| Prenup | Prenuptial Agreement Forms : how can | | | | legal advice, she chose not to. As held in |
| they be challenged? | | | | Beyrouty, a court should be loathe to set aside a |
| | | | | domestic contract where a party chose not to |
| Please note that the information provided herein is | | | | seek independent legal advice. |
| not legal advice and is provided for informational | | | | 191 The position of the parties at the date of |
| and educational purposes only. If you need legal | | | | separation is not a significant departure from the |
| advice with respect to getting a prenuptial | | | | reasonable expectations each party would have |
| agreement, you should seek professional | | | | had at the time the contract was negotiated. I |
| assistance (e.g. make a post on Dynamic | | | | find that Mrs. Loy's lack of employment is not |
| Lawyers). We have Toronto, Ottawa, Hamilton, | | | | related to the marriage or the separation but is of |
| Brampton, Mississauga and other Ontario lawyers | | | | her own choosing. No explanation was provided as |
| registered to help you. We will soon be offering | | | | to why she has not become certified in Canada |
| Prenuptial Agreements in our Legal Forms + Video | | | | or why she cannot undertake employment of any |
| Guides section. You can contact me directly if you | | | | kind. |
| need a lawyer. | | | | |
| This is the second of a series of article posts I'm | | | | Financial Disclosure |
| writing about prenups or prenuptial agreements | | | | 192 Under s. 56(4)(a), an entire contract may be |
| for Ontario. In the first article, I discussed what | | | | set aside if a party has failed to disclose significant |
| they are, when are they used, and what is | | | | assets. Although the disclosure in the marriage |
| required for them to be valid and enforceable. In | | | | contract was not detailed, Mrs. Loy did not seek |
| this article, I'll discuss how they can be challenged. | | | | further disclosure. In fact, Mr. Loy overestimated |
| How can a prenup be challenged? | | | | his net worth in the agreement; therefore, this |
| A Prenuptial Agreement can be challenged in | | | | argument is not persuasive. |
| various ways relating to the substance (i.e. terms | | | | 193 Under s. 56(4)(b), an entire contract may be |
| and conditions) of the Agreement or the process | | | | set aside if a party did not understand its' nature |
| in which it was entered into. For more general | | | | or consequences. Mrs. Loy argues that she did not |
| information about this topic, please refer to the | | | | receive independent legal advice and, hence, could |
| DL Guide entitled "Is My Legal Form Valid and | | | | not understand the contract. However, Mrs. Loy is |
| Enforceable?" that comes with each legal form | | | | an intelligent, educated, businesswoman who had |
| package you purchase. The Ontario Family Law | | | | previous experience with marriage contracts in |
| Act also outlines various ways in which these | | | | her native South Africa. Although she may not |
| Agreements can be challenged by a party. | | | | have been familiar with Canadian law, she did not |
| To begin, a party can make an application to a | | | | seek independent legal advice and signed the |
| court to have a Prenuptial Agreement – in | | | | contract freely. A court should be loathe to set |
| whole or in part – set aside on the basis under | | | | aside a contract when a party did not avail herself |
| section 56(4) that: | | | | of independent advice. |
| (a) a party failed to disclose to the other | | | | 194 The Applicant knew what she was doing |
| significant assets, or significant debts or other | | | | when she relocated herself and her children to |
| liabilities, existing when the domestic contract was | | | | Canada. She knew the income she was giving up |
| made; | | | | by leaving the two businesses behind. The |
| (b) a party did not understand the nature or | | | | Applicant has not attempted to explain why she is |
| consequences of the domestic contract; or | | | | not able to earn any income at all. She was able |
| (c) otherwise in accordance with the law of | | | | to persuade a bank to loan her money to |
| contract. | | | | purchase two condominiums during the marriage |
| In Loy v. Loy, [2008] W.D.F.L. 351, the Ontario | | | | without any financial assistance or backing from |
| Superior Court of Justice reviewed the | | | | Mr. Loy. |
| jurisprudence concerning section 56(4). In that | | | | In Loy v. Loy, Mrs. Loy also challenged the validity |
| particular case, Mrs. Loy had challenged the validity | | | | of the domestic contract on the basis of section |
| of a Marriage Contract (which, like a Prenuptial | | | | 33(4) of the Family Law Act. That section says |
| Agreement, is called a domestic contract) which | | | | that a Court may set aside a provision for |
| she had entered into. The Court found no | | | | support or a waiver of the right to support in a |
| grounds to set aside that domestic contract. | | | | Prenuptial Agreement and may set support: |
