it was signed, and (iii) in concluding that a payment
    made pursuant to the agreement exhausted the terms of the rest of the agreement.

[3]

The respondent supports the motion judges decision.

[4]

Both parties had independent legal advice before signing the
    cohabitation agreement and there is no challenge to the validity of the
    agreement.

B.

BACKGROUND

Family History

[5]

The parties began an off-and-on-again relationship in 2006, with
    numerous separations. This continued in 2012-2013 when the parties separated on
    a few occasions. In October 2012, the respondents mother purchased a home in
    which her daughter could reside. In December 2012 or January 2013, the parties
    decided to resume cohabitation and, during this period, entered into the
    cohabitation agreement that is the subject of this appeal. The respondent moved
    out of the appellants home shortly thereafter. The appellant paid her $5,000,
    pursuant to the agreement, for vacant possession of his home.

[6]

The parties reconciled in the first half of 2014. In June 2014, they
    married and the respondent moved back into the appellants home. The parties
    discussed adding the respondent to the title to the matrimonial home in 2016,
    but that was ultimately not pursued.

[7]

The relationship broke down for the final time in January 2019.

The Notice of Motion

[8]

The respondent brought a motion seeking the following relief:

An order for summary judgment to
    decide a question of law before trial pursuant to Rule 16(12)(a) of the
Family Law Rules
. Specifically, an Order that the
    Cohabitation Agreement executed by the parties in December 2012 (Applicant) and
    January 2013 (Respondent) is invalid, not binding on the parties and is of no
    force or effect.

[9]

The question of law that the parties wanted the motion judge to decide
    was whether, as a matter of law, separation followed by reconciliation
    terminated a cohabitation agreement.

[10]

Although
    the notice of motion was confined to a question of law, the motion judge went
    on to make findings about the subjective intentions of the parties, and to
    interpret the agreement. However, interpretation of a contract is a matter of
    mixed fact and law:
Creston Moly Corp. v. Sattva Capital
    Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50. The motion
    proceeded on the basis of an agreed statement of facts.

[11]

Both
    parties ask that, if necessary, this court interpret the agreement rather than
    sending this back for a new hearing, despite the limitations of the notice of motion.

The Motion Judges Decision

[12]

The
    motion judge concluded that the cohabitation agreement was of no force or
    effect for three reasons.

1.

The common law principle holding that reconciliation terminated a
    separation agreement applied to cohabitation agreements.

2.

The discussion about transferring title to the matrimonial home to the
    respondent in 2016 showed that the parties did not subjectively intend that
    their cohabitation agreement would continue to apply in the event of a
    separation and reconciliation. This was, he held, sufficient to rebut any
    presumption to the contrary. The motion judge went on to note that nothing in
    the agreed facts supported an intention that the agreement would be applicable
    if there was a reconciliation, and nothing in the agreement expressly dealt
    with the effects of a separation and reconciliation.

3.

The cohabitation agreement provided that upon breakdown of the
    relationship, the respondent would vacate the home owned by the appellant which
    the parties were then occupying as their home on 30 days written notice and
    upon payment by the appellant to the respondent of $5,000 payable on the date
    she left the property. The motion judge held that the consideration for the
    $5,000 payment was the respondents relocation from the matrimonial home and
    that, since that triggering event had occurred and payment made, the terms of
    the cohabitation agreement were exhausted.

C.

Analysis

[13]

I do not agree with the motion judges
    conclusion that a cohabitation agreement does not apply to the parties after a
    separation followed by reconciliation unless the agreement expressly provides
    to the contrary.

[14]

It is well-established that, at common law, a separation
    agreement becomes void upon reconciliation of the parties, subject to any
    clause in the separation agreement overriding the common law rule or which
    would imply that the intent of the parties was that terms of the separation
    agreement would be carried out notwithstanding any subsequent reconciliation:
    see
Ernikos v. Ernikos
, 2017 ONCA 347, at
    para. 11;
Sydor v. Sydor
(2003), 178 O.A.C.
    155 (C.A.), para. 22;
Bailey v. Bailey
(1982),
37 O.R. (2d) 117 (C.A);
Bebenek v. Bebenek
(1979), 24
    O.R. (2d) 385 (C.A.).


[15]

I would not extend the common law rule to cohabitation agreements.

