Written on behalf of Long Shariff & Associates
A marriage agreement, commonly referred to as a prenuptial agreement, is a contract made between a couple prior to their marriage, which outlines details about the couple’s finances and other logistics, such as spousal support, should there be a breakdown of their relationship. These matters can also be addressed during a separation in a separation agreement.
However, in certain circumstances, a court may disregard the provisions of these domestic contracts. This article examines whether a pre-nuptial agreement may remove a spouse’s entitlement to spousal support. We also look at a recent decision of the Ontario Superior Court of Justice in which a wife sought interim spousal support, even though a marriage contract purported to waive her claim.
A valid pre-nuptial or marriage agreement (or “prenup”) is a legally binding contract between the two parties getting married. These agreements lay down each party’s rights concerning matters such as the division of property, decisions on certain aspects of child-rearing and spousal support. A similar agreement for unmarried couples is known as a cohabitation agreement.
Prenups can be an important means through which couples can protect their assets and interests in the event of a breakdown of the relationship and can prevent additional confusion or potentially prolonged legal battles. However, as discussed below, courts may still intervene in some circumstances and refuse to recognize the terms of the contract.
Courts generally uphold domestic contracts, particularly when the agreement was negotiated with independent legal advice.
However, a court may refuse to recognize the provisions of a marriage contract in certain circumstances. According to section 15.2 of the Divorce Act, the existence of a marriage agreement is only one factor to be considered in making an order for spousal support.
A court may refuse to recognize the spousal support provisions of a marriage contract after considering two stages:
- The circumstances in which the agreement was negotiated and executed, and whether the terms are in substantial compliance with the objectives of the Divorce Act; and
- The current circumstances of the parties to determine whether the agreement still reflects their original intentions and the extent to which the agreement is still in substantial compliance with the objectives of the Divorce Act.
The objectives of the Divorce Act include recognizing the economic advantages or disadvantages to the spouses arising from the marriage or its breakdown, relieving any economic hardship of the spouses arising from the breakdown of the marriage, and promoting the economic self-sufficiency of each spouse.
In Hutton v Hutton, the parties were married in 1995. In 2005, they started a lumber brokerage business together. The husband held 51% of the shares in the company, with the wife receiving the remaining 49%.
The wife primarily raised the children and managed the house, as well as worked part-time for the business. The husband spent the majority of his time growing the business into a successful enterprise, which funded their “lavish” lifestyle.
The parties had different versions of the events, but in 2013, they signed a marriage contract that froze the value of their interests in the company and resulted in them receiving fixed-value preference shares. Upon separation, the wife was to receive $750,000 for her shares. The common shares representing future growth went to a family trust, of which the wife was not a beneficiary. The contract also provided that in consideration of a lump sum payment of $100,000, the wife waived her spousal support claim.
The parties separated in 2019 and the wife received $850,000. The company shares were valued at $15.8 million in 2018.
The wife sought interim child and spousal support from the court, as well as an order for the sale of the former matrimonial home in Cambridge, Ontario. Spousal support may be paid on an interim basis in advance of the full trial.
Regarding spousal support, the husband argued that the 2013 marriage contract constituted a bar to the wife’s claim.
The wife needed to establish that there was a “significant or serious issue” respecting the circumstances in which the agreement was negotiated and executed, whether the marriage contract was in substantial compliance with the objectives of the Divorce Act, and whether the contract still reflected the original intentions of the parties.
Justice Valente explained that, as this was an interim motion, the wife did not need to prove “a substantial likelihood of success” at trial in order to obtain interim spousal support.
His Honour determined that the circumstances in which the agreement was negotiated and executed did not raise a serious issue as to whether it should be discounted. The wife had obtained legal advice, the husband had provided financial disclosure, and there was no evidence of duress or urgency to sign the contract.
However, Justice Valente decided that there was a serious issue as to whether the marriage contract substantially complied with the objectives of the Divorce Act. His Honour noted that the wife gave up her prior employment to raise the children and assist the husband at the company. While she had lost her income stream, the husband effectively retained the business.
As a result, Justice Valente found that the marriage contract was not a bar to the wife receiving interim spousal support. His Honour awarded $25,500 per month, without prejudice to the outcome at trial and noting that if the marriage contract was later upheld, the wife had sufficient assets to compensate the husband for any overpayment of spousal support.
Contact the family lawyers at Long Shariff & Associates for trusted legal advice regarding marriage agreements
The family and divorce lawyers at Long Shariff & Associates in Markham Stouffville work with each client to ensure they have a full appreciation of the client’s goals before drafting or reviewing a marriage contract. We use our considerable experience in drafting and negotiating contracts to protect our clients’ rights and ensure they understand the implication of each term before signing. To review your prenuptial agreement, separation agreement or cohabitation agreement with a member of our team, please reach out to us online, or call us at 905-591-4545.