| Here is the Court's reasoning under section 56(4): | | | | (a) if the provision for support or the waiver |
| Section 56(4) | | | | of the right to support results in unconscionable |
| 174 This section of the Family Law Act gives a | | | | circumstances; |
| court the power to set aside a provision or an | | | | (b) if the provision for support is in favour of |
| entire agreement, if it falls within one of the | | | | or the waiver is by or on behalf of a dependant |
| enumerated categories. Mrs. Loy has submitted | | | | who qualifies for an allowance for support out of |
| that the domestic contract in this case should be | | | | public money; or |
| set aside due to a lack of financial disclosure and a | | | | (c) if there is default in the payment of |
| lack of independent legal advice. She also submits | | | | support under the contract at the time the |
| that Mr. Loy pressured her to sign the contract | | | | application is made. |
| and that she did so under duress. Duress would | | | | Once again, however, the Court disagreed with |
| be a factor the court could consider under section | | | | Mrs. Loy and found no reason to set aside the |
| 56(4)(c) as otherwise in accordance with the law | | | | provision of support in the domestic contract |
| of contract. | | | | before it. Here is the Court's reasoning with |
| 175 In Hartshorne, (2004), 47 R.F.L. (5th) 5 | | | | respect to section 33(4): |
| (S.C.C.), the Supreme Court of Canada reiterated | | | | Section 33(4) |
| that the approach to be taken in determining the | | | | 162 Section 2(10) of the Family Law Act provides |
| weight to be accorded to an agreement is the | | | | that a contract is determinative of the rights |
| two-stage analysis laid out in Miglin, 2003 SCC 24, | | | | between the parties unless the Act provides |
| and, further, that there is no "hard and fast" rule | | | | otherwise. Section 33(4) is one of the ways |
| regarding the level of deference accorded to | | | | that the Act "provides otherwise". Under this |
| marriage agreements as compared to separation | | | | section, a court may not set aside an entire |
| agreements. | | | | agreement; rather, only a provision for support or |
| 176 In Rosen, (1994), 3 R.F.L. (4th) 267 (Ont. | | | | a waiver of the right to support may be |
| C.A.), the Ontario Court of Appeal confirmed that | | | | overruled. Since s. 33(4) is concerned only with |
| courts do not have a general discretion to set | | | | support, the property arrangement in the |
| aside contracts that appear to be unfair. It is only | | | | agreement cannot be altered [footnote: In fact, if |
| where the bargain reaches the level of | | | | the domestic contract is held to be valid (i.e. not |
| unconscionability that the contract should be set | | | | set aside), then a court cannot alter the property |
| aside. | | | | provisions since there is no power to do so in the |
| 177 In LeVan, (2006), 82 O.R. (3d) 1 (Ont. S.C.J.), | | | | Family Law Act]. |
| Backhouse J. held that the proper approach under | | | | 163 The relevant subsection in this case is s. |
| s. 56(4) is to first determine if a claimant can | | | | 33(4)(a), that is, "the provision [...] results in |
| bring him or herself within one of the enumerated | | | | unconscionable circumstances". |
| subsections. If the claimant is successful, then it | | | | 164 Scheel v. Henkelman, (2001), 52 O.R. (3d) 1, |
| must be determined whether the court should | | | | 11 R.F.L. (5th) 376 (Ont. C.A.), a decision of the |
| exercise its discretion in favour of setting the | | | | Ontario Court of Appeal, discussed several |
| contract aside. | | | | important aspects of s. 33(4)(a). First, the Court |
| Failure to Disclose | | | | of Appeal held that the section is directed only to |
| 178 Under subsection 56(4)(a) if substantial assets | | | | unconscionable circumstances and not entire |
| or liabilities were not disclosed, then a court has | | | | agreements: |
| discretion to set aside the agreement. In LeVan, | | | | The use of the phrase "results in" in s. 33(4)(a) |
| Backhouse J. held that this section places a | | | | means that the subsection is not directed to |
| positive duty on every spouse to make complete, | | | | unconscionable agreements, but to unconscionable |
| fair and frank disclosure of all financial | | | | results of a provision waiving support. An |
| circumstances before the parties enter into the | | | | agreement which was fair and reasonable when it |
| contract. Notwithstanding this requirement, not | | | | was signed, may, through circumstances that |
| every breach will result in setting aside the | | | | occur in the future, result in unconscionable |
| agreement. Justice Backhouse, relying on Dochuk | | | | circumstances at the time of a support application. |
| v. Dochuk, (1999), 44 R.F.L. (4th) 97 (Ont. Gen. | | | | 165 The Court discussed the meaning of |
| Div.) and Demchuk v. Demchuk, (1986), 1 R.F.L. | | | | "unconscionable" in the subsection. Adopting the |
| (3d) 176 (Ont. H.C.) set out the factors to be | | | | discussion of the Ontario High Court in Newby v. |
