2015 QCCS 1186, 2015 QCCS 1186

Droit de la famille — 15565 2015 QCCS 1186 JD2919 SUPERIOR COURT CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL No: 500-12-226218-950 DATE: March 25 th , 2015 ______________________________________________________________________ IN THE PRESENCE OF: THE HONOURABLE FRANÇOIS P. DUPRAT, J.S.C. ______________________________________________________________________ W. L. Plaintiff v. S. S.

Defendant ______________________________________________________________________ JUDGMENT ON MOTION TO CANCEL SPOUSAL SUPPORT ______________________________________________________________________ [ 1 ] The husband is asking the Court, by way of motion, to put an end to the spousal support he has provided since 1997. I BACKGROUND OF LITIGATION [ 2 ] A judgment of divorce was granted on September 19, 1997. By Consent to judgment, dated November 3, 1998, the parties agreed to various accessories measures and the Consent was ratified by the Court on December 18 th , 1998 [1] .

The agreement aimed to set how spousal support would be provided to the wife. [ 3 ] In a nutshell, the husband, who is a financial planner, agreed to transfer from his registered retirement savings plan ( RRSP) a sum of $ 200 000 to the mother’s account.

He further agreed to manage the portfolio and he still does to this day. [ 4 ] It is not disputed that at the time of the Consent, the average return on investments was 8% and it was thought the portfolio would increase in value, over a period of more or less ten years, up to a sum of $ 624 000. [ 5 ] The ultimate goal was for the portfolio to eventually generate a monthly tax free income of $ 3 500 for the wife.

Until that goal was reached, the husband would supplement the income. [ 6 ] Unfortunately, the market and the portfolio did not perform as expected. [ 7 ] After a period of 15 years, the portfolio had a value of $ 212 000 and its annualized rate of return was 0.38% [2] . The evidence shows that at some point the value of the portfolio decreased to $ 115 000. [ 8 ] The target of increasing the capital of the portfolio to $ 624 000 was never reached and the portfolio is currently worth $236 000.

It never generated $ 3 500. [ 9 ] In a letter, dated September 25, 2013, the husband advised the wife that as of November 3, 2013, his obligation to pay spousal support would end [3] . [ 10 ] The husband’s

interpretation of the agreement leads him to believe there is a time limit of fifteen years on support. [ 11 ] The letter reads: According to the Agreement, the support was to be paid to you in the amount of $ 3 500 net of taxes per month, until such time as the portfolio managed by our client would reach the amount of $ 624 000 or whatever amount would generate the monthly revenue of $3 500 per month, and this for a period of 10 years from the date of signing of the Agreement.

In the event that the portfolio, managed by our client, did not produce $3 500 net of taxes per month, our client was to supplement the payment of $3 500 net of taxes for a maximum of 5 additional years. [ 12 ] The wife disagrees. She is of the view the agreement calls for a net income of $3 500 to be generated by the portfolio. Once this target is attained, the husband’s obligation stops if the goal is reached within the first ten years of the agreement.

After that period, the husband’s obligations ceases within five years of the first time the $3 500 mark is attained. [ 13 ] Since the portfolio never generated an amount of $3 500 net per month, the husband’s obligation to provide spousal support

must continue. [ 14 ] It is admitted the husband has the capacity to continue payment of the support. It is not argued that support should be interrupted because the wife’s situation is changed. The only argument to cancel support is in regards to the

interpretation to be given to the Consent and whether it contains a time limit. II QUESTIONS IN LITIGATION [ 15 ] The Court identifies the following issues:

a) How should the objections to evidence be decided?

b) How should the Consent to judgment be construed? III ANALYSIS

a) How should the objections to evidence be decided? [ 16 ] Objections were raised by both parties during the hearing. The Court allowed the evidence under reserve and must now deal with the objections. [ 17 ] The first objection concerns the evidence given by the parties as to their respective understanding of the Consent. [ 18 ] The husband explains it was paramount for him to have a term to the spousal support.

