H (husband) and W (wife) met in 1991 when the wife was 26-years-old and the husband was 46. The wife worked as a lawyer at a small Toronto litigation firm. The husband and his businesses were clients of the firm. The wife acted as junior counsel on the husband’s files.

When he met the respondent, the husband was separated from his former wife of 27 years. They had not, however, resolved their financial issues.

A personal relationship between the husband and wife started in 1992. They began living together in 1993 and the husband commenced divorce proceedings with his former spouse. That same year, the wife left the law firm where she had been employed and began working almost exclusively for the husband on his litigation and related corporate affairs.

The parties married on September 14, 1994 and had three children: Michael in 1994, Jeffrey in 1997, and Grace in 1999.

In 1999, the outstanding family law proceedings between the husband and his first spouse were settled.

The wife continued to practice law until 2001. With the exception of some part-time work between April 2004 and March 2006, she did not otherwise work outside of the home.

The parties’ marriage fell into difficulties and they eventually separated in May 2008.

In January 2008, the husband emailed the wife a template of a separation agreement. She did not initially respond. Meanwhile, the husband commissioned valuations and appraisals of the matrimonial home and the couple’s art collection. He consulted with accountants, retained a chartered business valuator and prepared, with input from his previous divorce lawyer, various net family property scenarios. For the most part, the wife was unaware of these activities and did not retain a lawyer. In late May 2008, the husband sent the wife a net family property statement showing that she owed him almost $954,000.

The wife did not retain a lawyer to review this information for several reasons: (i) the husband had considerable experience in valuing businesses; (ii) the financial statements had been audited; (iii) the husband was confident about the values given; and (iv) the wife knew that she would need to find a large error – of nearly $2 million – to negate any payment the husband claimed she owed.

The parties signed the separation agreement on May 31, 2008 in their home (the “Separation Agreement”). The Separation Agreement provided, among other things: the wife was released from her obligation to make a $954,150 equalization payment, and no child support would be payable as the children would spend equal time with both parties. The issue of child support would be reviewed yearly after 2010.

On separation, spouses are entitled to share equally in the increase in value of their respective property from the date of marriage to the date of separation. For that reason, each spouse has an obligation to value his or her property as of the date of marriage and the date of separation. The difference between the two values is the party’s net family property. The spouse with the higher net family property pays the spouse with the lower net family property an equalization payment representing one-half of the difference between their net family property values. A main issue in this appeal is the value of the husband’s property at the date of his marriage to the respondent-wife, for the purposes of calculating his net family property and, consequently, the value of any equalization payment.

The husband owned a 60 percent interest in a holding company, Renegade Capital Corporation. His former wife owned the other 40 percent. Renegade’s principal holding was Algonquin Mercantile Corporation, a publicly traded company in which Renegade held a 68 percent interest. In turn, Algonquin held investments in two businesses – a 50.1 percent interest in Pharma Rexall Drug Store Ltd. and a 100 percent interest in Dominion Citrus & Drugs Ltd.

The husband listed the date of marriage value for Renegade at $7,603,685.03. This reflected a “cost” or “book value” approach calculated by multiplying Renegade’s shareholders’ equity of $12,672,085 by the husband’s 60 percent interest in the company.

This value did not reflect any trading value in the market for Renegade’s $32,363,466 in long-term investments in its operating companies. The notes to the financial statements recorded this trading value as $16,243,860. The difference between the “book value” of Renegade and its “market value” was over $16 million. By using Renegade’s book value instead of its market value in disclosing his assets to the wife, the husband significantly overvalued the company.

The valuation of Renegade formed the majority of the husband’s $11,012,390.36 date of marriage deduction from his net family property. This deduction served to reduce his net worth, resulting in the wife owing the husband an equalization payment.

Applying the correct principle(s) of law, applicable sections of the relevant legislation, and proper analysis of the facts of the case scenario, discuss the legal grounds upon which the separation agreement can be challenged?

Answer rating: 100% (QA)

Women are not entitled to a share of husbands property Ownership bears with the person b... View the full answer