Lakhoo v Lakhoo, 2017 ABQB 126

Court of Queen’s Bench of Alberta Citation: Lakhoo v Lakhoo, 2017 ABQB 126 Date: 20170223 Docket: 1401 10865 Registry: Calgary Between: Shamim Lakhoo Respondent / Plaintiff - and - Rahim Lakhoo, R Lakhoo Holdings Ltd., Azim Lakhoo, John Peters, Burnett Duckworth & Palmer LLP, Bayshara Family Trust, and Rahim Lakhoo, Azim Kalhoo and John Peters As Trustees of Bayshara Family Trust and John A. Peters Professional Corporation Appellant / Defendants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice D.A.

Yungwirth _______________________________________________________ I. Introduction [ 1 ] This appeal from the Master involves two interrelated lawsuits. The first is a divorce and matrimonial property division lawsuit between Rahim Lakhoo and Shamim Lakhoo ( Lakhoo v Lakhoo , Alberta Court of Queen’s Bench Docket No 4801 146333) (the “Divorce Action”). The current appeal flows from a second lawsuit, the “Preference Action”. Shamim Lakhoo is the Plaintiff in both actions. [ 2 ] Shamim Lakhoo and Rahim Lakhoo entered into a Marriage Contract and Property Agreement (the “Marriage Contract”)

prior to their marriage. The validity of the Marriage Contract is a critical issue for both the Divorce and Preference Actions. [ 3 ] One of the Defendants in the Preference Action, Azim Lakhoo, applied for

summary judgment, arguing that the Marriage Contract is presumptively valid, and that it is a complete defence to the Plaintiff’s claims. Azim Lakhoo is the brother of Rahim Lakhoo. Azim Lakhoo relied on his own Affidavit and on other Affidavits and transcripts. Much of that material evidence was taken from the Divorce Action. [ 4 ] The

summary judgment application was heard by Master Farrington, who rendered a decision on December 16, 2015 dismissing the

summary judgment application of the Applicant/Appellant Azim Lakhoo against the Plaintiff, Shamim Lakhoo. [ 5 ] Azim Lakhoo now appeals. He maintains that he is “entitled to raise a full answer and defence and to seek

summary judgment in this action on any basis that could bring this action to a fair and cost effective conclusion”. [ 6 ] Through the case management process, six weeks has been scheduled for trial in 2020. The issue of whether the Marriage Action and Preference Action should be consolidated for that trial has yet to be determined. II. Background Facts [ 7 ] After a courtship of about two months, Rahim Lakhoo and Shamim Lakhoo signed a Marriage Contract and Property Agreement on November 10, 1995 in contemplation of marriage. At that time, Ms. Lakhoo was residing in Vancouver, BC and was employed as a pharmacist.

She was 45 years of age. Mr. Lakhoo was residing in Calgary, AB and was a businessman. He was 47 years of age. Both parties had been married before. [ 8 ] The Marriage Contract purports to protect the parties’ assets from distribution pursuant to the Matrimonial Property Act , RSA 2000, c M-8. It addresses assets owned by each party at the date of marriage and assets acquired by either party subsequent to the date of marriage. The Marriage Contract does not address spousal support. [ 9 ] The parties then married on November 29, 1995 in Vancouver, BC. They separated in November of 2010 after 15 years of marriage.

The Lakhoos had no children together. [ 10 ] Ms. Lakhoo started the divorce and matrimonial property action on November 15, 2010.

Clause 17 of the Divorce Action Statement of Claim seeks an Order setting aside the Marriage Contract on the basis that the Marriage Contract: 1. is unconscionable, 2. was obtained without adequate financial disclosure from the Defendant, 3. was signed by the Plaintiff when she was under duress and undue influence, and 4. that the Marriage Contract does not meet the objectives of the governing legislation or the parties’ intentions. [ 11 ] The Divorce Action Statement of Claim was subsequently amended to add a claim for unjust enrichment. [ 12 ] There is also some indication in the materials that Ms.

