Case: Krebs v. Cote, 2021 ONCA 467 (CanLII)

Keywords: cohabitation agreement; common law reconciliation rule

Synopsis:

Mr. Krebs and Ms. Cote begin an “off-and-on-again” relationship in 2006. There are “numerous separations”, continuing up to 2012-2013. During this time, the parties reside in Mr. Krebs’ home. However, in the fall of 2012, Ms. Cote’s mother purchases a home “in which her daughter could reside”. (See para. 5).

In January 2013, the couple resumes cohabitation at Mr. Krebs’ home. This time, they enter into a cohabitation agreement. The agreement provides that, upon breakdown of the relationship, Ms. Cote is to vacate Mr. Krebs’ home upon payment by Mr. Krebs to Ms. Cote in the amount of $5,000. (See para. 12). As noted by the Court of Appeal, “[b]oth parties had independent legal advice before signing…and there is no challenge to the validity of the agreement”. (See para. 4). Ms. Cote moves out. Mr. Krebs pays $5,000, pursuant to the agreement. However, the couple later reconciles and marries in the summer of 2014. Ms. Cote moves back into Mr. Krebs’ home. A few years later, the relationship breaks down “for the final time”, in January 2019. (See paras. 5-7).

Mr. Krebs and Ms. Cote ask a Motion Judge to determine whether, as a matter of law, separation followed by reconciliation terminates a cohabitation agreement. Mr. Krebs appeals the Motion Judge’s declaration that, in light of their reconciliation, the cohabitation agreement between him and Ms. Cote is of no force and effect. If the agreement is not in force, Ms. Cote “would have a right to equalization of net family property, calculated on the basis that the value of the home was included in the appellant’s net family property”. (See para. 30). The Court of Appeal disagrees with the Motion Judge’s legal conclusion, finding no language in the agreement “that temporally restricts the application of the terms to cohabitation at a defined time or restricts the broad language to cohabitation before separation followed by reconciliation”. (See para. 27). Pardu J.A. finds that, rather than signaling the cohabitation agreement was at an end, “the $5,000 payment was intended to assist [Ms. Cote] with a move to her own accommodation”. (See para. 38). 

Importance:

At common law, a separation agreement becomes void upon reconciliation, “subject to any clause…overriding the common law rule or which would imply that the intent of the parties was that terms of the separation agreement would be carried on notwithstanding any subsequent reconciliation”. (See para. 14). The important legal question in this case was whether that “ancient” common law rule should be extended to cohabitation agreements. (See para. 16).

The Court of Appeal did not agree with the Motion Judge’s conclusion (i.e. “that a cohabitation agreement does not apply to the parties after a separation followed by reconciliation unless the agreement expressly provides to the contrary”). (See paras. 12-13). For Pardu J.A., the “well-established” common law rule with respect to separation agreements should not be extended to cohabitation agreements. (See para. 15).

For Pardu J.A., the common law rule with respect to separation agreements “dates from a time when views about marriage, cohabitation, separation, and divorce were very different.” (See para. 18). However, in today’s context, Pardu J.A. found that “cohabitation agreements, and separation agreements are all part of the legislative landscape”. Further, “[p]arties should be encouraged to enter agreements to define their rights and obligations. Jurisprudential shoals upon which an agreement may founder unnecessarily do not advance that goal.” (See para. 19).

In the context of a separation agreement, Pardu J.A. found the common law reconciliation rule “continues to make some sense”. The reason being: “[w]here the raison d’être of the agreement is separation and parties reconcile, the foundation for the separation agreement dissolves”. However, this logic ought not to be extended to void a cohabitation agreement following reconciliation because “the reconciled parties have returned to the very state contemplated by the cohabitation agreement.” (See para. 20).

Despite this finding, the Court of Appeal declined to recognize (as Little J. suggested in Langdon v. Langdon, 2015 MBQB 153) a presumption in favour of a cohabitation agreement’s continued validity upon reconciliation. For Pardu J.A., the applicability of a cohabitation agreement “will depend on the interpretation of that agreement and the light it sheds on the intentions of the parties.” (See para. 22). In this particular case, the Court of Appeal determined the rights and obligations of the parties are governed by the agreement, adding that “[u]nquestionably, it would have been better if the cohabitation agreement had contained specific provisos dealing with the possibility of separation and reconciliation, making unnecessary this interpretive process”. (See paras. 40-41).

Counsel for the Appellant: David Goodman (Goodman, Solomon & Gold, Toronto)

Counsel for the Respondent: Ashley Gibson and Anthony Reitboeck (Gibson & Reitboeck LLP, Fort Erie)

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