[16]

The
    common law rule is ancient. In
Nicol v. Nicol
(1885), 30 Ch. D. 143, at p. 145, North J. of the Chancery Division explained
    the rationale for the common law rule that reconciliation brings a separation
    agreement to an end:

I think it
    clearly established by numerous authorities (no case in any way conflicting
    with them), that where a separation arrangement is made pure and simple, that
    arrangement is for the term of the separation, and for no longer. It comes to
    an end when the separation ends, not because the fact of reconciliation or
    recohabitation makes it void, but it dies a natural death. The agreement was to
    provide for a state of things which has come to an end, the state of things
    being that the parties were living separate although married. When they live
    together again as man and wife the state of things is totally different, and
    the arrangement comes to an end.

[17]

The rule was not absolute and depended on an
    interpretation of the parties intentions, as evinced by the whole of the
    agreement. For example, where a separation agreement had separation for one of
    its objects but also other matters within its purview, such as settlement of
    property issues, those aspects of the agreement may continue despite a return
    to cohabitation. As described by Montague Lush and Walter Hussey Griffith in
Law
    of Husband and Wife

within the Jurisdiction of the Kings Bench &
    Chancery Divisions
, 3rd ed. (London: Stevens and Sons, Limited, 1910), at
    pp. 461-463:

[I]t is a well-established principle of law
    that a separation deed properly so called

i.e
., a separation deed whose only object
    is to provide for the parties living apart from one another

is
ipso facto
put an end to for
    all future purposes if the parties subsequently become reconciled and return to
    cohabitation.

This principle is too well known and too plain
    to require observation.
For the very nature and object of
    the instrument is to provide for a state of circumstances which comes to an end
    on a cesser of the separation
.



But a separation deed the primary object of
    which is to provide for the parties living apart may have also a secondary
    objectviz., that of effecting a permanent settlement of property to continue
    not only during the separation but in any event.



The question whether a deed is a separation deed which will be
    avoided upon a return to cohabitation or a post-nuptial settlement which will
    continue valid notwithstanding a return to cohabitation turns upon the
    intention of the parties to be gathered from the terms of the deed
. [Emphasis added. Internal citations omitted.]

[18]

The
    common law rule dates from a time when views about marriage, cohabitation,
    separation, and divorce were very different. At one time, separation agreements
    were considered contrary to public policy. To cohabit without the benefit of
    marriage was to live in sin. The courts of equity would not enforce an
    executory separation agreement, i.e. one entered before the separation, though
    in contemplation of a future separation. Cohabitation for even a short time
    after execution of the agreement rendered the deed of separation void: see
Law of Husband and Wife
, at
p. 457.

[19]

Today
, marriage contracts, cohabitation agreements, and
    separation agreements are all part of the legislative landscape:
Family Law Act
, R.S.O. 1990, c. F.3, ss. 52-54. Parties
    should be encouraged to enter agreements to define their rights and obligations.
    Jurisprudential shoals upon which an agreement may founder unnecessarily do not
    advance that goal.

[20]

Notwithstanding the sea change in family law over the past
    century, the common law reconciliation rule remains a part of Canadian common
    law and continues to make some sense. Where the
raison
    dêtre
of the agreement is separation and parties
    reconcile, the foundation for the separation agreement dissolves. I see no
    basis to extend this logic so as to void a cohabitation agreement following
    reconciliation of the parties. Under such circumstances, the reconciled parties
    have returned to the very state contemplated by the cohabitation agreement.

[21]

In
Langdon v. Langdon
, 2015 MBQB 153, 321
    Man. R. (2d) 52, Little J. remarked, in
obiter
, that he was far from
    certain that reconciliation should affect a cohabitation agreement in the same
    manner as a separation agreement. He explained, at paras. 138-140:

I do not think it a proper inference or
    presumption to say that a resumption of cohabitation nullifies [a cohabitation
    agreement] concerning a property and support regime. Renewed cohabitation in
    that context is more reflective of an intention to return to a relationship
    where one's rights were formerly delineated by the agreement. It does not seem
    to me to be at all reflective of an intention to enhance one party's rights or
    to impose greater obligations on the other, something that will inevitably
    result when the cohabitation agreement no longer exists.

It seems to me
    that if there is to be an inference or a presumption at all it ought to be
    (barring other evidence of intention) that the resumption of cohabitation
    returns you to the position you held in the relationship to which you have now
    chosen to return. Presuming the termination of the cohabitation agreement on
    resumption of cohabitation could lead to strategic separations and
    reconciliations designed to nullify cohabitation agreements. It also results in
    a policy requiring redocumentation on resumption of cohabitation.

