The recent Supreme Court of Canada decision in Anderson v. Anderson, 2023 SCC 13, provides guidance on domestic contracts and the enforceability of an informal separation agreement between spouses. The Supreme Court noted that “On the one hand, individual autonomy to settle domestic affairs should be encouraged, as parties are generally better positioned than courts to understand the distinctive needs and circumstances of their private relationships. On the other, parties to domestic contracts are particularly vulnerable to unfairness and exploitation, given the unique environment in which domestic contracts are negotiated and concluded.” This case is important for family law practitioners and litigants because it clarifies the framework for evaluating agreements that are not presumptively binding under provincial family property legislation.
The parties (Diana and James Anderson) were married in 2012 and separated in May 2015 after a three-year marriage. This was not the first marriage for either party and both came into the marriage with considerable assets, including houses, vehicles, personal property, RRSPs and pensions. In July 2015, Diana presented James with a separation agreement that she had drafted, which essentially provided that each party would keep the property held in their name and give up all rights to the other’s property, except for the family home which had been jointly purchased and the household contents. The agreement was signed by both parties in front of two witnesses, but neither party had received independent legal advice or made financial disclosure to the other before signing. While Diana recommended that the husband “think it over and talk to a lawyer”, he declined and signed immediately.
Diana later filed for divorce and claimed that the agreement dealt with all property and spousal support issues. James counter-petitioned and sought family property division, arguing that the agreement was signed without legal advice and under duress. The trial judge found that the agreement was unenforceable, finding the lack of independent legal advice to be “most troubling”. He instead equalized the family property under Saskatchewan’s family property legislation, the Family Property Act, and ordered Diana to pay James a net equalization payment of about $90,000. The Court of Appeal set aside the trial judge’s decision and found that the agreement was binding.
The Supreme Court of Canada unanimously allowed James’ appeal and restored the trial judge’s order. The Supreme Court found that the Andersons’ agreement was binding and the trial judge should have considered it when dividing the family property. Writing for the court, Karakatsanis J. commented the agreement was short, uncomplicated and reflected the intention of the parties to effect a clean break from their partnership. Furthermore, the Court found that a lack of independent legal advice and formal disclosure can undermine informed choice but was not troubling here because James could not point to any resulting prejudice. There was no suggestion that the absence of these safeguards undermined either the integrity of the bargaining process or the fairness of the agreement. The agreement was therefore entitled to serious consideration given that it reflects the parties’ understanding of what division of property was fair in the context of their relationship at the time of separation.
Karakatsanis J. also commented on the framework developed in Miglin v. Miglin, 2003 SCC 24: “I would not transpose the Miglin framework, which arose within a different statutory context, into provincial family property legislation. While useful general principles emerge from Miglin to guide courts in approaching domestic contracts, Miglin is not, and was never intended to be, a framework of general applicability for courts in dealing with all types of domestic contracts.”
In conclusion, Karakatsanis J. emphasized that domestic contracts should generally be encouraged and supported by courts, within the bounds of the law, absent a compelling reason to discount them. This deference flows from the recognition that self-sufficiency, autonomy and finality are important objectives in the family law context. Not only are parties better placed than courts to understand what is fair within the context of their relationship, but the private resolution of family affairs outside the adversarial process avoids the cost of protracted litigation. However, Karakatsanis J. also recognized that courts have a role to play in ensuring that agreements are fair and equitable in light of the circumstances and objectives of the applicable legislation. She cautioned that parties who wish to contract out of their statutory rights and obligations should do so with full knowledge and understanding of their legal implications.