Hartshorne v. Hartshorne

Hartshorne v. Hartshorne
Collection
Supreme Court Judgments
Date
2004-03-26
Neutral citation
2004 SCC 22
Report
[2004] 1 SCR 550
Case number
29531
Judges
McLachlin, Beverley; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis; Deschamps, Marie; Fish, Morris J.
On appeal from
British Columbia
Subjects
Family law
Notes
SCC Case Information: 29531
Decision Content
Hartshorne v. Hartshorne, [2004] 1 S.C.R. 550, 2004 SCC 22
Robert Kenneth Hartshorne Appellant
v.
Kathleen Mary Mildred Hartshorne Respondent
Indexed as: Hartshorne v. Hartshorne
Neutral citation: 2004 SCC 22.
File No.: 29531.
2003: November 6; 2004: March 26.
Present: McLachlin C.J. and Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish JJ.
on appeal from the court of appeal for british columbia
Family law — Division of property — Marriage agreement — Parties electing separate property regime in marriage agreement — Whether marriage agreement unfair — Whether judicial reapportionment should be upheld — Family Relations Act, R.S.B.C. 1996, c. 128, s. 65(1).
Family law — Family assets — Law practice — Wife contributing indirectly to husband’s law practice through household management and childrearing — Whether law practice should be considered a family asset — Family Relations Act, R.S.B.C. 1996, c. 128, ss. 58(3)(e), 59(2).
Family law — Maintenance — Division of property — Double recovery — Parties electing separate property regime in marriage agreement — Whether judicial reapportionment of asset constituting main source of income resulted in double recovery.
The parties began to cohabit in 1985 and their first child was born in 1987. They married in 1989, a second marriage for both, and a second child was born later that year. Nine years later, they separated. From the time of the birth of their first child, the respondent wife withdrew from the practice of law to remain at home to raise the children. The appellant husband, also a lawyer, had made it clear to the respondent prior to the marriage that he would never again allow a division of his property. He brought assets worth approximately $1.6 million into the marriage, including his law practice, while the respondent entered the relationship with no assets and heavily in debt. On the day of the wedding, the appellant insisted that the respondent sign a marriage agreement that rendered the parties separate as to property, but with a provision that the respondent would be entitled to a 3 percent interest in the matrimonial home for each year that the parties were married up to a maximum of 49 percent. The parties obtained independent legal advice and the respondent was advised that the agreement was grossly unfair. She nevertheless signed the agreement with a few amendments, including a clause confirming her right to spousal support. Pursuant to the agreement, the respondent was entitled to property valued at $280,000 on separation, while the appellant was entitled to property worth $1.2 million. In divorce proceedings, the appellant relied upon the agreement to avoid the operation of the statutory family property regime while the respondent argued that the agreement should be set aside on common law principles or that the distribution of assets should be reapportioned because the agreement was unfair pursuant to s. 65(1) of the British Columbia Family Relations Act (“FRA”). The trial judge concluded that the agreement was unfair and ordered a reapportionment on a 60/40 basis in favour of the appellant of most of the family assets including the appellant’s law practice. Each party was held to be entitled to a half interest in the matrimonial home and contents. In addition, the appellant was ordered to pay spousal support. This judgment was upheld by the Court of Appeal.
Held (Binnie, LeBel and Deschamps JJ. dissenting in part): The appeal should be allowed.
Per McLachlin C.J. and Iacobucci, Major, Bastarache, Arbour and Fish JJ.: The primary policy objective guiding the court’s role in division of assets on marital breakdown in British Columbia is fairness. The FRA explicitly recognizes marriage agreements as a mechanism to govern a division of property upon the dissolution of marriage. To be enforceable, however, any such agreement must operate fairly at the time of distribution. If it does not, judicial reapportionment of property will be available to achieve fairness. Although the statutory scheme in British Columbia sets a lower threshold for judicial intervention than the schemes in the other provinces, courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship particularly where the agreement in question was negotiated with independent legal advice. Individuals may choose to structure their affairs in a number of different ways and courts should be reluctant to second-guess the arrangement on which they reasonably expected to rely.