I do not regard the first as good policy; the
    second is impracticable and is not in keeping with the way people typically
    lead their lives.

[22]

I agree with the views expressed in
these passages, although I would not go so far as to
    say there is a presumption in favour of the cohabitation agreements continued
    validity following reconciliation
. The applicability of a
    cohabitation agreement to the circumstances of the parties will depend on the
    interpretation of that agreement and the light it sheds on the intentions of
    the parties.

Interpretation of the cohabitation agreement

[23]

The words of the contract are central to the
    interpretive exercise. As observed in
Sattva
,
at paras. 47-49, the goal is to
    ascertain the objective intent of the parties and the scope of their
    understanding, reading the contract as a whole, giving the words used their
    ordinary and grammatical meaning consistent with the surrounding circumstances
    known to the parties at the time of the formation of the contract.

[24]

Deference is owed to first-instance
    decisionmakers on interpretation of contracts, absent an extricable error of
    law which may include the application of an incorrect principle, the failure
    to consider a required element of the legal test or the failure to consider a
    relevant factor:
Sattva
, at para.
53.

[25]

In this case, the motion judge made extricable
    errors of law in his interpretation of the cohabitation agreement. He
    approached the interpretive process with the idea that the agreement had to
    gainsay application of the common law test. He did not analyse the intentions
    of the parties at the time they entered into the agreement nor the contractual
    language itself. He made a finding about their subjective intentions not feasible
    on the record before him, based on a proposed transfer that was contemplated by
    the cohabitation agreement and not, as he held, incompatible with it.

[26]

The cohabitation agreement at issue envisaged
    cohabitation, marriage, divorce, separation, and death of a party. It provides
    the parties intend by this Agreement to outline their respective rights and
    obligations while cohabiting, before or during marriage, upon death and in the
    event of separation.

[27]

There is nothing in this language that
    temporally restricts the application of the terms to cohabitation at a defined
    time or restricts the broad language to cohabitation before separation followed
    by reconciliation. Were this the intention of the parties, such language would be
    expected in a context where the parties executed the agreement in the context
    of a relationship punctuated by multiple separations. That there could be
    multiple separations and reconciliations in the future would have been within
    the reasonable contemplation of these parties at the time the agreement was
    signed. An ordinary person reading this agreement would consider that if the parties
    cohabited under any circumstances, the agreement applied.

[28]

The agreement was intended to be long-lasting,
    noting the parties have considered in developing this Agreement future untold
    events, such as loss of income and major illness or disability.

[29]

The release of claims for support, property and
    equalization were broad:

7.
SUPPORT

AFTER
    BREAKDOWN OF MARRIAGE



(2)     Krebs and Cote each release the other
    from any and all obligations to provide spousal support, maintenance, or
    financial assistance of any nature or kind, pursuant to the provisions of the
Family
    Law Act
, the
Divorce Act
, the
Succession Law Reform Act
or any other law of any jurisdiction whatever, and release all rights to claim
    or obtain support, interim support, maintenance, interim maintenance,
    compensation for any loss of employment opportunity or career advancement as a
    result of the cohabitation or marriage, or any financial assistance of any
    nature or kind, pursuant to any laws of the Province of Ontario or any other
    jurisdiction.



8.
REAL PROPERTY



(e)     Subject to the rights of each party
    contained in Part II of the
Family Law Act
, in the event of
    separation, or death after marriage, each party hereto waives and releases the
    other from any claims which either may have or may acquire under the laws or
    any jurisdiction, and in particular under the provisions of the
Family Law
    Act
(Ontario), to any claim to any right or any title in the real property
    owned or registered in the name of the other, including any matrimonial home
    registered solely in the name of one of the parties, including all claims,
    rights and interest to and in:

(i)
ownership of the property of the other;

(ii)
possession of the property of the
    other;

(iii)
division or equalization of the
    real property of the other;

(iv)
compensation by payment of any
    amount of money or by award of a share in property or an interest therein, for
    contribution of any kind whether direct or indirect, monetary or non-monetary
    made to the property of the other.



(g) In the event the parties do not marry,
    neither shall have any claim to any right, title or interest in any real
    property registered in the name of the other, including:

(i)

ownership of the property of the other;

(ii)

possession of the property of the other;

(iii)

division or equalization of the real property of
    the other;

(iv)

compensation by payment of any amount of money
    or by award or a share in property or an interest therein, for contribution of
    any kind whether direct or indirect, monetary or non-monetary made to the
    property of the other.