Lakhoo intends to file a notice under Matrimonial Property Act , s 10, which allows the Court to grant a remedy where a spouse has transferred or gifted matrimonial property to a third party in certain specified circumstances with the intention of defeating a spouse’s claim under the Act . [ 13 ] Horner J on May 10, 2013 granted an application by Rahim Lakhoo that the Divorce Action proceed as a bifurcated trial. The issue of the validity of the Marriage Contract would be determined before deciding the remaining issues in the divorce and matrimonial property action.

That decision was subsequently overturned by the Alberta Court of Appeal on March 10, 2014 ( Lakhoo v Lakhoo , 2014 ABCA 98 , leave denied [2014] SCCA No 203) on the basis that there would be no savings of time or resources if the trial were split as the chambers judge directed. The Court of Appeal indicated that both property and spousal support are disputed, and disclosure would be required for both issues.

As a result there would be little, if any, savings of time if the Marriage Contract were found to be invalid because disclosure would still be required to evaluate the issue of spousal support. [ 14 ] On October 10, 2014, Ms. Lakhoo commenced the Preference Action. In her Statement of Claim she alleges, among other things, that Rahim Lakhoo, his brother - Azim Lakhoo, his lawyer - John Peters, and the other corporate and trust Defendants all conspired to conceal assets and deprive her of her property entitlements in the Divorce Action. III.

Decision of the Master [ 15 ] The arguments before the Master clearly establish that Azim Lakhoo’s

summary dismissal application was intended to benefit all of the Defendants in the Preference Action, and that Rahim Lakhoo intends to use a successful application by Azim Lakhoo to his advantage in the Divorce Action. [ 16 ] The Master expressed concern about Azim Lakhoo’s standing to challenge the validity of the Marriage Contract to which he was not a party, and as to whether that contract was best dealt with in the Divorce Action. [ 17 ] After confirming the principles established by the Supreme Court of Canada in Hryniak v Mauldin , 2014 SCC 7 , [2014] 1 SCR 87, the Master noted that Azim Lakhoo’s brief Affidavit attached a signed copy of the Marriage Contract.

He also noted that Azim Lakhoo:

... has no knowledge of what was discussed between Rahim and Shamim regarding the agreement, the nature of any discussions that they had regarding Rahim’s interest in various corporations, and the level of disclosure that was made, the relationship and timing of the agreement to their upcoming wedding, and the conduct of the parties insofar as the agreement is concerned after their marriage for the next 15 years, among other things. [ 18 ] Regarding the absence of evidence from Rahim Lakhoo, the Master concluded that “Azim seeks to rely upon Rahim’s agreement, without dealing with Rahim’s evidence relating to that agreement.” [ 19 ] The Master concluded that he was not satisfied that a fair adjudication could be made based on the record before him.

He pointed to the fact that the positive non-hearsay evidence in support of the application is minimal. He noted a gap in terms of the evidence of Rahim and the evidentiary record, and also expressed concern that the “many objections in the questioning of Azim and Rahim contributed to the posit (sic) of real and meaningful evidence on the application”. [ 20 ] The Master was not confident that he could fairly determine the issue of the enforceability of the Marriage Contract on the basis of the evidence before the Court. [ 21 ] The Master was also of the view that the application for

summary dismissal appeared to be an attempt to avoid the Court of Appeal trial bifurcation decision in the Divorce Action without a great deal of significant new evidence. [ 22 ] Finally, the Master pointed out that in this case, where assets of $70 million are alleged to be in issue, the concept of proportionality does not suggest that a trial should be avoided at all costs. IV. Law A. Standard of Review [ 23 ] The standard of review on appeal from a Master to a Judge of this Court, on all issues, is correctness; Bahcheli v Yorkton Securities Inc. , 2012 ABCA 166 , 524 AR 382. This is not disputed by either party. B.

Summary Judgment [ 24 ] The test for

summary judgment is well established. Rule 7.3 states: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in sub rule (1) have been met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single and undivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; (

b) if the only real issue to be tried is the amount of the award, determine the amount or refer the amount for determination by a referee; (

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstances require. [ 25 ] The Court may order

summary judgment per Rule 7.3 as an alternative form of adjudication provided the existing record provides a basis for a disposition that is fair and just to both parties: Hryniak v Mauldin ; Windsor v Canadian Pacific Railway Ltd. , 2014 ABCA 108 , 371 DLR (4th) 339. [ 26 ] This is a question of whether an action has “merit”.

