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Family - Domestic Agreements. Alaei v Alaei
In Alaei v Alaei (Div Court, 2024) the Divisional Court cites leading cases on the enforcement of separation agreements:[16] Mr. Alaei essentially seeks to re-argue the summary judgment motion in this court. He does not challenge that in paras. 61 to 64 of her decision, the Motion Judge recited the correct law to govern enforcement of separation agreements under s. 56 (4) of the Family Law Act, RSO 1990, c F.3. See: Quinn v. Epstein Cole LLP, 2008 ONCA 662 and Armstrong v. Armstrong, 2021 ONSC 5774, at para. 11. . Anderson v. Anderson
In Anderson v. Anderson (SCC, 2023) the Supreme Court of Canada reviewed the law of domestic contracts:[1] In the family law context, private agreements present unique advantages and concerns. On the one hand, individual autonomy to settle domestic affairs should be encouraged, as parties are generally better positioned than courts to understand the distinctive needs and circumstances of their private relationships. On the other, parties to domestic contracts are particularly vulnerable to unfairness and exploitation, given the unique environment in which domestic contracts are negotiated and concluded. As a result, family law legislation typically authorizes judges to review a domestic contract. The degree of deference afforded to a domestic contract under the governing statute often depends on whether it meets statutory formalities, such as whether the parties received independent legal advice.
[2] This appeal raises the issue of how courts should approach and weigh a domestic contract that purports to opt out of a provincial property scheme, but fails to meet the statutory requirements that would entitle it to presumptive enforceability. In particular, this appeal asks whether the analytical framework this Court developed in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 — which dealt with spousal support under the federal Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) — is appropriately applied to such a domestic contract.
[3] This Court’s jurisprudence on domestic contracts, including Miglin, recognizes that the breakdown of a spousal relationship is often wrought with emotional turmoil and can give rise to vulnerabilities that undermine the fairness of domestic contracts. The devastating impact of a separation means that parties to a separation agreement may be “ill-equipped to form decisions of a permanent and legally binding nature” (J. D. Payne and M. A. Payne, Dealing with Family Law: A Canadian Guide (1993), at p. 78, quoted in Miglin, at para. 74). Miglin and the cases that follow it therefore signal to courts to approach domestic agreements with caution and to have regard to important procedural protections that help ensure the deal struck is fair. Moreover, while this Court has long supported the freedom of parties to settle their domestic affairs privately, respect for private ordering cannot be permitted to thwart the public policy objectives enshrined in family law legislation. Therefore, in deciding how much weight to give the agreement, a reviewing judge generally examines both the fairness of the bargaining process and the substance of the agreement, in accordance with the legislative scheme.
[4] Like other provincial family property statutes, The Family Property Act, S.S. 1997, c. F-6.3 (FPA or Act), of Saskatchewan begins from a presumption of equal distribution, but permits spouses to contract out of the scheme in certain circumstances (relevant provisions of the FPA are reproduced in the appendix to these reasons). In particular, the FPA recognizes two types of domestic contracts dealing with family property. “Interspousal contracts” under s. 38 of the Act are presumptively enforceable if they conform to the statutory formalities set out in that provision, including that the parties formally acknowledge that they understand the nature and effect of the terms of the agreement in the presence of independent counsel. Domestic contracts that do not meet the statutory requirements set out in s. 38 may still be considered by a court, and, under s. 40, assigned “whatever weight [the court] considers reasonable”. While the Act begins from a presumption of equal distribution, a written agreement between the parties is an important factor in determining whether departure from equal division is fair and equitable in the circumstances (see s. 21(1) and (3)(a)).
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A. Domestic Contracts: Miglin and Later Cases
[25] A domestic contract is an agreement between spouses designed to organize some aspect of the couple’s affairs, be it child support, custody, spousal support or family property division. The agreement may be concluded at the outset of a spousal relationship, during a spousal relationship, or at the time of separation. Over the past two decades, this Court has interpreted provisions dealing with domestic contracts in a variety of federal and provincial statutes, beginning with Miglin, the decision at the heart of the Court of Appeal’s analysis below. While certain principles of general application emerge from this jurisprudence, the case law also reveals that a statute-specific approach must be taken when considering such contracts.
