O'Neil Law

Family Law

COHABITATION AGREEMENTS

If you intend to move in with someone in a conjugal or semi-conjugal relationship, you may want to consider entering into a Cohabitation Agreement beforehand. Many people think that if you live with someone for 6 months you are common law partners.  This is overly simplistic. The law creates certain legal consequences from living together . For example, the Canada Revenue Agency considers you to be living together in a common law marriage if you have cohabited for more than one year. They want you to declare your relationship on your income tax return.  This in turn will have some consequences  with respect to various benefits that you may no longer be entitled  to because of your larger joint income.

In Alberta, the Adult Interdependent  Relationship  Act stipulates that you are Adult Interdependent Partners (essentially common law married) if you live together in a conjugal relationship in excess of three years.  This gives rise to the right to seek support from your partner, though it does not specifically confer any property rights.
The courts will consider the circumstances in each relationship to see if the relationship creates any legal rights or responsibilities. If you only live together for 6 months, it is unlikely that any consequences will flow from such a relationship in the absence of children. If you live together  for more than 3 years then  you will be deemed to be Adult Interdependent partners, and consequences  flow from that.  This does not mean that you automatically get a half interest in your partner’s property. The determination of property rights flowing from a conjugal relationship can be very complicated. The court looks at a number of different criteria, including contributions to the accumulation of common property. It is often assumed that a man and woman living in a conjugal relationship will have both contributed to the maintenance of the household, but this does not mean that the property is to be shared equally.

Given the uncertainty surrounding the determination of whether or not you are in a conjugal relationship, and the consequences flowing therefrom,  if you have assets you should consider entering into a Cohabitation  Agreement prior to cohabiting. The purpose of the agreement is usually to state that the mere fact of cohabitation will not create any legal rights and to rebut the presumption  that you are creating a relationship of mutual interdependence.  You can do this formally, or informally. The law does not require any formalities  in the execution of such an agreement.  You can do it by yourselves. However, if you have significant assets, and want to make sure that the agreement is enforceable, it is prudent to have the agreement prepared by a lawyer and make sure that both parties have independent legal advice.   

The cost of this process can vary depending upon the complexity of your affairs. My fee will start at $1,000. Most of the time we can prepare the agreement, arrange for independent legal advice, and execute the documents for this fee. There will be an additional fee for the other lawyer to give independent legal advice. We can’t control this fee, but if the agreement is straight forward it is usually possible to find a lawyer who will do it for less than $500.

PRE-NUPTIAL AGREEMENTS

If it is your intention to get married, and you have assets, you may wish to consider entering into a pre-nuptial agreement.  The purpose of the agreement is to establish your rights and responsibilities after marriage.  If you do not enter  into such an agreement, then you will be subject to the Matrimonial  Property Act in dividing your property, and the court will determine how much spousal support  should be paid , if any.

The Matrimonial Property Act says that it is presumed that matrimonial property will be shared equally. Matrimonial Property is defined as assets accumulated after marriage, and the increase in value of any assets owned at the date of marriage.  Any property owned at the date of marriage is deemed to be exempt, as  are certain assets acquired after marriage, such as inheritances.  If you own assets and intend to get married, you may wish to have an agreement specifically exempting your existing assets from the matrimonial  property division. The Matrimonial Property Act does exempt existing assets from property division but it includes any increase in the value of such assets. Many people want to segregate their existing assets, and the increase in their value, from the property division scheme.

You may also want to establish certain guidelines for the payment of spousal support after marriage.  The courts have a number of rules that they apply to determine how much spousal support should be paid, but some people want to establish their own structure. This might be especially the case if you have children from a first marriage, or you are marrying someone with no assets, or a lot of debt.

It is crucial to remember that it is not only the agreement itself that is important, but how you deal with your financial affairs  after the agreement is executed.  If you agree that certain of your assets should not be treated as matrimonial property, but then you take those exempt assets and mingle them with your other matrimonial property, you may lose your exemption.  For example, let’s say that when you get married you have a stock portfolio worth $100,000. If, after marriage, you collapse that stock portfolio and use the money for a downpayment on a house you buy with your spouse, you probably lose some or all of your exemption in the stock portfolio.  You can easily protect against  such a problem by getting a subsequent acknowledgement from your spouse recognizing the continuance  of the exemption, but you have to remember to do it. The bottom line is, no matter how good your agreement, if you do not structure your financial affairs in accordance with its terms, you risk losing the protection afforded by the agreement.

The cost of preparing and executing the agreement will vary depending upon the complexity of your affairs. Our fee will start at $1,200. Many times we can prepare the agreement, arrange for independent  legal advice, and execute the documents  for this fee.  There will be an additional fee for the other lawyer to give independent legal advice. We can’t control this fee, but if the agreement is straight forward it is usually  possible  to find a lawyer who will do it for less than $500.

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Preparing for Divorce

An excellent article on preparing for divorce can be found at the McLean Family Law Group website, the essence of which is reproduced below:

A little pre-divorce planning can go a long way towards making the divorce itself run more smoothly as well as providing you with additional protection. Remember, knowledge is power, particularly in divorce proceedings. Doing your own homework can also save you money in legal fees. Here are some tips that you might want to download and keep handy:

MAIL: Review all mail coming into your house and make a list of the sender and return address. It is very important to know the address of stockbrokers, insurance companies, credit issuers, banks, and revenue properties, COPY THESE DOCUMENTS.

PERSONAL MATTERS
: Have your mail sent to an address other than the Matrimonial Home for your privacy and to ensure that you receive it. For example, a post office box or home of a close friend or relative. File a change of address notice with the post office.

FAMILY FINANCES
: Review all monthly bank statements and brokerage statements, credit card statements, property assessments, and COPY THESE DOCUMENTS. Give copies of necessary documents to your lawyer for safekeeping.

TAX RETURN
: Review all tax returns that have been filed by you and your spouse. Demand an explanation as to any item, which may be questionable before signing. Make complete copies of tax returns for the last several years.

TAXES OWED
: Be certain that all taxes owed to the Federal Government or other taxing agencies are paid to date. IF NOT COPY NOTICES OF ASSESSMENT.

SAFE DEPOSIT BOX: Inventory and review the contents of any safe deposit box. List the contents including cash and jewelry. Be sure that all safe deposit boxes are in joint names. TAKE PHOTOGRAPHS AND COPIES OF THE CONTENTS.

BUSINESS INTERESTS
: Be familiar with your spouse’s business interests. Become involved and be aware of financial information regarding the business by getting full information on the business, including bank documents, loan applications, corporate tax returns and financial statements.

MATRIMONIAL ASSETS
: Do not transfer, sign, or make a gift of marital assets in joint names. Credit cards in joint names may encourage large personal purchases by one party. Conversely, you may wish to cancel credit cards to prevent large purchases by your spouse without your permission.

PENSION PLANS
: Obtain copies of your pension plan and your spouse’s also with any yearly statements and determine when they vest and benefits become payable, ask for the plan booklets and latest contribution statements. These documents will be useful if you file for divorce.

WILLS 
AND TRUSTS: Obtain copies of any wills or trust agreements and be involved in any estate planning.

LOANS: R
eview and make copies of all loan documents, mortgage applications, and financial statements.

SIGNATURE
: Do not sign any blank financial statements. Know what you are signing and always keep a copy.

MEDICAL
: Have a complete medical and dental check up. Be sure that you have medical and dental insurance (if available) in the event of separation.

CANADA
 PENSION PLAN: Obtain Canada Pension Plan statements.

SAVINGS 
AND PERSONAL FINANCES: Separation generally causes immediate economic hardship. Put away funds in order to be able to purchase personal necessities in the event of a divorce.

AUTOMOBILE
: Be sure that your automobile is in good working condition and that it is titled jointly or in your sole name.

INSURANCE
: Review and make copies of all insurance policies relating to the matrimonial residence, furnishings, or other assets. This should include any jewelry, silverware, or other valuable. Make copies of any appraisal that have been prepared. These documents will be useful if you file for divorce.

INDEBTEDNESS:
 Do not create any additional debts and make no large purchases such as a new boat or car. Keep your assets as liquid as possible.

LIABILITY
: Prepare a complete list of all debts or obligations including credit cards, notes, mortgages, etc. Identify each debt, when it was incurred, and the reason for the debt. Identify who has been making payments on them, as well as the monthly or annual amounts.

ASSETS
: Prepare a complete list of all assets in your name and your spouse’s. These documents will be useful if you ever file for divorce. Include whether the assets are held individually or jointly and the source of the assets, whether inherited, gifted, or in the name of a third party on your behalf. It is important to determine whether the assets were acquired prior to or during the marriage. Make copies of any documents which show the details and values of all assets and debts.

INHERITANCES
: Keep all inheritances separate from the marital estate. Do not put an inheritance into joint names and do not use proceeds to pay for family expenses or purchases or to pay down debts.

EMPLOYMENT
: Do not quit work if you are employed. It is important to secure your future financial independence and earn enough to maintain assets such as your home and car.

RESIDENCE
: DO NOT MOVE OUT of the family residence without first discussing it with your lawyer. 

Divorce Process

The two basic ways to resolve a dispute that arises on a marriage breakdown are by agreement or through the court.

In Alberta, there are distinct levels of courts which deal with different aspects of family law.

The Provincial Court, Family Division has the power to deal with custody, access and spousal and child support issues. It has no power to grant a divorce or to deal with the division of family assets.

