Case comment: domestic contracts

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Anderson v Anderson is about the validity of a separation agreement that was made without full financial disclosure and independent legal advice. In their decision, the Supreme Court of Canada had to balance the rights of people to settle their own domestic affairs after separation with the need to protect against unfairness and exploitation.  

This is a case from Saskatchewan. In Saskatchewan’s provincial property legislation, a contract is presumptively enforceable where it is signed by both spouses, witnessed and there is an acknowledgement signed by a lawyer that the people understand the nature and effect of the contract. If all of these formalities are not present, the court will still consider the contract when making a decision, it just isn’t presumptively enforceable.   

The people in this case separated after 3 years of marriage. They invited their friends over to see if they could reconcile. When it became clear the relationship could not be repaired, the wife presented the husband with a separation agreement and told him to “think it over and talk to a lawyer”. He did not do so and instead they both signed it that same night in the presence of their friends as witnesses. They did not exchange any financial information and they did not get any legal advice from a lawyer before signing the agreement. In the agreement, both the husband and the wife agreed to leave the marriage with the property they brought into it. They agreed to deal with the family home at a later time after having it valued.  

After the agreement was signed, they both began to perform the terms of the agreement. For instance, the wife transferred a truck to the husband and the husband moved his furniture out of the family home. The wife then filed for divorce and the husband filed a response in which he made property claims and argued the separation agreement should be set aside because it was signed under duress without financial disclosure and legal advice.  

At trial, the judge ruled that the contract was just an “agreement to agree” because it did not deal with the family home. The trial judge also took issue with the lack of independent legal advice and ultimately decided that the agreement was not enforceable and gave it no weight. The trial judge ordered that property should be divided based on the legislation. 

The Court of Appeal found that the trial judge erred in finding the agreement not enforceable. Too much weight was put on the lack of independent legal advice. The court ultimately allowed the appeal, finding that the contract was binding and should be given a lot of weight when deciding any issue about property division.  

The Supreme Court of Canada agreed with the Court of Appeal in finding that the separation agreement was binding and should have been given serious consideration. In talking about the proper approach to take in assessing the validity of a domestic contract and the weight it should be given, Justice Karakatsanis made some of the following comments: 

“…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” (para 34) 

“…the weight given to the agreement in an order for the distribution of property depends on how its substance accords with what is fair and equitable in the circumstances, considering the objectives and factors of the legislative scheme” 

The Supreme Court unanimously decided that the agreement was fair and valid and enforceable even though it lacked the formalities required to make it a formal contract under the provincial legislation. The parties made the informed choice to enter into the agreement without these formalities. The lack of legal advice and financial disclosure do not alone make a contract invalid. When it comes to a lack of financial disclosure, a court must look at whether this undermined the fairness of the negotiating process. The focus will be on the prejudice that may arise from having unequal access to financial information. In addition, just because the agreement did not deal with how to divide the family home did not make it invalid or incomplete. There is no requirement that an agreement deal with every single family property issue before it is given any weight by the court. 

Justice Karakatsanis acknowledged that a lack of independent legal advice and financial disclosure can undermine informed choice, but because the husband did not suffer any resulting prejudice, the absence of these safeguards did not undermine the integrity of the bargaining process or the fairness of the agreement. The Supreme Court ultimately divided property in accordance with the agreement.   

This decision from the highest court in Canada makes it clear that courts will give significant deference to people’s own attempts at resolving their financial situation post-separation.  

This case comment was written by Gabrielle Slater, Articling Student and Emily Murray, Legal Director.

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