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Caution: pre-nups and cohabitation agreements when parties aren't yet AIPs

Ken Proudman - view Arbitrator profile
  BARR LLP
   Edmonton, Alberta


Section 37(5) of the Family Property Act states that if they purport to be an AIP in circumstances they knew or ought to have known that they were not AIPs, then their agreement contracting out of the FPA is unenforceable. That means that there's a significant risk when an agreement uses AIP terminology and the clients have no children or they haven't hit the three year mark yet.

I've heard lawyers question whether agreements contracting out of the FPA would apply to people who are neither spouses nor AIPs, as it states that spouses or AIPs may enter into agreements. The MPA had section 37(2) which explicitly permitted persons to enter into agreements if they contemplated marriage, however that was replaced by the subsection which states that an agreement can explicitly state that it will continue to apply after a marriage. While many of us likely have thoughts on this topic, there is some grey area.

You can make them AIPs by agreement in the same document, but then section 1 and the Schedule to AIRA's Regulations require two sets of witnesses.

For the best protection you may want them to become AIPs by agreement, but ensure that there are two sets of witnesses. They'll become AIPs though, so you'd want to consider that when drafting their new regime. That said, I would hope that agreements with minor deficiencies are saved by section 8(g).


0 39 days ago - edited 39 days ago

Anonymous 2018
   Edmonton Region, Alberta


Ken, do you have a precedent agreement with suitable language?

0 38 days ago

Stephen Harfield
  Queck & Associates
   Sherwood Park, Alberta


It gets hazier than that. 37(5) says an agreement entered by a person purporting to be an AIP knowing or in the circumstances in which the person ought to have known there was no valid interdependent relationship within the meaning of the AIP Act is unenforceable by that person.

s.7 of the AIP Act says "any 2 persons who are living together or intend to live together in a relationship of interdependence may enter into an adult interdependent partner agreement in the form provided for by the regulations."

Observations:

1) To enter into an AIP agreement, they "may" use the form in the regulations, but not "must"? And it doesn't actually say if there aren't two witnesses that this specifically invalidates an agreement, unlike the provisions of 7(2) and 8(1) of the act.
2) Assuming it is a must, then no limitations on witnesses provided. It could be each other! Or use the same witnesses.
3) Failure to have 2 witnesses doesn't actually say the s. 37 FPA agreement fails. It just says it is "unenforceable" by the person who ought to have known better. So it is not void. A) the other person can still enforce it. B) If you follow the agreement and then want it reversed, the court won't do it. C) How is a person supposed to know (or ought to know) if not having two witnesses is conclusive of the matter until a court makes a decision about it?
4) However, if the person who had the 2 signatures does enforce (when the other cannot), then arguably the court will do 2 things - 1: enforce the agreement on their application 2: Undo their application based on s. 9 of the AIP act.

That said, 8(m) of the Family Property Act seems to be the most likely saving provision. If everyone acted in good faith, no side girlfriends or boyfriends or wives or husbands or concubines or mistresses, and greater injustice is done being technical rather than upholding otherwise legitimate promises, then I think many Judges will think things are fine and only use their discretion to try to vacate only the most unconscionable provisions. That's my gut sense.

Other interesting observations:
1) An FPA agreement doesn't require witnesses at all. But shouldn't a witness be used to later uphold the agreement? Not according to s. 57 of the Evidence Act (Alberta).
2) Only the AIP's "signature" must be witnessed, if you read the regulation strictly. Which opens the question about whether the witness a) needs to see them sign in real time b) needs to see them sign at all, and only "witness" that they see a signature, which might allow for curing later.

In conclusion, AIP act and FPA are not masterclasses of legal drafting.


2 30 days ago - edited 30 days ago

Sierra Yanush
  Bell and Stock LLP
   Calgary, Alberta


We are having discussions about this - parties need to be able to enter into some type of property agreement prior to becoming AIPs (otherwise why would they). Frequently we do these agreements before people live together at all.

