Many of you have asked about the division of assets and property following dissolution of a marriage, and whether there is anything that can be done to avoid the over-reaching arm of the Canadian state, and perhaps tailoring the division along Islamic lines.

In 2004, the Supreme Court ruled on a British Columbia case involving two lawyers who had been living common-law before getting married, parented children, wound up getting married, and after 9 years of marriage, divorced.

Before entering into the marriage, the couple had signed a marriage agreement, whereby the husband would be entitled to keep all his assets that he brought into the marriage without division to the wife at divorce, and the wife would keep all the assets she brought into the marriage.  The wife would gain an escalating interest in the matrimonial home with every year the couple was married, up to a maximum of 49%.  The agreement also provided for spousal support amounts.  However, she would not have any interest in the husband’s law practice, where she initially worked but took maternity when the couple’s first child was born.  She ended up leaving the practice of law completely, to dedicate herself as a full-time mother.

The wife entered the marriage with no assets and was in fact, heavily in debt.  The husband had $1.6 million in assets.

Prior to entering into the marriage agreement, the two parties had consulted with their respective lawyers.  The wife’s lawyer told her that the agreement was unfair, but the wife still entered into the agreement.  She did so without compulsion and of her own free will.

The Supreme Court ruled that the agreement was valid and upheld it as the guide to the couple’s division of property and assets, overruling lower court decisions which instituted their own ruling on property division, after finding the agreement to be “unfair”.

In its decision, the Court upheld the sanctity of contracts entered into freely and willingly by parties, despite the negative implications of the contract to any one particular party.  The Court ruled that “private parties are permitted to take personal responsibility for their financial well-being upon the dissolution of marriage, courts should be reluctant to second-guess the arrangement on which they reasonably expected to rely. Individuals may choose to structure their affairs in a number of different ways, and it is their prerogative to do so.”

It is important to remember the difference between a “marriage agreement” and a “separation agreement”.  As the Court stated, marriage agreements are anticipatory and outline the husband and wife’s expectations of the marriage from the outset.  Separation agreements deal with existing rights and obligations that arise out of the marriage.  Usually marriage agreements will be given deference over a separation agreement; however there are instances when the latter may take precedence.  For example, if the marriage agreement does not “fairly” take into account the financial means, needs or other circumstances of the parties at the time of marriage breakdown.

Family law regimes in all provinces of Canada provide for the use of “marriage agreements” or “marriage contracts”, which will govern the relationship and its dissolution.  The Courts however can override the contract, if they find it to be “unfair”.

Although this decision was based on an interpretation of British Columbia law, the Court will use it to decide application of “override” provisions in all other provincial legislation governing family law.

In essence, the Court ruled that a marriage agreement, although not affording the same rights the codified law would on a marital breakdown, will not be interfered with, unless circumstances arise that were not contemplated by the parties when entering into the agreement; and if this is the case and the agreement is maintained, it would render an “unfair” result.  The Court will then use its powers to amend the agreement.

What is important to note is that both parties should consult a lawyer before agreeing to a marriage contract.  It may be that one party feels compelled to enter the agreement, for failing to do so, marriage will not occur.  Perhaps this pressure will arise from family, or from social constructs.  Whether this will constitute as “duress” by the Court, will need to be determined in a future case.  However, if the person entering into the contract is fully aware of their situation at the time, and can foresee their situation when the marriage dissolves (for example, not working and not having an intention to return to work in order to rear the family), then the division of property as outlined in the marriage agreement/contract, will override the legislation.