Provincial Family Court procedure is, however, more informal than that of the Court of Queen’s Bench and it is possible for disputes to be resolved more quickly and economically than in the Court of Queen’s Bench. There are Provincial Family Courts in most municipalities.

The Court of Queen’s Bench has the power to deal with custody, access and spousal and child support issues as well as issues of division of property and divorce.

In both the Court of Queen’s Bench and the Provincial Court, Family Division it is possible to obtain interim (“temporary”) orders for child support, custody and access and other matters. Interim orders are usually obtained at the beginning of the case and remain in place until the case has been completed and a final decision made. Interim orders can also be made for one spouse to have exclusive possession of a family asset, such as the family home, for the sale of assets or for the prohibition of the sale of assets.

While both the Provincial Court, Family Division and the Court of Queen’s Bench are making efforts to streamline the court process and to shorten the waiting time to have a case decided, obtaining a final decision in a family case can still take many months.

For more information about the Court of Queen’s Bench, go the Alberta Courts Website
 
A Guide to the Court of Queen’s Bench and Family Law Process

Once a divorce is commenced, the goal of the Court is to end the marriage and decide such issues as child custody, access, support, property and debt division and deal with responsibility for legal costs.

Roughly 90% of divorces end up proceeding on an uncontested basis. This means that most family cases are settled between the parties, whether by separation agreement or by embodying the agreement in a consent divorce order dealing with corollary relief.

Commencement of Action by Plaintiff
Proceedings at the Court of Queen’s Bench are commenced by a document called a Statement of Claim.  If you are proceeding in Provincial Court, Family Division, the proceedings are commenced by a document called a Claim. In either case the original document must be personally served on the other party.  In the case of a Statement of Claim, the other party will have 15 days after the Statement of Claim is served to file a Statement of Defence or get an extension of time to file a defence. In practice, most lawyers will grant an extension of time to file a Statement of Defence so that the other party can prepare a proper defence. If proceedings are commenced by a Claim filed at Provincial Court, then there will be a return date on the Claim whereby both parties must attend at the court to speak to the matter.

Provincial Court Procedure
Because the Provincial Court Family Division is very busy, they are very pro-active in trying to get parties to settle their differences.  When you attend at court for the first time, the court may make an interim order if something needs to be done right away. The court will likely refer the parties to mediation or judicial dispute resolution to see if things can be worked out.  If the parties can come to an agreement, the court will incorporate that agreement into an order of the court. If mediation or judicial dispute resolution fails, then the court will direct that the matter be set down for a hearing or a trial. Since the court is very busy, it is not unusual for a trial date to be set  9 months to a year after the initial claim is filed. The parties will be expected to produce witnesses and give oral evidence in their own behalf at the hearing or trial.
 
Court of Queen’s Bench Procedure The procedure at the Court of Queen’s Bench is quite different. It is much more document intensive. If there are issues of support or property, the Plaintiff will usually file and serve on the other party a Notice to Disclose.  The other party will have 30 days in which to produce to the Plaintiff a number of financial documents which are listed on the Notice to Disclose. If either party wants an order from the court for support, custody, access, or possession of the matrimonial home, then the party seeking the relief must file a Notice of Motion supported by an Affidavit. The Court of Queen’s Bench is also very busy, so it has adopted 2 measures designed to minimize conflict and encourage parties to come to an agreement without the court’s intervention. Prior to making any application to the court for relief, you must attend a Parenting After Separation Seminar, and you must attend a Dispute Resolution meeting. The Court will waive these 2 prerequisites in emergency circumstances.
     
If the parties are unable to resolve their differences at the Dispute Resolution meeting, then it may be necessary for one party to file a Motion and ask the court for interim relief. Because there is a significant wait until the parties can take the stand and give oral evidence concerning their family matter, Courts are often asked to provide interim relief orders. These interim relief orders deal with management of family law issues until trial. For example, who will live in the home, should the home be listed for sale, who will have custody of the children, how much child support should be paid, should spousal support be paid and if so in what amount, should a spouse be restrained from contacting the other spouse or disposing of assets pending trial, how should a business be run pending trial, should there be interim advances of monies to parties pending trial?  It is called interim relief because it is not intended to be permanent.  It is merely intended to give the litigants some framework while they work out an agreement or have a trial of the issues. In practice, the terms of interim orders frequently incorporated into final orders because of the cost and time involved in taking the matter to trial.

It is often the case that the issues between you and your spouse can be narrowed down during the litigation process. If the issue is relatively narrow, it may be amenable to be heard by the court as a special application. This is an application based upon Affidavit evidence. If issues are not amenable to a determination in a Special Application, then it will be necessary to have discoveries. A discovery is a process whereby each party gets the opportunity to examine the other party on oath. Discovery may be made of documents, for example, income and asset documents and expense and debt documents, documents relating to the parents ability to parent, documents relating to businesses and documents which show a spouse has disposed of money are all subject to being discovered by the opposing spouse. Once discoveries have been held, the matter can be set down for trial. Each party gets the opportunity to make their case at trial and all outstanding issues will be determined. It is not uncommon in more complex cases for psychiatrists, psychologists, business valuators and accountants to be called to testify on custody and financial issues. These people are referred to as experts

Negotiated Settlement

Most parties agree that it is better to resolve a case by agreement rather than to risk putting a stranger in charge of a dissolution of your marriage. However, it is important that parties understand that settlement – just for the sake of settlement – makes no sense. We feel that the purpose for which we are hired is to obtain more than you could get after the payment of our legal fees than if you obtain a settlement on your own. It is critical that you do not enter into any settlement discussion of a final nature without consulting with your lawyer. Warning: It is not uncommon for uninformed parties to be held to an unfair settlement.

Critical Rules for a Party to a Divorce to Follow  

Some useful advice is provided by the MacLean Law Group, as follows:

“Try to deal with the stress of the case and with your spouse and children in a reasonable, mature fashion.
Never enter into an agreement with your spouse without the benefit of your counsel’s legal advice.
Remember if you criticize your spouse in front of the children you diminish your own child as well.
Remember, anything you say to your spouse can and will likely show up in a written document or be presented to the      judge. Thus, do not say anything that you would not feel comfortable having repeated in front of the judge hearing your case.
Do not hide evidence, or mislead the court in the proceeding. Even one misstatement is too many and will cause your credibility on other issues to be sadly lacking. It may be that a judge disbelieves all of your truthful statements, because of one careless misstatement made during the proceedings. Do not attempt to hide evidence for assets or to destroy or get rid of financial documents.
Your divorce will be stressful, but it will not be the end of the world.
It is not uncommon for spouses to be angry at the start of the divorce, but to gain perspective and become more rational as the proceedings go on.
Remember that your spouse may not have been the greatest husband or wife during the marriage, but that you will be parents forever of your children.”
 
Variation and Enforcement
 In some cases after a trial has been completed, circumstances of the parties change such that a variation of support whether spousal or child or a variation of custody may need to occur. Basically, the parties will need to show there has been a substantial change of circumstances since the Order was made and that such a change, if known to the judge at the time of the Order would have led to a different court order being made.

Enforcement
If you are seeking to enforce a child or spousal support order, you should be aware of the Maintenance Enforcement Program. Click here for more information.

Separation Agreements

Case Comment on Miglin v. Miglin: Are Separation Agreements Finally Final? On April 17, 2003, the Supreme Court of Canada released the long-awaited judgment in Miglin v. Miglin [2003] S.C.J. No. 21, 2003 SCC 24, regarding separation agreements. All nine justices of the Supreme Court of Canada heard the appeal from the Ontario Court of Appeal. Judgment for the majority of seven justices was written by Mr. Justice Bastarache and Madam Justice Arbour. Mr. Justice LeBel wrote the dissenting reasons for himself and Mr. Justice Deschamps.

This decision has been awaited by family law practitioners because it represented an opportunity for the Supreme Court of Canada to clarify the proper approach to an application for spousal support under section 15.2 of the Divorce Act (Canada) where the spouses have executed a separation agreement releasing any future claim for spousal support. The state of the law regarding the certainty of separation agreements was previously governed by a trilogy of cases known as the Pelech trilogy. The cases in the Pelech trilogy were decided under the 1968 Divorce Act instead of the new 1985 Divorce Act.

The Pelech Trilogy stood for the proposition that where there are settlement agreements in place, an applicant for spousal support must establish a radical and unforeseen change in circumstances that is causally connected to the marriage before a court can interfere with the prior agreement and make or vary an order for spousal support. In Miglin, the Supreme Court of Canada stated that this narrow test is no longer appropriate given the significant changes in both statutory law and case law since the Pelech Trilogy was decided.

Instead, the majority of the Supreme Court in Miglin set out a two stage analysis to be applied by the courts in circumstances where there is an initial application for spousal support that is inconsistent with a pre-existing agreement.

The first stage of the analysis requires the court to look at the circumstances in which the agreement was negotiated and executed, including taking into account whether there was any oppression, pressure or other vulnerabilities, and the negotiating conditions, such as the duration and whether or not there was professional assistance for the parties. Unless there is evidence of a fundamental flaw in the negotiation process, fairly negotiated separation agreements should be viewed as expressing the substantive intent of the parties and the courts should be loathe to interfere. (Miglin, supra, para. 83)

Once the court has examined the circumstances in which the agreement was negotiated, the next step is to look at the substance of the agreement. The court must look at whether or not the agreement takes into account the objectives and factors set out in the Divorce Act. The court must assess whether or not the agreement substantially complies with these factors and objectives. If the agreement does not substantially comply, it does not mean that the entire agreement should be set aside; the agreement should still be considered as a factor in determining spousal support.

