Prenuptial Agreements for Canadians in Thailand - Overview of Canadian Law

With the exception of Quebec, private Law in Canada originates from Common Law. A Prenuptial Agreement ( also be called a Cohabitation Agreement or Common-Law Partnership Agreement if the partners are not getting married) is a type of legal document entered into by two people prior to marriage or another form of civil union. Basically, the document lists the assets of each party, and outlines which party should get what in the event of separation or death. Canadians are advised to make a prenuptial agreement Thailand should they marry a Thai spouse.


Canadian Law allows prenuptial agreements between spouses. For instance, you will find provisions about them in the Family Law Act ( R.S.O. 1990, c F.3) of Ontario, or in Matrimonial Property Act of Nova Scotia, (Matrimonial Property Act. R.S., c. 275, s. 1).


Because each province has its own particularities, pick a law firm knowing about Canadian Law.
An overview of Pre-Nuptial agreements in Canada
By John C. Soby, Q.C. and Alicia T. DuBois of Soby Boyden Lenz
Calgary, Alberta, Canada
The Canadian Constitution and its Effect on Marriage and Divorce


The independent state of Canada was born out of the British Commonwealth and is structured as a federation which is comprised of 10 provinces and 3 territories.[1] As specified in section 91(26) of the Canadian Constitution Act of 1867, the Parliament of Canada exercises exclusive legislative authority with respect to "Marriage and Divorce". In accordance with that authority, and as set out in sections 92(12) and (13) of the Constitution Act of 1867, the Parliament of Canada conferred upon the provincial legislatures the exclusive power to enact their own provincial laws in relation to "The Solemnization of Marriage in the Province" and "Property and Civil Rights in the Province", respectively. The practical implication associated with this division of power between the federal and provincial governments is that while the federal government is the governing authority with respect to divorce, each province and territory has the power to govern its citizens with respect to marriage and property division upon marriage breakdown.[2] Therefore, it is, for the most part, the provincial and territorial legislatures that govern the citizens with respect to matters pertaining to domestic contracts, including prenuptial agreements.



Statutory Requirements for Prenuptial Agreements in Canada
Federal Law


The Divorce Act is the federal statute that governs divorce across Canada. The Divorce Act stipulates the grounds for divorce in Canada, provides the basis on which spouses may seek spousal support and, where applicable, governs entitlement for child support, in addition to custody and access rights to children of the marriage. The Divorce Act briefly addresses domestic agreements and only makes reference to spousal agreements in the context of child support orders, spousal support orders, and the variation of child support orders in sections 15.1(5), 15.2(4), and 17(6.2), respectively. With respect to spousal support orders, the Divorce Act simply states that an agreement between spouses is a factor that ought to be considered when the court makes a determination regarding one spouse's application for spousal support. With respect to child support orders, or variations to child support orders, the Divorce Act focuses on ensuring that, if the spouses who have entered into an agreement have children, the best interests of the children are protected in the provisions of the spouses' agreement.

Further in that regard, in conjunction with the Divorce Act, spouses must consider the Federal Child Support Guidelines and adhere very closely, if not precisely, to the child support provisions therein. In 1997, the federal government put Child Support Guidelines in place for each province and territory and these Guidelines were recently updated in May, 2006. The Child Support Guidelines basically determine the amount of child support owed by the non-custodial parent to the primary parent based upon the non-custodial parent's gross income and the number of children of the marriage in the care of the primary parent. The 1997 Child Support Guidelines were put in place in order to address the unpredictable and varying awards of child support the Courts had ordered historically and also to address the great number of single mothers and children that were living in poverty due to the breakdown of marriages. Overall, the Child Support Guidelines have fulfilled their purpose and therefore, the Canadian courts are very reluctant to deviate from the Child Support Guidelines. As a result, and as stated in the Divorce Act, while the courts will consider prenuptials that deviate from the Child Support Guidelines, the parties must be able to provide compelling reasons supporting the deviation while also showing the court that the financial needs of the children will be sufficiently met under the proposed provisions of the prenuptial contract.

According to the Divorce Act, the courts may recognize and uphold provisions of a prenuptial contract that address custody of and access to children of the marriage so long as the agreements support the best interests of the children. For instance, generally speaking, Canadian courts operate on the premise that children benefit from a loving relationship and contact with both parents and that custody/access regimes ought to reflect this premise, with the exception of very severe circumstances of abuse, etc. Therefore, so long as spouses with children contract in a manner reflective of the importance of both parents' involvement with the children and neither parent has contracted out of his or her rights regarding the children, the federal statute enables the courts to recognize the provisions agreed upon in prenuptial contracts.