Pyrrha Design Inc. v Plum and Posey Inc. , 2016 ABCA 12 at para 19 explains this concept: The question is whether there is in fact any issue of 'merit' that genuinely requires a trial, or conversely whether the claim or defence is so compelling that the likelihood it will succeed is very high such that it should be determined summarily. [ 27 ] Parties have the obligation to put their “best foot forward”: Windsor v Canadian Pacific Railway Ltd. at para 21 . An analysis under Rule 7.3 relies on affidavit evidence and uncontested facts.

The corollary of that principle is that if a finder of fact needs viva voce evidence, then

summary judgment cannot be ordered. V. Position of the Parties

A. Azim Lakhoo, Appellant [ 28 ] Azim Lakhoo submits in his Brief that the merit of the Plaintiff’s claim in this action rests on a single issue: whether the Marriage Contract is a valid and enforceable agreement. If it is, he submits, it matters not what anyone did with Rahim Lakhoo’s assets. [ 29 ] The Appellant argues that all of the evidence necessary to evaluate the validity of the Marriage Contract is contained in the Plaintiff’s Affidavits, the Applicant’s Affidavit and the transcripts of questioning of Ms. Lee and the Plaintiff.

He argues that to the extent that it is necessary to give comfort to the Court, the direct evidence of Rahim Lakhoo is also available. The Appellant says that the merit of the Plaintiff’s claim can be wholly and fairly decided on the basis of this existing record.

He argues that there is therefore no genuine issue concerning a material fact that would require the Court to hear viva voce evidence in order to confirm the validity of the Marriage Contract. [ 30 ] Azim Lakhoo submits that pursuant to the Matrimonial Property Act , a marriage contract that satisfies the formal requirements of sections 37 and 38 is prima facie enforceable (i.e. presumptively valid) against a former spouse seeking division of matrimonial property.

The Appellant argues that a valid marriage contract can only be challenged under general common law contractual principles. [ 31 ] The Appellant argues that to withstand

summary judgment, the Plaintiff cannot rely on evidence that she says will come out in the trial of this action or her Divorce Action. She must put her best foot forward now to defend the

summary judgment application. [ 32 ] Further, the Appellant maintains that the Court can draw a negative inference from the lack of corroborative evidence to support the Plaintiff’s contention that the Marriage Contract is invalid. [ 33 ] The Appellant argues that: 1. Azim Lakhoo has the legal right to seek

summary judgment in this action separate and apart from the Divorce Action; 2. he has standing to raise any argument of fact and law that supports his application; 3. his application is not a collateral attack on the Court of Appeal decision in the divorce action; and 4. there is no significant risk of inconsistent verdicts in the two actions. B. Shamim Lakhoo, Respondent [ 34 ] Ms.

Lakhoo submits that the Marriage Contract does not meet the statutory formal requirements, and in any case is unconscionable, having been signed in the context of undue influence, duress, misrepresentation and non-disclosure. [ 35 ] In the alternative, she also argues that even if the Marriage Contract were found to be valid, this would only dispose of Ms. Lakhoo’s property claims and not her spousal support claims. Ms. Lakhoo submits that her spousal support claims alone are a sufficient basis to ground this action. [ 36 ] Ms.

Lakhoo submits that this appeal is an abuse of process akin to a collateral attack on the decision of the Court of Appeal in the divorce action. Ms. Lakhoo argues that the decision of the Court of Appeal requires that the validity of the Marriage Contract be determined at trial along with all of the other divorce and matrimonial property issues. [ 37 ] Ms. Lakhoo relies on the Supreme Court of Canada decisions of Rick v Brandsema , 2009 SCC 10 , [2009] 1 SCR 295 [“ Rick ”], Miglin v Miglin , 2003 SCC 24 , [2003] 1 SCR 303 [“ Miglin ”] and Hartshorne v Hartshorne , 2004 SCC 22 , [2004] 1 SCR 550 [“ Hartshorne ”].

