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The recent Ontario decision in Balsmeier v. Balsmeier, illustrates the steps the court will take and considerations that will be made where one party challenges the validity of a pre-nuptial agreement.
The Importance of Having a Pre-Nuptial Agreement
We’ve previously blogged about pre-nuptial agreements, also known as marriage contracts. In short, these agreements allow a couple to outline, in advance, what will happen in a number of critical areas following a divorce, including division of property as well as child support and spousal support obligations. Without a valid pre-nup, most property owned by the spouses will be subject to equalization under the Family Law Act.
Pre-nups are especially relevant where there are complex property matters involved, for instance, if one of the spouses owns a business, has valuable property or pensions, or carries substantial debt, or where the marriage at issue is a second marriage with a blended family.
In general, courts will respect private agreements made between spouses, particularly where each spouse has had a chance to obtain independent legal advice prior to signing the final contract. In order for a marriage contract to be valid, it must be in writing, properly signed, and properly witnessed.
Setting Aside a Pre-Nup
Pre-nups can be challenged by either of the parties that are subject to them.
Section 56(4) of the Family Law Act, provides that a court can set aside a marriage contract if:
- If a party failed to disclose significant assets, or significant debts/liabilities that existed when the contract was made;
- If a party did not understand the nature or the consequences of the contract;
- If there was any reason to set aside the contract under contract law (including due to fraud, undue influence, duress, or other such issue).
Balsmeier v. Balsmeier: What Happened?
The parties in question met on a dating website in 2008. At the time they met, the husband was 50, wealthy, had been married twice before, and had four children and at least one grandchild. The wife was 42, not wealthy, had never been married, and had no children. She was living with her father in Michigan. The husband resided in Ontario. They pursued a long-distance relationship, during which they broke up and got back together several times.
The parties ultimately got engaged in July 2010, and intended to move into the husband’s home in Markham following the marriage. A wedding date was quickly set for September of that year.
The Pre-Nup
The parties had previously discussed the husband’s desire to protect his assets for his children. In August 2010, the husband met with a lawyer to discuss a pre-nuptial agreement. The wife was provided with a draft copy of the contract, as well as a list of lawyers she could meet with to obtain independent legal advice. At trial, she stated that she was surprised at how “little” she would be entitled to under the draft contract, and had opted to meet with one of the proposed lawyers to see if “maybe there was more” she could obtain, including more spousal support, a 50% share of everything accrued during the marriage, and significant shares in the family home as well as in a condo they had discussed purchasing in Florida.
The wife met with her own lawyer in late August 2010. The wife informed the lawyer that she would not sign the contract under the terms in the draft. In her words, she wanted to ensure that “it would cost the husband” something if he left her.
After significant back and forth negotiations, the parties eventually agreed to:
- Spousal support of $6,000 per month for 36 months;
- A 10% interest in the Markham home for the wife;
- $1,000,000 in RRSP’s to the wife in the event of the husband’s death prior to any potential separation.
No mention was made of anything pertaining to the wife’s share of any potential future condo.
The parties married on September 11, 2010.
Events Leading to the Separation
By October 31, 2010 they separated for the first time, with the husband citing family strain as his children did not get along with the wife. The tumultuous nature of the parties’ relationship continued thereafter. Though the wife could have returned to her Michigan home, the parties continued to live separate and apart in the Markham home. In December of that year the wife pressed harassment and assault charges against the husband and one of his daughters. The parties reconciled by February 2011. The husband purchased the previously discussed vacation home in Florida, to which the wife made no contribution. By March 2012, the husband once again told the wife he wanted a divorce. Each pursued relationships with others. In the interim, the husband accused the wife of credit card fraud. The couple reconciled in July 2012. The couple separated on a final basis on November 1, 2013. The wife moved to the Florida condo where she has remained ever since.
Position of the Parties Post-Separation
Following the end of the relationship, the wife argued that the marriage contract ought to be set aside based on all of the grounds set out in s. 56(4) of the Family Law Act, and that the spousal support should be amended.
The husband sought to uphold the contract and relied upon the fact that he had honoured the terms of the contract by paying spousal support to the wife as required.
The judge considered each of the factors in s. 56(4), and made a number of conclusions.
Failure to Disclose Assets
- While the husband ought to have voluntarily disclosed all details of his income, his failure to do so was not sufficient to allow the wife to set aside the marriage contract. She was well-aware that he was wealthy, and did not rely upon the disclosure he did make to her to detriment.
- The wife made material misrepresentations about her own financial circumstances, including an alleged, but non-existent job offer in the U.S
Failure to Understand the Nature of the Pre-Nup
- The wife had received independent legal advice. She acknowledged that her lawyer had reviewed the terms of the agreement with her, and that she had understood them (though was not happy with what she was going to receive in the event of marriage breakdown).
- The wife understood the nature and consequences of the marriage contract before she signed it.
Fraud, Undue Influence, Duress or Other Factors
- The wife had not established that the husband took advantage or her or that she was vulnerable in any way. She had worked for many years in leadership and management positions, and described herself as having “excellent negotiation skills” and “sophisticated business acumen”.
- It is well established that the emotional stress from separation or divorce does not give rise to a presumption that a party is incapable of agreeing to a binding contract. In the same vein, the emotional stress of planning a large wedding very close in time to the contract being signed does not mean that the wife was incapable of understanding and agreeing to the contract.
- The husband did not attend any meetings the wife had with her lawyer, and there was no suggestion that he interfered with her obtaining independent legal advice.
- In signing the marriage contract, both the wife and her lawyer confirmed that she had not been subject to coercion or undue influence.
In addition to the above, the court also commented on the wife’s credibility throughout the trial stating that she:
…tried to tailor her evidence to fit what she may have learned about the law as it relates to marriage contacts and spousal support…her evidence in many important respects was contradictory or simply not credible
The court ultimately found that the original marriage contract as between the parties was “valid and binding in all respects”. The court further found that at the time of the trial, the husband had fully satisfied his spousal support obligations to the wife under the terms of that contract, and that no additional payments were to be made.
If you have questions about prenuptial agreements or marriage contracts, please contact experienced family lawyer Jason P. Howie, online or at 519.973.1500.
