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29

Challenging a Cohabitation Agreement (survives marriage) in Alberta (Part 7)

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Challenging a Prenuptial Agreement in Alberta

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to a cohabitation agreement in Alberta, you should seek professional assistance.

In this blog (which is the 6th in a series of blogs), I’ll be discussing how Cohabitation Agreements that continue past marriage can and been challenged in Alberta courts. Now, these types of agreements – once the parties get married – are called prenuptial agreements or marriage contracts. The name of the agreement doesn’t really matter. What matters is how they get challenged…

Court cases dealing with challenges to Prenuptial Agreements and Marriage Contracts

If the Cohabitation Agreement survives marriage, it will essentially turn into a Prenuptial Agreement or Marriage Contract. What follows is a review of some cases involving challenges to these types of agreements.

In Mastalerz v. Mastalerz, 2007 ABQB 416, 419 A.R. 323, the Alberta Court of Queen’s Bench had to assess the validity of a prenuptial agreement. First, the Court examined whether the prenuptial agreement complied with the requirements under the Matrimonial Property Act and the Divorce Act. The Court found that those requirements (i.e. acknowledgments from lawyers, etc.) were substantially met. Next, the wife claimed that she had inadequate legal representation (she hired a general practitioner who did not speak fluent Polish and had only 4 years of experience as a lawyer) and, as such, did not understand the Agreement. The Court rejected this argument and held that her lawyer properly explained the agreement and its legal effect to the wife and that the wife understood her. This is evidenced by the fact that the wife had insisted on an additional provision in the agreement to protect her in the event of her husband’s unexpected death during the marriage. On the issue of duress, the wife argued that the husband gave her no practical option other than to sign the agreement; she stated that she had given up the security that she had established in Poland and had no realistic hope that if she returned to Poland she would be able to reconstruct her life. She submits that she repeatedly told Mr. Mastalerz how unhappy she was with the Agreement. The Court rejected this argument: “there is no evidence that Ms. Mastalerz was forced to enter into the Agreement. To the contrary, she had many resources in Poland and, although she had quit her job to move to Canada, there is no reason to believe that she would not have been highly employable had she chosen to return.” Finally, the wife argued that the prenuptial agreement was unconscionable and therefore void. In determining the question of unconscionability, the Court must take into account all the circumstances and determine whether the bargain was so bad as to constitute a fraud perpetuated upon the party who is seeking rescission of the agreement. The wife claimed (among other things) that if she refused to sign the agreement, then she would have to return to Poland and be viewed as a “failure”. She further claimed that the husband had taken advantage of her ignorance of the financial realities of Canada, had forced her to enter into a contract of minimal benefit to her, and that her contributions helped her husband realize more wealth (e.g. by taking care of property and advancing his financial position). But D.L. Shelley J. rejected these arguments, stating that: “I also cannot accept the argument that she was in such an unequal position of power and was so vulnerable that she was forced to enter into a contract of minimal benefit to her”. Hence, the prenuptial agreement was enforceable.

In Nasin v. Nasin [2008] A.J. No. 390, the Alberta Court of Queen’s Bench had to decide whether an oral agreement made just prior to marriage and which required the husband to pay $10,000 to the wife in the event of failure of marriage was enforceable. After only 9 months of marriage, the married couple separated. The husband argued that he did not owe that money to his former wife under the oral agreement. The Court agreed. The Court reasoned that the oral agreement was a prenuptial agreement, but did not meet the legal requirements set out in the Matrimonial Property Act. To this end, A.B. Moen J. wrote the following:

20 These are mandatory under the Act before a pre-nuptial agreement will be enforced by the courts. As a matter of public policy as set out in the legislation, parties entering into marriage may enter into an agreement with respect to the division of their property if their marriage fails. However, that agreement will not be enforced by the courts unless the requirements set out in the Act are met.

21 There are good reasons for this policy. Where there is an unequal balance of power between the future husband and wife, the courts must be satisfied that the woman or man entered into the marriage of their own free will, knowing that they have property rights but willingly giving up those rights. The courts enforce the requirements so as to ensure that the policy established by the legislature is maintained.

22 Here, we have a pre-nuptial agreement that met none of the requirements. It was not in writing. There was no certificate of acknowledgment that met the requirements of s. 38 of the Act. The parties did not receive independent legal advice.

23 Therefore, even though the [oral agreement] is a pre-nuptial contract, it is unenforceable.

In Tardif v. Campbell, [2008] A.J. No. 1463, the Alberta Court of Queen’s Bench had to decide whether a prenuptial agreement was invalid. The husband argued that it was invalid on the basis that he was under duress when he signed because he was stressed over his upcoming wedding and he was never given full disclosure of the nature or extent of the wife’s property at the time he entered the Agreement (including financial statements and full particulars of all the property). The Court rejected these arguments and upheld the validity of the prenuptial agreement. With respect to the duress claim, the Court found that no one put any pressure on the husband to sign the agreement such that he “was not able to exercise independent judgment”. With respect to the disclosure obligation, the Court found that there was nothing in the Matrimonial Property Act which required the wife to make such disclosure.

