Coquitlam Lawyer: Pre-Nup. varied due to rising BC Home Prices.
In this case, an eight-year marriage broke down. Before the marriage, the parties had entered into a contract/agreement regarding the division of their assets which included the family home. The parties’ were married in 2008 - at the summit of the great recession - at a time when property values in BC were lower than the norm.
The wife had relocated from another country to marry her husband; as such, she held a limited amount of fund/assets. Her respondent husband, in contrast, had a significant number of assets as he had resided in BC for some time. The claimant wife brought an action to have the pre-marriage agreement held void due to unconscionability- a legal term used to deem contracts of all sorts, void.
The trial judge disagreed with the claimant wife.
Ultimately, the Court varied some portions of the prenuptial agreement stating that the Trial Judge in this matter failed to account for the unforeseen extraordinary rise in value of the parties’ home over the marriage.
The Court outlined the law in great deal re prenuptial agreements and when/how they will be deemed to be “unconscionable”. In canvassing the law re the above, the Court stated as follows:
[15] In summary, there are two stages of analysis. The first stage considers the circumstances at the time the agreement was entered into, to determine whether the agreement should be set aside as unconscionable. If the agreement is found to be enforceable, the second stage considers the fairness of the operation of the agreement as at the time of the marriage breakdown.
[16] Where the circumstances of the making of a marriage agreement are challenged as unconscionable, thereby rendering the agreement unenforceable, the leading cases are Miglin v. Miglin, 2003 SCC 24, and Rick v. Brandsema, 2009 SCC 10.
[17] There are two parts to the first stage in the analysis as to the enforceability of the agreement. The first requires the court to consider the circumstances under which the agreement was negotiated and executed. A court may intervene to override a domestic contract where circumstances of vulnerability or a fundamental flaw in the negotiation process vitiates the bargaining process. The court must be “alive to the conditions of the parties, including whether there were any circumstances of oppression, pressure, or other vulnerabilities”: Miglin at para. 81.
[18] Independent legal advice can assist in mitigating against vulnerabilities. When it does so, the court may consider the agreement as reflecting the parties’ mutual intentions: Miglin at para. 83.
[19] However, independent legal advice is not a complete answer and does not always mitigate against vulnerabilities. For example, in Brandsema, the wife was vulnerable due to mental instability and a historic power imbalance in the relationship, as well as due to the lack of full disclosure by the husband at the time of the negotiation and execution of the separation agreement. The Court agreed with the trial judge that these vulnerabilities were not mitigated by the independent legal advice that had been provided to the wife. The Court held that there is a duty on spouses to make full and honest disclosure of relevant financial information when negotiating separation agreements. Due to her psychological state, which was known to her husband, the wife was unable to make use of her legal assistance. The Court restored the trial judge’s decision, finding the separation agreement unconscionable and therefore unenforceable.
[20] A second part of the first stage analysis of the enforceability of a marriage agreement, as at the time it is entered into, requires considering whether the agreement is consistent with the objectives of the governing legislation: Miglin at para. 84; Brandsema at para. 47; Nicholl v. Nicholl, 2020 BCCA 173 at para. 30.
[21] If the agreement is set aside as unconscionable, the statutory regime then applies to the division of property between spouses. Under the FRA, this starts from the presumption of equal division of family assets, a presumption that can only be displaced by demonstrating that equal division would be unfair considering the factors set out in s. 65(1) of the FRA: S.B.M. v. N.M., 2003 BCCA 300 at para. 23.
[22] Presuming that an agreement between spouses for the division of property upon marriage breakdown is not set aside as unconscionable and is found to be enforceable, the second stage of analysis requires looking at the operation of the agreement after marriage breakdown, at the relevant time of the application for reapportionment of property. Here the governing test is fairness of the operation of the agreement, examined through the factors set out in s. 65(1) of the FRA.
[23] This analysis does not start from a presumption that equal division of family assets would be fair but from a presumption that the division under the agreement is fair, unless otherwise shown: H.S.S. v. S.H.D., 2018 BCCA 199 at para. 71.
[24] Section 65 of the FRA gives a judge discretion to make an order for division of property that is at variance from that provided for in the agreement on the basis that the operation of the agreement would be unfair. It provides:
65 (1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to
(a) the duration of the marriage,
(b) the duration of the period during which the spouses have lived separate and apart,
(c) the date when property was acquired or disposed of,
(d) the extent to which property was acquired by one spouse through inheritance or gift,
(e) the needs of each spouse to become or remain economically independent and self sufficient, or
(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,
the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.
(2) Additionally or alternatively, the court may order that other property not covered by section 56, Part 6 or the marriage agreement, as the case may be, of one spouse be vested in the other spouse.
[25] The question of fairness is examined as at the time of the triggering event under the FRA, which in this case was at the time of trial.
[26] The leading decision on the approach to considering whether an agreement would be unfair in its operation at the time of trial, pursuant to s. 65 of the FRA, is Hartshorne v. Hartshorne, 2004 SCC 22. In summary, this stage of analysis requires the judge to first consider what the result at trial would be if the terms of agreement were applied. Secondly, the judge must consider the factors in s. 65(1) to determine whether the agreement operates unfairly, considered in the context of whether the parties’ current circumstances were in their contemplation at the time the agreement was entered into: Hartshorne at paras. 43–47; Santelli at para. 72. This latter stage of the analysis also considers whether the agreement operates in a way that reflects the objectives of the governing legislation: Miglin at para. 87; Nicholl at para. 30.
[27] Where the current circumstances were not previously contemplated, the burden of establishing that the agreement operates unfairly, justifying a reapportionment of property division, is somewhat lighter: H.S.S. at para. 57. Where the current circumstances were in the parties’ contemplation at the time the agreement was made, the burden to establish that the agreement is unfair is heavier: Hartshorne at para. 47. The goal is to strike an appropriate balance between deference to the parties’ intentions and the assurance of an equitable result: H.S.S. at para. 57, citing Hartshorne at para. 47.