Despite the fact that the federal Divorce Act enables courts to consider and uphold contractual provisions regarding child access and custody under certain conditions, a number of the provinces have contradictorily legislated that spouses cannot contract regarding custody or access rights to children of the marriage.[3] This will be further discussed below.
Provincial and Territorial Law

Despite the fact that each province governs its citizens with respect to marriage and matrimonial property division, the laws across Canada pertaining to matrimonial property division universally operate on the overarching presumption of equitable sharing of marital assets between spouses on marriage breakdown. The parties are permitted, to a large degree, to contract out of this overarching presumption by creating and executing a valid prenuptial agreement with the aim of predetermining their division of matrimonial property, either in part or whole, in the event of marriage breakdown.[4] While all provinces and territories permit spouses to contract with respect to matrimonial asset and debt division, two provinces and one territory limit that allowance in that spouses are not permitted to contract out of their respective rights to the matrimonial home.[5]

It is unanimously required by all provinces and territories that prenuptial agreements shall be in writing. Furthermore, with the exception of one province[6], all provinces and territories agree that prenuptial agreements must also be signed by the parties and witnessed. The Yukon Territory statute further requires that only independent witnesses are permitted to sign prenuptial agreements.[7]

While only five of the Canadian provinces' legislations[8] are worded so to either explicitly require or implicitly suggest that independent legal advice is to be sought by and provided to both parties to a prenuptial agreement, the majority of recently reported cases from across Canada indicate that the courts generally acknowledge and encourage couples to obtain independent legal advice when finalizing prenuptial agreements in order to ensure their agreements are upheld if challenged.[9]

In light of the fact each provincial and territorial government has the authority to determine its own laws regarding marriage and matrimonial property division upon marriage breakdown, there are notable differences between the provinces with respect to what types of provisions within a prenuptial agreement will be recognized and upheld by the courts. For instance, and further to earlier discussions herein, approximately half the provinces and territories permit couples to contract regarding custody of and access to the children of the marriage while the other half explicitly forbid it. Similarly, approximately half the provinces legislate that courts can amend and/or deem invalid provisions within prenuptial contracts that are not in the child's best interests.[10] The Yukon Territory legislation narrows this issue even further in that the courts are able to amend and/or deem invalid any provision that does not reflect the best interest of the children of the marriage with respect to child support payments.

Another marked difference amongst legislation is the classification of specific assets. With the exception of specific exemptions,[11] all provinces and territories consider property acquired during the marriage such as matrimonial and vacation homes and their contents, vehicles, registered retirement savings plans (RRSP's), investments, and pension plans to be matrimonial property. There is, however, significant discrepancy amongst provinces with respect to the classification of business assets. The provinces of Nova Scotia, New Brunswick and Newfoundland, unlike the rest of Canada, have determined and legislated that business assets are not matrimonial property.[12] This determination has a profound influence on the balance of ‘equitable sharing' for the parties involved because only property deemed to be matrimonial property is to be equally divided between spouses upon marriage breakdown. That being said, however, simply because the provincial legislation does not classify these assets as matrimonial assets does not necessarily mean spouses are precluded from contracting in a manner that shares business assets equally as part of the matrimonial assets. These laws do, however, influence the degree of disclosure required between spouses when creating prenuptial contracts. In addition, if the legislation does not support a couple's equitable consideration of business assets in their contract, there is less likelihood that the courts will deem such a division as fair or reasonable without proof that the business was contributed to equally by both spouses. In the remainder of Canada's provinces and territories the legislation and case law alike assume that the business assets of one spouse ought to be attributed to both spouses equitably upon marriage breakdown and the onus is significant for one spouse to show otherwise.
The Law of Contract in Canada and Prenuptial Contracts

In addition to case law that aims to interpret legislation, the Canadian courts also adjudicate cases on the basis of the law of contract, as was done prior to the enactment of statutes governing prenuptial agreements and other domestic contracts. Most commonly, when the judiciary applies the law of contract to prenuptial contracts the contracts are reviewed on grounds relating to misrepresentation and fraud, duress, undue influence, and unconscionability.
Misrepresentation and Fraud

