Henderson Heinrichs LLP

The Worth of Family Agreements: Cohabitation, Pre-nuptial, and Separation Agreements

Henderson Heinrichs LLP

Written by: Henderson Heinrichs LLP (View All Posts • View Bio) Published: June 18, 2016

Categorized: Agreements, Alberta, Case Analysis, Dispute Resolution, Edmonton.

Cohabitation agreements (also known as adult interdependent partner agreement in Alberta), pre-nuptial agreements, matrimonial property agreements, and separation agreements (“Family Agreements”) are still touchy subjects for couples that are entering a new phase of increased commitment or in the process of separation,

When the subject of Family Agreements comes up in conversation, clients and friends of mine have voiced their concerns that a Family Agreement would reduce their relationship to a legal document that will not stand up in court over time. Clients that are separating do not trust that their former spouse will follow the agreement or that the court will enforce its terms. In other words, they wonder when it comes to Family Agreements, if ‘the juice is worth the squeeze’.

The concern regarding enforceability of a Family Agreement is a matter of law, and thus a suitable subject matter to explore in this blog post. The courts have found Family Agreements to be legitimate means for spouses to arrange their affairs, and are not likely to interfere with a Family Agreement negotiated honestly, with the assistance of proper independent legal advice for each party, and which does not substantially depart from the intention of the law. A notable exception is child support agreements that depart from the Federal Child Support Guidelines, for reasons discussed below.

The law in the province of Alberta clearly respects properly executed Family Agreements between spouses and those between interdependent partners  (aka. common law partners) dealing with property, and spousal support, and less so child support.  Both the Matrimonial Property Act, and Family Law Act contain provisions stating that parties may enter binding legal agreements dealing with issues arising from the breakdown of a marriage or relationship.

Matrimonial Property

The Matrimonial Property Act , Section 37 and 38, allows spouses (married partners) to depart from the presumption of equal division of property upon the breakdown of a marriage as long as the agreement is in writing, and includes written acknowledgement by each person, of the nature an effect of the agreement, possible future legal claims of the spouse, and that the spouse is entering into the agreement freely and voluntarily (without compulsion by the other side).

Spousal Support

The Family Law Act, section 62 allows spouses or adult interdependent partners to enter into agreements (a) where one spouse pays support payments to the other spouse, and (b) one partner agrees to release the other spouse or adult interdependent partner from liability for support. While, an agreement cannot vary an existing court order, a court cannot grant an order that differs from a spousal support agreement where the agreement is executed with independent legal advice,  without coercion, and where no spouse is dependent on government financial assistance.

Child Support

The Family Law Act, Section 53, permits parents to enter into child support agreements but also permits a guardian to apply for a child support order despite a child support agreement existing.

Notably, section 53 of the Act, regarding agreements dealing with child support is stated in weaker terms than the parallel sections dealing with matrimonial property and spousal support. This is because child support is essentially the right of the child and cannot be negotiated away by agreements between parents. As such, any child support agreement that significantly deviates from the legally-binding Federal Child Support Guidelines is likely to be overturned by the court.

Case Law

The leading decision regarding the validity of Family Agreements is Miglin v Miglin, 2003 SCC 24. Miglin changed the approach of the court from previous decisions (the Pelech Trilogy), which had required a radical and unforeseen change in circumstances to overturn a family agreement to a two stage analysis.

The Miglin two-stage analysis requires, first, that the court look at the circumstances in which the agreement was made, accounting for undue pressure from one of the parties, and the involvement of legal counsel. Secondly, the court looks at the substance of the agreement, taking into account whether the agreement substantially complies with objectives of the Divorce Act.

At first glance the Miglin decision appears to weaken the legal authority of Family Agreements, however, this is not necessarily the case where an agreement demonstrates a fair and professional negotiation process, and reasonably drafted terms.

The Court, in both Miglin and the proceeding decision of Hartshorne v. Hartshorne, 2004 SCC 22, stated:

A court should be loathe to interfere with a pre-existing agreement unless it is convinced that the agreement does not comply substantially with the overall objectives… it must look at the agreement or arrangement in its totality, bearing in mind that all aspects of the agreement are inextricably linked and that the parties have a large discretion in establishing priorities and goals for themselves” (para. 84)

The court held firm that the passing of time does not render an agreement invalid, finding that once an agreement has been reached, “the parties are expected to fulfill the obligations they have undertaken. A party cannot simply later sate that he or she did not intend to live up to his or her end of the bargain.”

Alberta courts have not departed from the principles set out in Miglin and Hartshorne, and have focused on the formation of the Agreement, focusing particularly on the circumstance of the formation of a Family Agreement, and ensuring that Independent Legal Advice was adequate.

In Hollingshead v. Hollingshead, 2008 ABQB 659 the court reviewed the circumstances of the formation of a Family Agreement that involved a mature couple in their second marriage, with a duration of 14 years, and no children.  The court upheld the prenuptial agreement between the parties, that maintained an unequal property division, and spousal support terms that were substantially less than the guidelines.

The court considered the formation of the prenuptial agreement, observing that despite unclear recollection of the parties and lawyers involved that each party met with an independent lawyers, after which the draft agreement was amended, and then executed by the parties at a later date.

In contract, the court in Lemoine v Griffith 2014 ABCA 4614 found that that a Matrimonial Property Agreement was invalid in the circumstances, of a 14 year relationship, in which there was no marriage, and one child of. The parties signed a Matrimonial Property Agreement, with a clause stating that the agreement remained in effect regardless of whether the parties ever married. Both parties executed a certificate of independent legal advice.

The court found the agreement of no force or effect due to improper Independent Legal Advice, in circumstance that displayed ‘undue influence’. The court observed that the wife did not have an opportunity to read proposed agreement beforehand, and met with a lawyer retained by her husband for only 15 minutes. The court found, apparently largely on the evidence of the brevity of the meeting, that there was only a brief review of the document and no legal advice given. The wife then executed the agreement in the company of a ‘complete stranger’.

Conclusion

Family Agreements, including prenuptial agreements, cohabitation agreements, adult interdependent partnership agreements, and separation agreements remain subject to review by the court. This is because the court, in family law situations, is especially concerned with achieving an equitable sharing of the economic consequences of marriage breakdown. Nonetheless, this does not mean that Family Agreements that depart from legal presumptions regarding property and spousal support are not worth it or that they do not have legal authority.

Family Agreements that depart from the presumptions of the legislation regarding 50/50 matrimonial property division, and the spousal support advisory guidelines, must demonstrate a fair bargaining process, and independent legal advice that is more than a ‘rubber stamp’.

A spouse or adult independent partner contemplating having a Family Agreement drafted must ensure that the other spouse has ample opportunity to review the proposed Family Agreement and to obtain Independent Legal Advice. Should the other party waive Independent Legal Advice, that waiver should be drafted in such a way that it makes clear the other spouse understands the consequences of the agreement in the event of breakdown of the relationship.

 

 

 

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