Hence, the agreement calls for support to be provided for a maximum period of 15 years irrespective of the portfolio’s performance. [ 19 ] The wife’s comprehension of the Consent is that support must continue until a net income of $3 500 is generated and that the husband must supplement the income should the target not be reached. [ 20 ] The Court is of the view that the objections to the testimony are unfounded. [ 21 ] The Court refers to the reasoning of the Court of Appeal in the matter of Placements Suclo Ltée c.

Métro Richelieu Inc.: 16 (…) Dans un procès, les parties peuvent, par témoignage, établir les circonstances ayant précédé et entouré la conclusion d'un acte. Les articles 2864, 1425 et 1426 C.c.Q. autorisent l'administration d'une telle preuve : 2864. La preuve par témoignage est admise lorsqu'il s'agit d'interpréter un écrit, de compléter un écrit manifestement incomplet ou d'attaquer la validité de l'acte juridique qu'il constate. 1425. Dans l'interprétation du contrat, on doit rechercher quelle a été la commune intention des parties plutôt que de s'arrêter au sens littéral des termes utilisés. 1426.

On tient compte, dans l'interprétation du contrat, de sa nature, des circonstances dans lesquelles il a été conclu, de l'interprétation que les parties lui ont déjà donnée ou qu'il peut avoir reçue, ainsi que des usages [4] . [ 22 ] The versions given shed light on the parties’ respective intention when the agreement was signed. It does not contradict the Consent. The objections are therefore dismissed. [ 23 ] The second objection refers to the filing in evidence of two letters written before the Consent to judgment was signed [5] . The first letter is dated June 10 th , 1998.

It was sent between the attorneys for the parties, contains the words without prejudice and clearly refers to negotiation and offers between the parties regarding spousal support and how it can be achieved. [ 24 ] The letter and its fax transmission sheet are hand noted with the husband’s explanations and comments to the offer, and were copied to the wife. [ 25 ] The second letter, dated September 22, 1998, is again an exchange between the attorneys and contains the mention without prejudice.

It refers as well to offers between the parties and negotiations to achieve spousal support through the management of a portfolio by the husband. [ 26 ] The Court is of the view that the objection to the filing of those letters is without merit. [ 27 ] The agreement signed by the parties on November 3 rd , 1998, was without a doubt drafted after negotiations between the parties.

The Consent contains the following clauses: WHEREAS the parties wish to settle the remaining differences amongst themselves on an amicable basis as well as the partition of their financial interests and have concluded the present consent to judgment with this in mind and wish that same be incorporated into the judgment to intervene herein, therefore: 13.

THAT the parties acknowledge having read the present Consent to Judgment, having understood same and having benefited from independent legal advice before signing same; Plaintiff being represented by the office of Me Linda Hammerschmid and Defendant represented by the office of Me Kalman Samuels. 14. THAT each party acknowledges that the present Consent to Judgment has been explained to him/her and represents their wishes and

their free choice without any constraints, undue pressure the one against the other. 17. The present Agreement shall constitute a transaction in virtue of

Article 2631 and following of the Civil Code of Quebec . [ 28 ] The negotiations led to an agreement which became a transaction and, eventually, a judgment. This is not a case where the negotiations failed and one party attempts to adduce evidence of the negotiations thereby breaching the confidentiality attached to settlement discussions. [ 29 ] The decision of the Supreme Court of Canada in Union Carbide Canada Inc. v. Bombardier Inc. clearly sets the distinction to be made.

Wagner J. writes: [35] The exception to settlement privilege at issue in the case at bar is the rule that protected communications may be disclosed in order to prove the existence or scope of a settlement. This exception is explained by Bryant, Lederman and Fuerst: If the negotiations are successful and result in a consensual agreement, then the communications may be tendered in proof of the settlement where the existence or

interpretation of the agreement is itself in issue. Such communications form the offer and acceptance of a binding contract, and thus may be given in evidence to establish the existence of a settlement agreement. [para. 14.340] The rule is simple, and it is consistent with the goal of promoting settlements. A communication that has led to a settlement will cease to be privileged if disclosing it is necessary in order to prove the existence or the scope of the settlement.

