El Feky v. Tohamy

El Feky v. Tohamy Collection Decisions of the Court of Appeal Date 2010-10-05 Neutral citation 2010 ONCA 647 Docket numbers C51594 Judges Rosenberg, Marc; Armstrong, Robert Patrick; Juriansz, Russell G. Subject Family Decision Content CITATION: El Feky v. Tohamy, 2010 ONCA 647 DATE: 20101005 DOCKET: C51594 COURT OF APPEAL FOR ONTARIO Rosenberg, Armstrong and Juriansz JJ.A. BETWEEN Naima Mohamed El-Sayed Mohamed El Feky Appellant and Adel Mohamed Tohamy Respondent Joanne Lagoudis, for the appellant Anser Farooq, for the respondent Heard: June 11, 2010 On appeal from the order of Justice Emile Kruzick of the Superior Court of Justice dated December 30, 2009. Rosenberg J.A.: [1] The appellant appeals from the judgment of Kruzick J. granting summary judgment and dismissing her claim for, among other things, equalization of net family property and orders to set aside two separation agreements. On his motion for summary judgment, the respondent claimed that the application for equalization of net family property was statute barred by reason of s. 7(3) of the Family Law Act, R.S.O. 1990, c. F.3. In response, the appellant applied for an order pursuant to s. 2(8) of the Act extending the time to bring her claim. [2] For the following reasons I would allow the appeal, set aside the order of the motions judge and in its place make an order dismissing the respondent’s motion for summary judgment. THE CHRONOLOGY [3] Set out below is the basic chronology of events: February 1982 The parties marry in Egypt July 1982 The appellant immigrates to Canada and joins the respondent in Montreal 1991 The parties move to Ontario October and November 2004 The parties separate; they enter into a “Divorce Settlement Agreement”; the appellant returns to Egypt May 26, 2006 The respondent applies for a divorce; the appellant is served with the application in Egypt October 2, 2006 Divorce Order granted to respondent November 2, 2006 Divorce takes effect June 2008 The appellant returns from Egypt July 8, 2008 The parties enter into a “Final Agreement” November 2, 2008 Limitation period under s. 7(3) expires March 3, 2009 The appellant brings her application for inter alia equalization of net family property and orders setting aside the 2004 Divorce Settlement Agreement and the 2008 Final Agreement. December 10, 2009 The respondent brings a motion for a declaration that the appellant is barred from proceeding with her claim for equalization of net family property by reason of s. 7(3) of the Act [the summary judgment motion] December 21, 2009 The appellant brings a motion for an order that the respondent’s motion for summary judgment be dismissed, an order that she be granted an extension of time pursuant to s. 2(8), and that the 2004 and 2008 agreements be set aside pursuant to s. 56(4) of the Act OTHER FACTS [4] The parties have two adult children. In 1992, they opened a Halal meat and supermarket in Mississauga. The business, Nader Halal Meat and Supermarket Inc., was originally owned equally by the appellant and respondent. In 2003, the parties added their two sons as owners so that each member of the family owned 25 percent of the business. There is a substantial dispute about the value of the business. The appellant claims it was worth $5,000,000 on valuation day. The parties also acquired an investment property in Toronto in 2003, which is held by a company, Tamer Investments Inc. The parties and their sons also held equal shares in this company. Again there is a dispute about the value of the property. The appellant claims the property was purchased for $5,750,000 and that at one time there was a mortgage registered on the property in the amount of $3,825,000. THE DIVORCE SETTLEMENT AGREEMENT 2004 [5] Just before the appellant moved back to Egypt, the parties’ son Nader presented her with a document entitled “Divorce Settlement Agreement”. The agreement purports to give the respondent exclusive possession of the matrimonial home and the appellant agrees to transfer the property into the respondent’s name. The appellant agrees not to claim “on the husband’s bank accounts, matrimonial home …, Nader Halal Meat Inc., or Tamer Investment Inc.”. Under the heading “Property” is the following: The Husband and the Wife accept the terms of this agreement in full and final satisfaction and discharge of all claims and demands each may, at any time, have against the other pursuant to the Family Law Act. [6] There is a similar clause relating to “Support”. The agreement does not set out anything that the appellant received in return for giving up all of her claims. In her affidavit, the appellant says that she received $100,000 U.S. as a lump sum payment for spousal support. The agreement also sets out under the heading “Independent Legal Advice” that the parties have read the agreement, have full knowledge of the contents, understand their rights, have made full and complete financial disclosure and that the agreement was entered into without undue influence, fraud or coercion. The appellant denies that she obtained independent legal advice, that she read the agreement or that the respondent made full financial disclosure. She claims that she does not read English and that the document was not translated into Arabic. The parties did not exchange financial information. [7] The appellant also claims that she is very intimidated by Nader. She says in her affidavit that Nader told her that the agreement simply stated that the respondent