“Well aware that Geropoulos involved settlement negotiations in the midst of active litigation, and thus that he was extending an existing principle, [in Pastoor v. Pastoor, 2007 CarswellOnt 4661 (Ont. S.C.J.) Justice Perrell] His Honour wrote: “it is arguable that what Robins, J.A. was saying … is that the formalities of s. 55(1) of the Family Law Act are not necessary when a settlement is negotiated freely and properly entered into with lawyer’s advice whether or not there was pending litigation.” His Honour went on to quote extensively from Scherer v. Paletta a well-known decision of the Court of Appeal addressing the ability of retained counsel to compromise a client’s position in reaching a binding settlement of active personal injury litigation.
For clarity, Justice Perell was being asked to cure the absence of the signature of one party and a witness on a half-signed domestic contract. His Honour did so on the basis that the terms of settlement had been negotiated freely and with the benefit of legal advice. I am being asked to extend that judicial involvement even further. I am being asked to deem an exchange of correspondence between counsel, pre-litigation, to be a valid and enforceable domestic contract. I conclude that I cannot do so for the following reasons:
a. Statutory Construction
A first principle of statutory construction is the presumption that the parliamentary body enacting the legislation crafted its language carefully.
Section 55(1) of the Family Law Act is clearly exclusive in nature. It provides three requirements that must be met in order for a document to be a “domestic contract.” The three requirements are that the document be in writing, signed by the parties and witnessed. In the absence of these three requirements, the document is not a domestic contract.
Further, section 56(4) sets out three situations in which a domestic contract may be set aside:
56. (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.
Notably, there is no mention of legal advice being a necessary prerequisite to the existence of a contract or of its absence being a trigger for the setting aside of a domestic contract.
b. Scope of Retainer – Negotiation vs. Litigation
There is an important distinction between the involvement of counsel retained to negotiate pre-litigation and counsel retained to conduct litigation. This distinction is evident in the rules of court in all areas of practice. Litigation counsel are served with court documents and regularly attend court in the absence of their clients. This is true even in serious criminal matters, where a Designation of Counsel form may be filed with the Court under section 650.01 of the Criminal Code of Canada which alleviates the need for the accused to be present at all court appearances.
c. Requirement of Legal Advice
In my view, relaxing the Family Law Act formalities to deem an exchange of pre-litigation correspondence to be a domestic contract as a result of the availability of legal advice actually exacerbates the uncertainty in family litigation. The foundation upon which such a principle would be based – the availability of legal advice – is unstable. Questions come to mind such as:
(1) What does “legal advice” look like, exactly? Is there a demarcation point compelling the announcement of the involvement of the advising lawyers if parties are otherwise negotiating smoothly between themselves? Do the advising lawyers have to communicate with one another in writing? Will this cause a chilling effect on the provision of “unbundled” legal services?12
(2) Are retainer agreements regarding the scope of pre-litigation counsel to automatically become material evidence when an alleged correspondence-based settlement is disputed? Does this mean that pre-litigation counsel must refer the client to another lawyer in every case of failed settlement negotiation lest he or she become a potential witness in the litigation?
(3) What if only one party has legal advice? What is the assessment process around the other party’s need for legal advice?
(4) What if a party’s unique vulnerabilities are not compensated for by legal advice?
(5) What if a party alleges that he or she received bad advice?
(6) Is there a strong public policy reason to add a legal advice factor to alleged settlements when Courts routinely uphold fully-compliant domestic contracts where no legal advice was obtained?
d. General Uncertainty
Separation and divorce are characterized by uncertainty at the outset and often by a continuing absence of closure as the litigation unfolds. This can be the case even where spouses understand themselves to be bound by Court Orders, which may be appealed or subsequently altered due to a material change in circumstances. If Court oversight is not a guarantee of closure, it is essential to avoid any confusion regarding the specific requirements of pre-litigation settlement so as to allow separating spouses to move forward with their lives. To raise an exchange of correspondence to the level of a binding domestic contract, absent clear legislative authority, would be to extend judicial involvement too far and contribute to increased uncertainty in matrimonial settlement negotiations.”