Clients often ask their family lawyers whether their agreement is binding. The answer? It depends
Many couples who have entered into a separation agreement, marriage contract or cohabitation agreement later wonder whether they made the right decision. Some ignore their self-doubt and simply live with the deal they made. Others seek legal advice about whether they can get out of their agreement.
Very few — especially those who were married a mere three years — have the validity of their separation agreement decided by Canada's Supreme Court.
But James and Diana Anderson of Saskatchewan did just that. On May 12, 2023, the Supreme Court decided the fate of the couple's "kitchen table" agreement, which was written by Diana at a meeting with James and two friends, and signed by the husband on the spot.
The Andersons didn't have any children, and ended their short marriage in 2015. The agreement Diana prepared said each of them would keep their own property and give up their rights to the other's property except for their home and household contents, which they jointly owned. The agreement did not deal with spousal support.
The agreement was signed and witnessed by the two friends who initiated the couple's meeting with the hope that the Andersons would reconcile. Neither spouse had independent legal advice before signing the agreement. Nor did either provide financial disclosure.
Diana later filed for divorce. James then asked the court to equalize their family property under Saskatchewan's Family Property Act, arguing that the agreement was signed without legal advice or financial disclosures, and that he had been under duress.
The trial judge set the agreement aside, gave no weight to the agreement and required that Diana pay about $90,000 to James.
The Saskatchewan Court of Appeal disagreed with the trial judge and found that the agreement was binding, relying on the Supreme Court's analysis in Miglin vs. Miglin, which set out the steps under the Divorce Act that a court should take when deciding whether to order spousal support in the face of an agreement releasing such support.
The Saskatchewan Court of Appeal decided that James should pay Diana a property settlement of about $5,000.
Writing for the court, Justice Andromache Karakatsanis decided that the terms of the agreement should be upheld, but made a different decision about the date at which the Andersons' property should be valued, ultimately deciding that Diana should pay James about $43,000.
Karakatsanis' decision was based upon the specific language of Saskatchewan's Family Property Act.
Canada's Constitution Act directs that issues related to divorce (the termination of a marriage, parenting issues, child support and spousal support) must be decided under the federal Divorce Act. By contrast, jurisdiction for property and civil rights under the Constitution Act is given to the provinces and territories.
The result is that after separation, a married couple's property is distributed based entirely on the legislation in the province where the couple resided at separation.
In Saskatchewan, "interspousal contracts" (contracts that are in writing, witnessed and a written acknowledgement is signed by the spouse in front of a lawyer) are presumptively binding. Despite this, kitchen-table agreements may be given weight even if the formalities were not observed.
Karakatsanis found that the Andersons' agreement was short, uncomplicated and reflected their intention to make a clean break. There was no financial disclosure or legal advice, but if James could not point to any prejudice he experienced because of the lack of disclosure and advice, the agreement was not automatically invalid.
The unanimous court, however, disagreed entirely with the Court of Appeal's reliance on Miglin, confirming that a decision about the validity of an agreement must be made based on the specifics of the provincial statute, not on the Divorce Act criteria as interpreted in Miglin.
Nevertheless, Karakatsanis agreed with the Court of Appeal, saying the trial judge should have given the agreement serious consideration.
The Supreme Court also distinguished between agreements relating to property (which look retrospectively at a couple's marriage) and those agreements that relate to spousal support, which may be changed when there is a change in circumstances (because support is generally prospective in nature).
By making this distinction, the Supreme Court suggested that property agreements are more likely to be upheld than those relating to support.
The court confirmed its earlier decisions about the need to accord appropriate deference to a couple's agreement given the important objectives on separation of self-sufficiency, autonomy and finality.
Nevertheless, the Supreme Court cautioned that "courts must review domestic contracts with particular sensitivity to the vulnerabilities that can arise in the family law context, without presuming that spouses lack the agency to contract simply because the agreement was negotiated in an emotionally stressful context."
Clients often ask their family lawyers whether their agreement is binding. The answer? It depends.
This article was originally published in the Financial Post.
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