| taken into consideration when exercising judicial | | | | Newby, (1986), 56 O.R. (2d) 483 (Ont. H.C.), it was |
| discretion, including whether: | | | | held to mean "shocking to the conscience of the |
| (a) there has been concealment of the asset or | | | | Court". The factors to be considered in |
| material misrepresentation; | | | | determining whether unconscionable circumstances |
| (b) there has been duress, or unconscionable | | | | have resulted are: |
| circumstances; | | | | (a) the circumstances surrounding the execution |
| (c) the petitioning party neglected to pursue full | | | | of the agreement, including the fact that each |
| legal disclosures; | | | | party was represented by competent counsel, |
| (d) the petitioning party moved expeditiously to | | | | the absence of any undue influence, the good |
| have the agreement set aside; | | | | faith and the expectations of the parties; |
| (e) the petitioning party received substantial | | | | (b) the results of the support provisions of the |
| benefits under the agreement; | | | | agreement, including any hardship visited upon a |
| (f) the other party has fulfilled his or her | | | | party; and |
| obligations under the agreement; | | | | (c) the parties' circumstances at the time of the |
| (g) the non-disclosure was a material inducement | | | | hearing including their health, employability and |
| to the aggrieved party entering into the | | | | ability to maintain their life-style. |
| agreement. | | | | Also, blameworthy conduct may be considered by |
| 179 In Baxter v. Baxter, (2003), 41 R.F.L. (5th) 23 | | | | the Court. |
| (Ont. S.C.J.), similar to LeVan, a list of factors | | | | Examples of Cases Decided Under s. 33(4)(a) |
| relevant to the court's discretion in setting aside | | | | 166 In Scheel, the applicant woman was living on |
| an agreement due to lack of financial disclosure | | | | a meagre monthly pension following the breakup |
| was enumerated: | | | | of her 11-year Prenuptial with the respondent, |
| 1. Whether the funds existed at the time of the | | | | who had assets approaching $3 million. The Court |
| signing of the agreement; | | | | of Appeal held that it was clear the woman was |
| 2. Whether the party seeking to set aside on this | | | | enduring significant economic hardship and that the |
| basis knew the facts were different than originally | | | | man had the ability to support her. Give the |
| stated but decided not to inquire further about | | | | relative circumstances of the parties, it would be |
| details, or neglected to pursue full legal disclosure; | | | | shocking to the conscience to require the woman |
| 3. Whether there was concealment or | | | | to live on her modest pension. The Court |
| misrepresentation; | | | | awarded the woman monthly, indefinite support. |
| 4. Whether there was duress, or unconscionable | | | | 167 In Mongillo v. Mongillo, 2007 CarswellOnt 2731 |
| circumstances; | | | | (Ont. S.C.J.), a recent case concerned with s. |
| 5. Whether the non-disclosure was material; how | | | | 33(4)(a), Wood J. determined that the |
| important would the non-disclosed information | | | | circumstances at the time of application were not |
| have been to the negotiations; | | | | so extreme as to be unconscionable. Even though |
| 6. Whether the agreed-upon terms are reasonable | | | | the wife was unable to earn any significant |
| and fair; would they have been different had all | | | | amount of money due to ongoing health problems |
| the facts been known; | | | | and had been influenced by the husband's father |
| 7. Whether the request to set aside is made | | | | during the negotiations, the waiver of spousal |
| expeditiously. | | | | support had not caused the degree of hardship |
| | | | | that one would expect. Indeed, the wife had |
| Examples of Cases Decided Under s. 54(4)(a) | | | | received a gift of one-half the value of a home |
| 180 In Baxter, the husband had disclosed the | | | | from the husband's father and the option was |
| existence of shares to his wife during settlement | | | | available to free up this capital. Justice Wood also |
| negotiations, and provided a valuation of the | | | | reiterated that simply because unforeseen |
| shares as of the date of separation; however, he | | | | circumstances have caused hardship to one party |
| did not disclose that they had been sold for $2.95 | | | | does not mean that a properly negotiated |
| million post-separation. Justice Olah held that while | | | | domestic contract shall be overridden by s. 33(4). |
| the sale would not effect the net equalization | | | | A review of Scheel and Desramaux v. |
| payment, it was relevant to the determination of | | | | Desramaux, (2002), 216 D.L.R. (4th) 613 (Ont. |
| child and spousal support. In light of the provision | | | | C.A.) (wife forced to live on savings as she was |
| in the minutes of settlement that the division of | | | | limited to baby-sitting to support herself. The |
| property and quantum of child support were | | | | agreement for time-limited support was premised |
