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Can you set aside a marriage contract when seeking dependant's relief?

By Kristine Anderson

The existence of a marriage contract does not, on its own, disqualify someone from making a dependant's relief application under the Succession Law Reform Act (SLRA) for proper support if they have been denied it in their spouse’s will. The existence of the marriage contract is only one of several other factors that the court will consider.

That said, there must be a compelling reason why the contract should not be applied in the dependant's relief application.  

The governing legislation that applies to a marriage contract executed after 1990 is the Family Law Act, which particularizes at s. 56(4) that a marriage contract or a provision in it may be set aside on the following basis:

  • if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
  • if a party did not understand the nature or consequences of the domestic contract; or
  • otherwise in accordance with the law of contract.

Marriage contracts in the context of dependant relief applications

There are cases where, despite the existence of a separation agreement or marriage contract barring support, dependant's relief is granted. Further, the court has stated that the predominant consideration in the determination of the adequacy of the provision for proper support is the economic situation of the dependant at the time of the hearing even in those instances where a marriage contract is present.

For example, in one Ontario Superior Court case from 1999, the terms of a fairly straightforward separation agreement were set aside when the wife applied for support notwithstanding the fact that she signed the agreement which already provided for modest support. 

In comparing the case law in this area, it appears that the key point was whether the deceased was providing support immediately prior to his death in order to open the door to the application proceeding.

The court will also consider other "moral obligations" of the deceased on the application.

Unconscionability 

There is a Supreme Court of Canada case that states that the essence of the court's inquiry where unconscionability is claimed is whether the circumstances of the parties, at the time of the marriage contract's drafting, were within the reasonable contemplation of the parties at the time and, if so, whether at that time the parties made adequate arrangements in response to these anticipated circumstances.

Another SCC case from 2003, discusses a two-part test for determining if an application for spousal support is inconsistent with a pre-existing agreement. The court mandates a two-stage investigation into all the circumstances surrounding the agreement, first at the time of its formation, and second, at the time of the application. In the 2003 case, the Supreme Court was reviewing a separation agreement. However, the two-part test has also been applied with regard to marriage contracts.

At the first stage, the court should look at the circumstances in which the agreement was negotiated and executed to determine whether there is any reason to discount it, including any circumstances of oppression, pressure or other vulnerabilities. However, the court expressly notes that the degree of professional assistance received by the parties may be sufficient to overcome any systemic imbalances between the parties

The second part of the test is to examine whether the contract still reflects the objectives outlined in the Divorce Act with regard to spousal support being an equitable sharing of the consequences of the marriage breakdown.

If circumstances have changed significantly at the time of the application to set aside the marriage contract in a way that was not reasonably foreseeable at the time it was made such that it no longer reflects the intentions of the parties, then it will be set aside or, at a minimum, just those provisions in regard to support. However, the circumstances must have changed so that the contract terms are so shocking that it should be set aside as unconscionable.

This two-part test specifically applies to releases of spousal support and has generally not been applied in the same manner with regard to waivers of the division of property rights.

Lack of financial disclosure and independent legal advice  

There is case law that finds that where there is no financial disclosure at all (and no knowledge of the assets through other sources at the time), the fact that independent legal advice was obtained will not be fatal to setting aside the marriage contract. However, there is commentary from the family bar that the leading case in this area may be so particular to the facts that it has little application in other matters. 

The key for the court where independent legal advice was received is whether the meeting with the lawyer leads to the conclusion that the client understood the nature and effect of the marriage contract, and signed it voluntarily.

In a 2003 Superior Court case, the judge found that it was likely that a 20-minute meeting did not provide enough time for the lawyer to explain the full impact of the agreement and, as such, it did not equate to providing independent legal advice. However, the court found the agreement to be valid as the evidence showed that the wife initiated the couple entering into the agreement, she understood its impact and there was no evidence of any undue influence by the husband.

A 2002 case from the same court stands for the proposition that lack of financial disclosure on its own can be deemed to be a reason to set aside a marriage contract, even where the party had independent legal advice and was not under duress. The court states that unlike separation agreements, marriage contracts require the utmost fidelity and good faith between the parties. Therefore, a greater duty of dealing in good faith and fair dealing is owed in marriage contracts.

However, this case involved a very particular fact pattern where the wife who was seeking to set aside the marriage contract did not read English, the agreement had not been translated and her comprehension of English was not great. The husband had disclosed some assets and financial information but neglected to advise of a substantial RRSP in his name.

The court found that although she did speak to a lawyer, the marriage contract would be set aside on the basis of the lack of financial disclosure. Case law suggests that the court can set aside a marriage contract where there was independent legal advice when it is clear that there was a lack of understanding as to the nature and consequence of the agreement (typically combined with a lack of disclosure).

There is a positive duty on every spouse to make complete, fair and frank financial disclosure before the contract is entered into, whether or not the other party requests it. Parties are not permitted to contract out of the obligation to disclose. A simple failure to disclose significant assets existing at the date the contract was made is sufficient for the court to exercise its discretion and set aside the agreement. Arguments trying to minimize the failure to disclosure as being not material generally do not sit well with the court. That said, you can see in the case law the reasoning of the judges that the monetary amount/asset value of the non-disclosure does factor peripherally into their decisions.

In addition, courts have determined that the lack of formal financial disclosure is not fatal to the enforceability of a domestic contract where the other party had knowledge of the assets by other means.

Contract grounds to set aside a marriage contract

The common law doctrine of misrepresentation, duress, coercion or fraud can apply to set aside a marriage contract.

In regard to misrepresentation, it must be material in the sense that a reasonable person would consider it relevant to the decision to enter the agreement in question. In addition, the material misrepresentation must have constituted an inducement to enter the agreement upon which the party relied. In this regard, conversations as to how the marriage contract came about will be relevant and whether the parties had previous knowledge of marriage contracts.

With respect to duress, the parties must enter into the agreement freely. If the contract is obtained by illegitimate pressure, coercion or intimidation, then it will be voidable on the ground of duress. To determine the seriousness of the "duress," the court takes into consideration the ability of the person threatened to resist such pressure. However, it has been held that it is enough if duress is "a" factor leading to the making of the contract to hold it voidable; that is, it need not be the only or the determining factor.

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