She submits the Court must examine all of the circumstances surrounding the signing of the agreement in order to determine whether the Marriage Contract is valid. [ 38 ] The Respondent submits that determinations regarding unconscionability, duress, and undue influence are “fact-dependent”. There are clear contradictions in evidence between witnesses Shamim Lakhoo, Rahim Lakhoo, lawyer Caroline Lee, and lawyer John Peters concerning material facts about the circumstances under which the agreement was executed.

Summary judgment is not an appropriate mechanism to test these inconsistencies. Instead, a trial is required. VI. Issue for Determination [ 39 ] Did the Master err in concluding that the evidentiary record before the Court in this action is insufficient to allow the Court to make a fair and just determination of the validity of the Marriage Contract? [ 40 ] No new evidence was adduced on this appeal VII.

Analysis [ 41 ] The jurisprudence which defines this Court’s power to invalidate or override a final agreement in a domestic context is complex. [ 42 ] In 2003 in Miglin the Supreme Court of Canada provided a new framework for the court’s exercise of discretion to override a final spousal support agreement under the Divorce Act , RSC 1985, c 3 (2nd Supp). The Court indicated a two stage analysis. A court

examines the circumstances: 1. at the time of execution, including the negotiations and the substance of the agreement and its compliance with the Divorce Act ; and 2. at the time of the application, including significant departures from what was anticipated by the parties, and substantive unfairness. [ 43 ] This is obviously a highly contextual analysis and goes far beyond a simple review of the text of an agreement.

That observation is confirmed in Carol Rogerson’s (Faculty of Law, University of Toronto) excellent review and analysis of post- Miglin developments on how courts have tested the validity and enforceability of spousal support agreements: Carol Rogerson, “Spousal Support Agreements and the Legacy of Miglin”, (2012) 31 Canadian Family Law Quarterly 13. [ 44 ] The Saskatchewan Court of Appeal in Radu v Radu , 2016 SKCA 145 has recently reviewed and restated the Miglin approach to spousal support agreements. The onus to prove an agreement is not valid falls to the spouse who challenges it: para 58.

While agreements are relevant and “given considerable weight” (para 50), the two step Miglin processes requires a court first look at the circumstances surrounding the original agreement and whether the result of that initial negotiation is “in substantial compliance” with the objectives of the Divorce Act (paras 51-54). Step two investigates whether subsequent developments and changes in circumstances mean the original agreement no longer captures what the couple intended, nor meets the objectives of the Divorce Act : paras 55-57. This is not an ‘all or nothing’ analysis.

Part of a spousal support agreement may be invalidated while other parts remain in effect: para 60. [ 45 ] While Miglin instructed on how a court should evaluate spousal support agreements, the Miglin approach has subsequently been adapted to other contexts. In 2009, the Supreme Court of Canada Rick decision applied the Miglin approach to domestic agreements, and the resulting implications thereof, in a scenario where a spouse deliberately did not provide all the relevant financial information during negotiations for the division of assets.

The Court reformulated the common law test for unconscionability to reflect the unique negotiating environment in which matrimonial bargains occur. [ 46 ] Abella J noted at para 39 that: While Miglin dealt with spousal support agreements in the context of a divorce, it nonetheless offers guidance for the conduct of negotiations for separation agreements generally, including negotiations for the division of matrimonial assets. [ 47 ] Then at para 47: In my view, it flows from the observations and principles set out in Miglin that a duty to make full and honest disclosure of all relevant financial information is required to protect the integrity of the result of negotiations undertaken in these uniquely vulnerable circumstances.

The deliberate failure to make such disclosure may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation. [ 48 ] The Court was therefore clear that whether a court will intervene will depend on the circumstance of each case : Rick at para 49 . [ 49 ] In Rick , the Supreme Court of Canada stressed that bargains entered into between spouses on marriage breakdown are not and should not be subject to the same rules as those that apply to commercial contracts negotiated between two parties of equal strength.

The Court emphasized that negotiations of this kind take place in a unique environment at a time of personal and emotional turmoil in which one or both parties may be vulnerable: Rick at para 40 , referring to Miglin at paras 73-74 . [ 50 ] The Court also acknowledged the importance of respecting the parties’ right to decide for themselves what bargain they are prepared to make, but noted that this contractual autonomy still depends on the overall integrity of the bargaining process. Rick at paras 45-46 . [ 51 ] Nor is legal advice determinative.