Once the parties have agreed on a settlement, the general interest of promoting settlements requires that they be able to prove the terms of their agreement. Far from outweighing the policy in favour of promoting settlements ( Sable Offshore , at para. 30), the reason for the disclosure — to prove the terms of a settlement — tends to further it. The rule makes sense because it serves the same purpose as the privilege itself: to promote settlements. [36] In Globe and Mail , this Court confirmed that the common law settlement privilege applies in Quebec.

As the Court of Appeal demonstrated in its reasons in the instant case, the exception for the purpose of proving the terms of a settlement also clearly applies in Quebec. The Court of Appeal cited a number of Quebec authors and cases on this point, and I find it helpful to reiterate how J.-C. Royer and S. Lavallée explain the application of the exception: [ translation ] 1137 — Limits of this privilege — This rule for the exclusion of evidence is grounded in a desire to promote the out-of-court settlement of disputes.

The privileged nature of the communication is accordingly limited to facts related to the negotiation of a settlement. Thus, an expert’s report is privileged if it is transmitted with a communication made for the purpose of settling a dispute. Moreover, a litigant cannot object to evidence of a fact that is independent of and separate from a settlement offer. Such an objection will be dismissed a fortiori if the fact is contrary to public order or to public morals, or if it is likely to cause serious injury to the recipient of the communication.

Thus, a threat made by a debtor in a settlement offer, or a statement by a debtor that he or she cannot pay his or her creditors, would not be privileged. A communication ceases to be privileged if it resulted in a transaction that one of the parties wishes to prove.

The existence of negotiations between the parties and of settlement offers can also be proven in order to prove certain relevant facts needed to resolve a question with respect to prescription, to prove fraudulent acts or to explain and justify a delay in pursuing litigation. ( La preuve civile (4th ed. 2008). [ 30 ] Since an agreement was reached, proof regarding the scope of the support may be adduced. The letters are therefore admissible in evidence in order to interpret the agreement.

b) How should the Consent to judgment be construed? [ 31 ] The litigation relates primarily to

article 6 of the Consent which reads: THAT pursuant to paragraph 5b., the Plaintiff will transfer $200,000.00 to the Defendant’s RRSP portfolio: (

i) The Plaintiff will manage over the next ten (10) year period the said RRSP portfolio for the Defendant so that at the end of the ten (10) year period, the Defendant will have revenues from the said portfolio in the amount of $3,500.00 net of taxes per month. At that time the spousal support pursuant to paragraphs 3 and 4 and following of the present agreement will cease automatically and terminate at that time.

Should the portfolio not produce sufficient income for an aggregate total of $3,500.00 net of taxes per month payment at the end of the ten (10) year period, the Plaintiff will make-up the difference between what the portfolio is generating at that time and the $3,500.00 net of taxes per month payment until such time as the portfolio generates $3,500.00 net of taxes per month by itself for the maximum period hereinafter set forth at which time Plaintiff’s obligation to pay any sums to Defendant will cease.

The Defendant may choose to have a third party manage the said portfolio however should Defendant make that choice, Plaintiff will no longer be responsible at the end of the ten (10) year period or thereafter for the income produced on a monthly basis by the said portfolio and his obligation to pay spousal support will terminate ten (10) years from the date of the signing of the present agreement no matter what revenue the portfolio is generating at that time on a monthly basis.

That should the portfolio at any time reach an amount of $624,000.00 or whatever amount which would generate a monthly revenue of $3.500.00 net of taxes whether being managed by the Plaintiff or a third party, his obligation to pay spousal will cease immediately at that time.

