The property section in the Family Relations Act recognizes that marriage is an equal partnership between spouses. Under s. 56 of the Family Relations Act, each spouse is entitled one half of the family assets. This provision acknowledges that child-care, household management and financial provisions are the joint responsibility of the spouses. The rules governing disposition of property upon marriage breakdown seek to ensure that all contributions be recognized and economic wealth shared in equal way. However, the statutory regime may be altered if the parties to a marriage agree to specific terms. As per s. 56(2)(b) the requirement of equal division is subject to the existence of a “marriage agreement.”
What is a “Marriage Agreement?”
A marriage agreement, domestic contract, or “pre-nuptial agreement” is a contract that summarizes each person’s obligations to the other. Usually, these contracts deal with financial issues and allow parties to make their own arrangements for how property will be divided if the marriage fails. The purpose of these agreements is to avoid the statutory obligations arising from the Family Relations Act discussed above. However, it is important to understand that these domestic contracts are subject to judicial intervention if the provisions for the division of property within the document are contested as unfair. While the authorities generally agree that courts should respect private the arrangements that spouses make for the division of their property on the breakdown of marriage, they may intervene if the arrangement is ‘unfair.’
What is “Unfair”?
While some provinces, such as Ontario, Nova Scotia, New Brunswick and Saskatchewan require high standards for intervention, such as fraud, undue influence or unconscionability, British Columbia uses a standard of fairness, which is a lower threshold for judicial intervention than the other provinces.
The FRA maintains that property should be divided as an agreement provides, unless it would be unfair having regard to:
- The duration of the marriage
- The duration of the period of time they have lived separate and apart
- The date when the property in question was acquired or disposed of
- Whether the property in question was an inheritance or gift specifically to one party
- The needs of each spouse
- Other circumstance relating to the acquisition, preservation, maintenance, improvements or use of property, or liabilities of a spouse
Where a court determines the apportionment is unfair with regards to the factors above, the property may be divided into shares fixed by the Court.
How do the courts apply this legislation?
In Hartshorne v. Hartshorne the Supreme Court of Canada considered the enforceability of marriage contracts. The parties were both lawyers who had been married for ten years and had two children. At the outset of the marriage the parties signed a marriage agreement after seeking independent legal advice.
In considering the case, the majority of the SCC maintained that private arrangements should generally be respected, especially where independent legal advice has been sought. Courts should “encourage parties to enter into marriage agreements that are fair, and to respond to the changing circumstances of their marriage by reviewing and revising their own contracts for fairness when necessary.” However, when agreements are unfair, intervention may be necessary. Fairness is evaluated by applying the terms of the contract and does not require bad faith, or an intention to cheat. For example, “the provisions of a contract could well be fair if the marriage lasted one year and unfair if the marriage lasted 30 years.”
For example, consider what would happen if Bob married Becky when he was 65 and she was 32. They signed a marriage agreement that precluded Becky from claiming any interest in Bob’s significant wealth. If they divorced five years later, the agreement would likely be considered fair. However, if the couple was married for 25 years, during which Bob was terribly ill and Becky quit her job to care for him, the agreement may no longer be considered fair within the context of s. 65.
When determining whether a marriage agreement is unfair under s. 65, consideration will be given to the parties’ person and financial circumstances, and in particular to the manner in which these circumstances evolved over time. If the current circumstances were in contemplation of the parties’ at the time of the agreement, it will be more difficult to prove the agreement is unfair.
What if independent legal advice was given?
In Hartshorne v. Hartshorne, both parties obtained legal advice. Prior to signing the agreement, Mrs. Hartshorne’s lawyer advised that the agreement was “grossly unfair” and that if the marriage broke down she would have a right under the Family Relations Act to an undivided one-half interest in all of the family assets. The lawyer recommended numerous changes before signing the agreement. After changing a few items, Mrs. Hartshorne signed, and later brought an action when the marriage broke down. In consideration of the facts the majority of the SCC maintained that despite the advice, Mrs. Hartshorne entered into the contract anyway, believing it would be held to be unfair. The court was clear that having received this advice, she could not now rely on it set aside the agreement. The majority determined that having this information in mind, Mrs. Hartshorne was thus obligated to uphold her end of the agreement and the contract was enforced.
What about “common-law”?
Section 120.1 of the Family Relations Act specifically includes cohabitation agreements are under s. 65(1). In 2005, the British Columbia Court of Appeal considered the Hartshorne decision in relation to a cohabitation agreement in Johnstone v. Wright.  In a nutshell, the court maintained that Hartshorne upholds the integrity of private agreement and permits interference only when “things did not turn out the way parties expected.”
The Court of Appeal confirmed that courts in BC should not find contracts unfair simply because they deviate from the statutory division of matrimonial property.
Practical Points for Executing a Valid Marriage Agreement…
If you want to ensure your marriage agreement will be enforceable, consider the following points:
- Your contract must be signed by both parties with at least one witness
- It takes effect immediately if it is signed after the marriage
- If both spouses receive independent legal advice and the agreement is “reasonably fair” it will likely be upheld
- If you sign the agreement, knowing that it is unfair and anticipating that a court will not uphold it, you will not be successful
- Although it is possible to include provisions regarding the care of children, courts will always review these upon marriage breakdown
- You can always change or cancel your agreement so long as both parties agree and sign the changes with a witness