A Review of Anderson v Anderson: The Enforceability of Kitchen Table Agreements – Part II

In the first part of this series, we reviewed the background, trial, and appeal to the Saskatchewan Court of Appeal in Anderson v Anderson.

This case deals with a “kitchen table agreement” made by the parties, without financial disclosure or independent legal advice, following the breakdown of a 3-year marriage in which there were no children. Nearly two (2) years after the Separation Agreement was signed, following the wife initiating a Divorce, the husband sought to set aside the Separation Agreement. As a refresher, at trial, the Separation Agreement was found to be unenforceable. When the wife appealed to the Saskatchewan Court of Appeal, the trial decision was set aside.

Of note is the specific legislation regarding interspousal contracts in the province of Saskatchewan. Section 38(1) of The Family Property Act sets out the formal requirements of an interspousal contract. Section 40 provides that the court may, in any proceeding pursuant to this Act, take into consideration any agreement, verbal or otherwise, between spouses that is not an interspousal contract and may give that agreement whatever weight it considers reasonable.

Following the decision of the Saskatchewan Court of Appeal, the husband sought leave and appealed to the Supreme Court of Canada. The Supreme Court was left with the question: If the Agreement does not meet the formal requirements of section 38, which would make it presumably enforceable, how should the Agreement be evaluated?

Major takeaways from the SCC Decision:

1. A statute-specific approach must be taken when considering domestic contracts;
2. The analysis with respect to the weight to be given to a domestic contract must be determined by reference to the distinctive nature of the underlying statutory scheme, as family property division falls within the provincial jurisdiction;
3. Domestic contracts should be generally encouraged and supported by Courts, within the bounds of the legislation, absent a compelling reason to discount the Agreement;
4. Negotiations over domestic contracts taken place in a singularly challenging environment, often at a time of acute emotion stress, in which one or both parties may be particularly vulnerable;
5. Judges must approach family law settlements with a view to balancing the values of contractual autonomy and certainty with concerns of fairness;
6. Concerns about vulnerabilities can be assuaged with procedural safeguards of full and frank financial disclosure and independent legal advice – though these should not be taken as immunizing the contract from unfairness; and
7. The review of fairness of a domestic contract should look at both the circumstances around the execution of the contract and the substance of the Agreement. The substance should be considered by reference to the governing legislation.

Given that the Separation Agreement in this case did not meet the formal requirements of section 38 of the Family Property Act, and was not presumably enforceable, the SCC then considered whether the Agreement merits consideration and weight under section 40. The weight to be given depends on how the substantive of the Agreement accords with what is fair and equitable in the circumstances.

The SCC found that there was nothing to suggest that one party took advantage of the other, did not understand the bargain, or that the Agreement was not binding. The deferral of the issue of the family home made it a partial agreement, not an incomplete agreement. The husband did not argue that there was inadequate financial disclosure or uneven knowledge of the parties’ assets and debts. The failure to disclosure financial information did not result in an agreement that was substantially different than the objectives of the legislation. While neither spouse may have known the precise value of the other’s assets and debts on separation, neither one concealed important information nor misled the other. Under The Family Property Act, legal advice is not a requirement for the Court to give weight to the Agreement. The marriage was short, and the Separation Agreement was simple – not having independent legal advice did not create unfairness.

In giving great weight to the Separation Agreement, the Court:

1. Disagreed with the Court of Appeal and ordered that the value of the matrimonial home be divided as of the date of adjudication, not as of 2015 as ordered by the Court of Appeal;
2. Found it would be unfair to equalize any property the parties intended to keep separate by way of the Separation Agreement, particularly given the delay of the husband in challenging the Agreement;
3. Found that the Separation Agreement is to be enforced, and the only property to be divided is the family home and household goods;
4. Found that the family property to be divided should be valued as of the date of trial, given the terms of the Separation Agreement and the continued contribution to the mortgage;
5. Reduced the payment owing by the wife to the husband to $43,382.63 and ordered the parties bear their own costs.

Given that this case dealt with family property in the province of Saskatchewan, it cannot be directly applied to domestic contracts in Ontario considering the differences between The Family Property Act (Saskatchewan) and the Family Law Act (Ontario). Nor should it be directly applied to cases involving issues of support, which may necessitate financial disclosure to calculate support obligations and entitlements. However, it does emphasize the general support Courts give domestic contracts, though they must be approached carefully and with consideration to the applicable legislation.

Part three in this series will provide a review of cases following Anderson and look at how Courts are considering this decision when a domestic contract is being challenged.

This blog post was written by a former member of the Family Law team.  For further information, please email family@mannlawyers.com.