Marital cases must reconcile respect for the parties’ intent, on the one hand, and the assurance of an equitable result, on the other. There is no “hard and fast” rule regarding the deference to be afforded to marriage agreements as compared to separation agreements. The court must determine whether the marriage agreement is substantively fair when the application for reapportionment is made. The essence of this inquiry is whether the circumstances of the parties at the time of separation were within the reasonable contemplation of the parties at the time the agreement was formed, and whether at that time the parties made adequate arrangements in response to these anticipated circumstances. In determining whether a marriage agreement operates unfairly, a court must first apply the agreement, assessing and awarding those financial entitlements provided to each spouse under the agreement and from other sources, including spousal and child support. Secondly, the court must consider the factors listed in s. 65(1) of the FRA, and make a determination as to whether the contract operates unfairly, and whether a different apportionment should be made. At this stage, consideration must be given to how the parties’ personal and financial circumstances evolved over time.
Here, the financial and domestic arrangements between the appellant and the respondent unfolded just as the parties had expected, so that the burden to establish unfairness is heavier. They were living out their intention to “remain completely independent of the other as regard to their own property, both real and personal”, the main feature of the agreement. There was no commingling of funds, there were no joint accounts of significant value, and the assets that the appellant brought into the marriage remained in his name. As planned they had a second child and the respondent remained at home to raise the children. While the duration of the marriage was a significant factor, it had to be considered in light of the fact that the vast majority of the property was acquired by the appellant prior to the commencement of the relationship. In addition, before making a determination that the agreement operated unfairly, the trial judge should have considered the impact of the spousal and child support to which the respondent was entitled under the agreement, which would have recognized the economic disadvantage suffered by the respondent in sacrificing her career for her family, the lingering effects of the sacrifice, and the true onus of the respondent’s parental responsibilities. The trial judge should have first applied the agreement, then determined the need for spousal support, and finally decided whether the result warranted a different apportionment of property in light of the s. 65 factors.
The agreement was fair at the time of the triggering event, in light of the provisions of the FRA, the provisions of the agreement and the circumstances of the parties at the time of separation, and the trial judge erred in finding otherwise. The implications of the agreement were understood, the respondent having specifically reviewed its shortcomings with her lawyer. The explicit preservation of a right to spousal support was an amendment made to the draft agreement at the respondent’s insistence, supporting an understanding on her part that her future needs could be met through support. Moreover, by signing the agreement, the appellant and the respondent entered their marriage with certain expectations on which they were reasonably entitled to rely. With respect to the appellant’s law practice, considering the provisions of s. 59(1) and that the value of the practice had not increased since the time of the marriage, it was not a family asset.
Per Binnie, LeBel and Deschamps JJ. (dissenting in part): A marriage agreement is merely a presumptive entitlement. Under the FRA the deciding inquiry is whether the agreement is substantively fair at the time of application to the court, considering the parties’ rights, entitlements and obligations at that moment, in light of the factors set out in s. 65(1) and the other separation conditions of custody and maintenance. While the circumstances at the time of the negotiation or execution of the agreement may provide indicators that it is either fair or unfair, the s. 65(1) factors in no way suggest that fairness during this time is determinative. Fairness must be based on a contemporaneous evaluation of the s. 65(1) factors, rather than the original intention of the parties. Various public policy concerns support this interpretation, such as the fact that marriage agreements are often executed years prior to separation at a time when the risk of the provisions ever coming into effect may be assumed to be low. Fairness is not always synonymous with equal division. If the agreement is fair in light of the s. 65(1) factors, it will stand; if not, a judge will redress it. Once a judge has redressed the unfairness, the s. 65(1) reapportionment may be compared to the division that would have been ordered absent any contract. Since marriage agreements are not included in the s. 65(1) factors for the court to consider, giving an unfair agreement any weight in the reapportionment process would defeat the fairness objective and parties would not be encouraged to make genuine efforts to conclude and update fair agreements. However, once the judge has reapportioned the total value of family assets, the marriage agreement will affect which specific assets will be awarded to each spouse.
