Pre-nup Agreements, Enforcability With No Independent Legal Advice
Enforceability of Marriage Agreements
The Family Relations Act of British Columbia is one of the Statutes which is applicable when there is a breakdown of a marriage. The Family Relations Act recognizes the existing of a marriage agreement, often commonly referred to as a prenuptial agreement, as one of the factors to be considered when looking at a division of assets on marriage breakdown. The Act does, however, allow the Court to set aside or vary a marriage or prenuptial agreement if that agreement is found to be unfair in all of the circumstances.
In a recent decision of the British Columbia Supreme Court called Dowell v. Dowell, the Court considered a marriage agreement which had been entered into between the parties before their marriage in 1983. At that time, the wife was 62 years old and the husband was 57 years old. Both had previously been married and brought assets into the marriage. The husband had annual income at the time of the marriage of approximately $18,000.00, and owned two pieces of property. The wife had nominal pension income at the time, and also owned two pieces of property, although one of them was mortgaged and had little equity. At the husband’s insistence, the parties signed a prenuptial agreement, and the wife waived her entitlement to legal advice. During the marriage, the husband inherited two pieces of valuable property, and subsequently sold them. Also during the marriage, the parties acquired a home in New Zealand, which was used as their winter home, and a property in Victoria, British Columbia, which was registered 2/3 in the husband’s name and 1/3 in the wife’s name, recognizing that the husband had made a greater contribution towards that property.
When the parties separated in 2006, the husband’s assets were worth $3,200,000.00 and the wife’s assets were worth $288,000.00. The wife’s income at separation was approximately $16,000.00 per year and the husband’s income at separation was approximately $35,000.00 per year.
After separation, the wife brought an action against the husband, seeking a division of family assets and spousal support, and she argued before the Court that the prenuptial or marriage agreement that they had entered into in 1983 was unfair. The Court agreed with the wife’s claim, and found that in all of the circumstances, fairness required that the agreement be varied, and the Court ordered that the wife would receive 22% of all of the assets, with the remaining 78% to be given to the husband. The Court did not order spousal support in addition to the asset division, and found that the division of assets that the wife received would allow her to attain and maintain self-sufficiency, and would more evenly and fairly distribute the economic consequences of the breakdown of this marriage.
Of note, the Court referred to the fact that the wife had not received independent legal advice when she signed the agreement. The Court found that the husband was a sophisticated businessman and may more likely have understood the intention of the agreement, whereas the wife was not a sophisticated businessperson and would likely have benefited from receiving independent legal advice.
Another important consideration was the fact that the marriage agreement was silent as to spousal support, meaning that there was no provision in the agreement waiving support in the event the marriage broke down. Had the agreement not been set aside, the Court found that the wife would, in all likelihood, have had to liquidate her assets in order to give her the cash flow to meet her financial needs. By varying the agreement and allowing the wife to have 22% of all of the assets, this would allow the wife to retain her condominium and have approximately $180,000.00 cash from which to draw, in addition to her income, to meet her expenses.
For more information on the advisability of preparing marriage agreements, or to discuss the consequences of a breakdown of marriage, contact Pushor Mitchell.