The Family Property Act and Informal Separation Agreements in Saskatchewan: Supreme Court of Canada's decision in Anderson v Anderson

A recent decision from the Supreme Court of Canada (the “SCC”) has implications for family property agreements in Saskatchewan (and across the country), where the agreements do not meet the formal requirements to be considered interspousal contracts under provincial legislation. The decision, Anderson v Anderson, 2023 SCC 13 [Anderson], involves consideration of an informal separation agreement that dealt with division of the parties’ family property and provides direction on how to approach informal agreements that are not interspousal contracts.

Anderson is a caution that informal agreements between parties, without involvement of legal counsel or financial disclosure, may bind the parties even if the agreements are not consistent with the rights and entitlements of the parties.

Background

The Family Property Act, SS 1997, c F-6.3 (the “FPA”) governs the distribution of family property in Saskatchewan upon a separation. Under the FPA, there is a presumption of equal distribution of family property. However, the FPA allows parties to contract out of this presumption by way of agreement or domestic contract. The FPA recognizes two types of domestic contracts dealing with family property: (1) interspousal contracts which meet certain formal statutory requirements as set out in s. 38 of the FPA that are presumptively enforceable; and (2) other agreements that do not meet the formal statutory requirements, but may still be considered and given weight by a Court by way of s. 40 of the FPA.

Facts of the Case

The Andersons separated in May of 2015 after three years of marriage. It had not been the first marriage for either of them and they both entered into the relationship with considerable assets including houses, vehicles, personal property, RRSPs, and pensions. In July of 2015, the Andersons were brought together by two friends with hopes of discussing the possibility of reconciliation. Talks of reconciling were unsuccessful, and the meeting ended with the wife presenting the husband with a written separation agreement that she had prepared. The Andersons executed the separation agreement at this meeting (the “Agreement”). It was a short and simple agreement that primarily provided that each of the parties would keep their own respective assets and liabilities. The Agreement did not address division of the family home, as the parties agreed that this would be dealt with at a later date. Lawyers were not involved, nor was there any financial disclosure between the two.

The wife eventually petitioned for divorce, and nearly 17 months after, the husband filed a counter-petition, arguing that the Agreement was signed without legal advice and under duress, and therefore, the Agreement was unfair and unlawful.

The Decisions Below

As a starting point, the Agreement was not a valid interspousal contract, as it did not satisfy the requirements of s. 38 of the FPA. Therefore, the Court had to assess whether the Agreement should be considered and, if so, what weight should be given to it under s. 40 of the FPA.

At the Court of King’s Bench for Saskatchewan, the trial judge gave the Agreement little weight, finding the absence of legal advice to be “most troubling” (Anderson v Anderson, 2019 SKQB 35 [Trial Decision] at para 108). He ordered the wife to pay the husband an equalization payment of $62,646.98 and either an RRSP rollover of $37,089.69 or a further cash payment of an additional $27,817.27 to the husband.

On appeal, however, the Court of Appeal for Saskatchewan (the “SKCA”) reversed the trial judge’s decision and found that the agreement was binding on the parties (Anderson v Anderson, 2021 SKCA 117). They decided to apply the framework from Miglin v Miglin, 2003 SCC 24 [Miglin] when assessing the appropriate weight to be given to the Agreement. At a high level, the Miglin framework is a two-step analysis that the SCC developed to be engaged when there is a private spousal support agreement and there is either a subsequent application for spousal support that is inconsistent with the pre-existing agreement. After applying this framework in the context of the FPA, the SKCA was of the view that the Agreement should be given great weight.

The Supreme Court’s Decision

The husband was granted leave to appeal the SCC. In a unanimous decision, the SCC allowed the appeal. In its reasons, the SCC found the Agreement was binding and adopted it in whole. In doing so, Karakatsanis J, writing for the Court, held that, despite concluding that the Agreement should be given great weight, the SKCA failed to appropriately adjust the Miglin analysis to fit the FPA. The SCC further found that the SKCA equalized the property in a way that defeated the parties’ intentions and resulted in unfairness.

The decision as a whole emphasizes the importance of respecting the contractual autonomy of parties in the family law context. It directs Courts to be less willing to interfere with property division than spousal support or child support agreements. Moreover, the SCC further emphasize that domestic contracts should generally be encouraged and supported by Courts.

The SCC provided clear direction that the Miglin analysis should not be directly transposed to the family property division context. While useful principles emerge from the Miglin analysis, the proper approach needs to be statute specific. Here, in the context of the FPA, the proper approach that a Court should take when assessing an informal separation agreement is to first determine whether an agreement is entitled to consideration. This involves the Court being alive to any concerns that the agreement is not valid according to ordinary contract law principles.

Once a Court is satisfied that an agreement is entitled to consideration, it is then to assess the substantive fairness of the agreement to determine how much weight should be placed on the agreement in ordering property division. This will depend on whether the substance of the agreement aligns with what is fair and equitable in the circumstances, considering the objectives and factors of the statutory scheme.

As a result, a person challenging an informal separation agreement entered into among parties “must point to evidence that suggests that the agreement was tainted by undue pressure, circumstances of oppression, or exploitation of a power imbalance or other vulnerability, or that a defect in the bargaining process prevented the parties from understanding some essential part of the bargain” (Anderson at para 49). Otherwise, the agreement will be binding upon the parties.

In the context of this specific case, the SCC found that the Agreement was binding and there were no substantiated concerns with its fairness, as it reflected the intention of the parties to effect a clean break from their relationship. The Agreement was entitled to “serious consideration” as the SCC was of the view that it reflected the parties’ understanding of what division of property was fair in the context of their own relationship at the time of their separation. Ultimately, the SCC held that the parties were best positioned to decide how the family property resulting from their marriage should be organized and divided – giving the Agreement full effect was the most fair and equitable solution. Notably, the SCC reached this conclusion despite lack of disclosure and lack of legal advice on the basis that neither were required under the FPA.

Takeaway

Following Anderson, Courts are likely to be less willing to interfere with parties’ informal separation agreements, even when parties were unaware of their rights and entitlements at the time that they entered into the agreement and did not realize what they may have been giving up. Anderson therefore serves as an important reminder that obtaining legal advice and financial disclosure in advance of entering into any agreement in the family law context is always a good idea.

Ultimately, legal advice can act as a safeguard which provides protections to parties in the family law context. You can better protect yourself by knowing your rights, obligations, and entitlements under Saskatchewan’s family law legislation.

McDougall Gauley’s Family Law team has extensive experience in providing legal advice to individuals going through separations and will work with you to ensure that you are aware of your rights and entitlements under Saskatchewan’s family law legislation.