Court Finds No Binding Separation Agreement Reached Between Ex-Spouses

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While it can be an incredibly emotional time, sorting out property division, support issues, and parenting arrangements can be difficult to navigate. However, by engaging in comprehensive discussions, parties can work through these issues outside the court, saving time and money. Though it is often clear whether or not the parties have reached a mutual settlement, in some cases, the resolution of certain issues may be ambiguous despite extensive efforts by the parties. 

This blog post will explore what happens when the parties to a separation agreement disagree on whether a final settlement has been reached, referencing a recent Ontario Superior Court of Justice decision.

Husband and Wife Disagree on Whether a Settlement Agreement Was Reached

The matter of N.C. v. M.D. involved the applicant’s wife (the “wife”), who commenced an application in August 2020, claiming that the respondent-husband (the “husband”) was in breach of the parties’ separation agreement dated November 5, 2018. The parties were married in 1999 and separated in 2016. They also had two children, the youngest of whom had just turned 18 years old when the matter was heard. 

In her application, the wife sought an order requiring the husband to pay child support, among other relief. The parties participated in extensive settlement negotiations in October 2023; however, the key issue before the Court was whether a settlement was reached regarding their separation agreement. The husband brought a motion for summary judgment, claiming that a settlement was reached, while the wife argued that this was not the case. 

Court Notes Issues With Indemnity Clause and Child Support Credit

The Court concluded that there was an insufficient consensus regarding the essential terms of the separation agreement and determined that a genuine issue that required a trial existed. In particular, the Court highlighted the issues with an indemnity clause and a $350,000 credit relating to child support.  

The indemnity clause stated, “[i]f a child brings an action against either party, the other party shall indemnify the other for any child support and legal fees they are ordered to pay.” The clause then attempted to explain what this meant. On September 28, 2023, the husband’s lawyer wrote to the wife’s lawyer regarding the indemnity clause and the child support credit, to which the wife’s lawyer responded that “substantial progress is made towards achieving a final resolution.” However, the “wife objected to what the husband was proposing in terms of both the indemnity clause.” In the Court’s view, the wife and her lawyer “never resiled from their objections to the two clauses in question.”

Court Highlights “Unusual Nature” of Indemnity Clause

Drawing on the principles of summary judgment in family law matters, outlined under Rule 16 of the Family Law Rules, the Court noted that a final order should only be made if no genuine issue requires a trial. Upon reviewing the evidence, the Court noted that an agreement had not been reached. 

The Court wrote that “[f]rom the eyes of a hypothetical observer, would it appear that the parties had reached an agreement on the essential terms of the deal, which essential terms (both sides agree) included the indemnity clause and the $350,000.00 clause?  Respectfully, I think not.” The Court also noted that the indemnity clause was of an “unusual nature” as “[s]ome judges are reluctant to approve of such a clause in that it is designed to preclude, or at least dissuade, a future child support claim but without any input from or agreement of the child.”

No Settlement Agreement Reached; Motion for Summary Judgment Dismissed

The Court stated that “[a]n agreement is binding if the parties consider that it contains all of the essential terms.” Although the parties engaged in intensive discussions and negotiations through their respective lawyers, the Court concluded that the parties had not unambiguously agreed on the agreement’s essential terms. Determining whether there was a meeting of the minds is also important to determine the intention of the parties. 

The Court noted that it was “not suggesting that such an indemnity clause cannot form part of a domestic contract” but rather “the specific wording of such a clause, generally, is crucial.” Further, “[w]ithout a meeting of the minds on these two essential terms of the agreement, there was no binding agreement.” Accordingly, the husband’s summary judgment motion was dismissed. 

The Court directed the parties to proceed to trial to resolve the outstanding disputes. The Court also offered to facilitate a settlement conference for the parties if they believed the issues could be resolved without further litigation.  

Contact the Windsor Lawyers at Johnson Miller Family Lawyers for Assistance Preparing a Separation Agreement

Resolving issues such as parenting disputes and child support can be contentious; however, these matters may be resolved outside of the court if the parties wish to negotiate and reach a mutually agreeable decision. If you wish to prepare a separation agreement or have questions about compliance, it is important to seek legal advice. At Johnson Miller Family Lawyers, our experienced family lawyers regularly work with clients to effectively resolve complex matters. To speak with a member of our team about your separation agreement, call us at 519.973.1500 or contact us online

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