was going to give her $100,000 U.S. and that she could move back to Egypt. THE FINAL AGREEMENT 2008 [8] The appellant says in her affidavit that because of her worsening health, she returned to Canada in June 2008. On this occasion, her other son, Tamer, presented her with another document, the Final Agreement. In her affidavit, the appellant says that Nader took her to the offices of a lawyer, Mr. Chhina, in Scarborough. Mr. Chhina advised her not to sign the agreement and to apply for Legal Aid because the agreement was not fair. She applied for Legal Aid, but was refused. She claims that Nader threatened her by saying that if she did not sign she would be homeless and he would turn against her. Nader then took her back to the lawyer, who again advised her not to sign. According to the appellant, Nader and the lawyer argued and Nader told him to mind his own business. Nader then told her that if she did not sign the agreement, he would leave her there. [9] The appellant claimed that she had difficulty communicating with the lawyer, who did not speak Arabic. She felt pressured and did not understand what she was signing. The only explanation Nader gave her was that the respondent was buying a condominium where she would be able to live but which would be in the children’s names. Nader told her that the condominium was not in her name because otherwise the government would seize it because she had not paid taxes while she lived in Egypt. Because of the coercion and statements from Nader, the appellant signed the agreement. However, she wrote in Arabic at the bottom of the document: I will never forgive you, and will never ever accept what you have done to me. Allah (Alone) is Sufficient for me, and He is the Best Disposer of affairs (for me). And you are unjust. [10] As for the terms of the Final Agreement, under the heading: “Equalization of Net Family Property” the parties agree that the respondent paid $150,000 Canadian in November 2004 for equalization of net family property. The respondent agreed to purchase a condominium for the appellant’s indefinite use but to be registered in the names of the children. The respondent agrees to pay all the fees, taxes and costs associated with the condominium and also to pay her medication costs for his life. The parties agree that those terms are in full and final settlement of all claims on the matrimonial home, Nadir Halal Meat Inc. and Tamer Investment Inc. “including but not limited to the equalization of net family property between the two parties”. The appellant agrees that she is not entitled to any of the equity in the matrimonial home or further equalization payments. She agrees to execute documents for the transfer, listing, and sale of the matrimonial home. [11] The appellant attached an unexecuted copy of the Final Agreement to her affidavit. She says that she never received a completed copy. The respondent attached a completed copy of the Final Agreement to his affidavit. That copy includes an affidavit of independent legal advice from Mr. Chhina. She denies receiving any lump sum payment other than the $100,000 U.S. (in November 2004). [12] The appellant was educated in Egypt as an agricultural engineer but did not work in Canada. She suffers from epilepsy and relies upon several medications that the respondent purchases for her. APPELLANT’S KNOWLEDGE OF THE DIVORCE [13] In May 2006, while she was in Egypt, the appellant was served with a copy of the respondent’s Application for Divorce. In her affidavit in support of her motion for an extension of time, the applicant states that she did not have the financial means to obtain Canadian legal advice. She states that she never received a copy of the final Divorce Order and had no knowledge of the divorce until she returned to Canada in June 2008. She claims that she did not know she had been legally divorced until early 2009 when she searched the court records and found the Final Divorce Order, which had been issued on October 4, 2006. She immediately sought legal advice and brought the application. On one of their visits to Egypt one of the appellant’s sons gave her a copy of an Islamic Declaration of Divorce, dated December 23, 2004. THE RESPONDENT’S POSITION [14] In the motion for summary judgment, the respondent states that the two agreements were “to the satisfaction of the applicant and her direction”. He states that her claim is statute-barred and that she is bound by the terms of the agreements. THE DISCLOSURE IN COURT [15] At the opening of this appeal, counsel for the appellant stated that she had just learned that somehow the appellant’s 25 percent shares in Nader Halal Meat and Supermarket Inc. and Tamer Investment Inc. had been sold without her knowledge. In open court, counsel for the respondent conceded that the Final Agreement did not affect the appellant’s interests in those companies. Counsel for the appellant indicated that she would be bringing a separate application respecting the appropriation of her shares of the two companies. THE LEGISLATION [16] The appellant’s claim for equalization of net family property is governed by Part I of the Family Law Act. Section 5(1) sets out the basic rule for division of property upon divorce: 5. (1) When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them. [17] Section 7(3) requires that a claim under s. 5 be brought within two years of the divorce: (3) An application based on subsection 5 (1) or (2) shall not be brought after the earliest