I am often asked about the possibility of setting aside a prenuptial agreement. Some clients want to know whether a prenuptial agreement would protect them if their relationship broke down. Other clients have a prenuptial agreement that they are unhappy with and want it set aside.
In this article, I will explain how prenuptial agreements are set aside. I will also write about a 2016 Supreme Court of British Columbia case where the prenuptial agreement was set aside as an example.
Family Law Act – Setting Aside a Family Agreement Concerning Property Division
Section 93 of the Family Law Act provides judges with the power to set aside a family agreement. However, the criteria in section 93 must be met before a family agreement is set aside:
93 (1)This section applies if spouses have a written agreement respecting division of property and debt, with the signature of each spouse witnessed by at least one other person.
(2) For the purposes of subsection (1), the same person may witness each signature.
(3) On application by a spouse, the Supreme Court may set aside or replace with an order made under this Part all or part of an agreement described in subsection (1) only if satisfied that one or more of the following circumstances existed when the parties entered into the agreement:
(a) a spouse failed to disclose significant property or debts, or other information relevant to the negotiation of the agreement;
(b) a spouse took improper advantage of the other spouse’s vulnerability, including the other spouse’s ignorance, need or distress;
(c) a spouse did not understand the nature or consequences of the agreement;
(d) other circumstances that would, under the common law, cause all or part of a contract to be voidable.
(4) The Supreme Court may decline to act under subsection (3) if, on consideration of all of the evidence, the Supreme Court would not replace the agreement with an order that is substantially different from the terms set out in the agreement.
(5) Despite subsection (3), the Supreme Court may set aside or replace with an order made under this Part all or part of an agreement if satisfied that none of the circumstances described in that subsection existed when the parties entered into the agreement but that the agreement is significantly unfair on consideration of the following:
(a)the length of time that has passed since the agreement was made;
(b)the intention of the spouses, in making the agreement, to achieve certainty;
(c)the degree to which the spouses relied on the terms of the agreement.
(6) Despite subsection (1), the Supreme Court may apply this section to an unwitnessed written agreement if the court is satisfied it would be appropriate to do so in all of the circumstances.
The Family Law Act became law on March 18, 2013. Prior to that date, the Family Relations Act governed family law in the province. Applications to set aside agreements entered into before March 18, 2013 are decided under the Family Relations Act. Section 65 of the Family Relations Act has an effect similar to section 93 of the Family Law Act:
65 (1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to
(a) the duration of the marriage,
(b) the duration of the period during which the spouses have lived separate and apart,
(c) the date when property was acquired or disposed of,
(d) the extent to which property was acquired by one spouse through inheritance or gift,
(e) the needs of each spouse to become or remain economically independent and self sufficient, or
(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,
the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.
(2) Additionally or alternatively, the court may order that other property not covered by section 56, Part 6 or the marriage agreement, as the case may be, of one spouse be vested in the other spouse.
(3) If the division of a pension under Part 6 would be unfair having regard to the exclusion from division of the portion of a pension earned before the marriage and it is inconvenient to adjust the division by reapportioning entitlement to another asset, the Supreme Court, on application, may divide the excluded portion between the spouse and member into shares fixed by the court.
Therefore, we can see some of the factors that can convince a court to set aside a prenuptial agreement. These factors include:
- Failure to disclose assets, property, or debt to a partner when the agreement was signed.
- Taking advantage of a partner’s financial or other vulnerability, ignorance, and distress.
- One of the parties not understanding the legal consequences of the agreement when they sign it.
- If the agreement is voidable under the rules of common law, such as:
- The agreement is unconscionable.
- The agreement was entered into under undue influence.
- One of the parties did not have the legal capacity to enter into the contract at the time the contract was made.
- If the prenuptial agreement was significantly unfair based on:
- The length of time since it was signed.
- The intentions of the spouses to achieve certainty when they signed the contract.
- The degree to which the spouses relied on the terms of the prenuptial agreement.
HSS was a family law case between Mrs. D, a wealthy heiress whose family had fallen on hard times, and Mr. S, a self-made lawyer who had amassed a considerable fortune during his career. At the time of Mr. S and Mrs. D’s marriage, the two signed a prenuptial agreement to protect Mrs. D’s property. However, by the time of the trial, Mrs. D’s family had lost a considerable part of their fortune. Although Mrs. D was still a wealthy woman by all accounts, having received millions of dollars in gifts and inheritances from her family.
Mr. S was not a wealthy person at the time of his marriage, however, by the time of trial in 2016, he had approximately $20 million dollars in personal wealth, more than twice as much as Mrs. D’s assets.
The parties had two adult children at the time of the trial. The older daughter, N, had significant learning difficulties and allergies while she was young. As a result of N’s health problems, Mrs. D had to leave her lucrative career in Human Resources to take care for N while Mr. S continued to work. Therefore, Mrs. D did not have an income when the parties separated in 2003, and she had not returned to her lucrative career by 2016.
The court decided to set aside the prenuptial agreement because Mrs. D and Mr. S had not considered the possibility of having a child with health difficulties at the time of signing the prenuptial agreement. Therefore, Mrs. D’s lack of an income in 2016 and her lack of self-sufficiency was an unexpected consequence of the prenuptial agreement. This unexpected consequence justified setting the prenuptial agreement aside.
Lawyer’s Role in Protecting Your Rights
As you can see, there are many reasons why a prenuptial agreement may be set aside. Therefore, it is imperative that you draft and sign your prenuptial agreement with the help of an experienced lawyer. The lawyer can draft a thorough agreement to reduce the chances of it becoming unfair in the future. Furthermore, the lawyer will ensure that the signing and execution of the agreement will be done under fair circumstances so that the agreement is not voidable.
Without the assistance of a lawyer in the drafting and execution of a prenuptial agreement, the chances of a challenge to the prenuptial agreement increase. Additionally, if the prenuptial agreement were to be challenged, it would be more likely that a court would set it aside.
If you are considering moving in with your partner or getting married, contact Amir Ghorbani about getting a prenuptial agreement to protect yourself and your property.