Misrepresentation occurs in the realm of prenuptial contracts when one spouse, while in prenuptial contract negotiations with another spouse, does not provide full or accurate disclosure with respect to his or her assets and/or debts to the other spouse. While providing false, incomplete or no disclosure at all are grounds to question the validity of a prenuptial contract, the courts have ruled that there is a significant difference between mistakenly providing insufficient disclosure and purposefully providing false information. While case law indicates the Canadian courts may or may not make allowances for mistakes,[13] the courts are less forgiving with respect to fraudulent misrepresentation. The law of contracts in Canada supports the rescission of prenuptial contracts under these circumstances because it is recognized that it is improper to uphold contracts in which one spouse intentionally misrepresents his or her financials for the purpose of inducing the other party to enter into a contractual agreement he or she may not otherwise agree to had accurate disclosure been provided. The remedy under the law of contract for misrepresentation is a claim for damages and/or the rescission of the contract.[14]

The Canadian courts have firmly decided that intentional misrepresentation in the process of creating and finalizing a prenuptial contract is sufficient grounds to rescind the contract in whole or part, especially when the misrepresentation involves financials. For instance in Le Van v. Le Van[15] the husband and wife entered into a prenuptial agreement and continued to live their lives on the false understanding, as put forth by the multi-millionaire husband, that the parties had very limited means. Upon the breakdown of the marriage and the wife's learning that the husband had been dishonest with her about his financial status prior to and for the duration of their marriage, the wife challenged the couple's prenuptial contract. The court found that the husband had materially misrepresented his financial circumstances. Due to the husband's misrepresentation and also because the wife failed to understand the nature of the contract the parties had entered into, the court determined that the parties were unable to appropriately negotiate the terms of their prenuptial contract. As a result, the prenuptial contract was rescinded and the wife was awarded a $5.3 million dollar equalization payment.
Duress, Undue Influence and Unconscionability

Duress occurs when one party to a contract induces the other party to enter into the agreement by way of threat. If the threat by one party is proved to have coerced the opposing party against his or her will to enter into the agreement, the law of contract states that the coerced party's consent ought to be vitiated. Undue influence is a milder form of duress in that while threats need not be made, a sense of pressure or influence may be sufficient to create a circumstance in which an agreement between parties is improperly entered into.[16] Most commonly, the courts use the term ‘unconscionable' when describing situations involving one party who is taken advantage of by the other while in the process of creating and finalizing a domestic contract. Unconscionability encompasses situations involving one party who, opportunistically, enters into a contract with another and in doing so capitalizes on the other party's weaknesses, ignorance, lack of sophistication, or unequal bargaining power.[17]

Canadian courts often simultaneously address the concepts of duress, undue influence and unconscionability in the realm of prenuptial contracts. In Freake v. Freake, Justice Cameron of the Newfoundland Court of Appeal summarized the two-part test that is to be applied when determining what constitutes unconscionable conduct as such: "1) there must be an inequality of position of the parties which might arise out of ignorance, distress or incapacity; and 2) the stronger of the two must have obtained a substantial benefit." [18] Case law from across the country, with differing fact scenarios has confirmed what unconscionable conduct is on the part of one spouse. The common themes in these cases tend to involve one or more of the following: 1) pressure on one spouse to sign the prenuptial contract,[19] 2) signing the contract without independent legal advice or without knowledge of the law;[20] 3) signing the contract without a true understanding of the nature and consequences of the contract;[21] and 4) signing the contract while experiencing a significant source of stress and while in a vulnerable state.[22]
Conclusion

This paper only begins to address the complexities involved in the creation and finalization of a valid prenuptial contract in Canada. The very basic requirements of this process, as briefly outlined herein, involve detailed attention to a number of statutes and legal concepts, in addition to thorough consideration of the dynamics of the relationship between the spouses who are subject to the agreement. Due to the direction recent law has taken and the ever-growing necessity for spouses to obtain independent legal advice, the creation of a legally binding prenuptial agreement ultimately becomes the delicate task of counsel who must not only employ a strong sense of intuition about the personalities involved and know the law as it currently is, but counsel must also attempt to put in place the necessary safeguards to ensure their client's interests are protected as the law and the parties' circumstances evolve over the years to come.

Once the parties have executed the contract, typically the contract is analyzed further only if and when one party to the contract challenges the agreement. At that juncture, the determination of the validity of the agreement is then left to the court's interpretation of statutes and the application of contract law. The judiciary undoubtedly exercises a significant degree of discretion when engaged in this process which invariably gives rise to the evolution of the law surrounding prenuptial contracts. Despite the uncertainty surrounding the future, the safest practice with respect to prenuptial contracts is one that applies as much knowledge of the law to the parties' fact scenario as possible.