In Rick the British Columbia Court of Appeal overturned the trial judge’s decision to set aside the agreement, concluding that the wife’s access to professional advice and assistance cured her vulnerabilities. The Supreme Court of Canada disagreed ( Rick , at para 60 , citing Miglin , at para 83 ): It may well be that in a particular case professional assistance will effectively compensate for vulnerabilities.

But the Court of Appeal appears to have assumed that the mere presence of professional assistance automatically neutralized vulnerabilities in this case. … But exploitation is not rendered anodyne merely because a spouse has access to professional advice.

It is a question of fact in each case . [Emphasis added.] [ 52 ] I also note that one year after Miglin , but before the expanded application of the Miglin principles in Rick , the Supreme Court of Canada in Hartshorne evaluated whether more or less judicial deference should be paid to marriage agreements vs separation agreements (para 39): This Court has not established, and in my opinion should not establish, a “hard and fast” rule regarding the deference to be afforded to marriage agreements as compared to separation agreements.

In some cases, marriage agreements ought to be accorded a greater degree of deference than separation agreements. Marriage agreements define the parties’ expectations from the outset, usually before any rights are vested and before any entitlement arises. Often, perhaps most often, a desire to protect pre-acquired assets or an anticipated inheritance for children of a previous marriage will be the impetus for such an agreement.

Separation agreements, by contrast, purport to deal with existing or vested rights and obligations, with the aggrieved party claiming he or she had given up something to which he or she was already entitled with an unfair result. In other cases, however, marriage agreements may be accorded less deference than separation

agreements. The reason for this is that marriage agreements are anticipatory and may not fairly take into account the financial means, needs or other circumstances of the parties at the time of marriage breakdown. [Citations omitted] In brief, this question depends on the context of the specific dispute. [ 53 ] As it now stands, Miglin has been applied in many inter-partner dispute contexts beyond spousal support agreements under the Divorce Act . Authorities are inconsistent on how the principles from Miglin , Hartshorne , and Rick are applied to agreements signed before or at the time of marriage.

The vulnerabilities of the parties are different at the time of marriage than they are following a marriage breakdown. There is also the reality, acknowledged in Hartshorne , that marriage agreements are anticipatory.

There is a lack of clarity in the authorities as to whether the disclosure obligations set out in Rick apply equally to agreements made at earlier points in a relationship. [ 54 ] This inconsistent case law is further complicated by the fact that some provinces have enacted a statutory court power to override unfair property agreements, while some provinces have not. [ 55 ] I highlight the complexities in this area of the law only to emphasize the point that there are many issues for the Court to consider when it decides whether to set aside a marriage contract. [ 56 ] This investigation goes beyond the circumstances around the actual execution of the agreement document, and extends to everything that was going on with each party and between the parties in the period leading up to the execution of the agreement.

The circumstances following the execution of the agreement and during the relationship may also be relevant. In exploring these types of circumstances, inconsistent and conflicting evidence is common. [ 57 ] As was stated in Rick at para 30 ; It is inherent in disputes generally, and matrimonial conflicts in particular, that parties have inconsistent versions of the underlying events.

It is the trial judge’s job as judicial historian to sift through the record, watch and listen to the parties, and determine which version of disputed events is the most reliable. [ 58 ] In the trial process, the trial judge will look for internal and external inconsistencies in the evidence. The trial judge in the Divorce Action is in the best position to conduct this review as that analysis will occur in the context of the totality of the evidence and will be tested by in court cross-examination.

Further, the conclusions of the trial judge on the validity of the Marriage Contract will be a factor for the Court’s consideration on the issue of spousal support. [ 59 ] The Appellant in this case argues that all of the evidence necessary to determine the validity of the Marriage Contract is contained in the Plaintiff’s Affidavits, the Applicant’s Affidavit and the transcripts of questioning of Ms. Lee and the Plaintiff.