If the separation agreement was fairly negotiated and substantially complies with the factors and objectives set out in the Divorce Act, the majority of the Supreme Court of Canada stated that the court should defer to the wishes of the parties and afford the agreement great weight.

However, despite this promising statement of certainty, the majority also noted that between the time the parties negotiated the separation agreement and the time of an application for spousal support, the circumstances may have changed in ways that the parties had not contemplated.

This forms the basis for the second stage of the analysis, where the court must assess the whether or not the agreement is still in substantial compliance with the factors and objectives in the Divorce Act, the extent to which it still reflects the intentions of the parties. The majority stated that the intentions of the parties will be the backdrop against which the court must assess whether giving the agreement conclusive weight is still appropriate.

Were it not for the subsequent statements by the majority, this second stage of the analysis may possibly have left the door wide open for applicants to argue a wide range of changes in circumstances that could merit judicial interference. Fortunately, the majority stressed the fact that in most cases some degree of change is foreseeable, particularly in areas such as job market changes, parenting responsibilities or transition into the job market.

It should only be a significant change in circumstances from what could have been reasonably foreseen at the time of negotiation that should merit judicial interference with a fairly negotiated settlement agreement. As the majority in Miglin state, it will be necessary to show that these new circumstances were not reasonably anticipated by the parties, and have led to a situation that cannot be condoned. (Miglin, supra, para 88)

Even if the court does find a change in circumstances that merits interference, the court cannot disregard the separation agreement entirely and must consider it as one of the factors in determining spousal support.

The majority in Miglin also expressed the opinion that this two stage analysis should be applied not only to separation agreements, but also to consideration of applications to vary an initial court order for spousal support under section 15.2 of the Divorce Act, and to vary an agreement incorporated into a court order under section 17 of the Divorce Act.

For family law practitioners, this may raise the question of whether or not it remains prudent practice to incorporate the terms of separation agreements into a consent order. This decision also raises the question of whether there may be wider applicability of the two stage analysis in Miglin to other aspects of separation agreements, such as property division. For example, Mr. Justice Fraser in Thomsett v. Thomsett [2001] B.C.J. No. 728 recommended that the parties insert a clause into a consent order for the division of assets stating that the division of assets did not derogate from the rights given to the parties under the B.C. Family Relations Act. Mr. Justice Fraser recommended this clause be included because in his view a consent order on property division should be subject to variation on the basis of unfairness in the same way that a separation agreement may be varied.

In summary, a fairly negotiated separation agreements will be given great weight in the event of a later application for spousal support, but the party seeking to enforce a waiver of spousal support will need an agreement that meets the criteria of the first stage of the analysis in Miglin.

If you are contemplating a separation agreement, the decision in Miglin emphasizes the importance of the negotiation process and of obtaining professional legal advice to ensure that the agreement substantially complies with the factors and objectives set out in the Divorce Act.

Separation and Prenuptial agreements Concerning Property Pre-Nuptial or Marriage Agreements:

On March 26, 2004, the Supreme Court of Canada released its decision in the case of Hartshorne v. Hartshorne [2004] S.C.J. No. 20, 2004 SCC 22.  This case pitted lawyer against lawyer in a dispute over the fairness of a marriage agreement signed on their wedding day.

The parties began dating in 1982 and began living together in 1985.  The husband had been practicing law since 1972.  The wife became qualified to practice law in 1981, and worked at the same firm as the husband until June of 1987 when she took maternity leave for the birth of the parties’ first child.

Both parties had been married previously and the husband had divided significant assets after his first marriage.  At the time of the second marriage, the husband had assets of approximately $1.6 million, whereas the wife had few assets and owed $10,000 to Revenue Canada.

The husband insisted upon a marriage agreement and had his lawyer prepare one in February of 1989.  The husband said he told the wife he would not divide his assets again and he would not get married without a marriage agreement.  The wife’s lawyer wrote an opinion letter to her stating that the draft agreement was grossly unfair and that she should not sign it.  Despite the wife’s protestations and at the husband’s insistence, the parties signed the marriage agreement on their wedding day in March of 1989

The parties’ second child was born in November of 1989.  The wife did not work outside the home after the birth of their first child and she was completely dependent upon the husband for her support.  The husband provided her with a household allowance and credit cards, but they did not otherwise share bank accounts or asset information during the marriage.

The parties separated in January of 1998 after 9 years of marriage and 12½ years of cohabitation.  After the separation, the wife continued to live in the former matrimonial home with the children, one of whom has special needs.  The wife did not begin working again until July of 2001 when she re-qualified to practice law and found a position as an associate lawyer at an annual salary of $52,000.  In the year 2000, the husband’s income from his law practice was $267,000.

The husband sought to rely on the marriage agreement at trial with respect to the division of assets.  Based on the marriage agreement, the wife was entitled to 3% per year of the market value of the matrimonial home up to a maximum of 49%.  At the time of trial, the wife’s share pursuant to the marriage agreement was 27%.

The trial judge reviewed the provisions of the marriage agreement pursuant to section 65(1) of the British Columbia Family Relations Act (the “FRA”) to determine whether or not the agreement was fair.  The trial judge considered the most relevant factors in section 65(1) of the FRA to be the length of the marriage, the disproportionate contribution by the husband to the assets, the need of the wife to become or remain economically self-sufficient, the wife’s contributions to the construction of the family home, and her role in assuming the household and child rearing responsibilities, which allowed the husband to maintain his law practice.

In all the circumstances, the trial judge concluded that the marriage agreement was unfair and that a reapportionment of the family assets was appropriate.  The trial judge excluded some of the husband’s assets, but found that the family home, RRSP’s, savings and term deposits, automobile and the husband’s law practice were all family assets.

The wife was awarded a 50% interest in the former matrimonial home and a 40% interest in the remaining assets.  The husband was awarded a 60% share of the family assets, other than the family home, and he was ordered to pay $2,500 per month in spousal support per month until the wife obtained employment, after which he was to pay $1,500 per month.  The net effect was that the wife received approximately 46% of the family assets with a value of approximately $654,000 instead of the approximately $280,000 or 20% of the family assets that she would have received under the marriage agreement.

The husband appealed to the British Columbia Court of Appeal, which released its decision in October of 2002.  In a 2 to 1 decision, the Court of Appeal dismissed the husband’s appeal.  The majority found no error in the approach taken by the trial judge in determining whether or not the marriage agreement was unfair based on the factors in section 65 of the FRA, or in the determination of the reapportionment of assets.  The majority also noted that the trial judge is in the best position to determine what is required to make the division of property objectively fair.

In dissent, Mr. Justice Thackray agreed with the majority that the marriage agreement was unfair, but disagreed on the issue of the reapportionment and would have excluded the husband’s law practice from the asset division.

The husband appealed to the Supreme Court of Canada and arguments were heard in November of 2003.  In a 6 to 3 majority, the Court overturned the decisions of the trial judge and the Court of Appeal and ruled that the marriage agreement ought to be upheld.

The Honourable Mr. Justice Bastarache, writing for the majority of the Court, summarized, in part, the issues on appeal as:

whether a marriage agreement respecting the division of property, entered into after receiving independent legal advice, without duress, coercion or undue influence, can later be found to be unfair and set aside on the basis that it failed “to provide anything for the respondent’s sacrifice in giving up her law practice and postponing her career development”, notwithstanding the parties’ agreement preserved the right to spousal support.  (supra, paragraph 2)

At the outset, the majority notes that the courts should respect marriage agreements that parties make regarding the division of property, particularly where the agreement is negotiated with independent legal advice.  The Court also notes that in British Columbia the primary policy objective guiding the division of family assets is fairness.

The presumption in section 56 of the FRA is that each spouse is entitled to a 50% interest in the family assets upon a triggering event, which includes a divorce.  This presumption is subject to a marriage agreement, a separation agreement and to a claim for reapportionment under Part 6 of the FRA.

Couples entering into a marriage agreement are often trying to avoid the statutory presumption of an equal division of family assets, usually because one party is bringing more assets into the marriage.

Section 65 of the FRA limits the freedom of parties to enter into written agreement varying the statutory presumption of equal division by giving the courts the power to reapportion the assets where the division is unfair at the time of distribution.  A marriage agreement that was fair when it was entered into could still be fair if the marriage only lasted 1 year but may be unfair if the marriage lasted 30 years.

The majority of the Court in Hartshorne noted that the threshold for judicial intervention with respect to domestic contracts is lower in British Columbia than in other jurisdictions in Canada.

The majority confirmed that there is no “hard and fast” rule regarding whether more or less deference should be given to marriage agreements as compared to separation agreements.  In some cases, marriage agreements should be given less deference because they are anticipatory and may not account for the actual financial circumstances of the parties when the marriage ends.

In considering the issue of deference, the majority stated that the Court ought to apply the general legal propositions from the decision in Miglin v. Miglin [2003] 1 S.C.R. 303 (S.C.C.) that marriage agreements should be given some weight, and that a court should not interfere with a pre-existing agreement unless it does not comply with the objectives of the governing legislation.  In addition, some deference should be accorded to the general proposition in Miglin that spousal support arrangements must be considered by looking at the whole agreement since financial arrangements are all connected.