of, (a) two years after the day the marriage is terminated by divorce or judgment of nullity [18] Section 2(8) of the Act, however, gives the court power to grant an extension of time to bring the claim: (8) The court may, on motion, extend a time prescribed by this Act if it is satisfied that, (a) there are apparent grounds for relief; (b) relief is unavailable because of delay that has been incurred in good faith; and (c) no person will suffer substantial prejudice by reason of the delay. [19] Finally, one other provision of importance concerns domestic contracts such as the two agreements involved in this case. Section 56(4) of the Act gives the court power to set such contracts aside. (4) A court may, on application, set aside a domestic contract or a provision in it, (a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made; (b) if a party did not understand the nature or consequences of the domestic contract; or (c) otherwise in accordance with the law of contract. THE REASONS OF THE MOTION JUDGE [20] The motion judge disposed of the appellant’s claim that she did not understand the agreements on the basis that he “must assume that counsel who dealt with [the appellant] at each stage would or should have taken steps to make sure she understood the nature of the proceeding in which she was involved and the documents she signed and sworn to in the presence of her legal representatives” [emphasis added]. And further her position “is contrary to the certificate of Independent Legal Advice signed by her counsel on July 2008”. It is unclear from the motion judge’s reasons to whom he is referring besides Mr. Chhina. There is no evidence in the record that the appellant was represented by counsel “at each stage” and in particular in 2004 when the Divorce Settlement Agreement was signed or in 2006 when the divorce was granted. All the evidence is to the contrary. [21] The motions judge then dealt with the appellant’s motion for an extension of time to bring her application for equalization of net family property. It is not apparent that the motions judge expressly dealt with the first condition, apparent grounds for relief. He began his reasons respecting the extension of time as follows: In the material filed the applicant has set out her reasons why she did not assert her claim within the time. I am not satisfied, however, that this threshold was met. She acknowledged the divorce proceedings were served upon her in 2006. Then knowing of the pending divorce the parties entered their “Final Agreement” which specifically referred to and contemplated the parties divorce. At the time I am also satisfied she was represented by counsel and had independent legal advice. [22] The motions judge then turned to the “second condition … whether the delay was incurred in good faith”. The motions judge relied upon the decision in Ferguson v. Ferguson, [2007] O.J. No. 390 (Sup. Ct.), which he interpreted as requiring that the appellant establish that she had no reason to make inquiries. The motions judge found that the appellant had every reason to make inquiries after she was served with the divorce papers in 2006 and he found that “she in fact did take action”. It is unclear what action the motions judge is referring to. The motions judge then referred to the 2004 agreement and the 2008 agreement. With respect to the latter, the motions judge found that the appellant “had every reason to make inquiries as to her rights, entitlement and status given the divorce proceedings of which she was aware”. The motions judge appeared to accept the appellant’s evidence that she only learned of the divorce in 2009, but he held that she should have made inquiries when she signed the Final Agreement in July 2008. He noted that on her own evidence, the appellant was unhappy with the terms of the Final Agreement at that time. He concluded that he had “difficulty in finding that she now comes before the court in ‘good faith’”. [23] The motions judge then turned to the third condition, whether any person will suffer substantial prejudice by reason of the delay. The motions judge referred to Deaville v. Boegemar (1985), 48 O.R. (2d) 725 (C.A.) and Basarky v. Quinlan, [1972] S.C.R. 390. He referred to the fact that the parties had been separated since 2004 and had entered into two agreements and a divorce since then. He concluded: Bearing in mind all the facts and circumstances as put before me, I cannot find the applicant has established special circumstances that necessitate relief to be given to her from the limitation period. [24] The motions judge then turned to the motion for summary judgment. He again referred to the period of separation, that the parties had two adult children and that both parties claimed to be in bad health. He stated as follows: In the end I cannot find any misrepresentations made by the Respondent in the material that led to the final agreement. The validity and binding nature of the “final” 2008 agreement was not challenged until March 2009, some eight months after it was signed in June 2008. [25] However, it is apparent that the motion for summary judgment was granted on the basis that the limitation period had expired. The motions judge concluded his endorsement as follows: 1. The Applicant’s motion for an extension of time is denied. 