Questions of reapportionment should generally be settled before turning to a consideration of maintenance as it is easier to deal with the parties’ need to become economically independent after a fair division of capital family assets. Imbalances in resources and independence after separation must be addressed in a principled and systematic manner. As a general rule, the trial judge should try to address in sequence (1) the apportionment of matrimonial property, (2) the existence of a right to maintenance and support and, if such a right exists, (3) the extent of the need for such maintenance or support. However, failure to follow this sequence, as in this case, does not amount to an error in law or principle, although it may lead to unforeseen hazards in the evaluation process.
Here, the trial judge properly concluded that the division of property provisions in this agreement were unfair, based on a consideration of s. 65(1) factors: the 12½-year relationship (s. 65(1)(a)), the fact that almost all of the property was acquired by the appellant prior to the relationship (s. 65(1)(c)), the respondent’s need to become or remain economically self-sufficient (s. 65(1)(e)), and the effect that the respondent’s assumption of homemaking responsibilities had on the appellant’s ability to focus on his law practice and on her own future career development (s. 65(1)(f)). Moreover, there were indications that the agreement was unfair at the time of negotiation and execution. That the respondent signed it knowing it to be unfair does not cure the agreement of its substantive unfairness. Married spouses must fully assume the responsibilities flowing from their decision to get married. By choosing to marry the respondent, to have children, and to support and benefit from his wife’s domestic work, the appellant agreed to bear all the consequences of the legislative regime regulating his decisions, including the judicial review under s. 65 of the FRA.
The trial judge’s reapportionment of the family assets should be shown deference, particularly as the litigation resulted in a protracted trial and the judgment involved complex factual assessments. Except for her reapportionment of the law practice, the trial judge did not commit any error. The respondent provided an indirect contribution to the appellant’s law practice through the assumption of full-time responsibility for child care and homemaking, allowing the appellant to continue to practice full time. The appellant’s interest in the law partnership was therefore a family asset capable of judicial reapportionment. Nevertheless, the trial judge erred in reapportioning the law practice, as it was the appellant’s main source of revenue, from which he had been previously ordered to pay significant spousal support. This resulted in double dipping. The respondent may apply for a reevaluation of her need for spousal support.
Cases Cited
By Bastarache J.
Approved: Toth v. Toth (1995), 13 B.C.L.R. (3d) 1; Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314; considered: Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24; distinguished: N. (D.K.) v. O. (M.J.) (2003), 41 R.F.L. (5th) 142; referred to: Clarke v. Clarke (1991), 31 R.F.L. (3d) 383; Gold v. Gold (1993), 82 B.C.L.R. (2d) 165; Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83; Moge v. Moge, [1992] 3 S.C.R. 813.
By Deschamps J. (dissenting in part)
Gold v. Gold (1993), 82 B.C.L.R. (2d) 165; Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24; Stark v. Stark (1990), 71 D.L.R. (4th) 446, leave to appeal refused, [1991] 1 S.C.R. xiv; Toth v. Toth (1995), 13 B.C.L.R. (3d) 1; Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314; Bracklow v. Bracklow, [1999] 1 S.C.R. 420; Moge v. Moge, [1992] 3 S.C.R. 813; Davidson v. Davidson (1986), 2 R.F.L. (3d) 442; Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33; Underhill v. Underhill (1983), 45 B.C.L.R. 244; Elsom v. Elsom (1982), 35 B.C.L.R. 293, aff’d (1983), 37 R.F.L. (2d) 150, leave to appeal refused, [1984] 1 S.C.R. vii; Gillespie v. Gillespie (1995), 1 B.C.L.R. (3d) 28; Peter v. Beblow, [1993] 1 S.C.R. 980; Piercy v. Piercy (1991), 31 R.F.L. (3d) 187, supplementary reasons (1993), 86 B.C.L.R. (2d) 285; Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43.
Statutes and Regulations Cited
Canadian Charter of Rights and Freedoms, s. 15(1) .
