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Oct

12

Prenuptial Agreements | Marriage Contracts (Part 2): Enforceability Issues

Toronto business lawyerPrenuptial Agreements | Marriage Contracts

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 getting a marriage contract or prenuptial agreement in Ontario, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Brampton and other Ontario family law lawyers registered on Dynamic Legal Forms who can offer information, advice, and assistance with respect to your marriage contracts and prenuptial agreements.

Prenuptial Agreements | Marriage Contracts: Enforceability Issues…

So in my last blog, I talked about enforceability issues in prenuptial agreements and marriage contracts. Specifically, I mentioned how provisions dealing with Children and Possession of the Matrimonial Home could be challenged. In this blog, I’m going to continue that discussion by talking about challenging SUPPORT provisions in prenups and marriage contracts. So lets go…

Support

A prenuptial agreement or a marriage contract can deal with issues of support. That said, the court may set aside a provision or a waiver of the right to support in a domestic contract and may determine and order support under section 33(4) :

  • if the provision for support or the waiver of the right to support results in unconscionable circumstances;
  • if the provision for support is in favour of or the waiver is by or on behalf of a dependant who qualifies for an allowance for support out of public money; OR
  • if there is default in the payment of support under the contract at the time the application is made.

So, even if you want to avoid creating financial obligations with respect to SUPPORT by entering into a prenuptial agreement, you need to be mindful that such provision can be challenged and struck down. Specifically, section 33(4)(a) says that such provisions can be challenged if the provision results in unconscionable circumstances. So what does “unconscionable circumstances” mean?

Unconscionable Circumstances
In Scheel v. Henkelman (2001), 52 O.R. (3d) 1, the Ontario Court of Appeal dealt with the issue of what “unconscionable circumstances” meant in the context of a cohabitation agreement. In that case, the cohabitation agreement signed by the parties said that the parties would be responsible for their own support, would release each other from claims of support, and acknowledged that this was a fair and equitable arrangement at present and for the future. The wife challenged the waiver of her right to support in the cohabitation agreement under section 33(4) and sought an order for support. The Court of Appeal agreed with her and held that the cohabitation agreement resulted in unconscionable circumstances; she was ultimately awarded $3,500 / month in support. Here’s what the Court said in coming to that conclusion:

[15] It is well established that s. 33(4) empowers the court to set aside a waiver of support contained in a domestic contract only when an application for support has been commenced, as in this appeal, under s. 33(1): Mealey v. Broadbent (1984), 47 O.R. (2d) 161, 10 D.L.R. (4th) 762 (Div. Ct.), affd (1987), 5 R.F.L. (3d) 214, 25 E.T.R. 1 (C.A.). Section 33(4)(a) reads as follows:

33(4) The court may set aside a provision for support or a waiver of a right to support in a domestic contract or paternity agreement and may determine and order support in an application under subsection (1) although the contract or agreement contains an express provision excluding the application of this section,

(a) if the provision for support or waiver of the right to support results in unconscionable circumstances; . . .

(Emphasis added)

The use of the phrase “results in” in s. 33(4)(a) means that the subsection is not directed to unconscionable agreements, but to unconscionable results of a provision waiving support. An agreement which was fair and reasonable when it was signed, may, through circumstances that occur in the future, result in unconscionable circumstances at the time of a support application: Mance v. Mance (1981), 22 R.F.L. (2d) 445 (Ont. Co. Ct.), affd 12 A.C.W.S. (2d) 471 (Ont. C.A.); Newby v. Newby (1986), 56 O.R. (2d) 483 (S.C.). As for an unconscionable agreement, it may be set aside under s. 56(4) of the FLA, which is a codification of the general law of contract applicable to unconscionable agreements. It differs from s. 33(4), which operates in respect of valid and subsisting domestic contracts and enables the court to set aside a support provision, or a waiver of a right to support, in the contract where such provision “results in unconscionable circumstances”. In other words, s. 33(4) concerns unconscionable circumstances and not unconscionable agreements.

[16] As the appellant’s claim under s. 33(4) to set aside the waiver of support was brought concurrently with a claim for support under s. 33(1), the claim was properly before the court. However, in my view the trial judge made several errors in his resolution of the claim.

[17] In referring to Clayton, supra, for the proposition that the courts are reluctant to set aside a domestic contract, the trial judge overlooked the fact that the appellant did not seek to set aside a domestic contract. She sought to have the waiver of the right to support contained in the domestic contract set aside on the ground that unconscionable circumstances had arisen from the waiver. She was entitled to seek this relief under s. 33(4) of the FLA. The appellant was not required to meet the more stringent test arising from the case law under the Divorce Act, R.S.C. 1985, c. D-3.4 [R.S.C. 1985 (2nd Supp.), c. 3], where a party seeks to override support provisions in the parties’ own agreement.

