The enforceability of domestic contracts is very relevant in the context of estate litigation.
Under the Family Law Act (“FLA”) a person is legally obligated to support his/her spouse. As well, if and when a person divorces, separates or dies, his or her spouse can exercise rights under the FLA and seek an equalization of net family property.3 In other words, the FLA seems to ensure that the property rights of a spouse are somewhat protected. Those rights can be worth a lot of money. However, the FLA also provides that the parties can sign an agreement whereby they agree to give up their respective rights under the FLA.4 That’s where a domestic contract comes into play. Under the FLA, spouses can give up their rights to support and/or to a division of net family property with their spouses. Often a wealthy person will insist that his or her future spouse sign an agreement to give up those support and property rights. To still maintain those FLA rights, the surviving widow/widower could challenge the validity of the domestic contract and seek to have the court set it aside. There are a number of ways a party can challenge the validity of the prenuptial agreement/domestic contract.5 For our purposes here, let’s just deal with what happens when, contrary to section 55(1) of the FLA, the agreement was not signed by a witness.
In Gallacher, a husband argued that a domestic contract was unenforceable because it did not comply with the formalities of execution set out in the FLA.
He argued that the domestic agreement was not valid because there was no witness to the signatures. In this case, the husband and wife lived together for about a year. They had a child and signed a domestic contract under which the husband gave up his rights to make property claims against his wife. The man received legal advice and said he signed the contract in his car on his way home from the lawyer’s office. He said his signature was not witnessed. There was no question that he had obtained independent legal advice and that he confirmed he understood his obligations under the contract and its nature and effect. There were five issues addressed by the court, but I want to focus on whether the domestic contract was enforceable due to the lack of a witness. Without a witness for the husband’s signature, it seems that the domestic agreement did not comply with section 55(1) of the FLA, which says: “A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.” The same type of argument is successfully used in Ontario to argue that wills are not valid unless they are executed exactly as required by Succession Law Reform Act. [SLRA]6. For a quick review of this issue, I refer the reader to a blog found at http://bit.ly/strictcompliance]. It seemed, therefore, that the husband’s argument made sense. The Ontario Court of Appeal disagreed.
Ontario’s Court of Appeal decided that, notwithstanding the absence of a witness to the husband’s signature, the wife could rely upon the domestic contract.7
The court explained that this section of the FLA was meant to ensure a measure of formality to the execution of these agreements so that there was proof it was actually signed and that parties were not unduly influenced into entering the agreements. The court referenced other court cases that discouraged a strict reading of the wording of this section and instead favoured substantial compliance as long as the goals of the FLA were met. In the Court of Appeal’s view, the “strict requirements of s. 55(1) may be relaxed where the court is satisfied that the contract was in fact executed by the parties, where the terms are reasonable and where there was no oppression or unfairness in the circumstances surrounding the negotiation and execution of the contract.”8 Does this mean that the absence of a witness is irrelevant? Clearly not – but it seems that one party’s failure to strictly comply with the formalities of execution set out in the FLA will not be enough to set aside a domestic contract.
So why do Ontario courts insist on strict compliance with the formalities of execution for wills and not for domestic contracts?
Ontario’s Court of Appeal adopted Pepall’s reasoning in Virc v. Blair,9 “… that in comparison with s. 4(1) of the Succession Law Reform Act, R.S.O. 1990, c. S.26, the language of s. 55(1) of the FLA allows for a less strict application of the witnessing requirement.” After reading the case I am still at a loss to explain the Court of Appeal’s rationale for differentiating between the rules governing domestic contracts and testamentary instruments.10
- The term prenuptial is not used by the Family Law Act, R.S.O. 1990, c. F.3 . “Domestic contract,” is defined in the FLA as “a domestic contract as defined in Part IV.” In Part IV, section 51, a domestic contract is defined as “means a marriage contract, separation agreement, cohabitation agreement, paternity agreement or family arbitration agreement.” Section 52 defines a “marriage agreement” as follows: “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.” ↵
- Gallacher v. Friesen, 2014 ONCA 399; 2014 CarswellOnt 6424 OCA. ↵
- Section 6 of the FLA provides that “When a spouse dies leaving a will, the surviving spouse shall elect to take under the will or to receive the entitlement under section 5.” ↵
- See section 52 of the FLA. ↵
- I refer the reader to the following blogs, which canvass different issues relating to the setting aside of a domestic agreement that would allow the surviving spouse to exercise his or her rights under the FLA:
- Setting Aside a Prenuptial Agreement – LeVan v. LeVan – http://bit.ly/prenup-agreement
- Setting Aside Unconscionable Prenuptial Agreements http://bit.ly/unconscionable-prenup
- Entitlement to Support despite Prenuptial Agreement – The Butts Case http://bit.ly/support-des-prenup
- Are Prenuptial Agreements Invalid Without ILA? http://bit.ly/prenup-without-ILA
- In Ontario, almost all the cases that address this issue stand for the proposition that full compliance with the formalities of execution is required for a will to be valid. See Ettorre Estate, Re (2004), 2004 CarswellOnt 3618, 11 E.T.R. (3d) 208 (Ont. S.C.J.) . Two exceptions that suggest that substantial compliance is sufficient for the execution of testamentary documents are Sisson v Park Street Baptist Church (1999), 24 E.T.R. (2d) (Ont. Gen Div.) and Malichan Estate 6 E.T.R. (2d) 217 (Ont. Gen. Div.).
Section. 4(1) of the Succession Law Reform Act, R.S.O. 1990, c. S.26, sets out the formalities of execution for testamentary instruments. Generally, this language has been interpreted very strictly in Ontario and the courts, meaning thatnon-compliance with the formalities of execution will invalidate the testamentary instrument. The issue of strict compliance and substantial compliance is dealt with very well in chapter 4 of Feeney’s Canadian Law of Wills, 4th Edition [Feeney’s ↵
- See paragraph 30 of the Gallacher decision. ↵
- See paragraph 27 of the Gallacher decision. ↵
- Virc v. Blair, 2014 ONCA 392 (CanLII), 2014 ONCA 392. ↵
- Policy reasons, as opposed to the different wording in section 55(1) of the FLA and section 4 of the SLRA may be the reason why Ontario’s courts decline to adhere to strict compliance with the formalities of execution with respect to domestic contracts. The rationale for strict compliance with the formalities of execution is that they serve an evidentiary purpose and deter fraud. Nonetheless, even in the context of testamentary instruments, academics and different legislatures across Canada argue that substantial compliance with the formalities of execution is the better way to go. At paragraph 4.2 in Feeney’s, the learned author states: “But there is the threshold question: whose interests are being served by formalism? As Gulliver and Tilson (in “Classification of Gratuitous Transfers” (1943), 51 Yale L.J. 1) suggested, if there was capacity, and there was no fraud or undue influence, what is left to prevent probate of the will, if it seems clear what the will-maker intended and there has been only some minor breach of the rules of execution? That the intentions of the will-makers have not been served by formalities is evidence by the number of times courts have had to apologize for the results they have effected.”
Interestingly, many provinces in Canada have granted probate in the absence of strict compliance with the formalities of execution. I refer the reader to chapter 4 in Feeney’s starting with paragraph 4.68 for a complete review. ↵