[26] In Miglin, Bastarache and Arbour JJ., writing for a majority of the Court, adopted a contextual framework to discern the weight to be afforded to separation agreements dealing with spousal support under s. 15.2 of the Divorce Act. Section 15.2(4) directs judges to consider several factors in making a spousal support order, including any domestic agreement, and s. 15.2(6) instructs that a support order should advance certain objectives. The first stage of the Miglin framework examines fairness at the time the agreement was concluded. It proceeds in two parts. First, the court must evaluate the “circumstances surrounding the negotiation and execution of the agreement” to determine whether there were any vulnerabilities or circumstances of oppression that affected the bargaining process (para. 92; see also para. 81). This includes looking to whether the parties had professional assistance, such as legal counsel. Second, the court must assess the substance of the agreement to determine whether it is “in substantial compliance with the general objectives of the [legislation] at its time of creation” (para. 87).
[27] The second stage of Miglin looks again to the substance of the agreement at the time of its enforcement to evaluate whether it still reflects the original intentions of the parties and remains consistent with the objectives of the Act. In essence, a court asks whether changes in circumstances make the agreement unfair to enforce today.
[28] The analysis in Miglin was borne out of the spousal support context and the relevant provisions, objectives and structure of the Divorce Act. As our jurisprudence has since recognized, these origins limit the applicability of the Miglin framework in other legislative contexts.
[29] In Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550, Bastarache J., writing for a majority of the Court, declined to import the Miglin framework to interpret s. 65(1) of the British Columbia Family Relations Act, R.S.B.C. 1996, c. 128, which allowed a court to set aside a presumptively enforceable marriage agreement where division of property would be unfair at the time of distribution (paras. 13 and 42). Bastarache J. held that to adopt “Miglin without qualification would distort the analytical structure” of the B.C. statute (para. 42). In D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231, in considering four cases about retroactive awards for child support, the Court again did not import a Miglin analysis in assessing whether to vary a prior child support agreement between the parties, noting that two of the appeals fell under the Divorce Act, while the other two fell under Alberta’s provincial regime (paras. 50-53). Rather, the Court had regard to the specific scheme set out in the legislation (see paras. 54 and 75-79). Finally, in L.M.P. v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775, this Court declined to apply the Miglin framework to interpret s. 17 of the Divorce Act, holding that the different language employed by Parliament in drafting ss. 15(2) and 17 warranted a different approach (paras. 25 and 28).
[30] Adding to comments from this Court, scholars have also questioned the extension of Miglin’s second stage of analysis to the family property division context. Spousal support is primarily a prospective and ongoing obligation that looks to future value, and is in part based on means and need; “[t]he default assumption is that, spousal support is open to modification in response to changing circumstances” (C. Rogerson, “Spousal Support Agreements and the Legacy of Miglin” (2012), 31 C.F.L.Q. 13, at p. 34; see also Miglin, at para. 209, per LeBel J., dissenting, but not on this point; Droit de la famille — 152477, 2015 QCCA 1618, at para. 16 (CanLII); R. Leckey, “A Common Law of the Family? Reflections on Rick v. Brandsema” (2009), 25 Can. J. Fam. L. 257, at p. 280). The division of family property, by contrast, is a chiefly retrospective exercise: it takes stock of property brought into and acquired during the spousal relationship as past contributions giving rise to a property entitlement (Leckey (2009), at p. 280). The relevance of post-execution changes in circumstances is far less obvious to separation agreements dealing with property division, as opposed to spousal support. This subject matter distinction has similarly been recognized by this Court (see Miglin, at para. 76), and partly explains why we have never fully extended the Miglin framework to the division of family property (see Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295, at para. 39; Hartshorne, at para. 42).
[31] It is clear from this review that the Miglin framework is not a panacea for all domestic contracts. Rather, the analysis to be undertaken in determining whether to give weight to a domestic contract must be determined by reference to the distinctive nature of the underlying statutory scheme. This is especially so given our country’s constitutional makeup: spousal support in the context of a divorce is dealt with under the federal Divorce Act, whereas, family property division, for instance, falls within the province’s jurisdiction over property and civil rights. To automatically import a structured analysis grounded in federal legislation to interpret a discretionary provision in a provincial statute risks undermining the province’s legislative authority (D.B.S., at para. 55; see also M. Bailey, “Limits on Autonomy”, in B. Atkin, ed., The International Survey of Family Law (2010), 95, at p. 97; Leckey (2009), at p. 287).
[32] Still, this Court has more broadly relied on principles from Miglin that address concerns common to domestic contracts. Although Bastarache J. declined to directly apply the Miglin framework in Hartshorne and D.B.S., he relied on principles from Miglin in both cases, such as the judicial deference to be afforded to domestic contracts, to inform the inquiry to be taken under the relevant statutory scheme (see D.B.S., at para. 76; Hartshorne, at paras. 40 and 43-45). And in Rick, this Court relied on ideas from Miglin in reshaping the common law doctrine of unconscionability “to reflect the uniqueness of matrimonial bargains” (para. 43), recognizing a “duty to make full and honest disclosure of all relevant financial information” in the bargaining process (para. 47).