The majority in Hartshorne clearly stated that in determining whether or not a marriage agreement is fair at the time of distribution, a court must consider the parties’ perspectives when the contract was formed, since the agreement should reflect what the parties thought was fair at the time.  The majority also stated that in any fairness analysis under section 65(1) of the FRA it will be important to consider the accuracy of the parties’ predictions at the time they entered their agreement compared to their circumstances at the time of distribution, if they gave consideration to the impact of the decision to enter into the marriage agreement, and “whether they adjusted their agreement during the marriage to meet the demands of a situation different from the one expected, either because the circumstances were different or simply because implications were inadequately addressed or proved to be realistic.” (supra, paragraph 44).

The suggestion that parties should review their marriage agreements during the marriage may outwardly appear to be a practical one, but it remains to be seen whether parties will actually make a concerted effort to review their marriage agreement as circumstances change.  For example, a spouse who has secured the protection of certain assets by way of a marriage agreement may not have much incentive to re-visit the agreement during the marriage.  Unlike most commercial contracts, domestic contracts like marriage agreements tend to provoke an emotional response, and the prospect of reviewing these agreements may not be relished by the spouses.

In Hartshorne, the majority found that at the time of trial the anticipated domestic and financial arrangements of the parties had unfolded as planned, and that the parties had lived out the intent of the marriage agreement to keep their property separate during the relationship.  In these circumstances, the Court stated that any finding that the marriage agreement was unfair should not be made lightly, but that the impact of sacrifices made during the relationship and the overall situation of the parties still should be considered in assessing whether the asset distribution was fair.

At this point in the judgment, the majority set out the following two stage test:

In determining whether a marriage agreement operates unfairly, a court must first apply the agreement.  In particular, the court must assess and award those financial entitlements provided to each spouse under the agreement, and other entitlements from all other sources, including spousal and child support.  The court must then, in consideration of those factors listed in s. 65(1) of the FRA, make a determination as to whether the contract operates unfairly.  At this second stage, consideration must be given to the parties’ personal and financial circumstances, and in particular to the manner in which these circumstances evolved over time.  Where the current circumstances were within the contemplation of the parties at the time the Agreement was formed, and where their Agreement and circumstances surrounding it reflect consideration and response to these circumstances, then the plaintiff’s burden to establish unfairness is heavier.  Thus, consideration of the factors listed in s. 65(1) of the FRA, taken together, would have to reveal that the economic consequences of the marriage breakdown were not shared equitably in all of the circumstances.

Although in the second stage of the test for determining fairness the Court specifically refers to the consideration of the factors set out in section 65 of the FRA, it seems that some of these factors may have been discounted somewhat in the majority’s application of the test to the facts in Hartshorne.

For example, section 65(1)(a) of the FRA lists the duration of the marriage as a factor, and the trial judge considered that a 9 year marriage and 12½ year total period of cohabitation was a relevant factor.  However, the majority found that the duration of the marriage is only relevant to the date property was acquired, and that in Hartshorne the husband had acquired the majority of the assets before the relationship.  It should be noted that the date when property was acquired or disposed of is a separate factor in section 65(1)(c) of the FRA.

In reviewing the trial judge’s approach to considering section 65(1)(e) of the FRA, which is the need for each spouse to become or remain economically independent and self-sufficient, the majority concluded that the analysis was insufficient.  The trial judge ought to have looked at all of the financial awards the wife would have received from all sources, including the division of property, child support and spousal support, before deciding the agreement was unfair.  The Court noted that an appropriate award of spousal support would have compensated the wife for the economic disadvantages she suffered from the marriage.

The majority considered it an error in law that the trial judge awarded spousal support before reapportioning the family assets because it meant that the wife’s need to become economically self-sufficient was considered twice.  The proper approach would have been to apply the marriage agreement, then determine spousal support and then decide if a reapportionment was still warranted on the result and in view of section 65(1).

The Court found that it was “highly significant” that the marriage agreement in this case preserved the right to spousal support and that the husband had a “healthy and continuous flow of income.” (supra, paragraph 58).

It was also significant that the wife had received independent legal advice at the time of negotiation, and that the wife’s lawyer had prepared a written legal opinion advising her, among other things, that the agreement was “grossly unfair”.  The wife made an informed decision to enter into the marriage agreement regardless of its flaws, and could not later rely on that legal opinion to say that she never intended to honor her part of the agreement because it was unfair at the start.  In effect, the wife should never have signed the agreement if she believed that it was unfair at the time.

In all the circumstances, the majority concluded that the marriage agreement was fair at the time of distribution, and that it should be upheld.  The Court acknowledged that this would potentially re-open the issue of spousal support, which had been discontinued by court order in February of 2002.

Having concluded that the marriage agreement was fair, the Court went on to consider whether the trial judge erred in finding that the husband’s law corporation was a family asset.  In very brief reasons, the Court noted that section 59(1) of the FRA excludes as family assets any property owned exclusively by one spouse for a business purpose where the other spouse has not contributed directly or indirectly to the acquisition or operation of the business.   The Court also noted that the value of the husband’s law practice had not increased since the marriage, and concluded it was not a family asset.

This portion of the majority’s decision is contrary to many other decisions under this section of the FRA.  Most often, the spouse who remains at home and attends to child care and domestic management would be seen as making an indirect contribution.

As noted by the Honourable Madam Justice Deschamps for the minority in Hartshorne, section 59(2) of the FRA recognizes savings through effective household management or child rearing responsibilities as an indirect contribution.  The minority agreed with the trial judge’s finding that the law practice was a family asset, but would have excluded it from the division of assets.  The husband relied on his practice to generate the revenue from which he would be paying spousal support, and it would amount to “double dipping” if the wife also received a share of the business.

The minority of 3 justices in Hartshorne dissented from the majority’s finding that the marriage agreement was fair, and did not endorse the two stage analysis of the majority.

In the view of the minority, this was not a case about the ability of parties to enter into marriage agreements, but was a case about “giving effect to the explicit legislative intention that only fair agreements be upheld.” (supra, paragraph 69).  The minority’s position was that to give any weight to unfair agreements, as is the result of the majority’s decision, would defeat the intent of the FRA to encourage parties to enter into fair marriage agreements by granting judges the discretion to reapportion assets.

The minority emphasized that deference must be accorded to the trial judge and to the British Columbia legislature.  With respect to the trial judge, considerable deference should be shown for the reapportionment she determined, particularly where, as in Hartshorne, there was a long trial and complex factual assessments were required.

With respect to the legislature, it chose a less restrictive standard for judicial review of marriage agreements in British Columbia than other jurisdictions, and that decision should be recognized by the courts and shown deference.  The likely net effect of the majority’s decision is that the standard of “fairness” established by the FRA has now been changed to “unconscionability”, which is not the standard set by the legislature.

The minority would have drawn on the decision in Miglin requiring an examination of the circumstances surrounding the negotiation and execution of the marriage agreement, which could be indicators of whether or not the agreement had characteristics of a fair or unfair deal.  The real determination of fairness in accordance with section 65(1) of the FRA, however, must be made at the time of application to the court.

The test proposed by the minority would be for the trial judge to review the asset division in the marriage agreement in light of the factors set out in section 65(1) of the FRA, and if it is fair at that time then the agreement should stand.  If it is unfair, the court can reapportion the family assets to achieve fairness.

The minority noted that section 65(1) of the FRA does not include marriage agreements as a factor to consider in the list of factors for assessing fairness, unlike the inclusion of agreements in section 15.2(4)(c) of the Divorce Act which was considered in Miglin.

The minority also disagreed with the majority’s approach in first applying the marriage agreement, then determining spousal support and finally deciding whether the result was fair on the basis of the factors in the FRA, since this approach gives undue weight to the marriage agreement.

In evaluating the trial judge’s findings of fact, the minority differed with the majority’s view that by choosing to sign an unfair agreement, the wife indicated she was not concerned about it.  To the minority, this analysis confused fairness with unconscionability.  Obtaining independent legal advice prior to signing an unfair agreement does not make the agreement fair, but it may be a bar to setting it aside on the basis of unconscionability.

The minority looked at the circumstances surrounding the execution of the marriage agreement in Hartshorne and found there were indications that the wife was in a vulnerable position when the agreement was negotiated, which could demonstrate possible unfairness and would require the trial judge to review the agreement “with increased scrutiny.” (supra, paragraph 90)

In all the circumstances, the minority would have upheld the trial judge’s decision except with respect to the division of the husband’s law practice. 

What are the lessons learned from Hartshorne?  If you are the party seeking to protect your assets from division under the FRA, the verdict on marriage agreements is “I Do”, and you should ensure that you have a marriage agreement in place before you walk down the aisle.

If you are the party being asked to enter into a marriage agreement waiving a claim to assets, you might want to think about saying “I Don’t” to signing on the dotted line, especially if you have had legal advice indicating that the agreement is unfair.    

 

Separation Agreements  

Case Comment on Miglin v. Miglin: Are Separation Agreements Finally Final? On April 17, 2003, the Supreme Court of Canada released the long-awaited judgment in Miglin v. Miglin [2003] S.C.J. No. 21, 2003 SCC 24, regarding separation agreements. All nine justices of the Supreme Court of Canada heard the appeal from the Ontario Court of Appeal. Judgment for the majority of seven justices was written by Mr. Justice Bastarache and Madam Justice Arbour. Mr. Justice LeBel wrote the dissenting reasons for himself and Mr. Justice Deschamps.

