British Columbia Family Law Blog

CONTRACTING OUT OF EQUAL DIVISION OF ASSETS

It is common for spouses who do not want to be bound by the presumptive equal division of assets as set down by our Family Relations Act to enter into marriage agreements which specify a regime of separate property as opposed to equally shared property.

In many jurisdictions marriage agreements are enforceable subject only to a limited number of exceptions including fraud, non-disclosure, undue influence or duress, and mistake, unconscionability. These exceptions are rarely applicable to most marriage agreements and thus in many jurisdictions marriage agreements are routinely enforced.

In British Columbia, however, in addition to the limited number of exceptions referred to above, a marriage agreement can be set aside or altered in British Columbia such that even though the parties had agreed to a regime of separate property (ie no sharing in each other s property) a British Columbia court can award a share of that separate property to the non-owing spouse.

BC MARRIAGE AGREEMENTS CAN BE SET ASIDE IF "UNFAIR"

The test applied in British Columbia to interfere with a marriage agreement entered into by the parties is set out in Section 65(1) of our Family Relations Act and reads as follows:

If the provisions for division of property between spouses under Section 56, Part 6 or their marriage agreement, as the case may be, would be unfair have regard to:

--the duration of the marriage,
--the duration of the period during which the parties have lived separate and apart,
--the date when property was acquired or disposed of,
--the extent to which property was acquired by one spouse through inheritance or gift,
--the needs of each spouse to become or remain economically independent and self-sufficient, or
any other circumstances related to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,
--the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

The Court will look at all of the factors listed above in determining whether the agreement was unfair at the time it was made or is unfair at the time the non-owning spouse brings the matter for determination before the Court.

PROCEDURE TO ATTACK AGREEMENT

Typically agreements alleged to be unfair under Section 65 are challenged and attacked by way of a spouse bringing on an application before the British Columbia Supreme Court to set aside the marriage agreement for one or both of the following reasons:

the property division set out in the agreement is unfair; and/or
the agreement fails to deal with property that otherwise would or should have been dealt with under Part 5 which is the property division portion of our Family Relations Act.
The application for variation on grounds of unfairness must be brought within two years after the parties are divorced, otherwise the applicant will no longer qualify as a spouse for purposes of proceedings under Part 5 of the Family Relations Act.

To assess the fairness of an agreement, the correct approach is to examine the respective positions of the spouses objectively as of the date of the agreement to determine whether the agreement was actually fair. Further, for marriage agreements which are to take effect upon the marriage breaking down the Court will assess whether it was procedurally and substantively fair at the date it was made, and then if the agreement passes that test, whether it was substantively fair when it took effect.

If the agreement is found to be unfair then Section 65 gives the Court flexibility to produce a fair result. A fair result does not necessarily mean that there will be an equal division of assets. A Court can vary the agreement without setting it aside, and may vary the division with respect to a single asset or divide assets by reference to the scheme of the Family Relations Act and thus completely ignore the regime established by the agreement.

The correct approach to a review for fairness is to determine a range within which reasonable people might disagree, after a consideration of the characterization issues, the valuation issues and all of the factors listed above in Section 65. The Court must maintain an appropriate level of deference to bargains people make for themselves.

Please note that Section 65 variations described above deals with variation of marriage agreements on the issue of property division.

EFFECT OF AGREEMENTS ON CUSTODY OF CHILDREN

On the issue of custody, guardianship and access, the Court is not bound by any agreement reached between the parties but will focus on the best interests of the children.

EFFECT OF AGREEMENT ON SUPPORT

In cases involving maintenance and marriage agreements which often arise where the marriage agreement has contained a waiver of claims of spousal maintenance by one against the other, our Divorce Act has been amended to make it clear that an agreement between the parties is only one factor to be considered by them and it is not determinative. The Ontario Court of Appeal decision in Miglin established that the 1985 Divorce Act represented a profound change in approach to support from that which was mandated by the 1968 Divorce Act. The 1985 Act sets out support objectives in which separation agreements are just one of several factors to be considered in awarding support. This Ontario Court of Appeal decision has been appealed to the Supreme Court of Canada and the Supreme Court of Canada will be hearing the matter in the near future.

I expect the Supreme Court will uphold the Court of Appeal decision which allowed a wife who waived maintenance in an agreement several years before to receive maintenance.

Agreements concerning child support which differ from the guideline support amounts are rarely binding on a court unless it can be shown a special provision was made which renders application of the guidelines inequitable.

WHAT CAN ONE DO TO PREVENT A MARRIAGE AGREEMENT TO BE ALTERED ON GROUNDS OF UNFAIRNESS?

Marriage agreements have a better chance of being enforced without any variation in marriages of shorter duration.

Generally speaking in marriages of longer duration, the marriage agreement becomes more susceptible to variation with every passing year of the marriage.

Thus, marriage agreements, which provide a spouse receive nothing by way of an interest in the property of the owning spouse, will look more and more unfair with each passing year. One way to deal with this issue is to have a sliding scale which increases the amount that the non-owning spouse will receive from the owning spouse with each year of marriage. It is not uncommon to have for example a spouse to receive a set payment per year for each year the marriage lasts. The benefit of this approach is that a spouse in a short marriage will receive a relatively nominal sum but a spouse in a long marriage will receive a larger sum which although not generous may still be found by the Court to be fair. The key is for the agreement to award less to the non-owing spouse after a 20 year marriage then that spouse would get without the agreement. In marriages of more than 20 years without an agreement, a presumptive 50-50 sharing will be hard to rebut. The hope of a family lawyer drafting a marriage agreement that he wishes to have upheld 20 years down the road is to award something perhaps substantially less than an equal share but something which a Court will not find to be unfair.

In short, marriage agreements are not bullet proof. They do offer protection particularly in short marriages and as well can help promote a less rancorous resolution to marriage breakdown.

If you are interested in a marriage agreement be sure to speak to a lawyer well in advance of the marriage to avoid any last minute distress to the wedding plans.