Domestic Contracts are not Fool Proof

Imagine Rebecca falling in love with a very wealthy older man. His children insist that before marriage she must sign a domestic contract and promise not to make any claim for support or division of property under either the Family Law Act or the Succession Law Reform Act. Rebecca is young, in love and knows that this man loves her. She agrees. Fast forward twenty years later and Rebecca’s husband has died. He has left her nothing in his Will and she has no means of support. Is there anything Rebecca can do? Maybe.

There are two very relevant pieces of legislation in Ontario which may provide Rebecca with a possible window of opportunity. In determining whether to grant support applications under the Succession Law Reform Act¹ the court has discretion to make “ … an order … despite any agreement or waiver to the contrary”. In dealing with applications under the Family Law Act, the courts are less likely to interfere when spouses made agreements unless its results are unconscionable or the applicant spouse is on social assistances or if the other spouse defaulted in the support payments contemplated under the agreement.²

So how do the courts apply the discretion granted to them by the legislation? There was a 1985 Ontario case, Re Goldhar³, where the couple entered into an agreement prior to marriage. Mr. Goldhar had three sons from his first marriage and upon his death he bequeathed the bulk of his estate to them. Unfortunately, Mrs. Goldhar was in need and her inheritance was not enough to support her. The Ontario Divisional Court ruled that the Domestic Contract was only one factor the court had to take into account in dealing with Mrs. Goldhar’s support application under the Succession Law Reform Act. The purpose of that legislation was “remedial” and should receive a broad interpretation. Mrs. Goldhar needed an additional $17,000.00 each year to make ends meet and despite the existence of a contract, in which she agreed not to ask for support, the court awarded her that support. Despites howls of protest from academics who found fault with the decision, the courts have remained steadfast in applying the remedial provisions to help dependants in need.⁴

In my view, Domestic Contracts are only part of the solution for parties entering into marriages. The best way to discourage litigation is for estate planning to include a fair support scheme for the surviving dependants. Too often the disputes cannot be resolved and end up in court. This is especially so when family members are at odds with one another and believe that they are being treated unfairly. Despite the temptation to jump to conclusions, it would be a mistake to substitute this review of the topic for substantive legal advice. For those considering this option, there is no replacement for a competent solicitor’s own research, analysis and judgment.