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Spouses may enter into a domestic contract addressing spousal support upon divorce. Generally, the parties have discretion to establish their own priorities and resolve family issues. However, courts have several avenues to set aside an agreement or to override spousal support terms. However, different considerations arise depending on whether an agreement is set aside pursuant to the Family Law Act or whether a court intervenes because the support terms fail to meet the objectives of the Divorce Act.
A Long Marriage, Unequal Earning Power, and a Contested Separation Agreement
In Davies v. Jane, the husband appealed an order setting aside a separation agreement. The parties separated after a 21-year marriage. At the time of separation, the husband was 55, while the wife was 52. For the majority of the relationship, the husband was the only income earner, while the wife was primarily responsible for raising the parties’ four children. After the separation, they signed two separation agreements. The first agreement provided that no spousal support was payable. However, a second agreement was signed. This time it provided that support would be payable in the amount of $28,800 each year until the wife: (a) remarried; (b) cohabits in a relationship resembling marriage for one or more periods totalling three years; or (c) dies. It also provided that the husband’s obligation to provide support would be suspended “while the wife cohabits in a relationship resembling marriage”.
The parties were facing financial challenges at the time of the separation. Their home was at risk of foreclosure, and to secure financing, the husband sought a separation agreement with minimal spousal support obligations. Importantly, the lawyer handling the transfer of the house also prepared the separation agreements for both parties. Eventually, the lawyer became uncomfortable with the conflict of interest and agreed only to represent the wife. At trial, the judge set aside the second agreement, citing the wife’s lack of understanding of it. The husband appealed, alleging that the trial judge committed several errors.
Divorce Act Permits Courts to Override Negotiated Support Terms
The trial judge relied on section 56(4) of the Family Law Act to set aside the second agreement. That section permits a court to set aside a domestic contract in certain circumstances, including:
- if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the contract was made;
- if a party did not understand the nature or consequences of the domestic contract; …
On review, the Court of Appeal agreed that there were flaws in the negotiation process, but concluded that the wife was not under duress and that any flaws did not nullify the parties’ consent or invalidate the agreement. The Court agreed the judge erred in setting the agreement aside on this basis. However, the Court agreed with the judge’s alternative reason for setting the second agreement aside on the basis that it did not substantially comply with the objectives of the Divorce Act. As the Court noted, different considerations arise to justify intervening with negotiated support terms under the Divorce Act.
In Faiello v. Faiello, the Court recognized that the Divorce Act does not grant authority to set aside separation agreements. However, section 15.2 allows courts to order spousal support as part of a divorce application. Additionally, the existence of a valid separation agreement is one factor courts may consider when deciding whether to award spousal support. Section 56(4) of the Family Law Act focuses on flaws in the formation that may provide grounds for a court to set the agreement aside.
Alternatively, the Court in Faiello confirmed that section 15.2 of the Divorce Act permits courts to look at “both the formation of the contract and all the circumstances at the time of the application, to override the support provisions of an agreement and order support contrary to the agreement”.
Judges Have a Two-Step Inquiry When Reviewing Agreements
The Court turned to the Supreme Court of Canada decision in Miglin v. Miglin, which sets out a two-stage inquiry when a support application is made despite the parties having an agreement in place. The first stage involves courts looking at “the circumstances in which the agreement was negotiated and executed to determine whether there is any reason to discount it”. The Court suggested that judges should consider the parties’ circumstances, including instances of oppression, pressure, or other vulnerabilities, as well as the conditions under which the negotiations were held. The court must also assess the substance of the agreement to assess whether it was in substantial compliance with the objectives of the Divorce Act at the time it was created, which include “an equitable sharing of the economic consequences of marriage and its breakdown”.
If a judge concludes that the conditions under which the agreement was negotiated are satisfactory, they must then proceed to the second stage and examine the agreement’s substance at the time of its enforcement. At this step, the judge considers whether the agreement reflects the parties’ original intentions and substantially complies with the objectives of the Divorce Act. However, in this analysis, the Supreme Court cautioned that the parties have discretion to establish their own priorities, but that the greater the vulnerabilities at the time of contract formation, the more necessary it is to conduct a deeper review at this stage.
Appeal Court Finds the Agreement Did Not Comply With the Divorce Act
In Anderson v. Anderson, the court described the first stage of the Miglin analysis as examining “fairness at the time the agreement was concluded”. In Davies, the trial judge determined that the spousal support terms set out in the agreement failed at the first stage of the Miglin analysis. For the trial judge, the circumstances surrounding the execution did not invalidate the contract. Instead, there was a significant concern that there was no evidence that the wife was not advised of her entitlements when she had health and financial vulnerabilities. And for the Court of Appeal, it was also concerning that the parties had a joint retainer until almost the point of execution. But there was nothing to indicate that the wife was cautioned about the obvious risk of re-partnering with an individual who was not in a position to support her needs.
Overall, the Court found that the second agreement was not in substantial compliance with the objectives of the Divorce Act. In Miglin, the Supreme Court acknowledged that an assessment of compliance with the Act at this stage generally permits “a broader gamut of arrangements than would be the case if testing agreements narrowly against the support order objectives”. However, for these parties, the court did not feel the cohabitation clause could remain effective.
Applying the Divorce Act’s Spousal Support Objectives to Long-Term, Compensatory Claims
Section 15.2(6) of the Act sets out the objectives of a spousal support order, which should:
- recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown.
- apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage.
- relieve any economic hardship of the spouses arising from the breakdown of the marriage.
- in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
When the parties negotiated the second agreement, the wife had not worked outside of the home for more than 20 years. This was also a long-term relationship where the four children were primarily in the wife’s care while the husband was employed. And throughout the marriage, the wife also had multiple chronic illnesses. The Court of Appeal concluded that the wife had a clear compensatory claim for indefinite spousal support, and that her ongoing need was also evident.
Consequently, the Court concluded that in this context, an arrangement where spousal support would be suspended upon cohabitation did not comply with the objectives in the Act. However, this does not mean that the entire agreement is set aside. Instead, the Court found it was appropriate to adjust the parties’ bargain only to the extent that was necessary to bring it into compliance with the Act. Consequently, the Court decided to delete the cohabitation clause.
Johnson Miller Family Lawyers: Providing Trusted Advice on Spousal Support in Windsor-Essex County
Spousal support agreements can have long-term financial consequences, especially if they don’t fully comply with the Divorce Act. If you’re negotiating, enforcing, or challenging a separation agreement, the family and divorce lawyers at Johnson Miller Family Lawyers can help protect your rights and ensure any support arrangement is legally sound. Contact us online or call 519-973-1500 for experienced family law advice in Windsor-Essex County and all surrounding areas.
