In the recent Supreme Court case of Anderson v. Anderson, 2023 SCC 13, the court reviewed the principles upon which courts should consider domestic agreements that do not meet the statutory requirements for presumptive enforceability under provincial family law statutes for the division of property between spouses or adult-interdependent partners.
In Alberta, the division of matrimonial and family property is governed by the Family Property Act (“Act”). This Act sets out the scheme for dividing matrimonial and family property upon the breakdown of a marriage or adult-interdependent relationship. The general rule is that all property acquired during the marriage or adult-interdependent relationship is split equally. However, the Act empowers the court to make an unequal distribution in certain circumstances. One of the factors a court must consider when determining the property distribution is an agreement between the parties to divide their property a certain way.
The Act allows for certain property division agreements made between spouses or adult-interdependent partners to be presumptively enforceable in legal proceedings, if they comply with certain requirements such as making an acknowledgement before a lawyer. The theory is that these formal requirements help to ensure a party is not taken advantage of by the other and that they understand the nature and effect of the agreement.
However, the specific language used in the Act does not restrict courts to considering only domestic agreements compliant with the formal requirements. Therefore the question has arisen “when are non-compliant domestic contracts enforceable under the Act, and what weight should be accorded to them?”
This question was answered in Anderson. James and Diana Anderson were only married for three years, separating in 2015. They had each been previously married and each brought their own property into the marriage. When the marriage broke down, the parties signed a separation agreement which essentially provided that each would keep the property they brought into the marriage, except for their house and household goods, and give up their rights to the other person’s property. This agreement did not comply with the formal requirements of the Saskatchewan Family Property Act for domestic property agreements; and therefore the trial court ruled that it was nonbinding and accorded it no weight.
The Supreme Court ruled that the trial judge had erred, and set out the following factors to consider whether a non-compliant domestic agreement should be considered:
- Does the agreement comply with the ordinary contract law principles?
- If so, is there any evidence-based concerns about the agreement’s formation in light of the governing legislation, such that it would be unfair to consider it, such as undue pressure, exploitation of a power imbalance, or other defect from preventing the parties from understanding the contract?
If the above test is satisfied, then the agreement merits “serious consideration.” However, the weight given by the court to the substance of the agreement will be determined by how it accords with what is fair and equitable in the circumstances. The question the court will ask itself is “does the parties’ autonomous choice fall within a range and fair and equitable possibilities contemplated by the governing legislation?” If so, the court may adopt all or part of the agreement when making a property order.
In Anderson, the Supreme Court decided the parties’ agreement was enforceable and was fair and equitable in the circumstances. They decided to enforce it according to its terms and also awarded the husband an additional equalization payment from the wife to deal with the house and household goods. The Supreme Court concluded:
“The parties were best positioned to organize the limited family property resulting from their short marriage and, given all the circumstances, the most fair and equitable solution is for their simple agreement to be given effect.”
Obviously, the word of caution to parties entering into such non-compliant domestic property agreements is that there is no guarantee they will be enforced or followed by the court. One would likely regret dividing their property on the back of an envelope with their partner, only for that partner to then claim a different division of the property, and the to court rule that the back-of-the-envelope agreement was of no force or effect. The prudent course of action is to make any agreement compliant with the governing legislation so that one knows it will be presumptively enforceable at court. An ounce of prevention is worth a pound of cure.
By Dakota Bailey
Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.
