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Are Prenuptial Agreements Invalid Without ILA?

Suppose that prior to the death of your spouse the two of you signed an agreement where you both committed not to sue each other’s estate.  Also imagine that you did not get legal advice before signing the agreement. Would a judge hold you to that agreement?  It depends.

In 2003 Justice Desotti, an Ontario Superior Court Judge, took this position, “While I cannot conclude that there will be no agreement involving an unrepresented party that is not declared to be valid, I am certain that it will be the exception and not the rule.”1  When I read that decision I understood that the judge meant that as a general rule when one of the spouses did not have their own lawyer the agreement will be set aside.  It’s eleven years later – let’s see how the law has evolved and how the rest of the judges think about independent legal advice and domestic contracts2.

Ontario’s Family Law Act, R.S.O. 1990, c. F.3 (“FLA”) allows people who are thinking of getting married or who are married to make an agreement in which they decide on their respective rights3.  In other words, subject to certain exceptions, people can choose to have the FLA not apply to them and can make their own deal.  Spouses can give up their rights under the FLA for an equal division of net family property and/or support when their spouses die.  The executors can defend claims normally made under the FLA by pointing to the past agreement. Given that statutory right to make your own deal and the court’s preference that parties negotiate their own deals one might suspect it would be difficult to set aside a domestic contract4.  Nonetheless, both the FLA and the common law provide Ontario’s courts with jurisdiction to set aside domestic contracts and Judges do so when the facts of the case warrant it.

Equally important as the rights of parties to contract out of the legislative scheme is that under the FLA the court has discretion to set aside a domestic contract under a number of circumstances.5 Several of those circumstances are set out under section 56(4).  In particular a court may set aside a domestic contract if a party did not understand the nature or consequences of the domestic contract6 or otherwise in accordance with the law of contract7.   So now the disinherited widow/widower who signed a deal giving up rights under the FLA has this argument:

  1. I did not have independent legal advice;  and
  2. Therefore I did not understand the agreement; and
  3. Please exercise your discretion to set this domestic contract aside.

In Davis v. Davis8 the court set aside a domestic contract because, in part, the wife did not have independent legal advice.  There were a number of grounds upon which the judge in this case could justify the use of his discretion to set aside the agreement.  First the husband received legal advice showing that there was an imbalance in bargaining power, he also did not disclose his financial assets, and the agreement was such that it did not reflect objectives of the Divorce Act because it did not address the economic disadvantages to the wife or burden of child care.  Nonetheless the judge went out of his way to comment on the fact that the wife did not have her own legal counsel.  Because of the importance of what he says, I quote those paragraphs here.

“10      …. I believe it is important that counsel should be aware that after Miglin, and based on what will be the courts’ careful scrutiny of agreements, an unrepresented party to an agreement opens a plethora of potential problems should the validity of the agreement be challenged. In short, the threshold for invalidity seems to be quite small and the smallest problem becomes, from the courts perspective, to be quite significant.

11      Even though counsel for the respondent in preparing this agreement was very careful and the agreement was not totally one sided, there were, with careful scrutiny, certain obvious problems. While I cannot conclude that there will be no agreement involving an unrepresented party that is not declared to be valid, I am certain that it will be the exception and not the rule.”(emphasis added)”

Not all judges agreed that allowing agreements to stand without ILA would be the “exception and not the rule.”  In Gregory v. Brown9, Justice Clark commented on the absence of independent legal advice in a domestic contract and said, “ ‘Although the court is not prepared to endorse the position taken in Davis v. Davis (2003), 44 R.F.L. (5th) 56 […] that an agreement with a self-represented litigant is worthless, the court should take a long hard look at such agreements to confirm and satisfy itself that the self-represented party knew what he was doing and did so voluntarily.  Justice Clark’s comments seem to reflect the sentiment of judges in most cases.

It may very well be that failure to obtain independent legal advice alone will not be sufficient to set aside a domestic contract.  In my experience, when determining the validity of domestic contracts judges are not mindlessly ticking off a checklist where they set aside an agreement where ILA was not provided.  A judge will not simply throw out a negotiated agreement because there is no ILA.    The case law suggests that judges will look to the unfairness of the transaction as evidenced by the criteria set out in the legislation and common law before deciding whether to set aside a domestic contract.10  One thing is for sure – at the very least the absence of ILA will be a red flag.