[33] So while the proper interpretive framework for assessing a domestic contract is statute-specific, useful principles emerge from Miglin and this Court’s subsequent jurisprudence that aid in this judicial assessment. As a starting point, domestic contracts should generally be encouraged and supported by courts, within the bounds permitted by the legislature, absent a compelling reason to discount the agreement (Miglin, at para. 46; D.B.S., at para. 76; Rick, at para. 45). This deference flows from the recognition that self-sufficiency, autonomy and finality are important objectives in the family law context (Miglin, at para. 28). Not only are parties better placed than courts to understand what is fair within the context of their relationship, but the private resolution of family affairs outside the adversarial process avoids the cost and tumult of protracted litigation (paras. 45-46; see also Association de médiation familiale du Québec v. Bouvier, 2021 SCC 54, at paras. 44 and 134).
[34] At the same time, negotiations over domestic contracts take place in a singularly challenging environment, often at a time of acute emotional stress, “in which one or both of the parties may be particularly vulnerable” (Miglin, at para. 74; see also Rick, at para. 47; C. Rogerson, “Miglin v. Miglin, 2003 SCC 24: ‘They are Agreements Nonetheless’” (2003), 20 Can. J. Fam. L. 197, at p. 225). In this context, the simple application of ordinary principles of contractual validity may be inadequate to quiet concerns of imbalance and exploitation (Miglin, at para. 77; M. Shaffer, “Domestic Contracts, Part II: The Supreme Court’s Decision in Hartshorne v. Hartshorne” (2004), 20 Can. J. Fam. L. 261, at p. 286). Rather, judges must approach family law settlements with a view to balancing the values of contractual autonomy and certainty with concerns of fairness. In essence, judges are to review domestic contracts with particular sensitivity to the vulnerabilities that can arise in the family law context, without presuming that spouses lack the agency to contract simply because the agreement was negotiated in an emotionally stressful context (Miglin, at para. 82; see also R. Leckey, “Contracting Claims and Family Law Feuds” (2007), 57 U.T.L.J. 1, at p. 14; Bailey, at p. 102 (citing the gendered unfairness that may arise from presuming incapacity to contract where a bargain is struck in an emotional context)).
[35] Concern about vulnerabilities may be countered by the presence of procedural safeguards. For example, full and frank disclosure of all relevant financial information between the parties can go far to assuage concerns of informational asymmetry (Rick, at para. 47; Colucci v. Colucci, 2021 SCC 24, at para. 51). Similarly, professional assistance, such as independent legal advice, can serve as a hallmark of a fair bargaining process (Miglin, at para. 82; Rick, at paras. 60-61), although the curative impact of legal advice in the negotiation of domestic contracts should not be taken as given. As La Forest J. recognized, dissenting in Richardson v. Richardson, 1987 CanLII 58 (SCC), [1987] 1 S.C.R. 857, divorce is one of the most stressful periods in an individual’s life and many people do “very unwise things, things that are anything but mature and sensible, even when they consult legal counsel” (p. 883). Courts must have careful regard to the financial and emotional pressures that characterized the relationship, and not simply presume that legal advice immunizes a contract from unfairness.
[36] The rigour of a court’s review of a domestic contract depends on the authorizing statute. Some statutes provide that a domestic contract may only be set aside where it is unconscionable, for example (see Family Law Act, R.S.O. 1990, c. F.3, s. 33(4)), while others use the measures of “inequitable” or “undue influence” (see Marital Property Act, R.S.N.B. 2012, c. 107, s. 43; Family Property and Support Act, R.S.Y. 2002, c. 83, s. 2(4)). In any case, however, fairness review of a domestic contract typically looks both to the circumstances surrounding the contract’s execution and to the substance of the agreement, where such a review is authorized by governing legislation. As Abella J. stated in Rick, at para. 50: “. . . the best way to protect the finality of any negotiated agreement in family law is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme”.
[37] An assessment of the substance of the agreement is generally determined by reference to the governing legislative regime. The purposes and criteria of the statute provide an objective yardstick against which to assess the parties’ subjective understanding of what is fair, and limit the risk that parties will depart significantly from public policy goals expressed by the legislature. Measuring the substance of the agreement against the legislation also helps to promote greater certainty for parties, who may rely on their statutory entitlements as a reference point in organizing their personal affairs (M. Shaffer and C. Rogerson, “Contracting Spousal Support: Thinking Through Miglin” (2003), 21 C.F.L.Q. 49, at p. 61).