This decision has been awaited by family law practitioners because it represented an opportunity for the Supreme Court of Canada to clarify the proper approach to an application for spousal support under section 15.2 of the Divorce Act (Canada) where the spouses have executed a separation agreement releasing any future claim for spousal support. The state of the law regarding the certainty of separation agreements was previously governed by a trilogy of cases known as the Pelech trilogy. The cases in the Pelech trilogy were decided under the 1968 Divorce Act instead of the new 1985 Divorce Act.

The Pelech Trilogy stood for the proposition that where there are settlement agreements in place, an applicant for spousal support must establish a radical and unforeseen change in circumstances that is causally connected to the marriage before a court can interfere with the prior agreement and make or vary an order for spousal support. In Miglin, the Supreme Court of Canada stated that this narrow test is no longer appropriate given the significant changes in both statutory law and case law since the Pelech Trilogy was decided.

Instead, the majority of the Supreme Court in Miglin set out a two stage analysis to be applied by the courts in circumstances where there is an initial application for spousal support that is inconsistent with a pre-existing agreement.

The first stage of the analysis requires the court to look at the circumstances in which the agreement was negotiated and executed, including taking into account whether there was any oppression, pressure or other vulnerabilities, and the negotiating conditions, such as the duration and whether or not there was professional assistance for the parties. Unless there is evidence of a fundamental flaw in the negotiation process, fairly negotiated separation agreements should be viewed as expressing the substantive intent of the parties and the courts should be loathe to interfere. (Miglin, supra, para. 83)

Once the court has examined the circumstances in which the agreement was negotiated, the next step is to look at the substance of the agreement. The court must look at whether or not the agreement takes into account the objectives and factors set out in the Divorce Act. The court must assess whether or not the agreement substantially complies with these factors and objectives. If the agreement does not substantially comply, it does not mean that the entire agreement should be set aside; the agreement should still be considered as a factor in determining spousal support.

If the separation agreement was fairly negotiated and substantially complies with the factors and objectives set out in the Divorce Act, the majority of the Supreme Court of Canada stated that the court should defer to the wishes of the parties and afford the agreement great weight.

However, despite this promising statement of certainty, the majority also noted that between the time the parties negotiated the separation agreement and the time of an application for spousal support, the circumstances may have changed in ways that the parties had not contemplated.

This forms the basis for the second stage of the analysis, where the court must assess the whether or not the agreement is still in substantial compliance with the factors and objectives in the Divorce Act, the extent to which it still reflects the intentions of the parties. The majority stated that the intentions of the parties will be the backdrop against which the court must assess whether giving the agreement conclusive weight is still appropriate.

Were it not for the subsequent statements by the majority, this second stage of the analysis may possibly have left the door wide open for applicants to argue a wide range of changes in circumstances that could merit judicial interference. Fortunately, the majority stressed the fact that in most cases some degree of change is foreseeable, particularly in areas such as job market changes, parenting responsibilities or transition into the job market.

It should only be a significant change in circumstances from what could have been reasonably foreseen at the time of negotiation that should merit judicial interference with a fairly negotiated settlement agreement. As the majority in Miglin state, it will be necessary to show that these new circumstances were not reasonably anticipated by the parties, and have led to a situation that cannot be condoned. (Miglin, supra, para 88)

Even if the court does find a change in circumstances that merits interference, the court cannot disregard the separation agreement entirely and must consider it as one of the factors in determining spousal support.

The majority in Miglin also expressed the opinion that this two stage analysis should be applied not only to separation agreements, but also to consideration of applications to vary an initial court order for spousal support under section 15.2 of the Divorce Act, and to vary an agreement incorporated into a court order under section 17 of the Divorce Act.

For family law practitioners, this may raise the question of whether or not it remains prudent practice to incorporate the terms of separation agreements into a consent order. This decision also raises the question of whether there may be wider applicability of the two stage analysis in Miglin to other aspects of separation agreements, such as property division. For example, Mr. Justice Fraser in Thomsett v. Thomsett [2001] B.C.J. No. 728 recommended that the parties insert a clause into a consent order for the division of assets stating that the division of assets did not derogate from the rights given to the parties under the B.C. Family Relations Act. Mr. Justice Fraser recommended this clause be included because in his view a consent order on property division should be subject to variation on the basis of unfairness in the same way that a separation agreement may be varied.

In summary, a fairly negotiated separation agreements will be given great weight in the event of a later application for spousal support, but the party seeking to enforce a waiver of spousal support will need an agreement that meets the criteria of the first stage of the analysis in Miglin.

If you are contemplating a separation agreement, the decision in Miglin emphasizes the importance of the negotiation process and of obtaining professional legal advice to ensure that the agreement substantially complies with the factors and objectives set out in the Divorce Act.

Separation and Prenuptial agreements Concerning Property B.C. Pre-Nuptial or Marriage Agreements:
Should it be “I Do” or “I Don’t”
After Hartshorne v. Hartshorne?
On March 26, 2004, the Supreme Court of Canada released its decision in the case of Hartshorne v. Hartshorne [2004] S.C.J. No. 20, 2004 SCC 22.  This case pitted lawyer against lawyer in a dispute over the fairness of a marriage agreement signed on their wedding day.

The parties began dating in 1982 and began living together in 1985.  The husband had been practicing law since 1972.  The wife became qualified to practice law in 1981, and worked at the same firm as the husband until June of 1987 when she took maternity leave for the birth of the parties’ first child.

Both parties had been married previously and the husband had divided significant assets after his first marriage.  At the time of the second marriage, the husband had assets of approximately $1.6 million, whereas the wife had few assets and owed $10,000 to Revenue Canada.

The husband insisted upon a marriage agreement and had his lawyer prepare one in February of 1989.  The husband said he told the wife he would not divide his assets again and he would not get married without a marriage agreement.  The wife’s lawyer wrote an opinion letter to her stating that the draft agreement was grossly unfair and that she should not sign it.  Despite the wife’s protestations and at the husband’s insistence, the parties signed the marriage agreement on their wedding day in March of 1989

The parties’ second child was born in November of 1989.  The wife did not work outside the home after the birth of their first child and she was completely dependent upon the husband for her support.  The husband provided her with a household allowance and credit cards, but they did not otherwise share bank accounts or asset information during the marriage.

The parties separated in January of 1998 after 9 years of marriage and 12½ years of cohabitation.  After the separation, the wife continued to live in the former matrimonial home with the children, one of whom has special needs.  The wife did not begin working again until July of 2001 when she re-qualified to practice law and found a position as an associate lawyer at an annual salary of $52,000.  In the year 2000, the husband’s income from his law practice was $267,000.

The husband sought to rely on the marriage agreement at trial with respect to the division of assets.  Based on the marriage agreement, the wife was entitled to 3% per year of the market value of the matrimonial home up to a maximum of 49%.  At the time of trial, the wife’s share pursuant to the marriage agreement was 27%.

The trial judge reviewed the provisions of the marriage agreement pursuant to section 65(1) of the British Columbia Family Relations Act (the “FRA”) to determine whether or not the agreement was fair.  The trial judge considered the most relevant factors in section 65(1) of the FRA to be the length of the marriage, the disproportionate contribution by the husband to the assets, the need of the wife to become or remain economically self-sufficient, the wife’s contributions to the construction of the family home, and her role in assuming the household and child rearing responsibilities, which allowed the husband to maintain his law practice.

In all the circumstances, the trial judge concluded that the marriage agreement was unfair and that a reapportionment of the family assets was appropriate.  The trial judge excluded some of the husband’s assets, but found that the family home, RRSP’s, savings and term deposits, automobile and the husband’s law practice were all family assets.

The wife was awarded a 50% interest in the former matrimonial home and a 40% interest in the remaining assets.  The husband was awarded a 60% share of the family assets, other than the family home, and he was ordered to pay $2,500 per month in spousal support per month until the wife obtained employment, after which he was to pay $1,500 per month.  The net effect was that the wife received approximately 46% of the family assets with a value of approximately $654,000 instead of the approximately $280,000 or 20% of the family assets that she would have received under the marriage agreement.

The husband appealed to the British Columbia Court of Appeal, which released its decision in October of 2002.  In a 2 to 1 decision, the Court of Appeal dismissed the husband’s appeal.  The majority found no error in the approach taken by the trial judge in determining whether or not the marriage agreement was unfair based on the factors in section 65 of the FRA, or in the determination of the reapportionment of assets.  The majority also noted that the trial judge is in the best position to determine what is required to make the division of property objectively fair.

In dissent, Mr. Justice Thackray agreed with the majority that the marriage agreement was unfair, but disagreed on the issue of the reapportionment and would have excluded the husband’s law practice from the asset division.

The husband appealed to the Supreme Court of Canada and arguments were heard in November of 2003.  In a 6 to 3 majority, the Court overturned the decisions of the trial judge and the Court of Appeal and ruled that the marriage agreement ought to be upheld.