If, at any time after the Plaintiff is no longer obliged to make spousal support payments and on the strict condition that the Plaintiff is still managing the portfolio, the portfolio does not produce $3,500.00 net of taxes, the Plaintiff will supplement the payment to $3,500.00 net of taxes for a maximum of five (5) additional years from the date the portfolio first produced the $3,500.00 net per

month revenue. The Defendant undertakes to have the portfolio manager provide to the Plaintiff, by-annually, a statement of her RRSP portfolio and the income generated therefrom if she has opted to have said portfolio managed by anyone else other than Plaintiff. [ 32 ] It is not the first time the parties have disagreed on the agreement. In 2005, a motion by the wife to obtain a lump sum was dismissed [6] . The portfolio at the time was worth $ 175 000.

This is how Courville J. dealt with the issue: 33 En vertu de l'entente signée en 1998, Monsieur transfère 200 000 $ dans le régime enregistré d'épargne retraite de Madame et s'engage à en effectuer la gestion pendant dix ans, de façon à ce qu'à la fin du terme le régime produise un revenu de 3 500 $ par mois exempt d'impôt (R-1, clause 6). 34 La clause 6 prévoit également : … That should the portfolio at any time reach an amount of $624,000.00 or whatever amount which would generate a monthly revenue of $3,500.00 net of taxes whether being managed by the Plaintiff or a third party, his obligation to pay spousal support will cease immediately at that time.

If, at any time after the Plaintiff is no longer obliged to make spousal support payments and on the strict condition that the Plaintiff is still managing the portfolio, the portfolio does not produce $3,500.00 net of taxes, the Plaintiff will supplement the payment to $3,500.00 net of taxes for a maximum of five (5) additional years from the date the portfolio first produced the $3,500.00 net per month revenue. 35 Étant donné que la valeur de son REER est seulement de 175 000 $, Madame demande le versement de 449 000 $ exempts d'impôt afin que la somme de 624 000 $ prévue à l'entente soit atteinte immédiatement.

Elle désire également que la gestion du fonds soit dorénavant confiée à une personne de son choix. 36 Monsieur invoque la crise financière de l'année 2001, la pire de l'histoire depuis le CRASH de 1929, pour expliquer la piètre performance du régime.

Tout en reconnaissant qu'il n'y aura pas 624 000 $ dans le REER à l'arrivée du terme à la fin de l'année 2008, il plaide que la demande de Madame est prématurée et, en conséquence, irrecevable. 37 Madame n'a pas attaqué la validité de la convention qu'elle a signée librement en 1998 après l'avoir lue et en avoir compris la portée, conseillée en cela par son avocate d'alors (R-1, clauses 13 et 14). 38 D'autre part, elle a volontairement confié à Monsieur la gestion d'une somme de 200 000 $ pour une période de dix ans échéant en décembre 2008. 39 En intervenant prématurément, le Tribunal adjugerait en fonction du futur et pourrait ainsi modifier la situation juridique dans laquelle se trouveront les parties dans trois ans.

Manifestement, ce n'est pas ce qui a été voulu à l'époque car la convention ne comporte aucune clause autorisant l'une ou l'autre des parties à écarter ce terme. Par respect de la convention, librement négociée au moment du divorce, le Tribunal ne peut intervenir pour modifier le statu quo. La demande de Madame est donc rejetée. [ 33 ] The Court must first look at how the agreement should be analysed. The authors Baudouin and Jobin offer the solution: Face à un contrat clair, le rôle du juge en est un d'application plutôt que d'interprétation.

La différence entre application et interprétation n'est pas que sémantique : le processus d'application vise l'adéquation d'une norme juridique définie à une situation factuelle donnée, alors que l'interprétation vise à définir la portée de la norme juridique avant de pouvoir l'appliquer. Il est donc nécessaire qu'il y ait une ambiguïté ou un doute à donner aux termes du contrat pour tomber dans le processus interprétatif; en l'absence d'une telle ambiguïté, le tribunal ne pourrait, sous prétexte de trancher cette intention, dénaturer un contrat clair.

