Are Vancouver Marriage Agreements Enforceable? The answer is: that depends. Vancouver marriage agreements that are fairly negotiated and that reasonably contemplated how the marriage actually played out are likely to be upheld. Unfairly negotiated agreements or fairly negotiated agreements that did not predict how the marriage developed are likely to be set aside entirely or varied at least in part. In today’s blog, by one of our rising star Vancouver marriage agreement lawyers, Gurdeep Khosa we explain the rules relating to enforcement, variation, or setting aside of marriage agreements. Gurdeep works out of both our Vancouver and Surrey offices.
Are Vancouver Marriage Agreements Enforceable? 604 602 9000
In the recent B.C. Court of Appeal case, Dhaliwal v. Dhaliwal, 2021 BCCA 72, the Court explored whether a marriage agreement entered into before the marriage was enforceable. The case helps you understand how to answer the question: Are Vancouver Marriage Agreements Enforceable? It is important to contact one of our experienced marriage agreement lawyers well in advance of the creation of a marriage agreement to avoid headaches.
The Respondent Husband, H.D. and the Appellant Wife, N.K. were 56 and 43 years old when they married. This was a second marriage for both of them. The parties each had their own career at the time they met. H.D. was a widower who had three children from his previous relationship and N.K. had a 13-year-old son. The parties entered into the marriage agreement on June 18, 2008, were married on June 20, 2008, and separated in March 2016.
The respondent relied on a marriage agreement entered into before the marriage, which provided that each side would keep their own assets and he would pay a fixed lump sum to the appellant to allow her to acquire her own home. The appellant appeals from the trial judge’s refusal to set aside the marriage agreement as unconscionable at the time it was entered into or as unfair in its operation pursuant to the Family Relations Act. The appellant argued that the judge failed to take into account the respondent’s nondisclosure at the time the agreement was entered into and made several other errors.
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The Court of Appeal allowed the appeal in part. The Court of Appeal found that the appellant had not established that the trial judge made errors in finding that the agreement was enforceable at the time the agreement was made. This is the first consideration a court looks at to answer the question: Are Vancouver Marriage Agreements Enforceable? However, the trial judge erred in finding that the agreement was fair in its operation by failing to take into account the unforeseen extraordinary rise in the value of the parties’ home and the respondent’s incomplete disclosure of the value of his assets at the time the agreement was made. This is the second thing a court looks at in answering the question: Are Vancouver Marriage Agreements Enforceable?
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The judge was found to have also erroneously treated spousal support as alleviating the unfairness of the agreement. The appellant has not satisfied the standard for review of the several other findings of the judge that she challenges. Applying the other findings of the judge, the agreement is upheld but varied to increase the lump sum payment by the respondent to the appellant from $450,000 to $525,000.
In addressing whether the trial judge erred in assessing what was in the parties’ contemplation, the Court of Appeal specifically stated that:
[120] It is apparent that the judge overlooked two key facts in reaching her conclusions that the operation of the agreement as at the time of trial was in line with the parties’ original contemplations.
[121] The judge did not consider what was in the parties’ original contemplations with respect to housing costs. The judge did not mention that the basis for the lumpsum payment to the appellant, as stated in the agreement, was to enable the appellant to purchase a home. The judge did not mention the specifics regarding the value of the family home, 4093, which had dramatically increased from a value of $875,000 at the time of the agreement to a value of $1,900,000 at the time of trial. In other words, the family home value increased by just over 100%.
[122] Given the judge’s findings that real estate values had increased “in line with market” during the marriage, this meant that the local residential real estate market had undergone the same remarkable increase in value. There was no evidence or finding that the parties contemplated this when contemplating that the lumpsum payment provided for in the agreement would enable the appellant to acquire a home.
[123] Further, in concluding that the agreement contemplated how the parties’ circumstances would evolve over time, and that their circumstances had remained relatively stable, the judge failed to consider the respondent’s incomplete disclosure of the value of his assets when the agreement was made. In particular, the judge did not consider the wide disparity between the values of the respondent’s assets disclosed in the agreement and the actual total value of his assets at the time.
[124] In the schedules to the agreement, the disclosed net values of the respondent’s assets totalled $1,700,000. In reality, based on the judge’s findings, the net value of the respondent’s undisclosed and disclosed assets as at the time of the agreement was approximately double this.
[125] While the respondent’s incomplete disclosure may not have been such as to establish unconscionability when the agreement was made, the test for establishing unfairness in the operation of the agreement, pursuant to s. 65(1) of the FRA, is a lower threshold: Brandsema at para. 35.
[126] The appellant was new to Canada at the time of the agreement, and at best it could be said she was reliant on the respondent’s good faith in estimating in the agreement the amount of a lumpsum payment to her that on its face was both commensurate with his wealth and substantial enough to go a significant way towards the cost of acquiring a new home. The evidence did not establish, and the judge did not find, that the appellant was ever told the approximate total value of the respondent’s assets when the agreement was made.
[127] Leaving the agreement unaltered would mean that the respondent would be the sole beneficiary of the windfall increase in value of the family home, despite the facts that: the growth in the asset occurred during the marriage; the growth had a disproportionate negative impact on the appellant’s ability to acquire a home; and the respondent has much greater financial security than does the appellant.
[128] The exceptionally large increase in the value of residential real estate in the Lower Mainland over the course of the parties’ marriage, relative to the clear goal of the lumpsum payment provided for in the agreement, is such a significant factor in considering whether the outcome of the agreement operated fairly that it had to be considered by the judge. When the respondent’s failure to fully disclose the total value of his assets, at the time the agreement was made, is also put into the mix, it can be concluded the judge made a palpable and overriding error in failing to find unfairness.
Are Vancouver Marriage Agreements Enforceable? Remember- It Depends!
The Court of Appeal concluded that an appropriate lump-sum amount payable to the appellant would allow her to share in the increase of the family home during the marriage, which would be in keeping with the agreement’s stated intention that the lump sum was intended to assist her in acquiring her own home. The Court of Appeal ordered that a fair remedy that would be consistent with the parties’ intentions and expectations, and with objectives of the FRA would be to increase the lump-sum payment payable by the respondent to the appellant under the agreement from $450,000.00 to $525,000.00.
Meeting with one of our skilled marriage agreement lawyers allows you to understand how to create a fair marriage agreement or to vary or set aside an unfair one. For more general information on marriage agreements and why it makes sense to create a fair one read this article.