From reading the legislation our office is having a question re: the "purporting to be AIPs" language can be avoided by very clearly stating they are not currently AIPs.

We also do not want to make people AIPs, which has implications for support purposes, when we are solely looking to protect things like a down payment.


2 30 days ago

Anonymous 2018
   Calgary Region, Alberta


I'm putting myself (anonymously) on record to bet the that Ken and Stephen are overthinking this one.

If a case comes out where a Justice sets aside one of these agreements made pre-AIP pre-marriage on otherwise clean circumstances, I'll eat my words.

HOT TAKE: The drafting team was instructed to mirror paragraphs dealing with marriage so that the FPA applied to AIRs as well. This is clear throughout the document.

Section 34(4) deals with a void marriage.
Section 35(5) deals with an invalid AIR.
The drafters saw a paragraph about void marriages and followed the basic instruction of creating an AIR mirror paragraph. That then leaves us to wonder what the heck an invalid AIR might as compared to a void marriage*.

Unfortunately, the plain language has the unintended effect of being an attack on all pre-nups** in an AIP context.

*Potential example of invalid AIR: unmarried man believes he had a kid with mom. He's not present for the birth, and it later turns out that he's not the father. The relationship is in its 5th year. He has a busy work schedule, and everytime he goes to work, the real father who had been hiding in the attic would come downstairs to rejoin his loving family for breakfast.

**The term "Pre-nup" is being used for ease of writing, but "pre-AIR" would more accurate.


2 21 days ago

Anonymous 2017
   Edmonton Region, Alberta


I do not understand how a team was used to draft this and it still has so many obvious problems.

Anyway, see Mitchell v Reykdal, 2022 ABCA 105.

The court of appeal shows that when it is boxed in by drafting about AIPs it doesn’t always try to wiggle its way out, even when the result is unjust and admitted to be unjust. That’s why it is up to lawyers to take close reads of these things and try to help where the legislature fails.


1 21 days ago - edited 21 days ago

Anonymous 2018
   Calgary Region, Alberta


@Anonymous: that's funny. You found a mirror to my "guy in the attic" example.

But I don't think your case is relevant here. The legislators in your case had not made a mistake. It was clear that the drafters legislated out the possibility of a mistress claiming AIP status. The court admitted that sucks for a mistress who gets duped into thinking she's a fella's One And Only, but the legislators were clear.

In our problem we have this strange idea of an "invalid" AIR contained in a paragraph clearly meant to mirror to a void marriage. You all seem worried that the court will interpret that to mean pre-AIPs cannot enter into an agreement until they become AIPs. I don't understand why. Pre-nup agreements are permitted and don't require that the people get married first, but Pre-AIR agreements are not? It's easy enough for a Court to get around the funky working of 35(5) so that Pre-nup agreements and pre-AIR agreements have the same legal status. This is especially true given that a core principle of the FPA was to give unmarried people the same property rights as married people.


1 20 days ago

Anonymous 2017
   Edmonton Region, Alberta


I suppose the other thing to observe is that the language of the act doesn't specifically preclude non-AIPS from entering an agreement. It just says if you are entering an agreement and purporting to be an AIP, but you aren't, you can't enforce it.

This opens the interpretation that you can have "springing" agreements, which sounds like a pre-nup.

I still see the need for careful drafting, and making clear that an agreement will spring into effect once they become AIPs and define when that will be. And be clear about what happens if they do not become AIPs.


0 20 days ago

Tina Huizinga - view Arbitrator profile
  Tina Huizinga PC
   Edmonton, Alberta


This issue was addressed as a concern in a LESA seminar in October 2019. Some do not wish to declare themselves as AIPs (and thus create support rights) as they don't reside together but are in a long terms relationship (there are cases that find AIP status). I am not aware of any cases that have addressed the contract wording so far. I have drafted "Relationship Agreements" which deny that they are AIPs but if they are, the agreement contemplates the FPA with ILA.

0 20 days ago

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