Setting aside BC separation agreements for significant unfairness is an area of law our top MacLean Law lawyers get asked about frequently. In today’s blog by Fraser MacLean, we explain the rules.
For our blog on common law grounds codified in the FLA used to set aside agreements for duress, non-disclosure, misunderstandings and unconscionable results click here.
Setting Aside BC Separation Agreements For Significant Unfairness 604 602 9000
Introduction
In the recent case of Schrader v. Schrader 2025 BCCA 50, the BC Court of Appeal clarified when courts can set aside separation agreements under the “significant unfairness” test in the Family Law Act. The court upheld a trial judge’s decision to set aside a separation agreement where property values had dramatically changed shortly after the agreement was signed.
The Legal Standard: Significant Unfairness
Section 93(5) of the Family Law Act gives courts discretion to set aside property division agreements that are “significantly unfair.” This standard is more stringent than mere “unfairness” and requires persuasive reasons to depart from equal division.
Setting aside agreements respecting property division
93 (1)This section applies if spouses have a written agreement respecting division of property and debt, with the signature of each spouse witnessed by at least one other person.
(2)For the purposes of subsection (1), the same person may witness each signature.
(3)On application by a spouse, the Supreme Court may set aside or replace with an order made under this Part all or part of an agreement described in subsection (1) only if satisfied that one or more of the following circumstances existed when the parties entered into the agreement:
(a)a spouse failed to disclose significant property or debts, or other information relevant to the negotiation of the agreement;
(b)a spouse took improper advantage of the other spouse’s vulnerability, including the other spouse’s ignorance, need or distress;
(c)a spouse did not understand the nature or consequences of the agreement;
(d)other circumstances that would, under the common law, cause all or part of a contract to be voidable.
(4)The Supreme Court may decline to act under subsection (3) if, on consideration of all of the evidence, the Supreme Court would not replace the agreement with an order that is substantially different from the terms set out in the agreement.
(5)Despite subsection (3), the Supreme Court may set aside or replace with an order made under this Part all or part of an agreement if satisfied that none of the circumstances described in that subsection existed when the parties entered into the agreement but that the agreement is significantly unfair on consideration of the following:
(a)the length of time that has passed since the agreement was made;
(b)the intention of the spouses, in making the agreement, to achieve certainty;
(c)the degree to which the spouses relied on the terms of the agreement.
(6)Despite subsection (1), the Supreme Court may apply this section to an unwitnessed written agreement if the court is satisfied it would be appropriate to do so in all of the circumstances.
Three key factors must be considered:
- The length of time since the agreement was made
- The intention of the parties to achieve certainty
- The degree to which parties relied on the agreement’s terms
As the Court noted, significant unfairness “represents a high threshold for setting aside an agreement.”
The Schrader Case: Property Values and Unfairness
In Schrader v. Schrader, the parties signed a separation agreement in May 2021 where Ms. Klyne would receive $200,000 for her interest in the family residence, believed to be worth approximately $750,000. Just four months later, Mr. Schrader sold the property for $1.18 million.
The Court of Appeal, in upholding the trial judge’s decision, noted the pivotal reasoning: “certainty disappears when the foundation for the Agreement turns out to be inaccurate.” As Justice Abrioux explained in paragraph 14:
“The trial judge identified a two-step process to determine whether to set aside the Agreement:
1) Determine whether there is a basis to set aside the Agreement under s. 93(3)(a)–(d) of the FLA… and, if not,
2) Determine whether the Agreement can be set aside or replaced on the basis of significant unfairness, under s. 93(5)(a)–(c) of the FLA.”
Key Points from the Decision
- Property Values Matter: A substantial difference between the value used in an agreement and the actual market value can render an agreement significantly unfair, especially when parties didn’t know the true value.
- Section 93(5) Factors Are Considerations, Not Determinative Tests: The Court clarified that the three factors in s. 93(5) don’t conclusively determine whether an agreement is significantly unfair. Rather, they’re considerations in deciding whether an unfair agreement should be set aside.
- Market Fluctuations Can Be Relevant: The Court affirmed that increases in property values after an agreement is signed can be an appropriate factor when evaluating fairness.
- Balancing Prejudice: Courts should balance unfairness against prejudice that might result from setting aside an agreement. In this case, Mr. Schrader received credit for renovations he made after the agreement.
Setting Aside BC Separation Agreements For Significant Unfairness 604 602 9000
Conclusion
The Schrader decision provides important guidance on when courts will intervene in separation agreements. While courts prefer to uphold agreements parties have freely entered into, significant unfairness—especially when based on inaccurate property valuations—can justify judicial intervention.
On the main issues, the court upheld the trial judge’s decision to set aside the separation agreement on grounds of significant unfairness. The agreement had allocated Ms. Klyne $200,000 for her interest in their family residence, but the property later sold for $1.18 million. The court found no reviewable error in the judge’s conclusion that the significant discrepancy between the property’s assumed value when signing the agreement and its actual market value rendered the agreement significantly unfair.
For those negotiating separation agreements, this case highlights the importance of current property appraisals and the potential risks when agreements are based on outdated or inaccurate valuations.
Contact us before you sign an unfair separation agreement and if you signed one you think was unfair in terms of disclosure and negotiation or that although fairly negotiated it became unfair on other grounds, call us immediately as time limits apply.