Footnotes
  1.   Please see paragraph 11 of  Davis v. Davis 2003 CarswellOnt 2800, (2003) O.J. No. 2938, (2003) O.T.C. 666, 44 R.F.L. (5th) 56.
     
  2.   A “domestic contract” is a phrase used and defined in the Family Law Act, R.S.O. 1990, c. F.3.    It includes a term often is referred to as a “prenuptial agreement”.  Section 51 of the Family Law Act, R.S.O. 1990, c. F.3  states that “domestic contract” means a marriage contract, separation agreement, cohabitation agreement, paternity agreement or family arbitration agreement; (“contrat familial”).  Section 52 (1)  states, “ Two persons who are married to each other or intend to marry may enter into an agreement in which they agree on their respective rights and obligations under the marriage or on separation, on the annulment or dissolution of the marriage or on death, including, (a) ownership in or division of property;(b) support obligations;(c) the right to direct the education and moral training of their children, but not the right to custody of or access to their children; and (d) any other matter in the settlement of their affairs. R.S.O. 1990, c. F.3, s. 52 (1); 2005, c. 5, s. 27 (25).
     
  3.   I refer the reader to sections 52-60 of the  Family Law Act, R.S.O. 1990, c. F.3. The general rule that parties can “contract out” of the statutory regime set out in the FLA has exceptions.  For example, one may not contract out of their FLA rights regarding:
    • a matrimonial  home,
    • the fact that any domestic contract must be in writing, or
    • clauses regarding chastity etc.


     

  4.   See Annual Review of Family Law 2013, James G. McLeod and Alfred A. Mamo 2013 Ann. Rev. Fam. L. 5 where the learned authors state, “Over the last decade, judicial resources have been devoted to case management designed to promote settlement between the parties. In addition, mediation services attached to the court or privately have been encouraged so as to assist the parties in reaching an agreement. Every day around the country judges preach to litigants about the merits of making their own deal rather than having a decision imposed on them. All these efforts presume that once an agreement is reached that it will be honoured and upheld by the courts in the absence of a good reason to the contrary: see Miglin v. Miglin, 2003 CarswellOnt 1374, 2003 CarswellOnt 1375, (2003) S.C.J. No. 21, 2003 SCC 24, 66 O.R. (3d) 736 (note), (2003) 1 S.C.R. 303, 34 R.F.L. (5th) 255, 224 D.L.R. (4th) 193, 171 O.A.C. 201, 302 N.R. 201 (importance of maintaining agreements generally and in context of support); Hartshorne v. Hartshorne, 2004 CarswellBC 603, 2004 CarswellBC 604, (2004) S.C.J. No. 20, (2004) 6 W.W.R. 1, 194 B.C.A.C. 161, 317 W.A.C. 161, 236 D.L.R. (4th) 193, 47 R.F.L. (5th) 5, 25 B.C.L.R. (4th) 1, 318 N.R. 1, 2004 SCC 22 (importance of property agreements).”
     
