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  • Writer's pictureJared Davies, Lawyer

Overturning a marriage contract in family Law pursuant to Torgersrud v. Lightstone, 2023 ONCA 580


Background


In a recent family law case, the Court of Appeal reviewed a decision to overturn two marriage contracts signed in Quebec, which had significant implications for the equalization of property.


The first contract, signed in 1988, was titled "Modification of Matrimonial Property Regime." This document declared the parties as "separate as to property" and essentially renounced their property rights in the event of marriage breakdown. Under Quebec law, this translated to a complete absence of property division upon divorce. Subsequently, in 1990, the couple signed a second Quebec instrument opting out of the family patrimony regime, which divides the net value of family property equally upon marriage dissolution, excluding inheritances, pre-marital property, and gifts.


The parties moved from Montreal to Ottawa, where they lived until their separation in 2015. Following their separation, the wife initiated proceedings to claim equalization under Ontario's Family Law Act (FLA). The husband, however, contended that the Quebec marriage contracts effectively excluded the provisions of the FLA.


Legal Issue


The central issue in this case revolved around the validity and impact of the Quebec marriage contracts on the equalization of property as prescribed by Ontario's Family Law Act (“FLA”).


Do these contracts, which declared the parties as "separate as to property" and renounced property rights, effectively override the FLA's equalization provisions?


Legal Analysis


The application judge found that the Quebec contracts did not supersede the FLA. The contracts did not contain explicit renunciations, releases, or waivers that directly addressed equalization claims. This aligns with jurisprudence, emphasizing a high threshold for out-of-jurisdiction marriage contracts to prevail over the FLA's equalization provisions. However, the Court of Appeal did not comment on this part of the analysis because of the alternative conclusion by the application judge.


In the alternative, the application judge also considered the discretionary power provided by s. 56(4) of the FLA. This section empowers the court to set aside a domestic contract if certain conditions are met, including a failure to disclose significant assets, a lack of understanding of the contract's consequences, or other contractual issues. The Court of Appeal explained:


[12] Section 56(4) provides:


Setting aside domestic contract


(4) A court may, on application, set aside a domestic contract or a provision in it,


(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;


(b) if a party did not understand the nature or consequences of the domestic contract; or


(c) otherwise in accordance with the law of contract. R.S.O. 1990, c. F.3, s. 56 (4).


[13] With respect to s. 56(4)(a), the application judge found, at para. 246, that the husband failed to disclose the value of assets as of the date of the marriage contract, specifically that he was about to receive 1/3 of his mother’s estate (as declared in his financial statement and NFP statement, for a total of approximately $4M). This is not a paltry sum.


[14] The application judge found that the wife “met her onus” under s. 56(4)(b), because she did not understand her entitlements under the law and therefore did not understand what rights she was renouncing in signing the contract. The meetings with the notary were short with little time to reflect, and the instruments did not contain details of her legal entitlements at the marriage breakdown and did not provide detailed waivers and releases which would have directed her to understand what wealth she might otherwise be entitled to share under the governing legislation.


[15] The application judge concluded, at para. 260:


I find that the wife would have rethought her position and what she was giving up if she knew she was renouncing her future rights to a division of property of that magnitude.


In this case, it was found that the husband failed to disclose substantial assets, specifically, a significant inheritance. The wife was unaware of the extent of the husband's financial position at the time of contract execution. Additionally, the contracts did not provide her with a clear understanding of what rights she was renouncing.


The application judge, exercising her discretion under s. 56(4) of the FLA, chose to set aside the contracts. This decision was justified by the husband's failure to disclose substantial assets and the wife's lack of understanding regarding the implications of the contracts. Given the potential magnitude of the husband's earnings from inheritances and the absence of full disclosure, fairness dictated that the contracts be invalidated.


The Court of Appeal did not find any error because these were findings of fact that were entitled to substantial deference. The appeal was dismissed:


[10] We do not need to decide this issue. The application judge’s alternative analysis involves discretionary decisions, which are entitled to deference and disclose no error. Accordingly, regardless of the result on the first issue, the appellant cannot succeed.


Conclusion


This family law case highlights the intricate legal considerations surrounding marriage contracts signed in one jurisdiction but applied in another.


This case serves as a reminder of the importance of full financial disclosure and clarity in marital contracts. It illustrates the court's commitment to ensuring fairness and equity in family law matters, even in the presence of intricate legal contracts.

Comments


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