2. The Respondent’s motion for summary judgment that the action is statute barred is granted. ANALYSIS The Extension of Time [26] In my view, the motions judge erred in law in his application of the test under s. 2(8) for whether to grant the appellant an extension of time to pursue her claim for equalization of net family property. As indicated, the court may extend the time for bringing an application under s. 7(3) where it is satisfied that (a) there are apparent grounds for relief; (b) relief is unavailable because of delay that has been incurred in good faith; and, (c) no person will suffer substantial prejudice by reason of the delay. [27] I begin with the question of apparent grounds for relief. In my view, the motions judge did not properly address this first question. The only reasons that appear to be directed to this first condition, relate to the explanation for the delay, not the merits of her claim for equalization of net family property. The motions judge would seem to have made the same error as was identified by this court in Scherer v. Scherer (2002), 59 O.R. (3d) 393. As Charron J.A. pointed out at para. 16 of that decision the “relief” under s. 2(8)(a) and (b) is “not referable to the extension of time sought by the moving party on the motion but to the relief sought on the prescribed claim”. [28] It may be that the motions judge intended to address this issue when he came to the question of whether to grant summary judgment to the respondent. As noted, the motions judge held that he could not find any misrepresentations made by the respondent in the material that led to the Final Agreement. If so, the motions judge misconceived the nature of the appellant’s claim concerning the validity of the Final Agreement. [29] In order to gain access to the provisions of the Act respecting equalization of net family property, the appellant would have to set aside the 2008 agreement in accordance with s. 56(4) of the Act. She could do so by showing that the respondent had (a) failed to disclose significant debts or assets or other liabilities, (b) that she did not understand the nature or consequences of the contract, or “c) otherwise in accordance with the law of contract”. In considering the motion for summary judgment, the motions judge considered only misrepresentation by the respondent. The appellant’s claim, however, was much broader. She claimed that she signed the Final Agreement under duress. Her evidence that she was coerced by her sons into signing the agreement stands uncontradicted. If coercion or duress was made out, the agreement could be set aside. That issue, which would turn on the credibility of the appellant, the respondent, the sons and other witnesses, would have to be determined at trial; it could not be determined on a motion for summary judgment. The motion judge also misapprehended the facts in stating that the appellant only challenged the validity and binding nature of the Final Agreement in March 2009. She stated that she would never accept what the respondent had done and alleged that the agreement was unjust at the very time she signed it, in her endorsement in Arabic. [30] I did not understand the respondent to suggest that if the Final Agreement were set aside there was not a basis for the appellant’s claim for equalization of net family property. [31] As to the 2004 agreement, its terms are manifestly unconscionable. After over 20 years of marriage, the appellant appears to give up any claim to the matrimonial home, or to any interest in the two companies and received no consideration in return. She received a relatively modest amount for spousal support. She signed the agreement without any independent legal advice. It is not surprising that the respondent attempted to have the appellant enter into another agreement in 2008. [32] In my view there are apparent grounds for relief, sufficient to meet the first condition under s. 2(8). [33] The motion judge also erred in his consideration of the second condition, whether the delay had been incurred in good faith. The motion judge, relying upon Ferguson v. Ferguson held that the appellant had to establish that she had no reason to make inquiries. In Ferguson v. Ferguson at para. 15, Tulloch J. , however, described good faith as “acting honestly and with no ulterior motive. A state of blameless ignorance.” He also pointed out that courts have held that ignorance of the law, with no ulterior motive, can in some circumstances amount to good faith provided the applicant also establishes that she had no reason to make inquiries. The appellant, however, did not claim ignorance of the law. Rather, she claimed that she was unaware that the divorce had been granted. [34] A more appropriate explanation for the meaning of good faith in this context is found in the decision of Mendes da Costa U.F.C.J. in Hart v. Hart (1990), 27 R.F.L. (3d) 419 at p. 432: Section 2(8)(b) enshrines in legislative form the concept of “good faith”. As is not infrequently the case, these words are not defined in the Act, and I do not believe that it would be either possible or useful to attempt to catalogue the possibilities that they embrace. However, I must attribute to these words their “plain meaning according to the understanding and practices of the times.”: Cash v. George Dundas Realty Ltd. (1973), 1 O.R. (2d) 241, 248 (C.A.). I believe, to establish “good faith”, it must be shown that the moving party acted honestly and with no ulterior motive. It does not seem to me that the Legislature, anticipating the general newsworthy nature of the family property provisions of the Act, intended that a mere failure to make enquiries should