Therefore, he submits, it matters not that Azim Lakhoo has no personal knowledge of the circumstances surrounding the execution of the agreement between Shamim Lakhoo and Rahim Lakhoo. [ 60 ] The Appellant argues that the merit of the Plaintiff’s claim can be wholly and fairly decided on the basis of this existing record. He also argues that the Plaintiff cannot rely on evidence that may come out at trial, but that she must ‘put her best foot forward’ in the

summary judgment application. The Court can then draw a negative inference, the Appellant argues, from the absence of detailed evidence supporting her challenges to the Marriage Contract. [ 61 ] The Court has read all of the evidence relied on by the Appellant in his

summary judgment application. This includes Affidavits of Azim Lakhoo, Shamim Lakhoo, John Peters, Rahim Lakhoo, transcript of oral questioning of John Peters, and the following additional transcripts:

a) Transcript of oral questioning of Rahim Lakhoo, dated April 9, 2013. This was an examination in the Divorce Action on Rahim Lakhoo’s Affidavits, sworn June 2-11, June 29, 2011, November 10, 2011, January 21, 2013, March 5, 2013, and March 27, 2013.

b) Transcript of oral questioning of Caroline Lee taken May 6, 2013 in the Divorce Action. She reports she has no specific recollection of the circumstances surrounding her meeting with Shamim Lakhoo to sign the Marriage Contract. Her evidence was based on her usual practice at the time.

c) Transcript of oral questioning of Shamim Lakhoo on affidavits sworn July 31, 2015, taken November 25, 2015 in both actions. [ 62 ] In this case, the Court is being asked to grant

summary judgment based on a determination of whether the Marriage Contract is valid or not. However, the more basic issue and preliminary question is whether the Court can from the record and the dispute decide whether it is essential to the resolution of the issue that the court see and hear from the witnesses. [ 63 ] The evidence before the Court does provide many of the factual details that are relevant to the issue that the Court must undertake to determine - the validity of the Marriage Contract. However, that evidence alone does not go far enough to allow a thorough and proper analysis to occur.

Further, the evidence raises questions related to disclosure and to discussions between Rahim Lakhoo and Shamim Lakhoo before the agreement was executed. [ 64 ] The Court is mindful of the decisions in Hryniak v Mauldin , Windsor v Canadian Pacific Railway Ltd , and Sticks and Stones Communications Inc. v Hole’s Greenhouses & Gardens Ltd. , 2015 ABQB 774 . The Court is also mindful of the dilemma faced by the Defendants in this action, in having to wait for rulings in the Divorce Action before being in a position to seek

summary dismissal of this action. However, these things should not interfere with the Court’s obligation to ensure that a trial is conducted where necessary in order to achieve a fair and just result.

[ 65 ] I agree with the Master that the validity of the Marriage Contract is best dealt with in the Divorce Action trial. That is the context in which to test the merit of this issue. However, even if that were not the case, I find that the evidence before the court does not permit a conclusion to be drawn on the validity of the Marriage Contract, in a manner that is fair and just to both parties.

The factual findings necessary for a proper analysis and application of the principles of Miglin , Rick , and Harshorne requires that the Court watch and listen to the parties, make credibility findings, and determine whose evidence is most reliable.

This cannot be done on the basis of the affidavit evidence before the court, even where oral questioning has occurred. [ 66 ] Given my conclusion that the evidence is insufficient to allow determination on the validity of the Marriage Contract, it is not necessary for me to address the Appellant’s arguments on the presumptive validity of the Marriage Contract or on the issue of inconsistent verdicts. [ 67 ] I find that the Master did not err when he concluded that a fair and just adjudication on the validity of the Marriage Contract cannot be made based on the evidentiary record before the Court. VIII.

Conclusion [ 68 ] The appeal is dismissed. [ 69 ] Failing agreement, costs may be spoken to within 60 days. Heard on the 14 th day of February, 2017. Dated at the City of Calgary, Alberta this 23 rd day of February, 2017. D.A. Yungwirth J.C.Q.B.A. Appearances: A. Zelmer and J. D. Poole Pool Lawyers for the Respondent / Plaintiff M. Mohamed Bennett Jones LLP for the Appellant / Defendant