Last week, we discussed the consequences of failing to disclose assets when entering into a marriage contract. Justice Pazaratz had found in favour of a wife who wanted her marriage contract set aside on the basis that her husband had not properly disclosed his assets going into the marriage.

The husband appealed, and the Court of Appeal ultimately overturned Justice Pazaratz’s decision.

The Court of Appeal

In the original decision, Justice Pazaratz had found that the husband had failed to properly disclose his assets by failing to indicate that the farm property that he owned was two distinct parcels of land rather than one. Based on this incomplete disclosure, Justice Pazaratz exercised his discretion to have the contract set aside.

The Court of Appeal ultimately found that Justice Pazaratz had erred in setting aside the marriage contract on the basis of failure to make proper disclosure.

Justice Pazaratz had criticized the husband’s trial lawyer, who he found had deliberately suppressed the fact that the property was two parcels in what the Justice had deemed was a deliberate attempt to mislead opposing counsel. The Court of Appeal noted that this was incorrect- both the husband and the wife had initially been under the mistaken belief that the property was one parcel only. Moreover, when the real estate appraiser retained by the husband discovered that the property was actually two separate parcels of land, that information was immediately provided to the husband’s trial lawyer.

This shared mistaken belief was innocent and did not detract from the fact that the wife was aware that she was giving up all claims against the property by signing the contract. The wife had obtained independent legal advice, though she ultimately did not act on it, and she had not been subject to any pressure or duress when she signed the contract. Any uncertainty about the value of the property could not be viewed as a disclosure failure because the wife knew she was giving up any interest in the property, irrespective of its value.

The Court of Appeal noted that:

it is important to keep in mind that courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship, particularly where the agreement in question was negotiated with independent legal advice.

The Court of Appeal ultimately set aside Justice Pazaratz’s order and awarded the husband costs of $25,000.

If you are separated or divorced, or in the process of separating and have questions about complex property division, call us at 519-973-1500 or contact us online. Many of our clients are referred to us by former and current clients, as well as by lawyers, accountants, and other professionals.

We previously blogged about the ongoing and very high profile divorce between Eleanor McCain, heiress to the McCain family fortune, and her estranged husband, Jeff Melanson. Their saga has now entered a new chapter after a judge recently ordered Ms. McCain to help pay Mr. Melanson’s legal fees.

Some Context

Ms. McCain and Mr. Melanson married in spring of 2014. At the time of the marriage, Ms. McCain had a net worth of more than $365 million, and an annual income of $4.25 million. Mr. Melanson had an annual income of $400,000, but was in debt, negating this income. They entered into a prenup in which Ms. McCain agreed to pay Mr. Melanson a lump sum of $5 million upon marriage breakdown.

The couple ultimately split approximately nine months after their wedding, at the beginning of 2015. Ms. McCain subsequently applied for an annulment, alleging that Mr. Melanson was a womanizer with a history of workplace harassment and “behind-the-scenes abuses”.

Ms. McCain also filed a motion to have Mr. Melanson’s lawyer, Harold Niman, removed as counsel. Mr. Niman had previously represented the ex-wives of Ms. McCain’s brothers in their respective divorce proceedings. According to Mr. Melanson, a response to Ms. McCain’s motion to remove his lawyer cost him $144,000.

At the time of the costs proceedings, Mr. Melanon had incorporated a consulting company but had not earned any income from it. He argued that the negative publicity surrounding the ongoing court matter with Ms. McCain made him a “less attractive candidate” for work. Mr. Melanson had $205 in his chequing account, and a balance of zero in his savings account, with his only significant asset being his RRSP.

Costs Ordered

Justice Horkins of the Ontario Superior Court ordered Ms. McCain to pay $125,000 in interim costs to Mr. Melanson, stating that “it is clear that he cannot afford to pay his legal fees”.

The Judge went on to say that this amount should eventually either be credited against any claim that Mr. Melanson might obtain from his $5 million pre-nup with Ms. McCain, or be reimbursed if the court ultimately decides that he is not entitled to the money outlined in the marriage contract.

Justice Horkins rejected Ms. McCain’s argument that Mr. Melanson did not deserve to have his legal costs covered as he had gone on a “spending spree” since their court battle began, and had travelled extensively, including to places such as Yukon, British Columbia, and California. The Judge noted that Mr. Melanson had to resign from his former position as CEO of the Toronto Symphony Orchestra due to the publicity around the marital dispute, and consequently, had to tap into his line of credit and sell his Toronto home.  She found that Mr. Melanson’s travels had been reasonable given the nature of his previous employment and his need to actively seek additional employment, to honour board commitments, and to attend speaking engagements across North America. His travel costs had decreased from more than $90,000 in 2015, to approximately $53,000 in 2016.

Both parties have been ordered to reach a settlement prior to the end of this year.

Costs Consequences in Family Law Cases

There can be significant costs consequences in family law disputes. Judges retain discretion to award costs, pursuant to section 131 of the Courts of Justice Act and Rule 24 of the Family Law Rules. In making a costs determination, court must consider a number of fundamental objectives as set out by the Court of Appeal in Serra v. Serra:

  • to partially indemnify successful litigants for the cost of litigation;
  • to encourage settlement; and
  • to discourage and sanction inappropriate behaviour by litigants.

The court must additionally consider all factors relevant to the circumstances of each specific case.

If you have questions about your rights and obligations in a separation, divorce, or high asset divorce speak with experienced Windsor family law lawyer, Jason P. Howie, at 519-973-1500 or contact us online. We serve clients in Windsor, Essex County and throughout the region.

A prenup, or prenuptial agreement, is a contract that two people will enter into before marriage, which sets out the rules about their marriage and what will happen in the event of a relationship breakdown. In Canada, these types of agreements are more commonly referred to as domestic contracts or marriage contracts.

Under the Family Law Act in Ontario, a domestic contract is a catch-all phrase that can refer to a number of different types of agreements, such as a marriage contract, a cohabitation agreement or a separation agreement.

A marriage contract, on the other hand, is specifically defined in section 52(1) of the Family Law Act. It is an agreement entered into by two people who are married to each other or intend to marry and which sets out their rights and obligations during the marriage or on separation, annulment or death including property ownership or division, support obligations, the education and moral training of the children or any other matter that they choose to include. The only thing that cannot be stipulated in a marriage contract is the right to child custody or access. In addition, if a marriage contract limits a spouse rights regarding the matrimonial home, that provision will not be enforceable.

Many people tend to associate prenuptial agreements with celebrity marriages, as they are popular among spouses with substantial assets or family fortunes that they wish to protect. And many people think that having a prenuptial agreement is a precursor for divorce because they contemplate the end of the marriage. But marriage contracts are not only for the rich and famous and they can be useful for couples from all different socio-economic and cultural backgrounds.

Marriage is a partnership, and anyone entering into a partnership should understand the terms and expectations of the relationship and take steps to protect their rights. To some people it might sound like a sure-fire way to kill the romance, but the unfortunate truth is that many marriages do end in divorce these days. Having an agreed-upon contingency plan is never a bad idea. Many time-consuming and expensive court battles could have been avoided if the spouses couple had sat down and drafted a proper marriage contract at the start of the relationship, when they still loved each other.

If you have questions about prenuptial agreements or marriage contracts, please contact experienced family lawyer Jason P. Howie, online or at 519-973-1500.

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