The Honourable Mr. Justice Bastarache, writing for the majority of the Court, summarized, in part, the issues on appeal as:

whether a marriage agreement respecting the division of property, entered into after receiving independent legal advice, without duress, coercion or undue influence, can later be found to be unfair and set aside on the basis that it failed “to provide anything for the respondent’s sacrifice in giving up her law practice and postponing her career development”, notwithstanding the parties’ agreement preserved the right to spousal support.  (supra, paragraph 2)

At the outset, the majority notes that the courts should respect marriage agreements that parties make regarding the division of property, particularly where the agreement is negotiated with independent legal advice.  The Court also notes that in British Columbia the primary policy objective guiding the division of family assets is fairness.

The presumption in section 56 of the FRA is that each spouse is entitled to a 50% interest in the family assets upon a triggering event, which includes a divorce.  This presumption is subject to a marriage agreement, a separation agreement and to a claim for reapportionment under Part 6 of the FRA.

Couples entering into a marriage agreement are often trying to avoid the statutory presumption of an equal division of family assets, usually because one party is bringing more assets into the marriage.

Section 65 of the FRA limits the freedom of parties to enter into written agreement varying the statutory presumption of equal division by giving the courts the power to reapportion the assets where the division is unfair at the time of distribution.  A marriage agreement that was fair when it was entered into could still be fair if the marriage only lasted 1 year but may be unfair if the marriage lasted 30 years.

The majority of the Court in Hartshorne noted that the threshold for judicial intervention with respect to domestic contracts is lower in British Columbia than in other jurisdictions in Canada.

The majority confirmed that there is no “hard and fast” rule regarding whether more or less deference should be given to marriage agreements as compared to separation agreements.  In some cases, marriage agreements should be given less deference because they are anticipatory and may not account for the actual financial circumstances of the parties when the marriage ends.

In considering the issue of deference, the majority stated that the Court ought to apply the general legal propositions from the decision in Miglin v. Miglin [2003] 1 S.C.R. 303 (S.C.C.) that marriage agreements should be given some weight, and that a court should not interfere with a pre-existing agreement unless it does not comply with the objectives of the governing legislation.  In addition, some deference should be accorded to the general proposition in Miglin that spousal support arrangements must be considered by looking at the whole agreement since financial arrangements are all connected.

The majority in Hartshorne clearly stated that in determining whether or not a marriage agreement is fair at the time of distribution, a court must consider the parties’ perspectives when the contract was formed, since the agreement should reflect what the parties thought was fair at the time.  The majority also stated that in any fairness analysis under section 65(1) of the FRA it will be important to consider the accuracy of the parties’ predictions at the time they entered their agreement compared to their circumstances at the time of distribution, if they gave consideration to the impact of the decision to enter into the marriage agreement, and “whether they adjusted their agreement during the marriage to meet the demands of a situation different from the one expected, either because the circumstances were different or simply because implications were inadequately addressed or proved to be realistic.” (supra, paragraph 44).

The suggestion that parties should review their marriage agreements during the marriage may outwardly appear to be a practical one, but it remains to be seen whether parties will actually make a concerted effort to review their marriage agreement as circumstances change.  For example, a spouse who has secured the protection of certain assets by way of a marriage agreement may not have much incentive to re-visit the agreement during the marriage.  Unlike most commercial contracts, domestic contracts like marriage agreements tend to provoke an emotional response, and the prospect of reviewing these agreements may not be relished by the spouses.

In Hartshorne, the majority found that at the time of trial the anticipated domestic and financial arrangements of the parties had unfolded as planned, and that the parties had lived out the intent of the marriage agreement to keep their property separate during the relationship.  In these circumstances, the Court stated that any finding that the marriage agreement was unfair should not be made lightly, but that the impact of sacrifices made during the relationship and the overall situation of the parties still should be considered in assessing whether the asset distribution was fair.

At this point in the judgment, the majority set out the following two stage test:

In determining whether a marriage agreement operates unfairly, a court must first apply the agreement.  In particular, the court must assess and award those financial entitlements provided to each spouse under the agreement, and other entitlements from all other sources, including spousal and child support.  The court must then, in consideration of those factors listed in s. 65(1) of the FRA, make a determination as to whether the contract operates unfairly.  At this second stage, consideration must be given to the parties’ personal and financial circumstances, and in particular to the manner in which these circumstances evolved over time.  Where the current circumstances were within the contemplation of the parties at the time the Agreement was formed, and where their Agreement and circumstances surrounding it reflect consideration and response to these circumstances, then the plaintiff’s burden to establish unfairness is heavier.  Thus, consideration of the factors listed in s. 65(1) of the FRA, taken together, would have to reveal that the economic consequences of the marriage breakdown were not shared equitably in all of the circumstances.

Although in the second stage of the test for determining fairness the Court specifically refers to the consideration of the factors set out in section 65 of the FRA, it seems that some of these factors may have been discounted somewhat in the majority’s application of the test to the facts in Hartshorne.

For example, section 65(1)(a) of the FRA lists the duration of the marriage as a factor, and the trial judge considered that a 9 year marriage and 12½ year total period of cohabitation was a relevant factor.  However, the majority found that the duration of the marriage is only relevant to the date property was acquired, and that in Hartshorne the husband had acquired the majority of the assets before the relationship.  It should be noted that the date when property was acquired or disposed of is a separate factor in section 65(1)(c) of the FRA.

In reviewing the trial judge’s approach to considering section 65(1)(e) of the FRA, which is the need for each spouse to become or remain economically independent and self-sufficient, the majority concluded that the analysis was insufficient.  The trial judge ought to have looked at all of the financial awards the wife would have received from all sources, including the division of property, child support and spousal support, before deciding the agreement was unfair.  The Court noted that an appropriate award of spousal support would have compensated the wife for the economic disadvantages she suffered from the marriage.

The majority considered it an error in law that the trial judge awarded spousal support before reapportioning the family assets because it meant that the wife’s need to become economically self-sufficient was considered twice.  The proper approach would have been to apply the marriage agreement, then determine spousal support and then decide if a reapportionment was still warranted on the result and in view of section 65(1).

The Court found that it was “highly significant” that the marriage agreement in this case preserved the right to spousal support and that the husband had a “healthy and continuous flow of income.” (supra, paragraph 58).

It was also significant that the wife had received independent legal advice at the time of negotiation, and that the wife’s lawyer had prepared a written legal opinion advising her, among other things, that the agreement was “grossly unfair”.  The wife made an informed decision to enter into the marriage agreement regardless of its flaws, and could not later rely on that legal opinion to say that she never intended to honor her part of the agreement because it was unfair at the start.  In effect, the wife should never have signed the agreement if she believed that it was unfair at the time.

In all the circumstances, the majority concluded that the marriage agreement was fair at the time of distribution, and that it should be upheld.  The Court acknowledged that this would potentially re-open the issue of spousal support, which had been discontinued by court order in February of 2002.

Having concluded that the marriage agreement was fair, the Court went on to consider whether the trial judge erred in finding that the husband’s law corporation was a family asset.  In very brief reasons, the Court noted that section 59(1) of the FRA excludes as family assets any property owned exclusively by one spouse for a business purpose where the other spouse has not contributed directly or indirectly to the acquisition or operation of the business.   The Court also noted that the value of the husband’s law practice had not increased since the marriage, and concluded it was not a family asset.

This portion of the majority’s decision is contrary to many other decisions under this section of the FRA.  Most often, the spouse who remains at home and attends to child care and domestic management would be seen as making an indirect contribution.

As noted by the Honourable Madam Justice Deschamps for the minority in Hartshorne, section 59(2) of the FRA recognizes savings through effective household management or child rearing responsibilities as an indirect contribution.  The minority agreed with the trial judge’s finding that the law practice was a family asset, but would have excluded it from the division of assets.  The husband relied on his practice to generate the revenue from which he would be paying spousal support, and it would amount to “double dipping” if the wife also received a share of the business.

The minority of 3 justices in Hartshorne dissented from the majority’s finding that the marriage agreement was fair, and did not endorse the two stage analysis of the majority.

In the view of the minority, this was not a case about the ability of parties to enter into marriage agreements, but was a case about “giving effect to the explicit legislative intention that only fair agreements be upheld.” (supra, paragraph 69).  The minority’s position was that to give any weight to unfair agreements, as is the result of the majority’s decision, would defeat the intent of the FRA to encourage parties to enter into fair marriage agreements by granting judges the discretion to reapportion assets.

The minority emphasized that deference must be accorded to the trial judge and to the British Columbia legislature.  With respect to the trial judge, considerable deference should be shown for the reapportionment she determined, particularly where, as in Hartshorne, there was a long trial and complex factual assessments were required.

With respect to the legislature, it chose a less restrictive standard for judicial review of marriage agreements in British Columbia than other jurisdictions, and that decision should be recognized by the courts and shown deference.  The likely net effect of the majority’s decision is that the standard of “fairness” established by the FRA has now been changed to “unconscionability”, which is not the standard set by the legislature.

The minority would have drawn on the decision in Miglin requiring an examination of the circumstances surrounding the negotiation and execution of the marriage agreement, which could be indicators of whether or not the agreement had characteristics of a fair or unfair deal.  The real determination of fairness in accordance with section 65(1) of the FRA, however, must be made at the time of application to the court.

The test proposed by the minority would be for the trial judge to review the asset division in the marriage agreement in light of the factors set out in section 65(1) of the FRA, and if it is fair at that time then the agreement should stand.  If it is unfair, the court can reapportion the family assets to achieve fairness.

The minority noted that section 65(1) of the FRA does not include marriage agreements as a factor to consider in the list of factors for assessing fairness, unlike the inclusion of agreements in section 15.2(4)(c) of the Divorce Act which was considered in Miglin.