necessarily negate “good faith”, provided that the absence of enquiry does not constitute wilful blindness or does not otherwise, in all the circumstances, fall below community expectations. As I have stated, my assessment of the evidence is that the wife was ignorant of her rights under the Act, and I believe that her state of mind was one of blameless ignorance. I am satisfied that the delay in issue was delay incurred in good faith within the meaning of section 2(8)(b). [35] In my view, the appellant has met this test. Contrary to the finding by the motions judge, the appellant did not have legal advice when she signed the Divorce Settlement Agreement in 2004. When she was initially served with the divorce application in 2006, she was in Egypt and without the financial means to retain counsel. Her assertion that she did not know about the divorce until 2009 is uncontradicted and seems to have been accepted by the motions judge. She immediately applied for relief under the Act. She brought her claim only four months after expiration of the limitation period. Her affidavit shows that she acted honestly and with no ulterior motive. Perhaps she could have made inquiries earlier, but there is no suggestion that her conduct amounted to wilful blindness. In other words, there is nothing to suggest that the appellant deliberately failed to make inquiries earlier because she suspected that she was not entitled to relief. [36] The final condition under s. 2(8) is whether any person will suffer substantial prejudice by reason of the delay. The motions judge did not identify any substantial prejudice to the respondent or any other party. Further, in my view, he erred in requiring the appellant to show “special circumstances”. Special circumstances was a condition imposed where the court was asked to exercise its common law power to amend a statement of claim to add a party or a claim after a limitation period had expired. In Deaville v. Boegeman, this court accepted that the applicant had to show special circumstances where the claim was barred by limitation periods under both the Family Law Reform Act and the Highway Traffic Act. As the court said at p. 729 : The fact that there are statutory conditions which, if satisfied, provide relief from the limitation periods prescribed by the Family Law Reform Act does not, in my view, alter or ameliorate the requirement that there be “special circumstances” before a claim or party be added after the limitation period has run under the Highway Traffic Act. [37] However, where the only limitation period that is engaged is under the Family Law Act, the applicant need only meet the statutory conditions in s. 2(8). See Hart v. Hart at p. 435. [38] The delay in this case is four months from expiration of the limitation period. The only suggestion of prejudice to the respondent is found in this paragraph of his affidavit: I am sixty-one years of age. I have suffered from multiple heart attacks and had two open-heart surgeries. I am moving on with my life the best I can and am trying to do whatever I can for my sons and extended family. [39] The respondent was well aware of the case and the nature of the claims. It was his lawyer that drafted the Final Agreement only months earlier in an attempt to deprive the appellant of her rights to equalization of net family property, support and the matrimonial home. This is the kind of case described in Deaville v. Boegeman at p. 730 where “the mere recitation of the facts and history of the case makes it clear there is no prejudice to the [respondent] and it can be inferred that he knew, within the limitation period, of the case and the nature of the claims now being made against him”. Having to deal with this litigation may well cause the respondent some hardship as attested to in his affidavit, but, in my view, this is not the kind of substantial prejudice envisaged by s. 2(8). The bald statement that he is moving on with his life and trying to do what he can for his sons, men who are adults and own 50 percent of the two companies, and his extended family provides no basis for finding that he would be substantially prejudiced by a claim brought by his wife of twenty years only four months outside the limitation period. The Summary Judgment Motion [40] The motions judge granted summary judgment on the basis that the limitation period had expired. Since I have found that he erred in failing to grant an extension of time for the appellant to bring her application, it follows that the order granting summary judgment must be set aside. DISPOSITION [41] Accordingly, I would allow the appeal, set aside the order of the motions judge and in its place make an order dismissing the respondent’s motion for summary judgment. I would also grant the appellant’s application for an extension of time under s. 2(8) of the Family Law Act to bring her claim for equalization of net family property. Of course, as indicated, the success of any claim for equalization of net family property will depend upon the appellant’s success in first setting aside the domestic contracts of 2004 and 2008. [42] The parties may submit brief written submissions concerning costs. The appellant shall provide her submissions within 10 days of release of these reasons. The respondent shall provide his submissions within 10 days of receiving the appellant’s submissions. Signed: “M Rosenberg J.A.” “I agree Robert P. Armstrong J.A.” “I agree R. G. Juriansz J.A.” RELEASED: “MR” October 5, 2010