Ontario Court of Appeal highlights importance of formalities in domestic contracts

In a property rights dispute, the Ontario Court of Appeal has declared an agreement between a former couple invalid due to non-compliance with formalities outlined in the Family Law Act (FLA).

The case of El Rassi-Wight v. Arnold, 2024 ONCA 2 involved a house acquired during a long-term relationship. The plaintiff and the respondent bought the house together, holding the title as joint tenants. In its reasons for the decision, the court shed light on the significance of adhering to legal requirements in domestic contracts.

The parties decided to part ways in the summer of 2020. The property's value had escalated significantly during their time together, ranging between $29,000 and $102,000. On August 2, 2020, the parties drafted a document outlining the respondent's agreement to transfer his stake in the house to the appellant in exchange for $10,000 and a motorcycle. However, the respondent later refused to follow through with the terms of this agreement, prompting the plaintiff to commence legal action.

The central issue concerned whether the August 2 document constituted a valid domestic contract under the FLA. In alignment with the FLA's strict requirements, the trial judge ruled that the document lacked validity as it had not been properly witnessed, even though the respondent acknowledged signing it, which was captured in a video recording.

The court, citing precedent, emphasized that formalities under the FLA could be relaxed under certain circumstances, such as when the parties genuinely executed the contract, the terms were reasonable, and no oppression or unfairness surrounded the negotiation. However, the trial judge concluded that, based on the evidence, relaxation of formalities was inappropriate. The respondent had not sought independent legal advice before signing, and the court found the document's language overly broad and vague.

The plaintiff raised several issues on appeal, challenging the trial judge's findings. However, the Ontario Court of Appeal dismissed the appeal, deferring to the trial judge's factual determinations. The court emphasized the importance of statutory formalities, highlighting their role in ensuring parties comprehend the significance of their agreements and discouraging informal, potentially unbalanced negotiations.

The court referred to precedent, noting that statutory formalities "serve to impress upon spouses the significance of their agreement and to encourage and preserve the validity of binding family property settlements." The appeal court noted that the trial judge found it factual that the respondent did not understand key aspects of the August 2 document, partly because the agreement itself was "overly broad and vague."

Ultimately, the appeal court found no basis to interfere with the trial judge's conclusion that the August 2 document was unenforceable under the FLA. Accordingly, the court dismissed the plaintiff's appeal.