A recent Ontario decision provides a good overview of what a court will consider when faced with a request to set aside a marriage contract (commonly referred to as a pre-nuptial agreement or “pre-nup”).
In this case, a wife had requested that the pre-nup she signed with her husband on the day before their marriage be set aside for several reasons, including alleged duress, undue influence, and pressure by the husband.
The parties began to date in December 2005. In April 2006 they agreed to marry, and did so in 2007. The wife was 58 years old at the time, and it was her first marriage. The husband was 78 years old, and it was his third marriage. They had no children together. Prior to their marriage they had signed a pre-nup, which the husband had insisted upon. The pre-nup negotiations had been drawn out over many months, and the parties had postponed their wedding three times as a result.
The parties separated in September 2016. In April 2017, the wife filed an application seeking a declaration that the marriage contract was null and void and requested that it be set aside.
The wife claimed that the terms of the marriage contract were unconscionable and that she had signed it under duress and as a result of undue influence. She further argued that the husband had pressured her into signing the pre-nup when he knew it was “grossly unfair” and that she had received inadequate disclosure from him prior to signing.
Further Details about the Relationship
When the parties first met the wife was employed with the City of Toronto earning $75,000 annually, with an additional income of $39,000 coming from two rental properties that she owned. Shortly after the parties met, the wife took a leave from her position so that the parties could travel extensively, and subsequently never returned to work.
After the parties moved in together, the wife continued to rent out a property that she had previously been renting, and began to rent the home she had been living in prior to meeting the husband. The husband paid all the costs of the matrimonial home.
The parties maintained separate finances during the marriage, sharing only one joint credit card used for combined household expenses. The husband paid for this credit card and gave the wife $3,000 in monthly spending money.
Negotiations over the marriage contract began in October 2006, seven months before the parties married. Changes in favour of the wife were made because of these negotiations.
The final pre-nup stipulated that the wife would receive spousal support and that it would increase with the duration of marriage. Under the agreement, the husband had to pay support in the amount of $12,000 per month for 112 months so long as his income exceeded $1,440,000.
The final pre-nup also stated that If the husband were to predecease the wife, she would be entitled to certain benefits, including a lump sum of $2.5 million (which would be paid regardless of the length of marriage), and the right to continue to live in the matrimonial home, with all expenses paid, for one year.
In addition, the final pre-nup also provided that in the event of separation or death, the property owned by parties would not be subject to equalization of net family property. All property was specifically identified in the pre-nup, with the value of each property item set out in separate schedules for each spouse.
The Position of Each Party
The husband argued that the wife’s lawyer never asked for additional disclosure beyond what had been provided during negotiations. He stated that he had provided the wife with a copy of his 2005 tax return, clearly outlining his income. Moreover, even if an item of disclosure was missing, the details of his wealth had been “clearly revealed” to the wife and she knew that he had significant wealth.
The parties presented conflicting evidence about the wife’s opportunity to review the pre-nup before signing it. The wife argued that she had limited contact with her lawyer because the wife had been travelling frequently with the husband with little or no telephone or internet access. The husband disputed this arguing that in the months leading to the finalization of the agreement the parties had been staying in his home in the Bahamas where there was a computer, internet, a phone, and a fax machine.
The final draft of the contract was finished in February 2007, at which point the husband’s son brought a copy of the agreement to the Bahamas for the wife to review. The husband claims that the wife reviewed the document.
The pre-nup was signed the night before the wedding. The wife claims that this was the first time that she saw a “hard copy” of the marriage contract, and that she could only review it on her Blackberry. She further argued that she did not understand the process of negotiating a marriage contract, and believed that she had no choice but to sign it. She additionally argued that there was no ILA document signed and attached to the contract by either lawyer, and noted that this suggested that she had not received any independent legal advice (i.e. ILA). The lack of ILA allegation was used to support the wife’s overall claim of duress, undue influence, and unconscionability.
The Court’s Decision
There is a two-part test to determine whether a court should uphold an agreement that limits a spouse’s support rights:
- The court must review the circumstances in which the agreement was negotiated and finalized to determine whether there is any reason not to follow it (this includes pressure, an imbalance of power or similar). The court must also determine whether the agreement was in “substantial compliance” with the objectives of the Divorce Act when it was entered into, including whether it reflects and equitable sharing of the economic consequences of marriage.
- The court must assess whether the agreement still reflects the original intentions of the parties and the extent to which the agreement is still in substantial compliance with the objectives of the Divorce Act.
Keeping this two-part test in mind, the court made a number of observations about the pre-nup and the negotiations related to it. For the first half of the above analysis, the court noted:
- The contract had been negotiated over many months. Changes were initially made at the request of the wife, who then had several more months to review the agreement before she was asked to sign the final draft. The process was not rushed, and the wife had ample time to communicate with her lawyer and ask questions;
- The wife received financial disclosure from the husband after the very first draft of the pre-nup was provided to her. The marriage contract listed the husband’s specific assets and values. The court noted that “it had to be very obvious to [the wife] that he was and still is a very wealthy person”. Moreover, the court noted that the wife had many months to ask questions or request further disclosure, but there was no evidence that any such requests were made;
- The wife had alleged that she was unwell and had been taking pain medication for chronic pain when she signed the pre-nup, however, she had provided no evidence of illness or proof that the medication had interfered with her ability to negotiate over several months;
- While the husband had insisted on having a pre-nup, such was his right, and it had always been made clear to the wife that she had ample time to consider her position. Indeed, the wedding had been postponed twice while the parties negotiated the agreement. While the wife may have felt “internal pressure” on the day she signed the pre-nup, the evidence did not create a serious enough issue to set aside the marriage contract;
- At the time it was signed, the pre-nup was in substantial compliance with the objectives of the Divorce Act, and reflected an equitable sharing of the economic consequences of marriage. For the duration of the marriage, the husband was financially responsible for the wife, which allowed her to invest and grow her assets;
- Even if the wife had been “forced” to leave her job, she had received a $3,000/month “allowance” during the marriage. In addition, the husband paid for all her expenses, including extensive travel.
With respect to the second half of the analysis, the court noted:
- The pre-nup continued to reflect the original intentions of the parties was still in substantial compliance with the objectives of the Divorce Act;
- There had been no significant change in the parties’ circumstances, they each retained the property they had entered into the marriage with, and the wife’s assets had actually appreciated;
- The wife did not have to deplete any of her property during marriage because the husband had paid for all her living expenses and travel. With that in mind, she had agreed to spousal support of $12,000 monthly for a fixed period.
The court additionally noted that:
While [the wife] may not be able to pay for the lifestyle that she enjoyed during the marriage, it was obvious when she signed the Marriage Contract that this would be the case. It cannot be said that she is financially disadvantaged. [The wife’s] existing circumstances were reasonably anticipated when she signed the Marriage Contract.
Moreover, this was not an instance where the wife had waived all rights to spousal support in the agreement, nor was it a case where she was financially dependent on the husband, or had lost her source of income. Lastly, the parties had agreed to a specific monthly amount of support for a set period of time, ensuring that the dispute between them was finite.
An experienced family lawyer can help you proactively plan for your future. If you are engaged and planning to get married and are contemplating entering into a pre-nuptial agreement with your partner, or if your partner would like you to sign a pre-nuptial agreement before you get married, contact the team at Borden Family Law in Oshawa. For over 17 years we have helped clients throughout Oshawa, Brooklin, Pickering, Ajax to protect their rights and interests. Call us at 905.576.6090 or contact us below to book your consultation and ask us about flat fees.