Divorce Act, R.S.C. 1985, c. 3 (2nd Supp .), ss. 15.2 [am. 1997, c. 1, s. 2], 15.2(4) [formerly s. 15(5) ].
Family Law Act, R.S.N.L. 1990, c. F-2, s. 66(4).
Family Law Act, R.S.O. 1990, c. F.3, s. 56(4).
Family Law Act, S.P.E.I. 1995, c. 12, s. 55(4).
Family Property Act, S.S. 1997, c. F-6.3, s. 24(2).
Family Relations Act, R.S.B.C. 1996, c. 128, Part 5, ss. 56, 58, 59, 61, 65, 68, 89.
Federal Child Support Guidelines, SOR/97-175.
Marital Property Act, S.N.B. 1980, c. M-1.1, s. 41.
Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 29.
Authors Cited
British Columbia. Law Reform Commission. Working Paper No. 63. Property Rights on Marriage Breakdown. Vancouver: The Commission, 1989.
Grassby, Miriam. “Women in Their Forties: The Extent of Their Rights to Alimentary Support” (1991), 30 R.F.L. (3d) 369.
Payne, Julien D. Payne on Divorce, 4th ed. Scarborough, Ont.: Carswell, 1996.
Shaffer, Martha, and Daniel S. Melamed. “Separation Agreements Post-Moge, Willick and L.G. v. G.B.: A New Trilogy?” (1999), 16 Can. J. Fam. L. 51.
Weitzman, Lenore J. The Divorce Revolution: The Unexpected Social and Economic Consequences for Women and Children in America. New York: Free Press, 1985.
APPEAL from a judgment of the British Columbia Court of Appeal (2002), 6 B.C.L.R. (4th) 250, 220 D.L.R. (4th) 655, 174 B.C.A.C. 129, 31 R.F.L. (5th) 312, [2002] B.C.J. No. 2416 (QL), 2002 BCCA 587, affirming a decision of the British Columbia Supreme Court (2001), 89 B.C.L.R. (3d) 110, [2001] B.C.J. No. 409 (QL), 2001 BCSC 325, and [1999] B.C.J. No. 2861 (QL). Appeal allowed, Binnie, LeBel and Deschamps JJ. dissenting in part.
Megan Rehill Ellis, for the appellant.
Charlene E. Le Beau, for the respondent.
The judgment of McLachlin C.J. and Iacobucci, Major, Bastarache, Arbour and Fish JJ. was delivered by
Bastarache J. —
I. Introduction
1 Domestic contracts are explicitly permitted by the matrimonial property regime in British Columbia. They allow spouses to substitute a consensual regime for the statutory regime that would otherwise be imposed on them. Domestic contracts are, however, like the statutory regime itself, subject to judicial intervention when provisions for the division of property which they contain are found to be unfair at the time of distribution, after considering the various factors enumerated in s. 65 of the Family Relations Act, R.S.B.C. 1996, c. 128 (the “Act” or the “FRA”).
2 At issue in this appeal is whether a marriage agreement respecting the division of property, entered into after receiving independent legal advice, without duress, coercion or undue influence, can later be found to be unfair and set aside on the basis that it failed to provide anything “for the respondent’s sacrifice in giving up her . . . law practice and postponing [her] career development”, notwithstanding that the parties’ agreement preserved the right to spousal support. The parties in this appeal also raised the issues of whether an agreement entered into prior to or at the time of marriage should be subject to the same review on appeal as a separation agreement, and whether, where provisions for the division of property in a marriage agreement are found to be unfair at the time of distribution, the whole agreement should simply be ignored.
3 The appellant and the respondent began to live together in 1985 after becoming romantically involved with each other in 1982. Their first child was born in July 1987 and the parties married on March 11, 1989 (a second marriage for both). Their second child was born in November 1989. The parties separated in January 1998 and were divorced on July 29, 1999.
