“It is undisputed that the Cohabitation Agreement in this case meets the technical requirements for a domestic contract; that is, the agreement is in writing, signed by the parties and witnessed… [However] the Family Law Act permits the court to set aside a provision for support or a waiver of a right to support in a domestic contract if [it] results in unconscionable circumstances…” - Raikes J. in Golton v. Golton, 2018 ONSC 6245 (CanLII)
The Principle
The court reserves the jurisdiction to scrutinize valid domestic contracts and set them aside on grounds of being unconscionable due to the circumstances of their formation or the results of their terms. This scrutiny extends to the waiver of rights to spousal support which would otherwise exist in view of the history of the relationship or the current circumstances of the parties. The threshold required to set aside a domestic contract is understandably high in appreciation of the parties’ autonomy to determine their affairs after the breakdown of their relationship. Accordingly, the burden of proof lies with the party seeking to set it aside.
Domestic contracts can be challenged on grounds of a party’s failure to disclose finances, duress, undue influence or unconscionable conduct during negotiations which significantly influence the drafting process. However, these are not objections that could be casually raised in court, particularly where the party seeking to make these arguments received independent legal advice. In addition to meeting technical correctness, domestic contracts on spousal support must also substantially comply with the policy objectives of the law which include, a recognition of economic disadvantages arising from marital/spousal roles, alleviation of economic hardship and promotion of self-sufficiency.
Even where the drafting is plain and accurately represents the parties’ true intentions, their circumstances may change over time, such that a once reasonable contract might descend into the realm of unconscionable outcomes. It is this inherent risk in domestic contracts that sometimes warrants judicial intervention and the award of spousal support, even where the parties had agreed to waive all rights to it.
The Facts
In Golton v. Golton, the Applicant (“Kim”) (age 53) sought to set aside a Cohabitation Agreement turned Marriage Contract signed with the Respondent (“Dave”) (age 64). They each had one child from a previous relationship, but no child together. They began living together in 1993, married in 1998 and separated in 2010. They were both employed by Laidlaw, with Dave having seniority earning a higher income.
Dave purchased the home in which the parties resided with their children from previous relationships. The title for the home was in his name and he paid the mortgage and associated property expenses. About 2 years after living together, Dave and Kim entered into a cohabitation agreement which included terms to the effect that if they separated, neither party would seek spousal support at any time in the future or a division of their respective property. The parties did not exchange financial disclosure but had a fair knowledge of their respective finances in advance of signing the contract. Both parties received independent legal advice before signing the contract. Kim assumed primary responsibility for domestic chores during the relationship with some support from Dave.
In 2005, Kim suffered a herniated disc rupture and underwent surgery. Due to that injury, Kim was only able to do part time work and received disability payments for the last 5 years of their relationship. She stopped working altogether in 2013 and was placed on long-term disability. Dave removed her from his health insurance coverage in 2015. As a result, she was unable to afford some of her medication, but he continued to provide her with other financial support from time to time. During the years following separation, Dave’s annual income was on average $600,000; while Kim’s annual income was on average $4,000. At the time of litigation, Dave’s annual income had dropped to approximately $100,000.
The Ruling
Kim brought a court action to set aside the cohabitation-marriage agreement on several grounds including allegations of insufficient financial disclosure and duress during the drafting of the agreement, non-compliance with the Divorce Act and unconscionable conduct. All those grounds were unsuccessful and dismissed. The court found that the contract was valid and aligned with public policy and refused her claims to equalize or divide the parties’ net family properties.
However, the Court was satisfied that there had been a significant change in circumstances from those contemplated by the parties, particularly Kim’s health and corresponding inability to work. It found that Kim’s changed circumstances were such that strict application of the Cohabitation Agreement would no longer be in substantial compliance with the objectives of the Act. Dave's argument that Kim was simply underemployed was dismissed, in view of her long-term disability and his continued financial support to her after their separation. Ultimately, while the court upheld the rest of the agreement, it awarded Kim $250,000 in lump-sum spousal support.
Our Thoughts
Family law legislation supports the making of domestic contracts including spousal support waivers; and such contracts will not be lightly interfered with. However, where there have been significant changes in circumstances, the Court may set it aside to the extent necessary to resolve the unconscionability.
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