[18] The issue before Cosgrove J. was straightforward and was whether the appellant had demonstrated that the waiver of her right to support had resulted in unconscionable circumstances, within the meaning of s. 33(4), at the time she commenced her application. Unfortunately, the trial judge failed to address this issue properly, and decided it on the basis of the substantial hurdle which a party must overcome when seeking to set aside an entire domestic contract. Moreover, he did not consider the authorities which have interpreted “unconscionablity” within the meaning of s. 33(4).

[19] Although it does not appear that s. 33(4) has been considered by this court, there are a number of trial court decisions which have done so, the most helpful being Newby. At p. 486 O.R., Bolan L.J.S.C. considered the meaning of “unconscionable”:

* The word “unconscionable” is defined in the Canadian Law Dictionary as “that which is contrary to the conscience of the Court”. It is defined in the Webster’s New Collegiate Dictionary as shockingly unfair or unjust. Whether “unconscionable” is used in a legal or non-legal sense, it can best be described as “something which is shocking, oppressive, not in keeping with a caring society”.

[20] He then stated that there are a number of factors to be considered in determining whether unconscionable circumstances have resulted, which he discussed at pp. 486-87 O.R., and which I would summarize as follows:

(a) the circumstances surrounding the execution of the agreement, including the fact that each party was represented by competent counsel, the absence of any undue influence, the good faith and the expectations of the parties;

(b) the results of the support provisions of the agreement, including any hardship visited upon a party, and

(c) the parties’ circumstances at the time of the hearing, including their health, employability and ability to maintain their lifestyle.

[21] The discussion in MacDonald and Wilton, The 2000 Annotated Ontario Family Law Act (Toronto: Carswell, 1999), at p. 259, on the meaning of “unconscionable” is also helpful:

The use of the world “unconscionable” is important as well. The Legislature did not use phrases such as “harsh or unjust” or “improvident or unfortunate”. It is submitted that the use of “unconscionable” creates a test that is more grave and weighty than mere harshness or injustice. Some assistance as to the meaning of unconscionable may be provided by various dictionary definitions. Black’s Law Dictionary defines an unconscionable contract as “one which no man in his senses, not under delusion, would make on the one hand, and which no fair and honest man would expect on the other”. The definition of unconscionable contract is one which is “monstrously harsh and shocking to the conscience”. However, the standard dictionary definition of the term as found in the Oxford English Dictionary when applied to actions is defined as “showing no regard for conscience; not in accordance with what is right or reasonable”. The Random House Dictionary of the English Language, which gives the definition in terms of American usage, defines the word as “not guided by conscience: unscrupulous; not in accordance with what is just or reasonable; excessive, extortionate”.

[22] In my view, the trial judge erred in placing too much emphasis on antecedent factors and failing to consider all of the parties’ circumstances at the time of the appellant’s application. Moreover, the evidence did not support his finding that the appellant was capable of supporting herself. In para. 13, I have outlined the factors which the trial judge failed to consider, the most significant of which were the appellant’s age, that she was unemployable, that her only income was a monthly pension of $407, that the respondent had removed the appellant as a beneficiary of his will and that the respondent had assets of $2,500,000 to $3,000,000. At the time of the trial, it was clear that the appellant was enduring significant economic hardship. It was equally clear that the respondent was capable of supporting the appellant.

[23] I am satisfied that in failing to apply the proper test to the evidence, the trial judge erred in failing to find that the support waiver provision in the domestic contract had resulted in unconscionable circumstances within the meaning of s. 33(4) of the FLA. Given the relative circumstances of the parties, it would be shocking to the conscience to require the appellant to live on her modest pension. The trial judge should have set aside the support waiver provision in the domestic contract and replaced it with a support order.

Worth mentioning is that, in Harper v. Harper [2010] O.J. No. 389, the Ontario Superior Court of Justice cited Scheel v. Henkelman in refusing to order interim spousal support. The Court in Harper found that a waiver of support in a prenuptial agreement would not result in an unconscionable. Importantly, in Harper, the Court stated that, in addition to what was said in Scheel, the purposes of a spousal support order under section 33(8) should be considered in making a determination as to whether to set aside a provision dealing with the waiver of support in a domestic contract. Section 33(8) states that an order for the support of a spouse should:

(a) recognize the spouse’s contribution to the relationship and the economic consequences of the relationship for the spouse;

(b) share the economic burden of child support equitably;

(c) make fair provision to assist the spouse to become able to contribute to his or her own support; and

(d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home)

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