4 The appellant is 57 years old and was called to the Bar of British Columbia in 1972. He has provided support for his two children from a previous marriage who were born in 1976 and 1979. The respondent is 50 years of age and was called to the Bar of British Columbia in 1981. She articled with the appellant’s firm and practised there as an associate until June 1987, when she left on maternity leave. Her annual salary at the time was $48,000. From that time, the respondent remained at home as the full-time caregiver for both children, one of whom has special needs. The respondent did not return to practice until after the parties had separated, when she took the necessary steps to become requalified to practise law.
5 Prior to the marriage, the appellant had made it clear to the respondent that, given the division of property that occurred after he and his first wife separated, he would never again allow a division of his property. He brought several assets into the marriage with the respondent, including a home, two recreational properties, RRSPs and savings, and his law practice. His assets were valued at approximately $1.6 million. The respondent did not bring any assets into the marriage, but instead entered the relationship heavily in debt.
6 The appellant arranged for a marriage agreement (the “Agreement”) to be drawn up, the terms of which clearly stipulated that the parties would be separate as to property. However, the Agreement provided that the respondent would be entitled to 3 percent interest in the family home for each year the parties were married, up to a maximum of 49 percent. The parties obtained independent legal advice. The respondent was told by her lawyer that the Agreement was unfair and that the courts would likely set it aside if the parties separated. The respondent nevertheless signed the Agreement (after making a few small amendments) on their wedding day, at the appellant’s insistence.
7 After 12½ years of cohabitation, nine of which they spent married, the parties separated in January 1998. During the divorce proceedings, custody and access, spousal and child support, and division of property were at issue. The appellant relied upon the Agreement to avoid the operation of the statutory family property regime, while the respondent argued that the Agreement should be set aside on common law principles or that the court should reapportion the distribution of family assets because the Agreement was unfair.
8 The primary policy objective guiding the courts’ role in division of assets on marital breakdown in British Columbia is fairness; it is achieved by reviewing either the presumptive division provided for in the Act itself, or the parties’ private agreement, in light of the factors set out in s. 65 of the FRA. To give effect to legislative intention, courts must encourage parties to enter into marriage agreements that are fair, and to respond to the changing circumstances of their marriage by reviewing and revising their own contracts for fairness when necessary.
9 The authorities generally agree that courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship. This is particularly so where the agreement in question was negotiated with independent legal advice. The difficulty of course is in determining the proper approach to deciding, at the time of distribution, what is fair under the terms of s. 65 of the FRA. A domestic contract constituting a derogation from the statutory regime, it is obvious that its fairness cannot be determined simply on the basis of its consistency with the said regime. In fact, s. 65(1) also provides for judicial reapportionment on the basis of fairness in the case of the statutory regime in s. 56(2). The appellant in these proceedings argues that the majority of the Court of Appeal effectively found the Agreement to be unfair on the basis that it derogated from the statutory regime. After reviewing the provisions of the FRA as well as the Agreement, it is my opinion that said Agreement operated fairly at the time of distribution.
II. Overview of the Family Relations Act
10 Part 5 of the FRA deals with division of assets on marital breakdown. It provides for presumptive entitlements which can themselves be reviewed for fairness on application to the court, and for reapportionment if a finding of unfairness is made.
11 Domestic contracts are also permitted under the FRA’s matrimonial property regime. Indeed, when there is a marriage agreement, the terms of the agreement represent the spouses’ presumptive entitlement. Accordingly, under s. 56, the presumption that each spouse is entitled to a one‑half interest in each family asset as a tenant in common is subject to any marriage agreement upon the occurrence of a triggering event, such as divorce. A “marriage agreement” is statutorily defined under s. 61(2); its definition is not at issue in this appeal.
12 While s. 61 permits parties to avoid the statutory default regime by entering into binding contractual arrangements to govern their relationship during and upon dissolution of the marriage, s. 65 limits this freedom by permitting the court to vary the contractual terms if the division of property under the agreement is unfair at the time of distribution.
13 Specifically, s. 65(1) provides that if the provisions for division of property between spouses either under their marriage agreement or under the statutory regime 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 such agreement or statutory regime be divided into shares fixed by the court.