| "inextricably intertwined", the agreement was set | | | | on the assumption that she would be |
| aside for non-disclosure. | | | | self-sufficient within five years, which was |
| 181 In LeVan, the husband had deliberately failed | | | | unrealistic and had not occurred) led Wood J. to |
| to disclose his income and assets and | | | | conclude that: |
| misrepresented the purpose and extent of the | | | | In each of these decisions, the Court of Appeal |
| contract to the wife. Additionally, the husband had | | | | took into account the present circumstances of |
| interfered in the wife's receipt of independent legal | | | | the parties. In each case, it also clearly took into |
| advice. Because of the cumulative weight of all | | | | account in [sic] the conduct of the parties while |
| the factors, Backhouse J. exercised her discretion | | | | they were together and subsequent to their |
| to set aside the marriage contract. | | | | separation. In each case, the party seeking |
| 182 In Armstrong v. Armstrong, [2007] W.D.F.L. | | | | support was destitute or close to it, and the |
| 255 (Ont. C.A.), the Ontario Court of Appeal | | | | party from whom support was sought lived an |
| reversed the trial judge's findings with respect to | | | | affluent lifestyle and had amassed significant |
| disclosure. The Court held that the wife was | | | | assets. As well, in each case, the court found |
| aware of the husband's assets and had as much | | | | some element of blameworthiness in the conduct |
| ability to value them as he did, therefore there | | | | of the party from whom support was sought. |
| was no ground upon which to set aside that part | | | | 168 The provision waiving support in the Loy |
| of the agreement. | | | | marriage contract is not "shocking to the |
| 183 The financial disclosure in the Loy marriage | | | | conscience of the Court". The parties had both |
| contract was not detailed and contained only | | | | been married before and both had children from |
| estimates as to "global net worth" for each party. | | | | their first marriage. Each party was a successful |
| However, Mrs. Loy did not seek further disclosure, | | | | business person and financially independent. The |
| which, in fact, would have indicated that Mr. Loy | | | | first factor to evaluate is the circumstances |
| had overestimated his worth in the agreement. | | | | surrounding the execution of the agreement. Both |
| 184 The Applicant did not suggest she would not | | | | parties had the opportunity to obtain independent |
| have signed the marriage contract if she had | | | | legal advice prior to signing the contract; there |
| more complete financial disclosure. I accept the | | | | was no interference by Mr. Loy with Mrs. Loy's |
| Respondent's submission that such a position | | | | ability to obtain this advice. Mrs. Loy claims to |
| would not make sense given the fact that more | | | | have been pestered by Mr. Loy to sign the |
| complete disclosure would have revealed that the | | | | agreement; however, she must have realized |
| Applicant had significantly underestimated her net | | | | there was no urgency in signing as a wedding |
| worth while the Respondent had significantly | | | | date had not been set, the parties were living in |
| overestimated his. The Applicant cannot rely on | | | | different countries and her immigration status had |
| her own failure to provide accurate disclosure to | | | | not been resolved. Mrs. Loy had previous |
| set aside the contract. The Respondent disclosed | | | | experience with domestic contracts and is an |
| his income. | | | | educated, intelligent woman who would have |
| | | | | understood the seriousness of the agreement. |
| Independent Legal Advice | | | | She had the means to seek legal advice and |
| 185 The Family Law Act does not require | | | | chose not to, for whatever reason. |
| independent legal advice a prerequisite to the | | | | 169 The financial circumstances of Mrs. Loy at the |
| formation of a domestic contract, nor is it a | | | | time of hearing are not clear. She states she has |
| requirement at common law: Somerville v. | | | | not looked for work or received any income |
| Somerville, [2005] W.D.F.L. 1957 (Ont. S.C.J.). | | | | other than the temporary spousal support since |
| Rather, independent legal advice is closely related | | | | separation. She provided no explanation for why |
| to s. 56(4)(b), under which a marriage contract | | | | she cannot seek some employment. She has not |
| may be set aside if a party did not understand | | | | taken any steps since separation to become |
| the nature or consequences of the contract. | | | | certified as an accountant in Canada since |
| 186 In Hartshorne, the Supreme Court of Canada | | | | separation. She has taken no steps in Canada to |
| noted that: | | | | upgrade except for two night courses at Wilfred |
| [i]ndependent legal advice at the time of | | | | Laurier University in 1999. She testified she is |
| negotiation is an important means of ensuring an | | | | continuing in her correspondence program and has |
