Recent case law: Waiving property rights in a prenuptial agreement

Recent case law: Waiving property rights in a prenuptial agreement

As you know, couples can write cohabitation agreements, prenuptial agreements and marriage contracts which set out the terms of their relationship and, often more importantly, what will happen if the relationship ends. And, couples can write separation agreements at the end of a relationship to set out the terms of their separation.

These agreements are all domestic contracts, which are governed by provincial family laws. They allow people to make arrangements other than those set out in family laws, as long as certain minimal conditions are met. There has to have been full financial disclosure by each person to the other and there cannot be coercion or duress. Some provinces require the parties to have received independent legal advice.

Dundas v Schafer, 2014 MBCA 92, deals with a prenuptial agreement in which the woman waived her entitlement to a share of her soon-to-be-husband’s workplace pension. Of course, there were a number of other clauses in the agreement as well, but the issue of interest to us is the one dealing with the pension.

The agreement met the legal requirements inasmuch as both parties had independent legal advice, full financial disclosure had been provided by both of them and there was no indication of coercion or duress.

However, at the time of separation, the wife sought to have this provision in the prenuptial agreement set aside so she could, after all, share in the value of her husband’s pension.

She acknowledged that at the time she entered into the agreement she was aware of her future husband’s pension and of the fact that he was not willing to share it. (He had already shared a portion of his pension with his first wife and was adamant that he would not do so again.)

The wife argued that the pension provision in the agreement was “void for statutory illegality,” because, she said, the Pension Benefits Act required an equal division of pension benefits regardless of what the agreement between her and her husband set out.

The trial judge upheld the terms of the prenuptial agreement, and the woman appealed to the Court of Appeal, which upheld the trial court decision.

To do so, the Court found that a prenuptial agreement creates a situation where the spouses have no entitlement under the marital property regime set out in family law. Since the wife had no entitlement, there was nothing to be divided, so the Pensions Benefits Act does not apply.

The Court also makes the point that agreements written at the beginning of relationships, when relations between the parties are amicable, are generally to be respected, while agreements made at the time of separation may require closer inspection due to the “bad bargains made in the chaos of separation.”

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