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DOMESTIC CONTRACTS AND SEPARATION AGREEMENTS - Cohabitation agreements

Friday, December 14, 2018 @ 8:25 AM  


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Appeal by the trustees of the Curé Estate from a judgment interpreting a cohabitation agreement with related declaratory relief. The appellants' father, Albert, was a successful businessman who controlled a number of companies. The respondent, Kilitzoglou, was a key employee of one of Albert's companies and involved in a relationship with Albert from 1995 until his death in 2007. In 1997, the couple moved into a residence purchased and financed by Albert and registered in his sole name. In 2005, Albert transferred title of the residence to himself and the respondent as tenants in common pursuant to a cohabitation agreement. Albert died suddenly in 2007. Albert's will, executed in 2002, appointed the appellants and his lawyer as estate trustees. The appellants were also the beneficiaries under the will. The respondent was not a beneficiary, but the cohabitation agreement gave her the option of remaining in the residence for three years with an option to purchase the residence. In the event the respondent did not purchase the residence, she could remain in the residence after the three-year period, provided she paid the Estate $140,000 and paid the ordinary and reasonable costs of maintaining the residence. A dispute arose between the parties. Following two trials, a dispute persisted over responsibility for property-related expenses as contemplated by the cohabitation agreement. In the judgment under appeal, the trial judge declared that the Estate was responsible for the outstanding balance of the mortgage, an equal portion of realty taxes, and all previously incurred capital costs and capital repairs commencing the third anniversary of Albert's death, reflecting Albert's intention to take care of the respondent for the rest of her life. The Estate was not liable for future capital expenses. In addition, the trial judge found that the appellants' bad faith justified an award of punitive damages of $20,000 on a joint and several basis, plus costs on a substantial indemnity basis. Albert's children appealed.

HELD: Appeal allowed.  The trial judge erred in his determination and use of the factual matrix in interpreting the cohabitation agreement by considering the respondent's financial circumstances at the time of Albert's death to construe the agreement. In addition, the trial judge allowed his view of the factual matrix to overwhelm and contradict the words of the contract. The content of the agreement reflected a dominant theme that each party would remain financially independent with no obligation to support the other under any present or future circumstance. Therefore, it was not open to the trial judge to make the inference that Albert wanted to care for the respondent for the rest of her life and use that inference to drive his interpretation of the agreement. Furthermore, the trial judge failed to recognize the extent to which the respondent's claim was precluded by res judicata arising from the first trial. The trial judgment, including the punitive damages and costs awards, was set aside and replaced with an order that the appellants were responsible for the outstanding mortgage. However, the respondent was responsible for all ordinary and reasonable costs of maintaining the residence after the three-year timeframe, including all costs of realty taxes and property insurance, with no exclusion for any ordinary and reasonable costs of maintenance on the basis that they were purportedly capital in nature. The respondent was thus liable to the appellants for all ordinary and reasonable costs of maintaining the residence paid by the Estate after the third anniversary of Albert's death of Albert, other than payment of the outstanding mortgage.

Kilitzoglou v. Curé, [2018] O.J. No. 5854, Ontario Court of Appeal, R.G. Juriansz, D.M. Brown and G. Huscroft JJ.A., November 8, 2018. Digest No. TLD-December102018009