• by David Frenkel
Originally published in the OFLM 2023-6 edition
Overview
The legal framework that the Supreme Court of Canada proposed in Anderson v. Anderson (2023 SCC 13) does not appear to add new law in Ontario in light of the existing LeVan framework. The main reason is that s.56(4) of the Ontario Family Law Act (“FLA”) already addresses setting aside a domestic contract and it is significantly different from Saskatchewan’s Family Property Act (“FPA”). While Anderson does reinforce useful principles, its framework for setting aside property settlements does not appear to be applicable in Ontario.
Introduction
The Supreme Court of Canada decision of Anderson v. Anderson was released on May 12, 2023, and it addressed the issue of how courts should deal with domestic contracts that opt out of a provincial property scheme where at least one party did not obtain independent legal advice (“ILA”).
The reason why ILA was a focus point in Anderson was that according to the Saskatchewan FPA, unless there is ILA and certain other criteria (FPA, s. 38), it does not reach the level of an “interspousal contract” and there is no longer a presumption that the agreement is binding between the spouses.
In Saskatchewan, even if parties don’t have ILA, the courts still can consider such an agreement (pursuant to s.40), but it no longer retains its interspousal contract name and it loses its presumptive status.
From this context, Anderson created a new framework to follow when courts address the issue of setting aside certain agreements that opt out of a provincial property scheme and lacking ILA. The details of the framework will be discussed in more detail below.
However, in Ontario we run into a bit of a kerfuffle applying Anderson since the Ontario FLA is different than the Saskatchewan FPA from which the new Anderson framework arises.
The difference is that Ontario does not have a provision in its Act that makes any domestic contract presumptive. The only criteria are that it be in writing, signed and witnessed (FLA s.55(1)).
Moreover, when a court needs to decide whether to set aside all or part of the contract, the starting point in Ontario is s.56(4) that assess whether,
- a party failed to disclose significant assets/debts existing when the contract was made;
- a party did not understand the nature or consequences of the contract; and,
- otherwise in accordance with the law of contract.
Ward v. Ward (2011 ONCA 178) provided the list of examples for the principle of the “law of contract”: unconscionability, undue influence, duress, uncertainty, mistake, misrepresentation, fraud, and repudiation of a term of the contract.
LeVan v. LeVan (2008 ONCA 388 at para. 51) outlined a specific two-stage framework when applying s.56(4):
Stage 1 - whether one or more of the provisions in s.56(4) have been engaged; and,
Stage 2 - whether it is appropriate for the court to exercise discretion in favour of setting aside the agreement.
Justice Kiteley in Turk v. Turk (2015 ONSC 5845) also provided a list of factors to consider (pooled from Dochuk v. Dochuk, Quinn v. Epstein Cole LLP and Toscano v. Toscano) when exercising its discretion in stage 2 of LeVan:
- whether there had been concealment of the asset or material misrepresentation;
- whether there had been duress, or unconscionable circumstances;
- whether the petitioning party neglected to pursue full legal disclosure;
- whether he/she moved expeditiously to have the agreement set aside;
- whether he/she received substantial benefits under the agreement;
- whether the other party had fulfilled his/her obligations under the agreement.
The LeVan framework has been consistently applied in Ontario for the last 15 years including the following more recent cases:
- MacLeod v. MacLeod (2022 ONSC 2457 at para. 115)
o marriage contract set aside; contract opted out of spousal support of the Divorce Act and equalization provisions of the FLA; wife did not have ILA, was unaware of her rights/obligations to both support and equalization, and clearly did not understand the nature or consequences of the contract;
- Togersrud v. Lightstone (2022 ONSC 7084 at para. 274)
o marriage contract set aside; contact only dealt with property issues and not spousal support; husband failed to disclose significant assets; wife did not have ILA; wife did not appreciate the contract’s nature and consequences;
- Malaviya v. Dhir (2023 ONSC 1993 at para. 131)
o court dismissed a summary judgment motion to dismiss the husband’s claim to set aside a cohabitation agreement; the agreement protected the husband’s business interests; the issue for trial was whether there was insufficient disclosure, duress, unconscionability and undue influence;
In light of the existing LeVan framework, how would the new Anderson framework fit in Ontario to set aside property agreements? The answer will be discussed later, but for now, let’s take a look at what the Anderson case was all about.