Il devra s'en tenir à une application de ce qui est littéralement exprimé, tenant pour acquis que le texte reflète fidèlement l'intention des parties. Si, au contraire, il y a un doute, les règles d'interprétation écarteront le sens littéral pour faire place à la véritable intention des parties au moment de la formation du contrat ; Le fait que les parties entretiennent une divergence d'ordre interprétatif n'entraîne pas de façon automatique qu'une ambiguïté existe réellement. Le rôle du juge comporte donc un aspect insolite, sinon paradoxal.

Il doit en quelque sorte interpréter le contrat une première fois pour déterminer s'il est clair ou ambigu; s'il est ambigu, il doit l'interpréter de nouveau, c'est-à-dire résoudre l'ambiguïté. C'est cette seconde étape, et non la première, qui appelle la mise en œuvre des règles édictées par le législateur aux articles 1425 à 1432 C.c.Q [7] . [ 34 ] The Court of appeal in Samen Investments Inc. c. Monit Management Ltd. calls for a three step approach in construing an agreement [8] . [ 35 ] First, should the wording of the agreement be clear there is no need to use the rules of

interpretation found in the Civil Code of Quebec . Secondly, if an ambiguity is found to exist then the Court should seek out the common intention of the parties as per articles 1425 to 1431 C.c.Q. Lastly, should an impasse persists, then the Court must construe the agreement in favour of the party adhering to it and against the party who stipulated it ( art. 1432 C.c.Q.). [ 36 ] The Court adds that it is likely the parties did not anticipate downturns in the market. However, this is not a case where a court is asked to weight new circumstances.

In Miglin , the Supreme Court underlined that changes are foreseeable: 89 We stress that a certain degree of change is foreseeable most of the time. The prospective nature of these agreements cannot be lost on the parties and they must be presumed to be aware that the future is, to a greater or lesser extent, uncertain. It will be unconvincing, for example, to tell a judge that an agreement never contemplated that the job market might change, or that parenting responsibilities under an agreement might be somewhat more onerous than imagined, or that a transition into the workforce might be challenging.

Negotiating parties should know that each person’s health cannot be guaranteed as a constant. An agreement must also contemplate, for example, that the relative values of assets in a property division will not necessarily remain the same. Housing prices may rise or fall. A business may take a downturn or become more profitable [9] .

[ 37 ] The parties filed reports by financial planners and testimony was given [10] . This evidence is not useful in determining how the Consent should be read. It establishes the portfolio was managed with a growth objective and that its performance was hampered by the weakness of the market and the corrections it went through. There is no conclusion to the effect that the husband mismanaged the portfolio. Other funds recovered and surpassed the returns of the portfolio over the same 15 year period. [ 38 ] The agreement states clearly the ultimate goal that the portfolio should generate $ 3 500 per month.

The target was never achieved.

The first portion of paragraph 6 contains the following: Should the portfolio not produce sufficient income for an aggregate total of $3,500.00 net of taxes per month payment at the end of the ten (10) year period, the Plaintiff will make-up the difference between what the portfolio is generating at that time and the $3,500.00 net of taxes per month payment until such time as the portfolio generates $3,500.00 net of taxes per month by itself for the maximum period hereinafter set forth at which time Plaintiff’s obligation to pay any sums to Defendant will cease. [Underlined by the Court] [ 39 ] The agreement has to be read with this objective in mind.

It contains advantages for both parties, for example, had the value of the portfolio reached $ 624 000 or generated $ 3 500 in the first ten years, spousal support would have ended. [ 40 ] The Court must give effect to the wording of the agreement and to the notion that the portfolio must generate a certain income before support is terminated.

The last part of paragraph 6 sets the bar for termination: That should the portfolio at any time reach an amount of $624,000.00 or whatever amount which would generate a monthly revenue of $3,500.00 net of taxes whether being managed by the Plaintiff or a third party, his obligation to pay spousal support will cease immediately at that time.

If, at any time after the Plaintiff is no longer obliged to make spousal support payments and on the strict condition that the Plaintiff is still managing the portfolio, the portfolio does not produce $3,500.00 net of taxes, the Plaintiff will supplement the payment to $3,500.00 net of taxes for a maximum of five (5) additional years from the date the portfolio first produced the $3,500.00 net per month revenue. [Underlined by the Court] [ 41 ] It is not denied the portfolio never produced the $ 3 500 per month income. The 5 year period may not run without that condition being met.

