The SCC released an important decision today about the enforceability of property agreements, Anderson v Anderson, 2023 SCC 13. I read through the entire decision as it's relevant to a particular file of mine, so I thought I'd share my observations.
The decision was based on Saskatchewan's legislation, however their section 38's requirements are nearly identical to ours, albeit worded slightly differently. The SCC made a comment about ILA being required in Alberta making Alberta seem like an outlier, however the reference to lawyers in each section 38 is essentially the same. I don't really see the difference, maybe someone else can fill me in.
The parties agreed to keep their own property, except for the house and contents, and a truck that would be returned to a spouse. The agreement did not comply with section 38, and lawyers were not involved.
The SCC adopted the agreement in whole. In a nutshell, the agreement was relatively fair at the time, perfect compliance with the statutory property division isn't required, and lack of financial disclosure or legal advice didn't cause any prejudice as the parties were generally aware of each others' assets. It also helped that it was only a 3 year relationship.
Here are the most significant portions of the decision:
Where there isn't compliance with section 38, there's essentially a three-step process:
Validity according to ordinary contract law principles;
Whether there are any substantiated concerns about the agreement's formation, such that it would be unfair to consider it, which requires that "...the challenging party must point to evidence that suggests that the agreement was tainted by undue pressure, circumstances of oppression, or exploitation of a power imbalance or other vulnerability, or that a defect in the bargaining process prevented the parties from understanding some essential part of the bargain. If the judge is satisfied that no such concerns are established, the agreement may be taken to represent the autonomous choice of the parties. While measures like independent legal advice and financial disclosure help ensure a fair bargaining process, they are not a statutory requirement... and their absence alone is not determinative of the inquiry"; and
Consider the agreement in determining the appropriate distribution of property. Considerable value is placed on spousal autonomy to contract. The weight accorded to the agreement accords with what is fair and equitable in the circumstances, considering the objectives and factors of the legislative scheme. The question is whether their autonomous choice at the time falls within a range of fair and equitable possibilities contemplated by the legislation. "But even where an agreement departs from the FPA in some way, the court may still respect those parts of the agreement it considers fair and equitable, while disregarding the rest."
Financial disclosure is not required by the legislation, and it's absence, without more, doesn't necessarily impugn the fairness of an agreement. The principles in Colucci do not apply because property legislation permits disclosure orders, it isn't a precondition as in the case of child support legislation. However, a court may intervene where a failure to disclose is deliberate and coupled with misinformation, or where a failure to disclose leads to an agreement that departs substantially from the objectives of the governing legislation. Inadequate disclosure isn't troubling where there's a lack of prejudice.
While their section 38 also required a certificate to be signed in front of a lawyer, the SCC stated that lack of independent legal advice is not fatal where there is no evidence of imbalance between the parties. Vulnerabilities are not simply to be presumed because agreements are negotiated and concluded in an emotionally stressful context; a finding of vulnerability must be grounded in evidence. Similarly, the absence of ILA isn't troubling where there's a lack of prejudice.
Miglin contains useful principles that can inform judicial discretion, but was not intended to deal with all types of domestic contracts, and isn't directly applicable to family property division, as Miglin pertains to spousal support under the Divorce Act.
The Court is very clear that the appeal only deals with agreements that do not comply with the formal requirements set out in family property division statutes. Do you think the principles still apply to an individual challenging a separation agreement that does meet the formalities?
That's right, the analysis only directly applies to agreements that don't comply with section 38, as the sentence before the first stage of the test says "How, then, should a court approach, under s. 40, an agreement that is not an interspousal contract?" I'll edit my post to clarify that, thank you.
The comments about unconscionability and financial disclosure might still be helpful even where there's compliance with section 38.
Well, I agree that vulnerability should not be presumed, but neither should equality. No time to read it this week, but when I do, I will be curious to see what facts if any are in the decision about the relative circumstances of the parties, ie. what grounds the finding that there was no vulnerability
Not every case from the SCC has to be watershed, but this gives some good clarifications about how courts should be thinking through these issues. The hope is that "more" of these types of agreement will be given their proper weight, and "more" lawyers will be able to settle the files and not have allergic reactions all the time there isn't ILA. There are definitely distinguishing factors here in the facts (short marriage, well-off parties, simple contract and issues), but clarifying the framework has value.
Unspoken in all this is that I think the court is reasoning its way toward a common sense "smell test". We are a country that honours agreements, and this agreement didn't need to be litigated to death or disregarded by the trial judge.