9.
PERSONAL PROPERTY

(1)     Each party waives all
    rights under Part 1 of the Family Law Act and the law of any other applicable
    jurisdiction, and, instead, each with the other agree by this Agreement that,
    whether they have married or not:

(a)
Rights of ownership govern the division of property between them,
    and there will be no division or equalization of property except according to
    ownership or as may be otherwise provided herein, it being acknowledged and
    agreed by Krebs and Cote that the assets listed in Schedule A to this
    Agreement were owned by Krebs on the date hereof and that the assets listed in
    Schedule B to this Agreement were owned by Cote on the date hereof and as
    such, for the purposes of this Contract, those assets, or any assets that can
    be traced into or from the same, and any accretions to or increase in the value
    of such assets, shall not be subject to a division or an equalization of net
    family property should death of either party or a breakdown of the marriage or
    relationship occur.

(b)
Neither p
arty will be entitled to a division of property
    owned by the other.

(c)
Neither p
arty will be entitled to the equalization of their
net family properties.

(d)
Neither party will be entitled to a share of any property or
    the value of any property owned by the other, unless otherwise provided for in
    this Agreement.

(e)
All personal property acquired in the future that is held in
    the names of both parties, or that has been acquired during the marriage of the
    parties and for which neither party can show proof of ownership, shall belong
    to the parties jointly and equally and shall be divided equally in the event of
    a separation or after death of one of the parties during the marriage.

[30]

Further, the agreement specifically contemplated
    that the one party could transfer property to the other, and that property
    would be deemed to be owned by the party to whom the property was transferred. To
    this extent, the 2016 discussion of transfer of some part of title to the
    matrimonial home was entirely consistent with the cohabitation agreement. If
    the cohabitation agreement was not in force, the respondent would have a right
    to equalization of net family property, calculated on the basis that the value
    of the home was included in the appellants net family property. If the
    appellant was considering giving the respondent an interest in the home and the
    agreement were in force, either a transfer, as discussed, or an amendment to
    the agreement would be necessary.

[31]

The waivers in ss. 11, 12 and 13 of the
    agreement are broad, and there is no hint of any limitation to their
    application:

11.
WAIVER AND RELEASE

Except as is otherwise provided in this
    Agreement, each party releases all rights to and interests in property of the
    other, whether real or personal, which rights or interests he or she may have
    now or in the future, and more particularly each releases:

(1)

Rights and interests respecting ownership,
    division or possession of the property;

(2)

Rights and interests arising out of any part of
    the Family Law Act or any similar statute in any jurisdiction, or any successor
    or amending statute, should the parties marry;

(3)

Claims to compensation or a share of property
    because of any contribution by way of money or moneys worth to the property of
    the other, whether the parties marry or not;

(4)

Any other right or interest resulting from the
    relationship of the parties through marriage or cohabitation;

(5)

Rights and interest in any deferred profit
    sharing plan or plans, pension or retirement plan or plans or benefits, savings
    or investments of any nature to which the other may be entitled.

12.

RELEASE

AGAINST THE ESTATE OF THE OTHER


Except as provided in this Contract, and
    subject to any gifts or designations of insurance or pensions from one of the
    parties to the other validly made either before or after the date of this
    Agreement or rights contained in the Last Will and Testament of either party,
    each of Krebs and Cote releases all rights which he or she has, had or may acquire
    under the laws of any jurisdiction in the estate of the other, and in
    particular:

(3)     under the
Succession Law Reform
    Act
, or any other statute of any applicable jurisdiction:

(a)     to share in the estate of the other
    upon the other dying intestate;

(b)     to an allowance or payment as a
    dependent from the estate of the other;

(c)     to
    elect against the provision of a partys Last Will and Testament; and

(2)     under the
Family Law Act
, or
    any other statute of any applicable jurisdiction, to elect to take under the will
    of the deceased party or to receive the entitlement pursuant to Part 1 of the
Family
    Law Act
, or any such similar statute or any such other jurisdiction, should
    the parties marry.

13.
RIGHTS ON DEATH

In the event of the death of one of the
    parties hereto, nothing in this Agreement shall be deemed to constitute a
    waiver of rights to:

(i)

Any property devised or bequeathed by the
    deceased to the other under the terms of the deceaseds will;

(ii)

Proceeds of any insurance or health insurance,
    pension registered retirement savings plan or other plan to which the survivor
    may be entitled as a designated beneficiary or otherwise pursuant to the terms
    of the said plans on the death of the deceased; and

(iii)

Any property held by the deceased and the survivor as joint tenants
    which passes to the survivor by right of survivorship.