14 Most of the provinces provide for judicial oversight of marriage agreements. For example, s. 56(4) of the Ontario’s Family Law Act, R.S.O. 1990, c. F.3, permits a court to set aside a domestic contract or a provision thereof if a party failed to disclose significant assets or liabilities, if a party did not understand the nature or consequences of the contract, or otherwise, in accordance with the law of contract. See also Family Law Act, R.S.N.L. 1990, c. F‑2, s. 66(4); Family Law Act, S.P.E.I. 1995, c. 12, s. 55(4), for this language. The threshold in Nova Scotia is a finding that any term is “unconscionable, unduly harsh on one party or fraudulent”: see Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 29. Saskatchewan allows a court to redistribute property where an interspousal contract was unconscionable or grossly unfair at the time it was entered into: see Family Property Act, S.S. 1997, c. F‑6.3, s. 24(2). New Brunswick permits a court to disregard a provision of a domestic contract where a spouse did not receive independent legal advice and application of the provision would be inequitable: see Marital Property Act, S.N.B. 1980, c. M-1.1, s. 41. By contrast, in British Columbia, as earlier noted, a court may reapportion assets upon finding that to divide the property as provided for in the agreement or the FRA would be “unfair”. Clearly, the statutory scheme in British Columbia sets a lower threshold for judicial intervention than do the schemes in other provinces.
III. Judicial History
A. Supreme Court of British Columbia, [1999] B.C.J. No. 2861 (QL) and (2001), 89 B.C.L.R. (3d) 110, 2001 BCSC 325
15 Although the appellant sought joint custody of the children, after considering that the parties were unable to communicate, their different parenting styles and the different roles they assumed in caring for the children, Beames J. ordered sole custody in favour of the respondent with joint guardianship of the children. On the issue of child support, despite having found the appellant’s income to be in excess of $150,000, Beames J. ordered the appellant to pay the amount set out in the Federal Child Support Guidelines, SOR/97-175, and the extraordinary expenses until such time as the respondent began to earn in excess of $2,000 per month.
16 In quantifying spousal support, Beames J. considered the evidence in light of the factors set out in s. 89 of the FRA and s. 15.2(4) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp .). She awarded the respondent $2,500 per month in support, to be reduced to $1,500 per month after the respondent received at least $2,000 per month in employment income. In addition, the appellant was ordered to pay a lump sum to the respondent in the amount of the fees required by the Law Society in order to be reinstated as a member. Beames J. determined that, though she had been out of the work force for 12 years, the respondent had a good chance of securing employment at a reasonable rate of remuneration and left either party at liberty to apply for a review of spousal support any time after July 1, 2001. Despite this finding, Beames J. recognized that the respondent had given up her career to assume full-time responsibility for child care and homemaking, and was completely dependent on the appellant for her support. She observed further that the respondent had suffered an economic disadvantage that would continue as long as she had custodial responsibilities. The appellant, on the other hand, had pursued his practice without interruption, secure in knowing that the respondent was caring for the home and children. Beames J. accepted that it was improbable that the respondent would ever enjoy the appellant’s earning capacity. On the other hand, she recognized that the respondent may not have attained the same earning capacity in any event.
17 With respect to the division of property, the appellant sought to rely upon the provisions of the Agreement. The respondent, on the other hand, denied that there was a valid marriage agreement or, in the alternative, argued that it was unenforceable as it was entered into under duress. The respondent argued in the further alternative that the Agreement was unfair and that there should be a reapportionment pursuant to the applicable provisions of the FRA. Reviewing the evidence surrounding the circumstances of the signing of the Agreement, Beames J. determined that the respondent failed to establish that the Agreement was unconscionable, or that it was entered into by the respondent under duress, coercion or undue influence. Beames J. did, however, conclude that the Agreement was unfair.
18 Beames J. examined the terms of the Agreement as well as the terms the parties had deleted from it. She also reviewed the letter the respondent received from her lawyer advising her not to sign the Agreement as it was “grossly unfair” and alerting her to the possible consequences of the unfairness. Beames J. noted that, despite this advice, no substantial changes were made to the Agreement and the appellant insisted that his original substantive proposal be accepted.
