Parties may voluntarily enter into a marriage contract to set out their respective rights to property ownership, equalization, and support if the marriage ends. Domestic contracts that were signed out of Ontario and under a foreign legal regime can still be valid in Ontario. However, these agreements may not always oust a party’s rights to equalization and can still be challenged.

Foreign Contract Must Meet Minimum Requirements

In Jasen v. Karassik, the parties entered into an agreement that addressed decision-making, parenting, and child support. The father resided in the United States, and the agreement was prepared by an American lawyer and used American terminology. The mother later commenced an application in Ontario to vary the agreement. The father argued the Ontario judge had no jurisdiction to vary the agreement as the agreement was not a domestic contract as described by Ontario’s Family Law Act but was a foreign contract.

The Court did not accept that, as it misconstrued the meaning of “domestic” contract, which referred to the subject matter of the agreement and not territorial factors. The Court of Appeal looked at section 58 of the Family Law Act, which states that a foreign domestic contract is valid and enforceable in Ontario if it is entered into in accordance with Ontario law.

The father argued that if a foreign contract fell under the Family Law Act’s definition of a “domestic contract,” parties could enforce agreements governed by foreign law without ensuring they complied with section 58. In the father’s view, this meant that any agreement could be enforced in the province even if it contained egregious provisions. However, the Court disagreed, as parties could still challenge the validity and enforceability of an agreement. The mere filing of an invalid contract did not mean the court would enforce it. Moreover, for a contract to be “entered into in accordance with Ontario’s internal law” meant that it had to meet the formal requirements of being made in writing, signed by the parties, and witnessed. It did not extend to substantive provisions in a domestic contract.

Dealing with Property Ownership is Not a Waiver of Equalization

Parties who have signed a domestic contract in one province but later relocated to a different province can also face uncertainties as to what the contract specifically addresses and whether it ousts a spouse’s rights. In Torgersrud v. Lightstone, the parties signed two Quebec legal instruments that purported to deal with matrimonial property. The first instrument was signed in 1998 and stated that the parties were to have renounced certain property rights, declared that they were separate as to property, and would not be liable for each other’s debts. When the matrimonial property scheme in Quebec was changed in 1990, the parties signed a second instrument where the parties agreed to opt out of the default property scheme.

At the time of the parties’ divorce, they were residing in Ontario. The applicant wife sought a declaration that the instruments did not prevail over her right to claim for equalization of net family property. She argued that while the 1988 instrument stipulated that the parties were “separate as to property,” it did not include specific terms outlining what would occur at the end of the marriage. The result was that she claimed she was entitled to equalization at an amount over $8 million.

Wife Argues Quebec Instruments Do Not Outweigh Ontario’s Legislative Regime

The core of the wife’s argument was that the Quebec instruments did not outweigh the Ontario equalization regime that is provided for in the Family Law Act as they did not use clear language concerning the property issues provided for under the Ontario legislation.

The wife pointed to Bosch v. Bosch, which held that domestic contracts stating that parties are separate as to property do not restrain equalization claims, as the contracts do not deal with property issues in a parallel manner as in the Family Law Act. A contract dealing with the ownership of property during marriage does not deal with the division of property outlined in the Family Law Act. The Court held that contracts must address the relative economic positions of parties on the marriage breakdown.

The husband argued that the Quebec instruments were valid and binding domestic contracts and that the Court should not set aside the instruments but, instead, should uphold the parties’ intention to maintain the separate property. He indicated that the instruments were signed to protect his inheritance from equalization, and this was reflected in their actions during the marriage, as some assets were placed in their joint names so they would share in those particular assets.

Domestic Contract Must Address Ontario’s Equalization Regime

To determine whether the two instruments ousted the application of the Family Law Act, the judge looked at section 2(10), which states that “a domestic contract dealing with a matter that is also dealt with in this Act prevails unless this Act provides otherwise.” Consequently, unless the Family Law Act provides otherwise, a domestic contract will determine the rights between the parties.

Looking again to Bosch v. Bosch, that case provided that the instruments had to deal with a matter akin to equalization to be able to oust the application of the equalization provisions of the Family Law Act. That was because the Family Law Act assigns values to assets at the date of separation and is concerned with the economic position of the parties upon divorce and provides for an equalization payment. This regime is broader than just dealing with the ownership of property.

In Webster v. Webster, the Court examined a marriage contract that only discussed ownership but did not provide any other basis for distributing wealth between the parties. In that case, the Court noted that there is “a high threshold that must be met before finding that an out-of-jurisdiction marriage contract … prevails over the equalization provisions of the FLA”. In Webster v. Webster, the contract did not include a renunciation of equalization rights. The Court explained that section 2(10) is only applied when a matter in the domestic contract is also dealt with under the Family Law Act. However, in that case, the contract did not deal with equalization rights upon divorce, so the marriage contract did not prevent the party from making an equalization claim.

Wife Not Barred From Advancing Equalization Claim

The judge also took note of the decision in Lay v. Lay. In this instance, the parties’ contract stated the wife would retain certain property free from any claim by the husband. It also provided that all rights and obligations of the parties in connection with the possession, ownership, or division of that property would be governed by their agreement, which would prevail over the legislation. The Court of Appeal explained that the issue was whether the parties “directed their minds to whether the property would be subject to – or exempt from – the governing statutory regime.” Although the parties did not specifically refer to the sections of the legislation, they did address the essence of that regime in the contract.

The parties’ experts in Quebec matrimonial law agreed that the Quebec instruments intended that marriage breakdown would not permit a division of property and that property in each spouse’s name would belong to that spouse. However, Justice Doyle found there was no clear language that ousted the Family Law Act’s equalization provisions. There was no renunciation of those rights in the instruments, and unlike in Lay v. Lay, the parties did not express a clear intention in the instruments. The instruments did not release equalization claims or address rights to equalize property on divorce. Therefore, the wife was not barred from advancing an equalization claim by the domestic contract.

High Threshold to Oust Equalization Rights

A foreign marriage contract can be valid in Ontario, but it will depend on a number of factors. And even if an agreement is valid, it does not mean that every provision will be enforced. An agreement that merely addresses property ownership will not be enough to indicate the parties opted out of the equalization regime, which requires a high threshold.

Contact the Family Lawyers at NULaw in Toronto for Advice on Marriage Contracts

The skilled family lawyers at NULaw understand the importance of having a sound marriage contract. Having an experienced family lawyer on your side can help you ensure that the agreements made between you and your spouse will be upheld in the event of a relationship breakdown. Our lawyers help clients review, draft and negotiate various domestic contracts, including separation agreements and co-habitation agreements. We work closely with clients to ensure that they have a comprehensive understanding of their legal rights and have sufficiently protected their assets and interests. To arrange a confidential consultation with a member of our team, contact us online or call us at 416-481-5604.