[32]

Section 17 of the agreement reflects s. 53(2) of
    the
Family Law Act
and provides If the parties marry at any time in
    the future, this Agreement shall become a Marriage Contract.

[33]

Reading the contract as a whole, in the context
    of the relationship of the parties at the time it was signed, I conclude that
    it was intended to apply despite a separation and subsequent reconciliation,
    preceding the final separation.

Were the terms of the agreement exhausted by
    a triggering event?

[34]

The motion judge relied on
Sandrelli v.
    Sandrelli
, 2015 ONSC 7913, 72 R.F.L. (7th) 135, observing that case held,
    at para. 32, that [d]ischarge of a contract by performance describes the
    situation where the contract comes to an end when both parties perform their
    contractual obligations in the manner prescribed by the contract. The motion
    judge noted that case suggested if the parties intend the agreement to
    continue after they reconcile the agreement needs to state that, citing
Sandrelli
,
    at para. 41.

[35]

Sandrelli
was a
    case about a cohabitation agreement that explicitly contained a clause
    providing for disposition of property upon the happening of certain triggering
    events including where the parties ceased to cohabit for a period of greater
    than 90 days. Again, the motion judge in that case approached the matter from
    the stance that the common law rule applicable to separation agreements applied.
    She noted that the cohabitation agreement did not provide for reinstatement
    upon reconciliation following a triggering event and that there was no
    presumption in law that a reconciliation revives a cohabitation agreement.

[36]

The respondent relies on
Sandrelli
to
    argue that the payment by the appellant to the respondent of $5,000 was a
    similar triggering event which brought the agreement to an end. Counsel for the
    respondent analogizes this to an employment contract calling for payment to an employee
    on termination. Once the payment is made, the terms are fulfilled and there is
    no scope for further operation of the contract. If the employee returns to
    work, in this analogy, the parties cannot rely on the old contract; they must
    enter a new agreement.

[37]

I would respond that the question of the scope
    of the contract and its application depends on the language of the contract and
    the interpretation given to that language. Adopting the respondents analogy, if
    the same employment contract called for releases, there is no doubt that those
    releases would be enforced despite payment as envisaged by the contract. If
    there was a non-competition promise contained in the agreement, that too would likely
    be enforceable. In some sense, the approach advocated by the respondent is
    tautological. The agreement comes to an end when there is nothing left to bind
    the parties, i.e., when it comes to an end. In any event, the analogy is not
    perfectly apt, as employment is a contractual relationship, while cohabitation
    is not necessarily so.

[38]

For the same reasons as expressed earlier, I
    would conclude that the broad language of the cohabitation agreement evinces an
    objective intention to have the agreement apply in general to cohabitation,
    including that which follows a separation and reconciliation. One could
    reasonably conclude that the $5,000 payment was intended to assist the
    respondent with a move to her own accommodation.

[39]

As noted in
Hartshorne v. Hartshorne
, 2004
    SCC 22, [2004] 1 S.C.R. 550, at para. 67, courts should respect private
    arrangements that spouses make for the division of their property on the
    breakdown on their relationship particularly where the agreement was negotiated
    with independent legal advice.

[40]

As I stated earlier, there is no presumption
    that reconciliation brings an end to cohabitation agreements. Each particular
    cohabitation agreement must be interpreted in accordance with contractual
    principles to ascertain the objective intentions of the parties. Unquestionably,
    it would have been better if the cohabitation agreement had contained specific
    provisos dealing with the possibility of separation and reconciliation, making
    unnecessary this interpretive process.

D.

Disposition

[41]

For these reasons, I would allow the appeal, set
    aside the declaration below that the cohabitation agreement is no longer of any
    force and effect, and substitute a declaration that the rights and obligations
    of the parties are governed by the cohabitation agreement they executed.

[42]

Costs of the appeal are awarded to the appellant
    in the agreed sum of $2,500.00, all inclusive. The award of costs for the
    motion below in favour of the respondent is reversed in favor of the appellant,
    in the same amount as awarded below.

Released: June 25, 2021
M.T

G. Pardu J.A.

I agree M. Tulloch J.A.

I agree L.B. Roberts J.A.