The minority also disagreed with the majority’s approach in first applying the marriage agreement, then determining spousal support and finally deciding whether the result was fair on the basis of the factors in the FRA, since this approach gives undue weight to the marriage agreement.

In evaluating the trial judge’s findings of fact, the minority differed with the majority’s view that by choosing to sign an unfair agreement, the wife indicated she was not concerned about it.  To the minority, this analysis confused fairness with unconscionability.  Obtaining independent legal advice prior to signing an unfair agreement does not make the agreement fair, but it may be a bar to setting it aside on the basis of unconscionability.

The minority looked at the circumstances surrounding the execution of the marriage agreement in Hartshorne and found there were indications that the wife was in a vulnerable position when the agreement was negotiated, which could demonstrate possible unfairness and would require the trial judge to review the agreement “with increased scrutiny.” (supra, paragraph 90)

In all the circumstances, the minority would have upheld the trial judge’s decision except with respect to the division of the husband’s law practice. 

What are the lessons learned from Hartshorne?  If you are the party seeking to protect your assets from division under the FRA, the verdict on marriage agreements is “I Do”, and you should ensure that you have a marriage agreement in place before you walk down the aisle.

If you are the party being asked to enter into a marriage agreement waiving a claim to assets, you might want to think about saying “I Don’t” to signing on the dotted line, especially if you have had legal advice indicating that the agreement is unfair.   

Divorce

If you are married, then your rights are determined by the Divorce Act, the Child Support Guidelines, and the Matrimonial Property Act.  The Court of Queen’s Bench has jurisdiction over your divorce, which is the superior level of court inj Alberta.  Most proceedings are conducted by affidavit, instead of by attending at court to give evidence. An affidavit is a sworn document setting out all of the evidence that a party wishes to put before the court. 

The courts break things down into several categories and apply specific rules to each category. The categories are as follows:

Custody and access to the children
Support for the children
Support for the spouse
Matrimonial property division
Divorce

The court’s first concern is for the welfare of your children. The court will want to ensure that the children have a place to live, and that sufficient resources are available for the person caring for the children. Issues surrounding where the children live, and how much of a role each parent will have in the lives of the children after separation are called custody and access. Decisions on custody and access determine who is going to be paying support, and how much will be paid.

If you are separating, or contemplating a separation, then you will need to know:

Where am I going to live?
Can I take the children with me?
Can I force the other party to get out of the house?
How much money am I entitled to?
How do I collect support?
How do I protect my assets?
How do I get my fair share of the matrimonial property?
When do support payments stop?
How do I get matters started?
Do I need a lawyer, or should we go to a mediator?

Getting matters started

If you and your spouse are amicable, but have determined that your relationship is no longer working, then you need to take a first step towards ending the relationship and instituting legal proceedings. There are a number of ways of doing so, but the most common and effective are as follows:

Hire a lawyer

A lawyer will consult with you and advise you what your rights an obligations are.  In my opinion, this is a necessary first step, whether you anticipate an amicable divorce or a difficult one. You need to know what your rights and obligations are before you can negotiate a settlement. This consultation does not need to be long and expensive. I can usually determine whether issues are going to be complicated or straight forward in a brief consultation.

Once you understand your rights an obligations, then you can address yourself to the best way to achieve a settlement. Many couples opt for mediation. This means that they both attend before a third party who attempts to mediate their issues. Mediation works very well if both parties are motivated to make it work. It works well for negotiating parenting schedules, and for complicated asset division. It does not work so well if one party insists on unfair or unrealistic values on assets, or wishes to punish the other party. If you need to compel the other party to disclose assets, place proper values on assets, or abide by an agreement, then mediation may not be the preferred way to go. It can be more cost effective, but only if both parties are motivated to make it work.

There is also a relatively recent process known as collaborative law. This is similar to mediation, in that it is based upon a mutual desire to work out a solution collaboratively. If you want to pursue the collaborative approach, you must each hire a lawyer who is a collaborative lawyer. You will enter into an agreement with the other party and their lawyer that neither party will resort to the court process until they have exhausted the collaborative process. As with mediation, the success of the process is dependent upon the willingness of the parties to be fair. If one party is seeking to gain an undue advantage over the other, the collaboration may break down.

Many people wish to avoid hiring a lawyer because they fear that they will get into a big expensive fight.  This is far from being the case.  Most divorces are resolved with neither party going to court. Lawyers prefer to work matters out rather than going to court. However, if your spouse is trying to be difficult, it is a good idea to retain the option of going to court if you can’t get co-operation.   

Canada Child Custody, Guardianship & Access

The information below is general in nature and not intended to be a substitute for legal advice. If you are concerned about custody of or access to your child, please contact our offices.

Child custody, guardianship and access rights/arrangements can come about by statute, agreement or Court order in Canada.

Jurisdiction

For married couples, it is possible to obtain Canada child custody and/or access orders under either the FLA (provincial legislation) or the Divorce Act (DA) (federal legislation). Unmarried couples may only obtain custody and/or access orders under the FLA. While the statutes do have some differences, the courts have interpreted them in a similar manner so that there are effectively few substantive differences.

Do not sign a separation agreement without independent legal advice. Courts are not forced to accept the terms of an agreement between the parents and will look to the best interests of the child.

Both the Provincial Family Court and the Court of Queen’s Bench have jurisdiction over custody, guardianship and access matters under the FLA. However, parties seeking a divorce at the same time as a Canada child custody or access order are limited to proceedings in the Court of Queen’s Bench.

A Court order granting custody or access under the Divorce Act may be obtained prior to, at the same time, or after, a divorce. In the case of unmarried couples, an order may be obtained at any time.

The distinction between Custody, Guardianship and Access
The word “custody” is sometimes used to mean mere physical custody and day-to-day care of the child. At other times, it is used in a broader sense to mean the full bundle of rights and responsibilities of a parent to a child (in effect, to mean something very close to guardianship). The Court often used the broad meaning and both the Divorce Act and the Family Law Act have adopted a broad definition of custody that includes physical control over the child as well as the right to determine the child’s education, healthcare, religion, and other matters concerning the child’s well-being.

The Divorce Act does not mention guardianship but an order for custody under the Divorce Act gives the full bundle of parental rights and responsibilities unless some rights or responsibilities are reserved to another person by statute or court order.

“Guardianship” refers to the full bundle of parental rights and responsibilities. Guardianship is composed to two parts: guardianship of the estate of the child in which the guardian has the full bundle of parental rights regarding the child’s property; and guardianship of the person of the child in which the person has the full bundle of parental personal rights, including the right to physical possession of the child.

“Access” can be regarded as a form of temporary possession of the child with the powers granted to the access parent (or other person) being those necessary to ensure the well-being of the child. Access is not intended to be the mere right to visit a child. Access is intended to facilitate a meaningful, continuing, post-separation relationship between the child and access parent.

Access has been stated to be a right that belongs to the child, not the person seeking access. However, it is probably best understood as a mutual right.

If there has been no Court order or Agreement
In the absence of a Court order and subject to any agreement between the birth parents, guardianship of the child is held jointly by the mother and father so long as they live together. After separation, the birth parents remain joint guardians of the estate of the child but the birth parent who usually has care and control of the child is the sole guardian of the person of the child. If the father and mother were never married and never lived together so as to be considered joint guardians, then the mother is the sole guardian of the child.

Where there is no Court order or agreement and there are conflicting claims to custody, the person who may exercise custody is the one with whom the child usually resides. In cases where the child resides with both parents, the parent who has the day to day care of the child may exercise custody.

Factors Considered in making child custody and access awards:

In making a custody, guardianship or access order, the Court must look to the best interests of the child.

In making a custody order, the court takes into consideration the condition, means, needs and other circumstances of the child. Relevant issues are the health and emotional well-being of the child including any needs for care and treatment, the love and affection between the child and other persons, the education and training of the child, the capacity (including financial) of each prospective caregiver to look after the child, and, if appropriate, the views of the child (typically more important as the child gets older).

The Court will consider who looked after the child while the parents lived together, what each parent’s plan for the care of the child is following the separation, the degree of bonding between the child and the prospective caregiver, as well as the amount of time that the parent has to spend with the child.

A child’s race, culture or aboriginal heritage and the custodial parent’s willingness to respect and foster the child’s cultural identity is a relevant consideration.

The conduct of one or both parents in not considered relevant to the determination of child custody unless the conduct is relevant to the ability of the person to parent a child. Personality, character, and stability will be taken into account. A person’s alcoholism, drug addiction, sexual misconduct, dishonesty, and lack of social responsibility may also be considered in determining the best interests of the child.

The willingness of each parent to allow or facilitate access to the child by the other parent is also an important factor. The court must seek to make an order that will facilitate the child having the maximum contact with each parent, subject to the child’s best interests.

The Court is typically slow to change the status quo where the children are happy and in a stable setting. However, if the long term best interests of the child require a change, the court may so order notwithstanding the immediate discomfort and emotional upset.

In making an access order, the Court will look at the same factors, but with the aim of making an order that facilitates a meaningful relationship between the access parent and the child in so far as it is in the best interests of the child.

Access has been denied in circumstances where the Court perceives risk to the child, the person has had insufficient contact with the child prior to the application, where there is a problem between the child and the parent, or even where there is a problem between the parents.