The Facts in Anderson and the application of Miglin
In Anderson, the SCC decision of Miglin v. Miglin (2003 SCC 24) took center stage. It was referenced and distinguished extensively, and according to the SCC, the Miglin framework was incorrectly applied by the Saskatchewan Court of Appeal.
As a refresher, Miglin provided us with a two-stage framework for determining whether to allow an application for spousal support in the face of a separation agreement with contrary terms (Shalaby v. Nafei, 2022 ONSC 5615 at para. 69). The first stage requires the court to examine two aspects of fairness at the time of making of the agreement, that is, the bargaining process and the substance of the agreement. The second stage evaluates the time of enforcement and whether the contract still reflects the original intentions of the parties and remains consistent with the objectives of the Divorce Act. (See Justice Karakatsanis’s concise summary of Miglin at para. 26 of Anderson).
The facts in Anderson are fairly straight forward. The husband attempted to set aside an agreement he and his wife entered into after a three-year marriage (not the first for either party). They had no children. The parties brought into the marriage considerable assets, including houses, vehicles and investments.
Two months after they separated, the parties signed an agreement prepared by the wife, dividing the family property. The agreement was witnessed by two friends without any exchange of financial disclosure or independent legal advice.
The wife, to her credit, did recommend that the husband “think it over and talk to a lawyer”, but he immediately declined and signed anyways.
The agreement kept the parties separate as to their respective assets and liabilities except for the family home (having no equity at the time) and a vehicle that the wife agreed to reconvey to the husband.
However, two years later, the husband refused to follow the agreement and claimed an equalization payment which was determined at trial as $62,646.
The Saskatchewan Court of Appeal set aside the trial decision, found the agreement binding (based on the Miglin framework) and ordered the husband to pay the wife $4,914.
The Supreme Court in Anderson reviewed the Miglin framework and held that it was improperly applied by the Saskatchewan Court of Appeal to uphold the agreement.
As Justice Karakatsanis put it at paragraph 7: “Miglin is not and was never intended to be, a framework of general applicability for courts in dealing with all types of domestic contracts. Rather, the judge’s interpretive exercise is statute-specific, and differences between property division and spousal support, division of powers concerns, and the distinctive features of the Saskatchewan statute mandate a tailored analytical approach.”
Applying and not Applying Miglin in Ontario
Anderson was a case originating in Saskatchewan and accordingly reviewed the Miglin application with its provincial legislation in mind. Anderson did not mention Ontario specifically and thus it is important to review how Ontario fits the Miglin framework alongside its provincial statutes.
Referring to Rempel v. Smith (2010 ONSC 6740), Phil Epstein cautioned us that Miglin was intended to be used for spousal support cases and LeVan for property division (Fam. L. Nws. 2011.07).
Phil Epstein had this to say:
One needs to be very careful about this analysis. In this particular case, we are talking about a separation agreement that primarily resolved property issues. Miglin is not about property issues but, in particular, it is about Section 15 of the Divorce Act and the court's authority to override an agreement that relates to spousal support. It is true that Rick v. Brandsema, 62 R.F.L. (6th) 239 (S.C.C.) may well have extended the Miglin analysis about the circumstances surrounding the negotiation and execution of an agreement related to property matters, and if that is what Justice Henderson meant, then he has the backing of the Supreme Court of Canada.
Besides Rick v Brandsema, however, this is the clearest case that treats a separation agreement that deals primarily with property in the same way that a support release is dealt with when the party who gave the release seeks to set it aside. It is not necessarily correct to treat the principles of Miglin in the same way as Section 56(4) is treated in LeVan, since one is about property and the other is about support. (emphasis added)
Still, there are times where you may need to use both Miglin and LeVan and that would be when the agreement that one is trying to set aside has both spousal support and property division components.
