The husband had originally co-owned the home with other partners, however, prior to the marriage, he obtained a vendor take back mortgage against the home to finance the purchase of his partners’ half interest in the home. He subsequently refinanced and replaced his original mortgage and vendor take back mortgage with a single conventional mortgage, which remained on the property at the date of marriage. Said mortgage was paid off during the marriage.
The case at bar is an appeal from the order of Justice Snowie, which arose out of two actions that were tried together. One action was a matrimonial proceeding between a husband and wife. The other action was in regards to two possible debts: one owed by the husband and wife to the wife’s brother and one owed to the wife by her mother. These actions were tried together because the determination on the debt issues would affect the amount of the equalization payment made in the matrimonial proceeding.
The ‘Debt’ Owed to the Brother: The trial judge found that the husband and wife owed the wife’s brother $200,000.00 because they gave him a promissory note promising to repay this amount. The husband argued that the trial judge erred in finding that there is a debt owing to the brother because the evidence indicated that there was no expectation that the $200,000.00 would ever be repaid.
The Court of Appeal agreed. It was held that the trial judge erred in failing to take into account the document evidence demonstrating the understanding between the parties involved. It was clear from this evidence that the brother would not make a demand on the promissory note and that the money was a gift and not a loan.
The court ruled that just because it looks like a promissory note, doesn’t mean it is one if there is proof that the parties agreed that this debt would never be paid. In this case the parties stated in the ‘promissory note’ “We are prepared to go along with the settlement because Robert Posa has assured us that he will never make a demand on the note,” as is the case here, then there is no promise. The brother even confirmed this assurance in a handwritten note indicating that the husband and wife do not have to pay him any interest or principal accrued on this amount.
The court set aside the trial judge’s order and dismissed the brother’s action against the parties finding that the brother had gifted the money to the wife.
The wife also submitted that two (2) documents titled ‘Instructions’ from 1996 and 1999 constituted domestic contracts, where the husband had agreed to release any claim he had to share in the monies from the promissory note. Section 55. (1) of the FLA establishes the requisite formalities for an enforceable domestic contract:
55.(1) A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.
The parties did not meet this test and as such it was not an enforceable domestic contract.