| informed decision to enter an agreement. | | | | nearly completed a Bachelor's degree in |
| 187 In Atkinson v. Atkinson, [1990] W.D.F.L. 1135 | | | | Management. This degree will be her third |
| (Ont. H.C.), Ross J. stated that:in reference to the | | | | post-secondary education program. Yet, she |
| significance of independent legal advice…what | | | | offers no explanation as to why she cannot |
| must be considered is whether the parties freely | | | | secure employment. In fact, she stated in |
| and willingly entered into the bargain. | | | | cross-examination that she has not made any |
| Examples of Cases Decided Under s. 54(4)(b) | | | | efforts to seek employment since the separation |
| 188 In Settle-Beyrouty v. Beyrouty, (1996), 24 | | | | in February 2005. |
| R.F.L. (4th) 318 (Ont. Gen. Div.), the parties | | | | 170 The circumstances that Mrs. Loy claims have |
| executed a marriage contract and each | | | | resulted in financial hardship to her cannot be |
| acknowledged receipt of independent legal advice. | | | | described as unforeseen. She knew what she was |
| The wife alleged in her application for support that | | | | doing when she left South Africa to live in Canada |
| she did not respond truthfully when asked by the | | | | with her children. Mrs. Loy's net worth at the time |
| respondent's lawyer whether she had obtained | | | | of separation was $881,212.00. She had the |
| independent legal advice. She submitted that, as | | | | financial ability to purchase two condominiums |
| she did not receive independent legal advice, she | | | | during the marriage without any financial |
| did not understand the consequences of the | | | | contribution from Mr. Loy. She was able to |
| marriage contract. Justice Dunnet held that courts | | | | persuade a bank to finance these purchases. She |
| should be loathe to set aside an agreement | | | | is not destitute. |
| where a spouse did not avail himself or herself of | | | | 171 I find that there is no blameworthy conduct |
| the opportunity for independent legal advice. | | | | on the part of Mr. Loy with respect to the |
| According to Dunnet J., the wife was intelligent, | | | | execution of the contract. He did not place undue |
| articulate and well-educated. She [was] employed | | | | duress upon Mrs. Loy. I am satisfied that Mr. Loy |
| in a responsible position. I have no doubt that she | | | | and Mr. Lang did everything they could to direct |
| was aware of the nature and contents of the | | | | Mrs. Loy to seek independent legal advice. I |
| contract and she understood them. | | | | accept the evidence of Mr. Lang that he urged |
| 189 In Keough v. Keough,(2005), 248 Nfld. & | | | | Mrs. Loy to seek independent advice from an |
| P.E.I.R. 165 (N.L. T.D.), the Newfoundland and | | | | Ontario lawyer, being aware that she had a sister |
| Labrador Supreme Court determined that an | | | | who practiced law in South Africa. Mrs. Loy's |
| agreement concerning the matrimonial home | | | | evidence is not credible. She states that she did all |
| resulted in inequity for the husband, since it | | | | that she could to retain a lawyer familiar with |
| excluded him from having any interest in the | | | | Ontario law. Her efforts did not have to stop |
| property. The husband had been given an | | | | after she signed the contract. She did not marry |
| opportunity to seek independent legal advice but | | | | Mr. Loy until 5 months after the contract was |
| decided not to pursue it. The Court upheld the | | | | signed. If there was something in the contract she |
| agreement since the husband signed of his own | | | | did not understand when she signed it she had a |
| free will and understood the nature and | | | | lot of time to obtain the advice or information she |
| consequences flowing from the contract. | | | | needed before she married Mr. Loy. As an |
| 190 Mrs. Loy was familiar with domestic contracts | | | | educated and experienced businesswoman Mrs. |
| and the role that legal advice should play in | | | | Loy would know the importance of a contract. |
| executing them, since she had signed an | | | | Whether or not she understood Canadian law is |
| agreement with the aid of a notary public in her | | | | not as significant as the fact that she certainly |
| first marriage. Further, as mentioned above, there | | | | would know that she was signing a document |
| was no urgency in signing the contract as a | | | | that impacted on her future rights and obligations. |
| wedding date had not been set, the parties were | | | | 172 I accept Mr. Loy's evidence that there was |
| living in different countries and her immigration | | | | no urgency to the signing of the contract in |
| status had not been resolved. Mrs. Loy is an | | | | February 1997. |
| educated, intelligent woman who would have | | | | 173 There is no evidence to suggest the parties |
| understood the seriousness of the agreement. | | | | were not equal bargaining partners or that one |
| Although she had the means and time to seek | | | | preyed upon the other. |