The following are some recent examples where courts used both LeVan and Miglin:
- In Kinsella v. Mills (2020 ONSC 4785), Justice Chappel employed both LeVan and Miglin to uphold an agreement made by the parties. The agreement was in the form of a Minutes of Settlement and a Consent and addressed spousal support and property division. The wife attempted to set the agreement aside and ultimately was not successful.
- In Chee-A-Tow v. Chee-A-Tow (2021 ONSC 2080), the wife brought a claim to set aside a separation agreement dealing with both property and support. Justice Sossin referred to both LeVan and Miglin and held that the separation agreement should be set aside.
- Finally, in Oliver v. Coderre (2021 ONSC 4102), Piccoli J. used both the LeVan and Miglin frameworks to refuse a husband’s claim to set aside a cohabitation agreement that included both spousal support and property division components.
The “Anderson framework” as outlined by Justice Karakatsanis.
So, in light of an improper use of Miglin, the Supreme Court outlined the correct framework (the Anderson framework).
At paragraphs 8-9 in Anderson, Justice Karakatsanis outlined the general Anderson framework to follow when setting aside agreements that are not interspousal agreements as defined by the FPA of Saskatchewan.
You can read the original version in the SCC decision but also refer to following simplified version of the Anderson framework as outlined below:
- Stage One
- Examine the integrity of the bargaining process for undue pressure or an exploitation of a power imbalance or other vulnerability.
- Determine whether the parties executed the agreement freely and understanding its meaning and consequences.
- Unless the court is satisfied that the agreement arose from an unfair bargaining process, an agreement is entitled to serious consideration.
- Stage two
- Once the court is satisfied that an agreement is entitled to consideration, it may assess the substantive fairness of the agreement in order to determine how much weight to afford the agreement in fashioning an order for property division.
- The weight to ascribe to the substance of the agreement will ultimately be determined by what is fair and equitable according to the scheme set out by the provincial legislation.
How does the Anderson framework apply in Ontario?
It appears that in Ontario, the Anderson framework does not have much legal implications when a court assesses a claim to set aside domestic contracts dealing with property division. The reason is that in Ontario, we already have the framework in place and Anderson does not appear to add that much more than we already have.
Firstly, s.56(4)(a) of the FLA addresses the failure to disclosure significant assets or debts. If there is a failure, then the LeVan framework is invoked. The contract can then be set aside if the non-disclosure is significant enough and if the court does not exercise its discretion not to.
Second, s.56(4)(b) addresses the issue of whether a party understood the nature or consequence of the contract. If it is found that a party did not understand the consequences, the court can either set it aside, or again not, depending on its discretion.
Finally, s.56(4)(c) addresses the law of contract (i.e. duress, unconscionability, etc.) If present, a court can set the contract aside, or not, depending on discretion.
And, independent legal advice in and of itself is not determinative as it is in Saskatchewan and the FPA. Rather, Ontario courts assess ILA as part of the s.56(4)(b) analysis. In contrast, Anderson created a whole framework around its absence as the FPA did not have a s.56(4) equivalency.
With the LeVan framework already in existence, when would we fit in the Anderson framework?
That is a bit of a head scratcher.
But the more you think about it, it appears clear that the Anderson framework does not seem to add any additional principles in Ontario that we do not already employ.
Anderson Take-Away Principles for Ontario
Despite not adding any new legal frameworks in Ontario, there are still a number of helpful principles in Anderson that have been already discussed in prior decisions.
Agreements
- The court will support the freedom of parties to settle their domestic affairs privately as long as family law public policy objectives are not thwarted (para. 3).
- Judges must approach family law settlements with a view to balancing the values of contractual autonomy and certainty with concerns of fairness (para. 34).
- Courts must have careful regard to the financial and emotional pressures that characterized the relationship, and not simply presume that legal advice immunizes a contract from unfairness (para. 35).
- The purposes and criteria of the statute provide an objective yardstick against which to assess the parties’ subjective understanding of what is fair, and limit the risk that parties will depart significantly from public policy goals expressed by the legislature (para. 37).
