Spousal support release clauses not always watertight: Heft
By Rob Lamberti, AdvocateDaily.com Contributor
The release indicates the couple will not seek spousal support from each other if there is separation or divorce, “and it's supposed to be a forever clause,” says Heft, founder and principal of Heft Law.
But it often doesn’t work out that way, she says.
While Heft usually advises clients to include a release clause in an agreement, she warns that they should not “hang your hat on it” as circumstances change over time.
“The most common occurrence that can change a spousal support release clause is when they have children, and one party decides to be a stay-at-home parent,” she says.
Heft says clauses can anticipate changes, but “it’s not bulletproof by any stretch. To put this into context, in Quebec, it is contrary to public policy to insert a spousal support release clause into cohabitation agreements and marriage contracts.”
Heft says while release clauses in most cases show intentions of the parties involved, they are not always enforceable.
A 2003 Supreme Court of Canada ruling determined when a court can override such an agreement, she says. The decision solidified the concept that family law contracts are not treated or viewed in the same light as commercial contracts, Heft explains.
“Because it’s a family agreement, they are held to a higher standard,” she says.
The Miglin Test is a two-step process that developed from the case. It gives judges guidance in determining when to override an agreement. A court first considers the circumstances in which it was negotiated and agreed upon, to see if there is reason to discount the arrangement, Heft says.
“They look for conditions of oppression, pressure, and vulnerability, and then they look at the conditions of the negotiations — was proper financial disclosure made, how long did the negotiations take and if the parties had legal advice,” she says.
The second part of the test determines whether the agreement is in accordance with the objectives and factors outlined in s. 15(2) of Canada's Divorce Act, Heft says.
“When you’re negotiating a contract and entering into an agreement that is patently unfair, even if the other party agrees to it, you might be unaware that it’s not solid if it’s really unfair,” she says.
The court will review whether there's been substantial compliance with the spousal support considerations and factors, and take into account that the parties want finality, certainty, and to be able to decide their own lives, along with the circumstances at the time of the contract, Heft says.
“The court also looks at the extent the agreement reflects their original intentions,” she says. “Don't forget, by the time you're looking to set aside an agreement, it's aged a bit, so a court is going to determine if it still complies with the factors and objectives of the Divorce Act.
“The courts don’t just set them aside without thought, it will need to see that there's been a significant departure from the factors and objectives of the Act,” Heft says.
Challenges would include whether there was full and frank financial disclosure at the time the clause was crafted, or at the time of separation, she says. Further, if one of the parties didn’t have proper legal advice or representation, it raises the spectre of vulnerability.
“A person with a brain injury which makes them mentally or intellectually deficit, that person has a vulnerability,” Heft says. “The vulnerability could be emotional, where someone has been in an abusive relationship and is inclined to want to leave, and then there’s the person who’s scared and will sign anything they’re told to sign.
“I’ve had people come in here and say, ‘My husband says I need to sign this,'” Heft says. “You can’t say what people should do because they are independent, but certainly a large part of my job when I’m reviewing these agreements, is pointing out what's missing and explaining what's wrong.
“They need to know what it is they are signing and understand it with a forward view,” she says.
Heft says, over time, spousal release clauses have gone from one paragraph to three pages. “Every time the courts open another loophole, we try to plug it,” she says.
“But I don’t think we’ll ever be able to plug it completely,” Heft says. “At the end of the day, there’s the equity side of things, studying the agreement, and asking if it is substantively fair, if it was properly negotiated, and if you were properly advised.”