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House divided in half by hand

The Latest from the Supreme Court on Domestic Contracts

While we think of it in more romantic terms, marriage is effectively a contract, an agreement to be bound. To have and to hold, in sickness and in health…these are terms of the contract that bind spouses together. There are also legal documents that accompany marriage, such as the marriage license that binds the couple together under provincial law.

Thus naturally, if a couple decides to separate, there are legal documents too. In situations where one spouse accumulated significantly more assets during the marriage than the other, or if there were children, there will likely be agreements about division of property and payment of support. Yet who should be involved in making those agreements?

In a recent Supreme Court case, a couple wanted to make their separation as simple as possible. They did not want a complicated family law battle and wished to do things in a fairly straightforward manner. So, should their wishes be invalidated just because they didn’t involve lawyers or the court system?

The Case

In Anderson v. Anderson, 2023 SCC 13, Diana and James Anderson were a Saskatchewan couple married for three years before they separated in 2015. It was neither one’s first marriage, and both had considerable assets. They met with friends who suggested that they reconcile, but when that was impossible, Mrs. Anderson drafted a simple homemade agreement. While she offered Mr. Anderson to seek legal counsel, he instead signed immediately without any independent legal advice or an exchange of financial disclosure. 

Their agreement provided that each party’s assets and debts would remain separate except for, amongst other smaller things, the matrimonial home. The parties contributed to the matrimonial home equally and would incur a loss if forced to sell. As a result, they agreed to leave the matrimonial home issue to a later date. 

In law, this is known as a ‘loose end’ between the parties – essentially a piece of unfinished business. Ms. Anderson then involved a lawyer in an attempt to tie up this loose end, being the matrimonial home, and that’s when the situation began to get complicated. 

When communication between the couple broke down, Ms. Anderson filed a petition for divorce. Mr. Anderson then contested the divorce and claimed that he had signed the agreement without any independent legal advice and under duress, and thus the agreement was invalid.

At trial, Mr. Anderson was successful when the trial judge determined the agreement was unenforceable. The trial judge found the lack of independent legal advice to be “most troubling.”  In the division of family property, the trial judge found that Ms. Anderson owed Mr. Anderson an equalization payment plus an RRSP rollover or a further cash payment, with a combined total of about $90,000.

The Saskatchewan Court of Appeal, however, disagreed. They found that under Saskatchewan’s Family Property Act, independent legal advice is not a requirement, and the contract between the former spouses was a contract rather than a simple agreement. The Court of Appeal used the valuation date of Ms. Anderson’s divorce petition, and found that Mr. Anderson instead owed her nearly $5,000. The husband then appealed to the Supreme Court. 

The Ruling

The Court’s analysis largely depended on how to apply the framework from an earlier 2003 Supreme Court case known as Miglin. In that decision, the parties had reached a private agreement which included a comprehensive release of spousal support. The wife then brought a court application seeking spousal support. While independent legal advice is not mandatory, the analysis from Miglin emphasizes the importance of independent legal advice in the construction of domestic contracts or separation agreements. In short, a party needs to be fully aware of what they are agreeing to, or what they are agreeing to give up. 

Another added complexity is the discrepancy in federal and provincial laws. Spousal support is dealt with directly under the Divorce Act, which is federal legislation, however it is provincial legislation that deals with division of property. Ultimately, the Court ruled that while the principles in Miglin were helpful for interpretation, it is more appropriate as a guidepost than as a strict framework in all cases. 

Here, the Supreme Court agreed with the Court of Appeal and found that the simple homemade agreement in question was, in fact, binding. The provincial statute, which dealt with property, did not require independent legal advice. There was no issue with choosing to sort out the matter of the house at a later date. Moreover, while the parties did not do formal financial disclosure, there was no evidence that they had purposefully concealed information from one another. 

The Outcome

The case marks another milestone in the assessment of domestic contracts done privately between the parties. While the provincial laws of Saskatchewan did not require independent legal advice or financial disclosure, the agreement was also upheld because the parties behaved reasonably during the drafting of the agreement, and more or less treated each other fairly. Had they not approached things equitably, the outcome might well have been different. Not having independent legal advice and financial disclosure and resorting to a homemade agreement increases the risk that the agreement could be set aside by a court. 

The greater risk here though is the use of homemade agreements. Often parties in family law will try to save funds by taking a ‘DIY’ approach, especially if they’re still on good terms with a former partner. The thought process is usually that lawyers will be expensive, and sour a good working relationship, so leaving lawyers out can save on both time and hurt feelings. Instead, doing things privately between each other would be simpler, less expensive, and avoid any airing of dirty laundry. 

Unfortunately, that approach is often counterproductive. These agreements often contain loose ends similar to the Anderson’s, and those loose ends will usually require lawyers’ and sometimes even judges’ intervention. The resulting price tag on making these agreements incomplete, or even incorrect, can often be higher than just hiring lawyers to assist with drafting and negotiations in the first place when both parties are working well together. 

That’s why we’re here to help. We routinely provide advice and help draft domestic contracts and separation agreements for former partners throughout the Cambridge, Kitchener, and Waterloo Region.  We have extensive experience in family law and know how to strongly advocate for our clients, while still complying with the requirements of the law and fostering relationships. Contact us today to set up a consultation.