The Court notes the agreement underlines the word and; surely it signifies the parties wanted to place emphasis on the two conditions which follow. The husband manages the portfolio and it must produce the amount of revenue needed for the support to end. [ 42 ] The argument that support ends, no matter what after a period of 15 years, fails to take into account the target the parties negotiated. The husband’s view of the agreement neglects the undertaking that he must supplement the income for 5 additional years once the portfolio first produced $ 3 500.

This eventuality has not yet materialized. [ 43 ] In the eyes of the Court, the words are clear and do not require further

interpretation. There is no ambiguity. [ 44 ] Should the Court take a step further and analyse the common intention of the parties, then the conclusion would be the same. [ 45 ] This intention is illustrated in the letters exchanged between the attorneys for the parties. First, the July 10, 1998 letter [11] . At that time the parties contemplated a portfolio of $ 135 000 and an income of $ 3 000. The husband’s [ 46 ] handwritten notes, which were forwarded to the wife, read: if the portfolio doesn’t provide $ 3 000/mo net I would continue to pay $ 3 000/ mo until it did generate $ 3 000/mo net.

This is a no lose situation for you and it ensures I will manage it well. If you do not want me to manage it then that would be OK but at the end of 10 years I wouldn’t be responsible for the value of the portfolio or for the $ 3 000 net. [ 47 ] The letter does contain a mention that the husband does not wish to provide support to the wife until she is 65 years of age as he then would be 74 years old [12] . [ 48 ] The second letter, dated September 22, 1998, proposed a $ 200 000 portfolio, and a $ 3 500 monthly net income. It contains the following: It is obvious that Mr.

L. should manage these funds since it is in his interest to ensure that they compound adequately to ensure Mrs. S.’s future revenue (if the portfolio does not provide an income of $3 500 net per month at the end of the ten (10) year period, our client would pay $ 3 500 per month until said portfolio did generate the requisite $ 3 500 net payment (or he would make up the difference). [ 49 ] The five (5) year period found in the Consent does not appear in the letters which only refer to a ten (10) year period.

The five (5) year period provides an additional advantage to the husband as it puts a time limit on his obligation to pay support once the target income has first been reached. [ 50 ] The husband was confident the portfolio would grow and reach the $3500 goal and, if that level could not be maintained right up to the end of the 10 years, then he wanted to end support at 5 additional years from the first successful month. This is the

interpretation to be given. [ 51 ] The Court concludes the motion to cancel support is not founded. The agreement provides for support to continue until a $3 500 net monthly income has been reached and it will end 5 years from the first time the income has been achieved. [ 52 ] In argument, the wife asked the Court to provide a condemnation against the husband to pay arrears with legal interests since February 15, 2014, the date upon which the husband ceased payment. The Court will not agree to this request.

There is no motion by the wife in this matter and the Court is seized only with the husband’s motion to cancel support. Secondly, as a general rule interests are not awarded on support and there is no reason to find otherwise [13] .

[ 53 ] The wife also requests for support to be the subject of an Act to facilitate the payment of support [14] . A similar demand was dismissed by Courville J. [15] and the Court agrees that the parties through the Consent wanted the husband to be exempted from the Act. [ 54 ] FOR THESE REASONS, THE COURT : [ 55 ] TAKES ACT of the husband’s undertaking to settle outstanding taxes which may be owed under the Consent to judgment; [ 56 ] DISMISSES the motion to cancel spousal support; [ 57 ] THE WHOLE WITHOUT COSTS. __________________________________ FRANÇOIS P. DUPRAT, J.S.C.

Me Samy Staltari HAMMERSCHMID & ASSOCIES Attorney for Plaintiff Me Asher Neudorfer SARNA NEUDORFER Attorney for Defendant Date of hearing: March 12 and 13 2015