[38] In sum, our jurisprudence on domestic contracts, beginning with Miglin, values the principles of autonomy and certainty by encouraging parties to arrange their intimate affairs outside the court system. But the emotional complexities of family dynamics make contracting over domestic affairs unlike regular arm’s length transactions. The unique context out of which these agreements arise requires courts to approach them with keen awareness of their potential frailties to ensure fairness, having regard for the integrity of the bargaining process and the substance of the agreement. . Krebs v. Cote
In Krebs v. Cote (Ont CA, 2021) the Court of Appeal considered when a separation agreement is still valid, despite the reconciliation of the parties:[14] It is well-established that, at common law, a separation agreement becomes void upon reconciliation of the parties, subject to any clause in the separation agreement overriding the common law rule or which would imply that the intent of the parties was that terms of the separation agreement would be carried out notwithstanding any subsequent reconciliation: see Ernikos v. Ernikos, 2017 ONCA 347, at para. 11; Sydor v. Sydor (2003), 2003 CanLII 17626 (ON CA), 178 O.A.C. 155 (C.A.), para. 22; Bailey v. Bailey (1982), 1982 CanLII 1760 (ON CA), 37 O.R. (2d) 117 (C.A); Bebenek v. Bebenek (1979), 1979 CanLII 1861 (ON CA), 24 O.R. (2d) 385 (C.A.).
[15] I would not extend the common law rule to cohabitation agreements.
[16] The common law rule is ancient. In Nicol v. Nicol (1885), 30 Ch. D. 143, at p. 145, North J. of the Chancery Division explained the rationale for the common law rule that reconciliation brings a separation agreement to an end:I think it clearly established by numerous authorities (no case in any way conflicting with them), that where a separation arrangement is made pure and simple, that arrangement is for the term of the separation, and for no longer. It comes to an end when the separation ends, not because the fact of reconciliation or recohabitation makes it void, but it dies a natural death. The agreement was to provide for a state of things which has come to an end, the state of things being that the parties were living separate although married. When they live together again as man and wife the state of things is totally different, and the arrangement comes to an end. [17] The rule was not absolute and depended on an interpretation of the parties’ intentions, as evinced by the whole of the agreement. For example, where a separation agreement had separation for one of its objects but also other matters within its purview, such as settlement of property issues, those aspects of the agreement may continue despite a return to cohabitation. As described by Montague Lush and Walter Hussey Griffith in Law of Husband and Wife within the Jurisdiction of the King’s Bench & Chancery Divisions, 3rd ed. (London: Stevens and Sons, Limited, 1910), at pp. 461-463:[I]t is a well-established principle of law that a separation deed properly so called—i.e., a separation deed whose only object is to provide for the parties living apart from one another—is ipso facto put an end to for all future purposes if the parties subsequently become reconciled and return to cohabitation.
This principle is too well known and too plain to require observation. For the very nature and object of the instrument is to provide for a state of circumstances which comes to an end on a cesser of the separation.
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But a separation deed the primary object of which is to provide for the parties living apart may have also a secondary object—viz., that of effecting a permanent settlement of property to continue not only during the separation but in any event.
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The question whether a deed is a separation deed which will be avoided upon a return to cohabitation or a post-nuptial settlement which will continue valid notwithstanding a return to cohabitation turns upon the intention of the parties to be gathered from the terms of the deed. [Emphasis added. Internal citations omitted.] [18] The common law rule dates from a time when views about marriage, cohabitation, separation, and divorce were very different. At one time, separation agreements were considered “contrary to public policy.” To cohabit without the benefit of marriage was “to live in sin.” The courts of equity would not enforce an executory separation agreement, i.e. one entered before the separation, though in contemplation of a future separation. Cohabitation for even a short time after execution of the agreement rendered the deed of separation void: see Law of Husband and Wife, at p. 457.
[19] Today, marriage contracts, cohabitation agreements, and separation agreements are all part of the legislative landscape: Family Law Act, R.S.O. 1990, c. F.3, ss. 52-54. Parties should be encouraged to enter agreements to define their rights and obligations. Jurisprudential shoals upon which an agreement may founder unnecessarily do not advance that goal.
