How To Vary BC Marriage Agreements is a common question our top-rated* Vancouver family lawyers get asked. We have a new BC Family Law Act but given its transition rules, prenups and marriage agreements entered into before March 2013 are governed by the older Family Relations Act. The test under the old act is easier to meet for a successful variation than the new act BUT NOT Automatic. The issue of How To Vary BC Marriage Agreements is complicated and it makes good sense to hire a lawyer like the top rated lawyers* at MacLean Law to help guide you.
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In the recent BC Appeal Court decision in H.S.S. v. S.H.D., the BC Court of Appeal reviewed the two-step test for how to vary BC Marriage Agreements. There are two ways to attack marriage agreements but in this blog, we focus on varying agreements as opposed to setting them aside for lack of independent legal advice, unconscionability duress or fraud. In HSS v SHD the Appeal court ordered a new trial on the issue of whether the marriage agreement should be varied because a wife had raised children at expense of her career.
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Here is what the Court said on How To Vary BC Marriage Agreements dealing first with the Act itself:
[51] Section 65 is the reapportionment provision. It is found within Part V of the FRA, which has as its purpose division of family assets. It is in Part V that the provision for marriage agreements, the definition of family assets, and the presumption of equal interest in family assets are located.
[52] Section 65 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.
[Emphasis added.]
How To Vary BC Marriage Agreements – The Legal Decisions Setting Out The Proper Approach Call 1 877 602 9900
After setting out the key sections of the FRA the court explained the proepr way for a court to apply the legislation:
[53] Hartshorne is the leading case on the application of s. 65(1) in the case of property covered by a marriage agreement. Therein Justice Bastarache delivered comprehensive reasons setting out the underlying principles of, and appropriate approach to, reapportionment in the case of a marriage agreement. He observed that British Columbia’s legislation with respect to marriage agreements differed from that of other provinces by setting a lower threshold — “fairness” — for judicial intervention in such agreements.
[54] Recognizing this court’s decision in D.K.N. v. M.J.O., 2003 BCCA 502, Justice Bastarache held that marriage agreements must be “substantively fair” at the time when reapportionment applications are made. He wrote:
[43] … The essence of this inquiry is whether the circumstances of the parties at the time of separation were within the reasonable contemplation of the parties at the time the agreement was formed, and, if so, whether at that time the parties made adequate arrangements in response to these anticipated circumstances …
[44] Thus, the determination that a marriage agreement operates fairly or unfairly at the time of distribution cannot be made without regard to the parties’ perspectives … Thus, central to any analysis under s. 65(1) of the FRA is consideration of how accurately the parties predicted, at the time of contract formation, their actual circumstances at the time of distribution, whether they truly considered the impact of their decision and whether they adjusted their agreement during the marriage to meet the demands of a situation different from the one expected, either because the circumstances were different or simply because implications were inadequately addressed or proved to be unrealistic.
[Emphasis added.]
[55] Justice Bastarache concluded that determination of the essential issue — accordance of the parties’ circumstances at distribution with their reasonable contemplation of the same when the agreement was formed — should be addressed in the following two steps.
[56] First, the court must apply the marriage agreement, considering entitlements both under the agreement and from other sources, including spousal and child support. While Hartshorne instructs the court to consider entitlement to spousal support at this stage, it is well settled that property division should be addressed before the quantum of support is fixed: Toth v. Toth (1995), 13 B.C.L.R. (3d) 1 (C.A.); Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314 (C.A.), cited in Hartshorne at para. 55. In other words, the court must consider the opportunity for an award of spousal support at the first stage, but should not settle on the quantum or duration of support. Doing so the court must bear in mind the risk of double recovery explained in Toth by Madam Justice Prowse:
In discussing the relationship between maintenance and the division of property under Pt. 3 of the FRA, it is useful to note that s. 51(e) and (f) of the FRA[here s. 65(1)(e) and (f)], relating to reapportionment of property, incorporate concepts which are also found in the maintenance provisions of both the Divorce Act, 1985 and the FRA. Thus, property division and maintenance are closely intertwined. One advantage of this legislative tie is that s. 51 [here s. 65] may be utilized in the division of property to reflect the relative abilities of the parties to become or remain economically independent and self-sufficient (s. 51(e)) [here s. 65(1)(e)], and the respective capacities and liabilities of the parties (s. 51(f)) [here s. 65(1)(f)]. These concepts are also relevant to determinations of spousal maintenance. The potential pitfall presented by this legislative link between property and maintenance, however, is the danger of double recovery where, for example, property is reapportioned under s. 51 [here s. 65] and then further reapportioned by an award of lump sum maintenance.
[Emphasis added.]
[57] Second, the court must consider the s. 65(1) factors (a) to (f) to determine whether the marriage agreement operates unfairly. The critical question in assessing the operational unfairness of the marriage agreement is whether the current circumstances were within the contemplation of the parties at the time the agreement was made. The burden lies on the party seeking reapportionment to establish the agreement’s division of property would be unfair considering the s. 65(1) factors, and if the current circumstances were previously contemplated, the burden on the proponent of unfairness, says Hartshorne, is heavier. I understand this to mean that where the current circumstances were not as contemplated at the time of making the marriage agreement, the burden to establish unfairness on the path to reapportionment is somewhat lighter. As the Supreme Court held in Hartshorne at para. 47, this “accords with the underlying principle of the FRA, striking an appropriate balance between deference to the parties’ intentions, on the one hand, and the assurance of an equitable result, on the other”.
[58] On finding that the marriage agreement operates unfairly, s. 65(1) empowers the court to divide the family property into shares. Where such a division cannot remedy the unfairness found, s. 65(2) allows the court to order that other property be vested in the other spouse.
[59] Justice Bastarache concluded his discussion on the correct approach to s. 65 in this way:
[67] … However, in a framework within which private parties are permitted to take personal responsibility for their financial well-being upon the dissolution of marriage, courts should be reluctant to second-guess their initiative and arrangement, particularly where independent legal advice has been obtained. They should not conclude that unfairness is proven simply by demonstrating that the marriage agreement deviates from the statutory matrimonial property regime. Fairness must first take into account what was within the realistic contemplation of the parties, what attention they gave to changes in circumstances or unrealized implications, then what are their true circumstances, and whether the discrepancy is such, given the s. 65 factors, that a different apportionment should be made.
[Emphasis added.]
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