Just a case of buyer’s remorse…or, something more? Challenging domestic contracts in Ontario are becoming commonplace
Court proceedings dealing with setting aside a domestic contract, or a part thereof, are very common today. In fact, in recent years, a significant amount of family law litigation has arisen solely as a result of these types of cases. Although many family lawyers find themselves dealing with these issues on a regular basis, it is important to be aware that ultimately it is very difficult to succeed in having a domestic agreement set aside, as the Courts will aim to respect the decision made by parties to engage in binding settlements reached by negotiation.
A domestic contract may arise at various stages of a parties’ relationship. They include binding agreements made between two spouses or separating spouses such as (1) a cohabitation agreement (2) a marriage contract and (3) a separation agreement. A domestic contract may also include a paternity agreement or a family arbitration agreement. In order to be considered binding, a domestic contract must meet certain technical requirements, namely that they must be in writing, signed and witnessed.
A cohabitation agreement is a contract made between two unmarried parties that are cohabiting or intending to cohabit together.
A marriage contract is made between two parties who plan to get married or who are already married. A separation agreement is a contract made between two separating spouses, including both married and unmarried parties.
In some cases, parties to a domestic contract later come to realize that the terms they agreed to maybe unfair based on different factors.
Although a domestic contract may be properly drafted, signed and witnessed, pursuant to section 56(4) of the Family Law Act, the Court has wide authority as follows:
(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
A domestic contract can also be set aside if the Court finds that it contravenes the objectives of the Child Support Guidelines.
The most common grounds for setting aside a domestic contract include,
- lack of financial disclosure; and,
- failure to understand the terms and consequences of the agreement.
The party challenging the domestic contract bears the burden of proving their claim.
The Ontario Court of Appeal in Levan v Levan set out a two-part test for setting aside a domestic contract:
- First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged.
- Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.
Section 33(4) of the Family Law Act, also provides the Court with authority to set aside waivers of spousal support:
(4) The court may set aside a provision for support or a waiver of the right to support in a domestic contract and may determine and order support in an application under subsection (1) although the contract contains an express provision excluding the application of this section,
(a) if the provision for support or the waiver of the right to support results in unconscionable circumstances;
(b) if the provision for support is in favour of or the waiver is by or on behalf of a dependant who qualifies for an allowance for support out of public money; or
(c) if there is a default in the payment of support under the contract at the time the application is made.
The Supreme Court of Canada’s decision in Miglin v Miglin is an important decision. In that case, although Mrs. Miglin was not making a claim to set aside the parties’ Separation Agreement, she was successful in making a claim for spousal support despite the fact that the Separation Agreement contained comprehensive releases.
It is extremely difficult to succeed in having a domestic contract set aside by a Court. In the recent case, Caparello v Henkenhaf, Justice Gray stated the following, “Where an agreement has been negotiated under impeccable circumstances, and each party has had access to competent legal and other expert advice, it should only be a rare case where an agreement will be set aside.”
Challenging a domestic contract can be complicated. For more information and assistance with respect to your family law matter, click here to book a consultation.