[20] Notwithstanding the sea change in family law over the past century, the common law reconciliation rule remains a part of Canadian common law and continues to make some sense. Where the raison d’être of the agreement is separation and parties reconcile, the foundation for the separation agreement dissolves. I see no basis to extend this logic so as to void a cohabitation agreement following reconciliation of the parties. Under such circumstances, the reconciled parties have returned to the very state contemplated by the cohabitation agreement.
[21] In Langdon v. Langdon, 2015 MBQB 153, 321 Man. R. (2d) 52, Little J. remarked, in obiter, that he was “far from certain” that reconciliation should affect a cohabitation agreement in the same manner as a separation agreement. He explained, at paras. 138-140:I do not think it a proper inference or presumption to say that a resumption of cohabitation nullifies [a cohabitation agreement] concerning a property and support regime. Renewed cohabitation in that context is more reflective of an intention to return to a relationship where one's rights were formerly delineated by the agreement. It does not seem to me to be at all reflective of an intention to enhance one party's rights or to impose greater obligations on the other, something that will inevitably result when the cohabitation agreement no longer exists.
It seems to me that if there is to be an inference or a presumption at all it ought to be (barring other evidence of intention) that the resumption of cohabitation returns you to the position you held in the relationship to which you have now chosen to return. Presuming the termination of the cohabitation agreement on resumption of cohabitation could lead to strategic separations and reconciliations designed to nullify cohabitation agreements. It also results in a policy requiring redocumentation on resumption of cohabitation.
I do not regard the first as good policy; the second is impracticable and is not in keeping with the way people typically lead their lives. [22] I agree with the views expressed in these passages, although I would not go so far as to say there is a presumption in favour of the cohabitation agreement’s continued validity following reconciliation. The applicability of a cohabitation agreement to the circumstances of the parties will depend on the interpretation of that agreement and the light it sheds on the intentions of the parties.
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[34] The motion judge relied on Sandrelli v. Sandrelli, 2015 ONSC 7913, 72 R.F.L. (7th) 135, observing that case held, at para. 32, that “[d]ischarge of a contract by performance describes the situation where the contract comes to an end when both parties perform their contractual obligations in the manner prescribed by the contract”. The motion judge noted that case suggested “if the parties intend the agreement to continue after they reconcile the agreement needs to state that,” citing Sandrelli, at para. 41.
[35] Sandrelli was a case about a cohabitation agreement that explicitly contained a clause providing for disposition of property upon the happening of certain “triggering events” including “where the parties ceased to cohabit for a period of greater than 90 days.” Again, the motion judge in that case approached the matter from the stance that the common law rule applicable to separation agreements applied. She noted that the cohabitation agreement did not provide for reinstatement upon reconciliation following a triggering event and that there was no presumption in law that a reconciliation revives a cohabitation agreement.
[36] The respondent relies on Sandrelli to argue that the payment by the appellant to the respondent of $5,000 was a similar triggering event which brought the agreement to an end. Counsel for the respondent analogizes this to an employment contract calling for payment to an employee on termination. Once the payment is made, the terms are fulfilled and there is no scope for further operation of the contract. If the employee returns to work, in this analogy, the parties cannot rely on the old contract; they must enter a new agreement.
[37] I would respond that the question of the scope of the contract and its application depends on the language of the contract and the interpretation given to that language. Adopting the respondent’s analogy, if the same employment contract called for releases, there is no doubt that those releases would be enforced despite payment as envisaged by the contract. If there was a non-competition promise contained in the agreement, that too would likely be enforceable. In some sense, the approach advocated by the respondent is tautological. The agreement comes to an end when there is nothing left to bind the parties, i.e., when it comes to an end. In any event, the analogy is not perfectly apt, as employment is a contractual relationship, while cohabitation is not necessarily so.
[38] For the same reasons as expressed earlier, I would conclude that the broad language of the cohabitation agreement evinces an objective intention to have the agreement apply in general to cohabitation, including that which follows a separation and reconciliation. One could reasonably conclude that the $5,000 payment was intended to assist the respondent with a move to her own accommodation.
[39] As noted in Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550, at para. 67, courts should respect private arrangements that spouses make for the division of their property on the breakdown on their relationship particularly where the agreement was negotiated with independent legal advice.
[40] As I stated earlier, there is no presumption that reconciliation brings an end to cohabitation agreements. Each particular cohabitation agreement must be interpreted in accordance with contractual principles to ascertain the objective intentions of the parties. Unquestionably, it would have been better if the cohabitation agreement had contained specific provisos dealing with the possibility of separation and reconciliation, making unnecessary this interpretive process.
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