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Spouses can negotiate a separation agreement to resolve issues arising from the breakdown of their relationship. The parties can outline their respective rights to reach a final settlement. But courts can review the enforceability of the contractual terms, and will particularly scrutinize any provisions related to child support. Child support is the right of the child, and courts will not uphold provisions that purport to waive such support. One recent case also examined the impact of a liquidated damages clause intended to discourage further litigation, cautioning that such clauses cannot penalize a party seeking to enforce child support obligations.
Contract Included a Liquidated Damages Clause if a Party Commenced Litigation
In Shatilla v. Sorichetti, the judge had to consider the parties’ agreement and its impact on whether the mother could proceed with a motion to change. The parties had three children, all now over the age of majority; however, two were still attending post-secondary education. They previously executed final minutes of settlement (“Minutes”) in which they agreed that neither was obligated to pay the other any amount for child support. The mother now alleged there was a material change in circumstances and that the waiver of support should be set aside. She further claimed that the father should pay $7,500 in retroactive section 7 expenses that he had refused to pay.
The Minutes in question provided that disputed claims would be submitted to a mutually agreed-upon parenting coordinator, mediator, or arbitrator, who would have the authority to make a final decision on the disputed claim. In addition, the Minutes contained a liquidated damages clause stating that if either party breached the terms or commenced any further litigation, they would pay $20,000 in damages to the other party before commencing any further proceedings.
The mother testified that at the time the parties finalized the Minutes, they had a shared parenting arrangement in which their daughter lived with the mother and the two sons lived with their father. However, the parenting arrangements changed, and the two sons later moved in with the mother for the summer months during their post-secondary education. The mother also admitted that she had not followed the procedure set out in the Minutes for disputed section 7 expenses. In contrast, the father admitted that he occasionally refused to pay for items that he did not consider proper expenses.
Parties’ Agreement Was Intended to be Final and Non-Reviewable
The first question the judge had to decide was whether the mother could bring a motion to change the Minutes, given the non-reviewable nature of their agreement. The judge agreed that spouses are entitled to negotiate and settle family law issues and enter into minutes of settlement. But, section 56 (1.1) of the Family Law Act specifically provides that courts may disregard provisions in a domestic contract “where the provision is unreasonable having regard to the child support guidelines, as well as to any other provision relating to the support of the child in the contract”.
The parties confirmed that counsel represented them during the negotiations of the Minutes and that they conducted extensive negotiations. Moreover, the parties had been involved in litigation for 10 years at the time the Minutes were signed.
Having considered all the evidence, Justice Ohler concluded that the parties intended the Minutes to constitute a full and final resolution of all issues, and specifically included clauses to that effect. The Minutes also went further and provided that the parties were no longer obligated to make financial disclosure to each other. In addition, the Minutes did not contain a provision defining a material change in circumstances that would justify a variation of their agreement.
Furthermore, the Minutes also contained a liquidated damages clause. The parties claimed that the final result, as documented in the Minutes, was based on the living arrangements and circumstances that existed at that time. In particular, one child resided with the mother, while the two sons lived with their father. However, the judge noted that the Minutes did not specifically address that issue, which was curious given that the Minutes were agreed to within a shared parenting arrangement.
For the judge, it was also notable that the Minutes did not address the parties’ incomes. Justice Ohler felt that if income information had been included in the agreement, it might have been reasonable for the parties to agree to a set-off based on shared parenting time. But in the absence of that information, the judge could not conclude that the Minutes amounted to a set-off based on split parenting time.
Court Finds Release From Child Support Obligations Was Unenforceable
The judge concluded that the provisions in the Minutes, which released both parties from the obligation to pay child support, were unreasonable. In D.B.S. v. S.R.G., the Supreme Court of Canada discussed the four principles underlying the support obligations that parents have to children:
- Child support is the right of the child.
- The right to support survives the breakdown of a child’s parents’ marriage.
- Child support should, as much as possible, provide children with the same standard of living they enjoyed when their parents were together.
- The specific amount of child support owed will vary based on the payor parent’s income.
The judge accepted that, when the parties entered into the Minutes, they did not anticipate that the children would be living with the mother full-time. Therefore, the change in the children’s residence amounted to a material change in circumstances, and the mother was not prevented from bringing a motion to change.
Clause Penalizing a Party Seeking Child Support Is Unreasonable
The mother also claimed that the father’s failure to pay the section 7 expenses constituted a breach of the Minutes and that she was entitled to $20,000 in liquidated damages. In contrast, the father’s position was that he was not in breach of the Minutes, as he had paid the agreed expenses. He claimed that, since the mother was the party seeking reimbursement, she had to follow the process for settling disputed section 7 expenses, but she had not done so. On this basis, he claimed that the mother should have to pay him $20,000 in damages before proceeding with a motion to change.
The judge determined that the father had not breached the Minutes, as the parties recognized that some section 7 expenses could be disputed. They specifically established a process to determine which claims to accept. But the mother was in breach of the Minutes, as she failed to follow the agreed process.
Ultimately, she could not seek relief for those expenses at this time. Looking at the rationale for the clause, Justice Ohler held that the clause was clearly intended to discourage parties from further litigating any financial claims. But the mother’s motion to change dealt with the father’s obligation to pay child support. And courts consistently remind family litigants that child support is the child’s right. Consequently, “a clause that operates to penalize a party that seeks to enforce child support obligations is unreasonable”. Ultimately, the judge concluded that the liquidated damages clause was unenforceable.
Courts Can Still Review Final Settlements
While parties have wide latitude in negotiating domestic contracts, including a liquidated damages clause, it does not necessarily mean that a party will be able to recover damages. Courts can disregard child support terms that limit the statutory rights and will not enforce clauses that impose a financial penalty on a spouse for further litigating child support.
Johnson Miller Family Lawyers: Advising Windsor-Essex Parents on Child Support & Separation Agreements
While separation agreements and Minutes of Settlement can provide clarity and finality, not every provision will withstand judicial scrutiny. In Ontario, child support is the right of the child, and courts retain the authority to set aside unreasonable waivers or clauses that improperly restrict a party’s ability to enforce support obligations.
If you are negotiating a separation agreement, responding to a motion to change, or dealing with disputed section 7 expenses, experienced legal guidance is essential. The experienced family and divorce lawyers at Johnson Miller Family Lawyers provide strategic advice on separation agreements, child support variations, retroactive support claims, and enforcement issues. Contact us online or call 519-973-1500 to discuss your situation and ensure your agreement reflects both your intentions and the law.