[1] Geographically speaking, the Provinces of Canada from west to east include: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland. The territories, also from west to east, include: Yukon Territory, Northwest Territory and Nunavut. This paper aims to summarize the law pertaining to prenuptial contracts across Canada, with the exception of the Province of Quebec. The Province of Quebec is excluded from this study due to the fact that Quebec is a common law province and differs from the other Canadian provinces with respect to how its laws are structured. Further in that regard, it is also our understanding that Mr. Kalman Samuels, Q.C. has undertaken to provide a paper regarding the Province of Quebec.

[2] What is important to note is that each province's legislation regarding property division is only applicable to property within the borders of that province. Therefore, one province does not have the authority to determine the manner in which property held in another province is to be divided.

[3] The Provinces of British Columbia, Ontario, Newfoundland, New Brunswick, and Prince Edward Island, in addition to Northwest Territories and the territory of Nunavut do not allow spouses to contract with respect to custody or access rights to children of the marriage.

[4] The idea that couples are able to contract out of their rights to significant matrimonial property and that under appropriate circumstances, the courts ought not undo what spouses previously agreed to was strongly supported by a relatively recent decision of the highest court in Canada, the Supreme Court of Canada, in the case of Hartshorne v. Hartshorne (236 D.L.R. (4th) 193).

[5] Manitoba, Ontario and Yukon Territory have enacted legislation that states ant clause in a prenuptial contract that purports to limit a spouse's right to his or her share of the matrimonial home is unenforceable.

[6] As per the Marital Property Act (C.C.S.M. c. M45) of the province of Manitoba, section 1(1) as noted within the definition of "spousal agreement".

[7] Section 64 of the Family Property and Support Act R.S.Y. 2002, c.83.

[8] Namely, Alberta, Ontario, Newfoundland, New Brunswick, and Prince Edward Island.

[9] Reischer v.Reischer [2006] B.C.J. No 1108; Mraovic v. Mraovic [2003] M.J. No. 457; Rogerson v Rogerson [2004] N.S.J. No. 152; LeVan,v. LeVan [2006] O.J. No 3584, Khan v. Khan [2005] O.J. No. 1923 and Dhanna v. Dhanna [2004] O.J. No. 5036.

[10] The Provinces of Ontario, Newfoundland, New Brunswick, Nova Scotia, Prince Edward Island and Northwest Territory and Nunavut do not permit spouses to contract in a manner that fails to consider the best interests of children of the marriage.

[11] Recognized property exemptions in Canada include property brought by one spouse to the marriage, inheritances, gifts from third parties, and insurance proceeds from settlement claims.

[12] The legislation of these provinces do enable compensation to be paid to spouses who have contributed to the other spouse's business in some direct fashion. It is clear, however, that the courts tend to grant compensation awards that are not as substantial as awards granted on the basis of equitable sharing.

[13] Freake v. Freake [2004] N.J. No. 222; Montreuil v. Montreuil [1999] O.J. No. 4450; Demchuk v. Demchuk (1986), 1 R.F.L. (3d) 176; Dubin v. Dubin 34 R.F.L. (5th) 227 (Ont. SCJ); Pruss v. Pruss (2000) 12 RFL (5th) 188 (Ont SCJ); Murray v. Murray (1994) 10 RFL (4th) 60 (Alta. C.A.); and, in part, Dilly v. Hall-Dilley [2006] B.C.J. No 2021 also supports this premise;

[14] G.H. Treitel, The Law of Contract, 9th ed. (London: Sweet & Maxwell, 1995) [hereinafter referred to as The Law of Contract].

[15] [2006] O.J. No. 3584.

[16] The Law of Contract, Ch 10.

[17] The Law of Contract, Ch 10.

[18] [2004] N.J. No. 222, para 47.

[19] Horvath v. Horvath [2005 B.C.J. No. 1253 and LeVan,v. LeVan [2006] O.J. No 3584. It is important to note that as per the case of Reischer v. Reischer [2006] B.C.J. No 1108, an ultimatum is not necessarily recognized by the court as undue pressure to sign a prenuptial agreement, especially if all other factors, such as adequate independent legal advice and absence of duress, validate the contract.

[20] Horvath v. Horvath [2005 B.C.J. No. 1253, Khan v. Khan [2005] O.J. No. 1923 and Dhanna v. Dhanna [2004] O.J. No. 5036.