Where the Court has some concerns about granting access, a conditional order may be made rather than denying access all together. The conditions may be as simple as setting a time and place for access or as onerous as requiring a third party to supervise access.

Types of Orders
There are many types of custody orders that may be made. A court may order sole custody (with sole guardianship) sole custody with joint guardianship, joint custody, shared custody (equal time) or decline to make an order.

Access may be ordered with or without attached conditions (for example supervised access, or a specific schedule), and it is possible to get an access order when no order for custody has been made. It is also possible for third parties to obtain access orders.

Joint Custody
In the past, Courts have been reluctant to order parents to share joint custody of a child unless there was some evidence or indication that the parents would be able to cooperate and communicate with one another and make decisions and resolve differences relating to the child with a minimum of conflict. Where it was apparent that to expect the parents to make joint decisions would only lead to further conflict, the court was likely to give sole custody to one of the parents.

In the early 1990’s joint Canada child custody awards increased as courts looked beyond bald statements that the parties could not cooperate and began to order joint custody even in cases where the parties did not always see eye to eye regarding the raising of their children. Judges have concluded that to require perfect cooperation between parents after separation is unrealistic. 

Child Support

The information below is general in nature and not intended to be a substitute for legal advice. It is not a simple matter to determine whether an individual is or will be liable for child support. If you are concerned that you may be liable for support or wonder whether you are able to claim child support following a separation, please contact our offices.

Upon a separation, a person may be required by the court to provide support for a dependent spouse or child. If the parties agree, support can be provided through a separation agreement.

The rules relating to child support apply equally to opposite-sex and same-sex relationships.

The Amount of Support
In all cases, the amount of child support is calculated on the basis of the Child Support Guidelines, which stipulate the support payable. The amount of support is based on the income of the non-custodial parent, generally without regard to the income of the custodial parent.

In addition to a basic amount of child support, the court can also order the parents to share the cost of such additional expenses as day-care, medical and dental expenses, university education and extracurricular activities.

In Alberta, child support is generally paid until a child is 18 years old, although the payments can continue beyond the age of 18 if a child remains dependent because of illness, disability or the pursuit of post-secondary education.

It is important to be aware that child support is not tax-deductible and is not taxable income for the parent receiving the support.


Who is Liable to Pay Child Support?
Typically, the non-custodial parent pays child support to the custodial parent for the care and maintenance of the child. Whether an individual qualifies as a parent and is liable for support is determined under either the federal Divorce Act or the Family Law Act.

If the parties are unmarried or do not wish to divorce, child support is governed by the Family Law Act.

Where the parties are married and intend to divorce, child support may be sought under either the federal Divorce Act or the Family Law Act. The Court will make an order pursuant to the legislation that is most favorable to the interests of the child.

The Divorce Act
Under the Divorce Act, a person ending a marriage may be required to pay support for a “child of the marriage.”  This phrase is defined broadly and includes children who are:

A child of both of the spouses;
A child for whom both the spouses “stand in the place of a parent”; or
A child for whom one spouse is a parent and the other spouse “stands in the place of a parent.”

In determining whether a person “stands in the place of a parent” the Court will look at the following factors:

Whether the child participates in the family as would a biological child;
Whether the person provides financially for the child;
Whether the person disciplines the child as a parent;
Whether the person represents to the child, the family, the world, either explicitly or implicitly, that the person is a parent to the child; and
The nature or existence of the child’s relationship with the absent biological parent.
 

The Family Law Act
If the parties are not married at the time of separation, are not seeking a divorce, or an application is brought pursuant to the  Family Law Act, a different test applies to determine whether a person is obligated to pay child support.

Under the Family Law Act, it is not necessary for a person to “stand in the place of a parent” in order to be liable for support.  Instead, a person who is neither the biological or adoptive parent of a child may be liable for child support if the person has made a financial contribution towards the support of the child.

An individual becomes a “parent” and thereby liable to pay support if they are a guardian of the child or if the person is a “standing in the place of a parent” as defined by section 48 of the Family Law Act. 

Spousal Support

The information below is general in nature and not intended to be a substitute for legal advice. It is not a simple matter to determine whether an individual is or will be liable for spousal support. If you are concerned that you may be liable for support or wonder whether you are able to claim spousal support following a separation, please contact our offices.

Spousal support provisions apply to both opposite-sex and same-sex spouses subsequent to the breakdown of either a marriage or a common-law relationship.

For married spouses, a support order is available under the Family Law Act or the Divorce Act.  If common-law spouses fall within the definition of Adult Interdependent Partners as defined in the Adult Interdependent Relationships Act, then they  can apply for support under the Family Law Act. Once an Adult Interdependent Relationship has been established, then the courts use much the same principles for determining spousal support as they do if the parties are married.

Entitlement to Support
There is no presumption of mutual support upon the breakdown of a common-law relationship or marriage.  According to the Supreme Court of Canada in Bracklow v. Bracklow [1999] 1 S.C.R. 420, there are three bases for entitlement to spousal support:

To compensate a spouse for hardship or opportunities lost due to the marriage or its breakdown;
To fulfill a contractual agreement, express or implied, that the parties were responsible for each other’s support; or
On a non-compensatory basis, to assist a spouse in need.
 

A spouse may be entitled to spousal support on any or all of these bases.
Generally, the longer the marriage or common-law relationship the greater the disparity in the economic circumstances of the spouses, the more likely it is that spousal support will be awarded.  Support orders are more common following relationships in which the parties assumed “traditional” roles.  However, even where the parties have maintained financial independence, needs-based support may be ordered to assist a disabled spouse.

Amount and Duration of Support
Spousal support is awarded on an interim, temporary or permanent basis. Support may be ordered in the form of a lump sum payment, although most often it is a monthly amount.

There are no guidelines setting out the amount or duration of support.  The Courts determine each case on its own particular facts and with reference to the following objectives of spousal support set out in the Divorce Act:

To recognize the economic advantages or disadvantages to the spouses arising from the marriage breakdown;
To apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above the obligation apportioned between the spouses;
To relieve any economic hardship of the spouses arising from breakdown of the marriage; and
In so far as is practicable, to promote the economic self-sufficiency of each spouse within a reasonable period of time.

In light of these objectives, the Court will consider the condition, means, needs and other circumstances of the spouses in arriving at a reasonable support award.  Relevant facts include:

The length of time that the spouses lived together;
The functions performed by each spouse when they lived together and the effect of this on earning capacity;
Any other source of support for the spouse making the application;
Any obligation of the spouse from whom support is sought to support another person.
Any order, agreement or arrangement relating to the support of either spouse;
The capacity and reasonable prospects of a spouse obtaining retraining; and
The desirability of the applicant spouse having special assistance to achieve financial independence from the supporting spouse.

Spousal misconduct is not relevant to the issue of support with some confusing exceptions as a result of the Supreme Court of Canada decision in Leskun v. Leskun.

It is common for the Courts to order interim or temporary support to ameliorate the effects of the marriage breakdown and to assist one spouse to become self-sufficient.  Temporary support may be ordered, for example, so that a spouse can retrain, upgrade career skills or adapt to a new situation.

Permanent support orders are made in cases where it is unreasonable to expect a spouse to achieve financial independence.  For example, in a long marriage where one spouse remained at home and out of the work force for many years, a time limited support order may be inappropriate.  Similarly, permanent needs-based support may be ordered where, subsequent to a long marriage, a spouse is unable to become financially independent because of disability.

In setting the amount of support, the Courts seek to provide a reasonable standard of living (if means are available), bearing in mind the marital standard of living. Subsequent to long relationships, there may be a greater expectation that the standard of living of the spouses should be equalized.

  SPOUSAL SUPPORT AND SPOUSAL MAINTENANCE

How much post-divorce support should you expect to pay? The Canadian Spousal Support Advisory Guidelines, while not legislated or mandatory, provide a formula for spousal support you can use as a benchmark.

The formula for cases where no child support is involved suggests an annual payment of 1.5% to 2% of the difference between the spouses’ gross incomes for each year of marriage or cohabitation, up to a maximum of 50%. Spousal support is to be paid for a duration of six months to a year for each year of marriage, and is indefinite for marriages of 20 years or longer. Say you were married 10 years, your gross income is $300,000 and your ex-spouse’s is $60,000. To determine your minimum support payment, multiply your income difference ($240,000) by 1.5, then multiply again by 10 (number of years of marriage). The grand total: $36,000 per year. Given the duration of your marriage, you’d be expected to pay this amount for at least five years.
With child support, the formula is based on the combined individual net disposable income (INDI) of both spouses. Add together your and your ex-spouse’s INDIs, then multiply by 40% to 46% of the combined INDI: That’s the amount of support likely to be awarded to the lower-income spouse.

Except as it concerns interim orders, the amount and duration of spousal support is generally decided after division of the marital assets. In some cases, the division of assets may fulfill the four objectives of spousal support (stated above) and there may be no need for further support.

Varying a Support Order
Both the Divorce Act and the Family Law Act require that there be a material change one party’s needs, means, financial circumstance, or ability to pay spousal support before the Court can consider an application to vary a support order.

Effect of an existing agreement See Separation Agreements


Tax Implications
Spousal support, unlike child support, may be tax deductible to the paying spouse and taxable in the hands of the receiving spouse but only if paid pursuant to a Court Order or a written agreement signed by both spouses.  Call us immediately to assist you with obtaining documentation that will enable you to obtain tax deductibility.