Our firm recently represented the successful respondent at the trial and appeal of a case involving an application for spousal support which would necessitate setting aside an existing marriage contract containing a spousal support release. The Ontario Superior Court of Justice held that the circumstances were not sufficient to warrant setting aside the contract and dismissed the application, and the Court of Appeal upheld the decision.
The criteria for determining whether a marriage contract should be set aside had been previously set by the Supreme Court of Canada (the “SCC”) in Miglin v. Miglin, which established the approach to be taken by a court when dealing with an application for spousal support that would contravene an existing marriage contract:
- Investigate all circumstances surrounding the formation of the agreement, and
- Investigate the terms and circumstances at the time of the application in order to determine the degree to which the terms divert from those set out in the Divorce Act (or, as in this case, the Succession Law Reform Act). Only a significant diversion will warrant intervention by the court.
Hartshorne v. Hartshorne, another decision of the SCC, added the qualification that a court should also look at the degree to which the parties’ lives had followed the path the parties had contemplated when the agreement was made.
The Original Marriage Contract
The husband and wife married in 1996 and entered into a marriage contract the following year. The contract included a release from spousal support, stating that neither party would be entitled to support from the other, or from their estate. This contract was negotiated extensively, and both parties had retained independent legal advice. After a lengthy back-and-forth, the wife agreed to the support release on the condition that the marital home was to be held jointly.
The First Amending Agreement
In 2002, the couple decided to purchase a plot of land and build a new home. The husband requested that they hold title in the new home as tenants in common rather than jointly, which would have the effect of eliminating the right of survivorship. Upon the death of one party, the share owned by that person would instead form a part of their estate. The husband also suggested the couple execute an amending agreement with respect to the marriage contract, in order to reflect the new matrimonial home and to create a life estate in the home for the surviving spouse upon the other’s death. The wife met with her lawyer to advise him of these new developments and asserted that she would agree to owning the home as tenants in common, so long as she held a 2/3 interest.
The wife met with her lawyer again several months later, this time with a draft of the amending agreement that had been prepared by her husband’s lawyer. The amending agreement specified that the couple would each hold a 50% interest in their home. The wife’s lawyer explained what this would mean for his client, and while she expressed that she wasn’t happy about it, she agreed to sign in order to preserve their relationship.
In 2006, the couple purchased a vacation property in Florida, along with a share in the associated co-op. In 2009, the wife made the decision to retire from her job where she earned $52,000 per year so that she and her husband could travel more. In 2010, the couple sold their matrimonial home and purchased a new home that cost significantly less. They each received $100,000 from the proceeds of the sale and invested their shares separately. The new matrimonial home was held jointly.
The Second Amending Agreement
The couple executed a second amending agreement in 2011, for the purposes of addressing the Florida property and making the reference to the matrimonial home less specific, in order to accommodate future potential moves. This agreement also established a life interest for each party in the event of the death of the other with respect to both the Florida property and the matrimonial home. The wife again met with her lawyer to review the agreement but failed to mention the fact that the current matrimonial home was owned jointly. Because the agreement created a life estate with respect to the home, it had the effect of severing joint tenancy, and converting the ownership to a tenancy in common.
The husband died four years later. Upon his death, the wife sold their share in the co-op for $125,000. She also transferred the Florida property into her name only, despite having only a life estate under the second amending agreement. She also inherited her husband’s RRIF, valued at $200,000, and was the sole beneficiary of his life insurance policy, valued at $25,000. At this point, the wife had assets totalling $1.25 million, including her 50% share of the matrimonial home.
She brought an application seeking an order declaring her the sole owner of the matrimonial home by right of survivorship. She also sought support from her husband’s estate in the amount of $2,500 per month, or a lump sum of $300,000. She further argued that the joint tenancy with respect to the primary home had not been severed and that the spousal support release in the marriage contract was invalid because it had been contemplated when the matrimonial home was held jointly. Alternatively, she submitted that the support requirement could be satisfied by transferring the Estate’s share of the matrimonial home to her. Lastly, she argued that if the support release was deemed valid, then the joint tenancy was not invalidated by the second amending agreement, which would have the same effect of transferring the Estate’s share in the home to her.
The Superior Court Decision
The first stage of the test set out in Miglin required the court to determine whether the agreement had been entered into properly. In this case, the marriage contract had been negotiated over an extended period of time and the final version was considerably different from the original. The wife was represented by a knowledgeable lawyer who successfully negotiated several changes in her favour, including joint tenancy in the matrimonial home and making her the beneficiary of her husband’s life insurance and RRSPs. Nothing about the process called the validity or fairness of the agreement into question. The court found that the wife faced no undue pressure to sign the agreement.
The second stage involved looking at the wife’s circumstances at the time of her application. She was then 61 years old, and if reemployed, was likely to earn minimum wage. The court found that, over the course of the marriage, the wife had made no significant contributions to the following:
- Her husband’s welfare, over and above regular spousal contributions;
- The acquisition, maintenance or improvement of any of her husbands’ assets; or
- Her husband’s career potential.
The couple had lived a comfortable, but not opulent lifestyle. The couple had made the decision for the wife to quit her job together; it was not done under duress or force.
The court held that the terms of the marriage contract were fair. At the time it was signed, it would have been assumed that the husband would predecease his wife given their 15-year age difference. The wife would have known that giving up her job would possibly cause hardship in that event. At the time she signed the contract, she knew her husband did not want to be burdened with support. The court had this to say:
In my view the Marriage Contract was fairly negotiated and its application upon Bill’s death does not result in unfairness to Anna. The result of the operation of the Marriage Contract would have been within the reasonable contemplation of Anna and Bill at the time it was executed and throughout the period of the marriage.
The wife’s argument that the support release could not stand because it had been agreed to on the condition that the matrimonial home was held jointly was not accepted by the court. The first amending agreement had been signed when the couple’s home was held as tenants in common, yet no change had been made with respect to support. While she may have been unhappy about the arrangement, she did have independent legal advice from the same lawyer who had advised her on the original marriage contract and she was not forced to sign the amending agreement.
The Court of Appeal Decision
The Court of Appeal upheld lower court decision, with reasoning as follows:
As the trial judge was engaged in a contractual interpretation exercise, we must defer to the trial judge and his conclusion, absent a clearly identifiable error in law or a palpable and overriding factual error. We find neither.
The appellant does not advance any other argument that she has a claim for support if, as the trial judge found and as we have affirmed, the waiver in the marriage contract is valid.
This case provides support for the principle that a marriage contract will be upheld unless there is a finding of unfairness or in situations where life circumstances change significantly from what was contemplated at the time the contract was executed. It will be extremely difficult to establish a lack of fairness if both parties had sound advice from legal representatives. Further, it demonstrates that holding a property jointly is only the first step to ensuring the passing of property by way of right of survivorship. It is also important to ensure that subsequent domestic contracts or other conduct do not have the effect of severing a joint tenancy.
Family law issues, including issues of spousal support and domestic agreements, can be extremely complicated. Consulting an experienced, compassionate family lawyer can significantly ease the process. As the oldest independent law firm in Waterloo Region, and one of the oldest in the province, Duncan, Linton LLP has been providing clear, effective and strategic legal advice to clients for over a century. Call us at 519-886-3340 or contact us online for a consultation.