Should the Court Override the Spouses’ Separation Agreement Due to Post-Signing Events?
The spouses had been together 26 years, and married for 18 of those. Their separation agreement provided that the husband: 1) waived all claims to spousal support; 2) released his interest in the matrimonial home; and 3) assumed responsibility for a greater share of the debt he and the wife accumulated during marriage. In exchange, the husband would be absolved of all financial responsibility for child support for their two children.
Although the agreement was struck with the aid of a lawyer that the husband helped choose, the husband had no independent legal advice prior to signing. He was unemployed at the time, even though he was a trained investment advisor who had previously earned very good money during this career.
Within a year of signing, the still-unemployed husband stopped paying off the joint debts he had agreed to assume. His registration with the Investment Dealers Association of Canada was suspended, and he had no place to live. He had slept on the floor of a stock room, and at the homes of his sister and parents.
The husband commenced a court application against the wife. He challenged the validity of the entire separation agreement, and asked for lump sum spousal support notwithstanding the support waiver he had signed. A lower court found that there was no basis for setting the entire agreement aside, but agreed that in the circumstances the husband should get lump sum support from the wife. It awarded him $144,000.
On subsequent appeal, the Ontario Court of Appeal confirmed that lower court ruling.
The Court reasoned that in this scenario, there were two potential sources of court authority for making the order requested. The first was the provincial Family Law Act, which deals with intrinsic flaws in how a domestic contract is formed, and allows a court to set it aside in some circumstances. However, the husband had not proven that he met any of the relevant tests for doing so here: This separation agreement was not “unconscionable”, and it could not be said that the husband did not understand its nature and consequences. The Appeal Court also pointed out that it was the husband’s idea to hire a lawyer to draft it, and that he could have obtained independent legal advice if he wished.
On the other hand, the court could circumvent the spousal support waiver under the second source of its authority: The court’s powers under the Divorce Act, which allows it to override an agreement or clause that does not substantially comply with the objectives of that legislation, using a detailed two-part test from a case called Miglin.
Especially in light of the husband’s current unemployment and other misfortunes – which the lower court seemed to conclude were at least partly marriage-related – the separation agreement could be validly overridden in this scenario. The Appeal Court had no reason to interfere with the lower court’s fact-based assessment, and left the lump sum award of $144,000 untouched.
For the full text of the decision, see:
Fai v. Faiello, 2019 ONCA 710