Assume your marriage contract is a sweetheart deal? Do not be so certain

Article content material

Marriage contracts could be an efficient software for a pair wishing to create certainty within the occasion of their future separation. However failing to take care within the negotiation course of can result in the alternative consequence, as was evident in a latest case earlier than Justice Michael J. Valente of the Ontario Superior Court docket of Justice.

Article content material

Over the course of their 23-year marriage, the husband and spouse within the case had 4 kids. Roughly ten years after their marriage, they began a lumber brokerage enterprise, which achieved appreciable success. Within the years main as much as the events’ separation in 2019, the enterprise generated revenue for the household of roughly $2.5 million per 12 months. The husband owned 51 per cent of the enterprise, whereas the spouse owned the remaining 49 per cent.

Article content material

Whereas to start with of their relationship the events struggled to make ends meet, the success of the enterprise in the end enabled the household to take pleasure in a lavish way of life. They lived in a 12,000-square-foot house with two swimming pools. They owned two trip properties, one in Florida and a cottage in Ontario. The kids have been educated completely at personal faculties. For this household, cash was not a problem.

Article content material

In 2008, the events signed a shareholder settlement that required the spouse to promote her curiosity within the lumber enterprise to the husband if the events ever separated.  In keeping with the husband, that settlement was designed to offer the spouse certainty ought to their relationship finish. The spouse, conversely, mentioned that she didn’t know the aim of the settlement and signed it as a result of the husband “turned threatening when questioned.”

5 years later, the events entered into a wedding contract. The contract supplied that, if the events have been to separate, the spouse would obtain $750,000 for her share within the enterprise and a one-time fee of $100,000 overlaying the whole lot of her entitlement to spousal help. When the events certainly separated in 2019, the husband made each funds to the spouse.

Article content material

However the worth of the enterprise on the time was estimated within the vary of $11 million to $15.8 million and consequently the spouse commenced courtroom proceedings in an effort to right the monetary imbalance generated by the wedding contract.

The matter earlier than Justice Valente was at an interim stage of the courtroom proceedings — probably years earlier than the trial at which the enforceability of the wedding contract would in the end be decided. In a movement, the spouse sought interim spousal help from the husband within the quantity of $27,916 monthly, however the phrases of the wedding contract with which the husband had complied. The husband resisted the spouse’s declare, arguing the contract must be honoured. The query was thus: Ought to the spouse obtain spousal help now or be pressured to attend till a choice was made at trial?

Article content material

For Justice Valente, the place to begin was a recognition that “courts ought to try to uphold home contracts.”

He cited a Supreme Court docket of Canada case of Miglin v. Miglin which set out a two-stage evaluation to find out if spousal help must be paid within the face of a wedding contract that claims in any other case.

Within the first stage, a choose should think about the “circumstances during which the settlement was negotiated and executed” and to weigh whether or not the phrases have been in line with the Divorce Act’s targets. If the settlement passes muster within the first stage of the evaluation, the second stage requires a choose to think about “the present circumstances of the events to find out whether or not the settlement nonetheless displays their authentic intentions” and once more, to evaluate it towards the targets of the Divorce Act.

Article content material

Justice Valente discovered no challenge with Stage 1 of the Miglin check, however in addressing Stage 2 concluded that after a 23-year marriage, the spouse’s entitlement to a one-time spousal help fee of $100,000 and the husband’s retention of the worthwhile household enterprise didn’t “acknowledge the financial benefits or disadvantages to the spouses arising from the wedding or its breakdown.” Such an end result was inconsistent with the targets of the Divorce Act.

Justice Valente’s conclusion doesn’t finish the dispute, nevertheless. Fairly, it pinpoints a severe challenge with the wedding contract and acknowledges {that a} trial is critical to find out if it must be upheld or put aside. That severe challenge opened the door to an interim order for spousal help and Justice Valente ordered the husband to pay the spouse spousal help of $25,500 monthly pending the trial.

However these funds got here with a caveat for the spouse: Justice Valente made it clear that the fee of spousal help on the interim stage was topic to adjustment primarily based on the end result on the trial — in different phrases, that if the trial choose have been to uphold the contract, the spouse could be obligated to reimburse the husband.

The choose famous she had “ample property” to cowl such compensation, if wanted.

Adam N. Black is a accomplice within the household regulation group at Torkin Manes LLP in Toronto.

ablack@torkinmanes.com