Miglin
- Our jurisprudence on domestic contracts, beginning with Miglin, values the principles of autonomy and certainty by encouraging parties to arrange their intimate affairs outside the court system. But the emotional complexities of family dynamics make contracting over domestic affairs unlike regular arm’s length transactions. The unique context out of which these agreements arise requires courts to approach them with keen awareness of their potential frailties to ensure fairness, having regard for the integrity of the bargaining process and the substance of the agreement. (para. 38)
- Miglin was never intended to be a framework of general applicability for courts in dealing with all types of domestic contracts (para. 7).
- Vulnerabilities are not simply to be presumed because agreements are negotiated and concluded in an emotionally stressful context. A finding of vulnerability must be ground in evidence (para. 69, referencing Miglin).
Disclosure
- Disclosure is critical in family law to prevent misinformation and exploitation (para. 67).
- A lack of disclosure, on its own, will not necessarily call for judicial intervention (para. 67).
- A court may intervene, where a failure to disclose is deliberate and coupled with misinformation, or where a failure to disclosure leads to an agreement that departs substantially from the objectives of the governing legislation, that is, resulting prejudice from uneven access to information (para. 67).
Discussion - Miglin, LeVan and Anderson frameworks
When setting aside agreements, it is usually helpful to keep in mind and distinguish the seminal cases that courts regularly refer to. These usual suspects include:
- Miglin v. Miglin (2003)
o separation agreement (spousal support)
- Hartshorne v. Hartshorne (2004 SCC 22)
o marriage contract (property division)
- LeVan v. LeVan (2008 ONCA 388)
o marriage contract (property division and spousal support)
- Rick v. Brandsema (2009 SCC 10)
o separation agreement (property division)
- Anderson v. Anderson (2023 SCC 13)
o separation agreement (property division)
Although Hartshorne dealt with the issue of setting aside a domestic contract, the principles arising from it mainly applied to British Columbia. The reason is that BC has a relatively lower threshold for judicial intervention when setting aside agreements compared to other provinces. It uses the term “unfair” while other provinces have higher thresholds (Hartshorne, at para. 14).
In Ontario, Hartshorne has been referred to for various principles relating to autonomy and independent legal advice, but the courts typically have not used any of its frameworks and have stuck to s.56(4) and LeVan.
In Rick v. Brandsema, the Supreme Court addressed the issue of setting aside a separation agreement with respect to property, and it did not propose any new frameworks applicable to Ontario. Rather, it focused on the issue of unfairness as defined in the BC property legislation and provided principles relating to autonomy, disclosure, misinformation and the integrity of the bargaining process (Rick, paras. 46 – 48).
That leaves us with Miglin, LeVan and Anderson which did create frameworks to follow.
One of the key differences between the three cases is that when applying the Miglin framework, a court is to review both the circumstances that occurred after the agreement was reached and at the time of making the agreement. While, in LeVan and Anderson, the courts’ focus is primarily on the time of entering the agreement.
The reason for the difference between setting aside a spousal support versus a property division agreement was explained by Justice Karakatsanis at paragraph 30:
Spousal support is primarily a prospective and ongoing obligation that looks to future value, and is in part based on means and need; “[t]he default assumption is that, spousal support is open to modification in response to changing circumstances” …
The division of family property, by contrast, is a chiefly retrospective exercise: it takes stock of property brought into and acquired during the spousal relationship as past contributions giving rise to a property entitlement ….
This subject matter distinction has similarly been recognized by this Court (see Miglin, at para. 76), and partly explains why we have never fully extended the Miglin framework to the division of family property… (emphasis added)
Therefore, it appears that in Ontario, Anderson does not add any new framework to follow that LeVan and the related case law do not already address. Both in the Anderson and LeVan frameworks, we are required to assess the procedural fairness of the agreement and also the fairness of the result relative to the appropriate legislation.
Aside from the general principles as outlined above, we can now breathe a sigh of relief that we don’t need to add a new Supreme Court of Canada framework in the already existing Ontario landscape.