19 Under the terms of the Agreement, as signed by the parties, the most that the respondent could receive was a 49 percent interest in the family home (after 16 years of marriage), a joint interest in the household contents, and an interest in the family vehicles. Beames J. was struck by the fact that the Agreement provided nothing for the sacrifices that the respondent had made by giving up her own law practice and, in particular, that no provision was made for any entitlement to pension or retirement savings. By the time of separation, the terms of the Agreement provided that the respondent’s interest in the family home was 27 percent, using a period of cohabitation following marriage of 9 years, at 3 percent per year.
20 Beames J. reviewed ss. 56(1), 61, 65 and 68 of the FRA. She held that the court may review marriage agreements to determine whether or not the terms are fair. She stated that it was critical to bear in mind that domestic contracts were not to be treated the same way as commercial contracts (Clarke v. Clarke (1991), 31 R.F.L. (3d) 383 (B.C.C.A.)), and held, at para. 57 of her 1999 judgment:
In assessing fairness in this case, the most relevant factors in my view are section 65(a), (c), (e), and (f). The duration of the marriage, excluding the period of cohabitation, the relationship [sic] was almost nine years, and including the period of cohabitation, was approximately 12½ years. This was not a short term relationship. On the other hand, the vast majority of the property was acquired by the plaintiff, prior to the commencement of his relationship with the defendant, although the property which is now the matrimonial home was acquired while the parties were cohabiting, albeit with the plaintiff’s financial resources. For the reasons I have already dealt with concerning the issue of spousal support, I consider the need of the defendant to become or remain economically independent and self‑sufficient to be a significant factor in this case. I am also cognizant of the evidence with respect to the defendant’s efforts concerning the construction of the family home, and her involvement therein, and the effect her assumption of home and child care responsibilities and the effect that had on the plaintiff’s ability to concentrate on the maintenance and improvement of his law practice.
21 Having concluded that the Agreement was unfair, Beames J., at para. 60 of her 1999 decision, considered the judgment in Gold v. Gold (1993), 82 B.C.L.R. (2d) 165 (C.A.), at para. 36, regarding the reapportionment of property between the spouses:
With respect, unless bound by authority to decide otherwise, I would conclude that subss. (a) to (f) of s. 51 [now s. 65] provide the grounds upon which a finding of unfairness must be based, but such a finding need not lead inevitably to an equal redistribution. In many cases, equality may be the only fair result. There will, however, be other cases, with or without a marriage agreement, where only an unequal division of family assets in favour of one spouse or the other will be fair. All that Clarke [v. Clarke (1991), 31 R.F.L. (3d) 383 (B.C.C.A.)] decides is that when an agreement is unfair, the party having the advantages provided by the unfair agreement must expect that the Court will reapportion the assets for the purpose of achieving fairness. Fairness will not always be synonymous with equality.
22 Beames J. explained that as she did not have many of the asset valuations before her, she would merely define those assets that were family assets and, where possible, fix the percentage apportionments. On the evidence, she held that the family home, the contents, the RRSPs and savings, term deposits, the 1968 Mercedes, the Osoyoos vacation property, and the appellant’s law practice were all family assets as defined by the FRA. The appellant’s motorcycle, the lot in the State of Washington, and the appellant’s interest in Commercial Appliance Centre Ltd. were held not to be family assets. Beames J. determined that the home and its contents should be divided on an equal basis. With respect to the vacation property, RRSPs and savings, and law practice, she ordered that the appellant retain 60 percent, with the respondent receiving 40 percent. The appellant was ordered to have his law corporation transfer the Ford Expedition to the respondent.