  5.  There are a number of provisions that permit a court to set aside a domestic contract:
    • 33(4) The court may set aside a provision for support or a waiver of the right to support in a domestic contract and may determine and order support in an application under subsection (1) although the contract contains an express provision excluding the application of this section,  (a) if the provision for support or the waiver of the right to support results in unconscionable circumstances; (b) 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 (c) if there is default in the payment of support under the contract at the time the application is made
    • 56.  (1)  In the determination of a matter respecting the education, moral training or custody of or access to a child, the court may disregard any provision of a domestic contract pertaining to the matter where, in the opinion of the court, to do so is in the best interests of the child. R.S.O. 1990, c. F.3, s. 56 (1); 1997, c. 20, s. 10 (1).
    • Contracts subject to child support guidelines(1.1)  In the determination of a matter respecting the support of a child, the court may disregard any provision of a domestic contract pertaining to the matter where the provision is unreasonable having regard to the child support guidelines, as well as to any other provision relating to support of the child in the contract. 1997, c. 20, s. 10 (2); 2006, c. 1, s. 5 (8).
    • Clauses requiring chastity (2)  A provision in a domestic contract to take effect on separation whereby any right of a party is dependent upon remaining chaste is unenforceable, but this subsection shall not be construed to affect a contingency upon marriage or cohabitation with another. R.S.O. 1990, c. F.3, s. 56 (2).
    • Idem(3)  A provision in a domestic contract made before the 1st day of March, 1986 whereby any right of a party is dependent upon remaining chaste shall be given effect as a contingency upon marriage or cohabitation with another. R.S.O. 1990, c. F.3, s. 56 (3).
    • Setting aside domestic contract (4)  A court may, on application, set aside a domestic contract or a provision in it,(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;(b) if a party did not understand the nature or consequences of the domestic contract; or (c) otherwise in accordance with the law of contract. R.S.O. 1990, c. F.3, s. 56 (4).
    • Barriers to remarriage (5)  The court may, on application, set aside all or part of a separation agreement or settlement, if the court is satisfied that the removal by one spouse of barriers that would prevent the other spouse’s remarriage within that spouse’s faith was a consideration in the making of the agreement or settlement. R.S.O. 1990, c. F.3, s. 56 (5).
    • Idem(6)  Subsection (5) also applies to consent orders, releases, notices of discontinuance and abandonment and other written or oral arrangements. R.S.O. 1990, c. F.3, s. 56 (6).
    • Application of subss. (4, 5, 6) (7)  Subsections (4), (5) and (6) apply despite any agreement to the contrary. R.S.O. 1990, c. F.3, s. 56 (7).


     

  6.   I refer the reader to Dubin v. Dubin (2003), 34 R.F.L. (5th) 227 (Ont. S.C.J.) at para.32 where Justice Mesber said, “ A party needs to know what asset base might potentially grow, in order to determine what he or she is being asked to give up in the agreement. Coupled with financial disclosure is the notion of understanding legal rights and obligations under the legislative scheme. This second notion carries with it the concept of independent legal advice. Thus, a party must know what assets and liabilities exist at the date of the contract, and must understand the general legislative scheme in order to know what he or she is giving up in the proposed agreement.”
     
  7.   What is clear from the FLA is that if the legislation intended to make a certificate of independent legal advice mandatory to the enforcement of any domestic contract it could have done so in the way it did with respect to enforceability of a family arbitration award.  Under section 59.6(1) of the act such an award is envorcable only if each of the parites to the agreement receives independent legal advice beofe making the agreement.
     
  8.   See cite in End note 1.
     
  9.   Gregory v. Brown (2005), 2005 CarswellOnt 6799, 2005 ONCJ 284, 21 R.F.L. (6th) 289 (Ont. C.J.).
     
  10.   For some relevant cases on this topic I refer the reader to
    • Dayal v. Dayal 2011 CarswellOnt 1305, 2011 ONSC 1304, (2011) W.D.F.L. 2432, (2011) W.D.F.L. 2434, 198 A.C.W.S. (3d) 1053, 2 R.F.L. (7th) 349;
    • Stewart v. Foreman 2005 CarswellOnt 2389, 2005 ONCJ 193, (2005) W.D.F.L. 3390, (2005) O.J. No. 2372;
    • Dubin v. Dubin (2003), 34 R.F.L. (5th) 227, 2003 CarswellOnt 534 (Ont. S.C.J.) ;
    • Gregory v. Brown, 2005 CarswellOnt 6799 (Ont. C.J.);
    • Danylkiw v. Danylkiw, 2004 CarswellOnt 4401 (Ont. C.A.);
    • Phillips-Renwick v. Renwick Estate, 2003 CarswellOnt 3107 (Ont. S.C.J.);
    • Miglin v. Miglin 2003 CarswellOnt 1374, 2003 SCC 24, 34 R.F.L. (5th) 255, 224 D.L.R. (4th) 193, 302 N.R. 201, 171 O.A.C. 201, 66 O.R. (3d) 736 (note), (2003) 1 S.C.R. 303, REJB 2003-40012, J.E. 2003-790;
    • Koster v. Koster, 2002 CarswellOnt 2951 (Ont. S.C.J.).


     

Charles Wagner

The author of this blog is Charles B. Wagner. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.

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