The only thing required by that Act was an acknowledgment that the husband be “aware of the nature and the effect of the agreement” and that he enter into the agreement “freely and voluntarily without any compulsion” on the part of the other party (along with formalities of execution including an acknowledgment before a lawyer who is not acting for the wife). In any event, the husband knew that the wife’s financial position was considerably larger than his own. Finally, the court rejected the suggestion that he did not have the capacity to “understand the ramifications of such an Agreement or to instruct counsel. In fact he had his lawyer include an amendment to one of the clauses. He knew that the property coming to the Defendant was substantial. He understood the concept of co-mingling of accounts and assets by his own admission. The fact that the Plaintiff may now wish that there was no Agreement given the fact that the marriage failed, is of no interest to this Court.”

In Kuehn v. Kuehn, [2010] A.J. No. 1482, the Alberta Court of Queen’s Bench held that a prenuptial agreement which a husband had forced his wife to sign on their wedding day and for which full disclosure was not made was INVALID. D.K. Miller J. wrote the following at paragraph 40:

40 … I put no value or emphasis on the Agreement that [the wife] was compelled to sign an hour before the wedding ceremony. It is not an Agreement she had input in, it is not an Agreement that provided any disclosure from the side who wanted the Agreement and the shadowy nature of extracting her signature all lead me to exclude it completely from any calculation or judgment. [The husband] may have in fact lived by the Agreement faithfully but an Agreement must have at minimum some form of consensus ad idem which in my view the June 29, 2000 document does not.

In Hollingshead v. Hollingshead, [2008] A.J. No. 1424, the Alberta Court of Queen’s Bench had to decide whether a prenuptial agreement was valid and enforceable. The wife had sought to challenge that agreement on the basis (among other things) that:

  • she was not aware of the nature and effect of the agreement, or the possible future claims that she waived;
  • she signed the agreement 5 days before her wedding after she had become financially dependent on her husband;
  • she believed the agreement expired after five years; and
  • the agreement contained patently false statements regarding completeness of financial disclosure, and her financial independence.

The Court rejected all of the wife’s arguments and held that the prenuptial agreement was valid and enforceable. There was nothing in the terms of the prenuptial that supported the wife’s contention of a five year expiry. Both the husband and the lawyer that advised the wife gave testimony to the contrary. Any such belief was mistaken and unreasonable. The contention that the factual assertions in the agreement were false was not proven. The wife’s decision to quit her job and move in with the husband did not transform her into a dependent individual. There was no indication that the wife was not content with the level of financial disclosure in the agreement at the time of execution. At the time of signing, the wife acted freely and voluntarily. There was no evidence of coercion or financial pressure by the husband. The lawyer that prepared the agreement and the lawyer that advised the wife were separate legal practitioners. The wife was not entitled to further spousal support, as the provision for spousal support in the agreement complied substantially with the objectives of the Divorce Act.

The case of Fedor v. Fedor, [2011] A.J. No. 314 is a good example of why Prenuptial Agreements must be clear and complete if they wish to deal with certain matters. In that case, the Alberta Court of Queen’s Bench had to decide whether a Prenuptial Agreement had expressly excluded liability for spousal support. The Prenuptial Agreement did not specifically deal with spousal support or mention a waiver of spousal support under the Divorce Act (Canada); rather, it focused entirely on property claims. Mr. Fedor argued that the Prenuptial Agreement should be interpreted by the Court in a manner that excluded spousal support because it required each party to waive an interest in the other’s assets, income from those assets, and future assets. But the Court disagreed and held that the Prenuptial Agreement did not deny spousal support claims:

20 In my view, on a plain reading the Agreement does not exclude spousal support claims. In the recitals, it expressly states that Part I of the Matrimonial Property Act does not apply; and the Agreement is deemed to be made pursuant to section 37 of the Act and to be the sole determinant of the division of all of the property ever owned by either or both of them. Further, it defines the parties’ assets and sets out terms that exclude claims to assets or, in very limited circumstances, allow them. The structure, words and tenor of the Agreement show that it is intended to deal with rights to property (real and personal), not personal support claims. I cannot find that these parties intended to exclude spousal support claims under the Divorce Act without words that expressly refer in some fashion to a spousal claim for support, alimony, maintenance or similar expression. That conclusion is reinforced by the contrast of very express language used in relation to division of property and the Matrimonial Property Act.

The moral of the story: have a clear, certain, and complete Prenuptial Agreement that deals with all the issues (e.g. spousal support, ownership and division of property, estate entitlements) so that you’re not leaving it up to a court to decide!

By the way, if you’re looking for a Cohabitation Agreement in Alberta that either terminates upon marriage or survives marriage (and becomes a prenuptial agreement or marriage contract), then you’ve come to the right place:

Cohabitation Agreement – Terminates Upon Marriage

This legal form can be used by non-married couples in Alberta who wish to avoid creating obligations through their cohabiting (i.e. living together) with each other. This particular cohabitation agreement waives support obligations and divides property according to legal ownership (in other words, what’s mine is mine; what’s yours is yours). This cohabitation agreement terminates when the parties get married to each other. If you want the cohabitation agreement to continue past marriage (i.e. continue to be valid and enforceable past marriage), then you can check out the cohabitation agreement below:

Cohabitation Agreement – Continues Past Marriage

This legal form can be used by non-married couples in Alberta who wish to avoid creating obligations through their cohabiting (i.e. living together) and their marriage to each other. It essentially becomes a Prenuptial Agreement or Marriage Contract when the parties marry each other. This particular cohabitation agreement waives support obligations and divides property according to legal ownership (in other words, what’s mine is mine; what’s yours is yours). This cohabitation agreement continues to be valid and enforceable past marriage.

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