23 The trial judge subsequently heard evidence on the valuation of assets. On evidence that the home had depreciated in value since the date of trial, Beames J. noted that the respondent had been residing in the mortgage-free home for over three years with no rent. She was satisfied that the date of valuation should be July 1999 at a value of $755,000. Each party’s one-half interest was held to be $377,500. Beames J. ordered that the respondent keep the family residence (by agreement of the parties), subject to a first mortgage in the amount of $265,318 in favour of the appellant, most of its contents, and the Ford Expedition. The RRSPs were dealt with by permitting the respondent to retain those valued at $16,391 in her own name and by ordering the appellant to roll over to the respondent RRSPs in the amount of $87,018 in order to effect a 60/40 division in favour of the appellant.
24 At the appellant’s request, the trial judge reconsidered her previous decision with respect to the reapportionment of the appellant’s law practice. She considered that the appellant had built it up before the parties had commenced their relationship, that the respondent had a law degree and was already leaving the marriage with substantial assets, and with significant child and spousal support. In deciding to maintain the original 60/40 division of this asset, Beames J. considered the factors on which she had originally relied. She weighed the evidence as to the value of the practice, including tax issues and loans, and determined that the final net value was $261,624, to which the respondent was entitled to a 40 percent share.
25 The net effect was that the respondent received an interest in the family assets with a value of approximately $654,000, about 46 percent of the family assets valued at approximately $1,415,000. Under the Agreement, she would have received about 20 percent of the family assets with a value of about $280,000.
B. Supreme Court of British Columbia, [2001] B.C.J. No. 2854 (QL), 2001 BCSC 1678
26 With the respondent past the probationary period at her law firm and earning a salary of $52,000, Melnick J., on application by the appellant, ordered the spousal support of $1,500 per month to terminate at the end of December 2002. The respondent initially appealed this decision, but filed a notice of abandonment on November 5, 2002 (following the judgment of the Court of Appeal affirming Beames J.’s order with respect to the division of family assets). Melnick J. noted that if there was some dramatic change in her circumstances as a result of the decision of the Court of Appeal with respect to the division of the parties’ matrimonial assets, then it would be open to the respondent to bring a new application for spousal support.
C. Court of Appeal for British Columbia (2002), 6 B.C.L.R. (4th) 250, 2002 BCCA 587
(1) Rowles J.A. (Huddart J.A. concurring)
27 The majority found no error in principle in the approach that the trial judge took to determine whether the Agreement was unfair having regard to the factors listed in s. 65(1) of the FRA. Affirming that the preservation of spousal support clause should be ignored, the majority agreed with the trial judge that the most serious deficiency with the Agreement was that it failed to compensate the respondent’s sacrifice in giving up her law practice and postponing her career development. Further, the Agreement did not consider sufficiently either the respondent’s need to become economically independent or the contribution she made to the appellant’s career by her sacrifice of career development to homemaking and child care responsibilities. Although the majority recognized that the way the issues were presented and decided at trial made it difficult to discern how the trial judge evaluated the factors she found relevant under s. 65, they found no error that would permit the court to intervene with the reapportionment that the trial judge ordered.
28 The court analysed the matrimonial property regime and explained, at paras. 33-34, that:
It is important to note that s. 56 of the FRA does not set out the prima facie presumption that each spouse is entitled to an undivided half interest in each family asset, subject to judicial reapportionment under the FRA. It states that each spouse is entitled to an undivided half interest in each family asset as a tenant in common on the occurrence of a triggering event, subject to a marriage agreement or separation agreement. The relevant question is not whether the agreement strays too far from an equal division, but whether the agreed division is unfair in the circumstances of the spouses, considering all the factors in s. 65, and all the provisions of the agreement. If the agreed division would be unfair, the ultimate question is what variation to the agreement the listed factors require, in the context of the entire agreement, to make the property division fair.
A determination as to whether a division under a marriage agreement is unfair at the triggering event is a two‑step inquiry. The first step is to determine the division of property under the agreement. The next step is to determine whether that division would be unfair having regard to the factors set down in s. 65. At the second step, the court must take into account all the provisions of the agreement, including any that relate to spousal support or provide a future income stream by some other vehicle. Trusts, insurance, deferred annuities, and pensions come to mind. The court must also be mindful of the context in which the agreement was made.
29 On the issue of fairness, generally, the majority stated, at paras. 61 and 64, that:
What the