• by Christina Hinds
Originally published in the OFLM 2023-12 edition
Overview
The recent decision by Justice Black in Singh v. Khalill (2023 ONSC 6324) sets out the applicable factors when determining if a marriage contact is valid and enforceable.
Introduction
Singh v. Khalill (2023 ONSC 6324) is recent decision concerning the validity of a marriage contact wherein it was accepted that the party seeking to set aside the marriage contract did not read it prior to signing.
After consideration of section 56(4) of the Family Law Act and the circumstance surrounding the marriage contract, Justice Black held that the marriage contact was valid and enforceable.
Facts
The parties met in February 2016 and were married in March 2016. The Applicant, Mr. Singh, was 44 years old and the Respondent, Ms. Khalill, was 55 years old. Ms. Khallil had two adult children from a previous marriage. Mr. Singh was also previously married and had six children form his previous relationships. Justice Black noted that “Given their ages and stages, both parties entered the relationship with life experience and, at least in the case of Ms. Khalill, with assets.”
There were difficulties early in the marriage. Ms. Khalill deposed that she paid for all the parties living expenses and felt that Mr. Singh was not contributing to the household.
After the parties were already married, Ms. Khalill raised the idea of a marriage contract with Mr. Singh and told him that she wanted to protect her assets – she had acquired multiple properties prior to her marriage.
Her friend who was a lawyer prepared the marriage contract which Ms. Khalill brought home for Mr. Singh’s review. The contract was intended to protect each party’s assets and not require either of them to support each other in the future.
The parties gave conflicting evidence as to when Mr. Singh was provided a copy of the marriage contact. Mr. Singh deposed that he was provided a copy of the marriage contact the night before Ms. Khalill insisted that he sign it. Ms. Khalill deposed that she provided the agreement to Mr. Singh several weeks before it was signed. Justice Black ultimately accepted Ms. Khalill’s evidence.
Justice Black accepted Mr. Singh’s evidence that he did not review the marriage contact prior to signing it. Mr. Singh deposed that he was given an ultimatum – to “sign or get out” and that he felt he needed to sign the contact to save the marriage. He also deposed that he was educated, understood contracts, and was capable of understanding the terms of the marriage contract.
The parties met at a local lawyer’s office to sign the agreement in March 2017. The lawyer signed a Certificate of Acknowledgement confirming that Mr. Singh understood the contents of the marriage contract and that he was signing voluntarily.
Ms. Khalill deposed that after the parties signed the marriage contact, they acted consistent with the contract, keeping their finances and assets separate.
The problems in the parties’ marriage continued and Mr. Singh left the home in February 2020. The parties were divorced in May 2021. In June 2021, Mr. Singh commenced an application for equalization of the parties’ net family properties.
However, Mr. Singh did not mention the existence of a marriage contract in his court application.
Law
Justice Black reviewed the relevant provisions of the Family Law Act – specially sections 51 and 56(4).
Section 51 of the Family Law Act sets out the burden of proof to set aside a marriage contact, which is the party seeking to set aside the marriage contact.
Section 56(4) of the Family Law Act provides that:
(4) A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
Justice Black also considered Justice McGee’s summary in Harnett vs. Harnett, 2014 ONSC 359 at paragraphs 87 – 94:
[87] As a general rule, courts will uphold the terms of a valid enforceable domestic contract: Hartshorne v Hartshorne, 2004 SCC 22 (CanLII), 2004 CarswellBC 603 (SCC.)
[88] It is desirable that parties settle their own affairs: Farquar v. Farquar (1983), 35 R.F.L. (Ont. C.A.) and courts are generally loathe to set aside domestic contracts. See page 297:
“the settlement of matrimonial disputes can only be encouraged if the parties can expect that the terms of such settlement will be binding and will be recognized by the courts ... as a general rule ... courts should enforce the agreement arrived at between the parties.... The parties to the agreement need to be able to rely on [them] as final in the planning and arranging of their own future affairs"
[89] Parties are expected to use due diligence in ascertaining the facts underlying their agreements. A party cannot fail to ask the correct questions and then rely on a lack of disclosure: Clayton v Clayton 1998 CanLII 14840 (ON SC), 1998 CarswellOnt 2088.
[90] A domestic contract will be set aside when a party was unable to protect his or herself. Such cases are generally predicated upon a finding that one party has preyed upon the other, or acted in a manner to deprive the other of the ability to understand the circumstances of the agreement.
[91] The court is less likely to interfere when the party seeking to set aside the agreement is not the victim of the other, but rather his or her own failure to self-protect. The Ontario Court of Appeal in Mundinger v. Mundinger (1968), 1968 CanLII 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.) says that the court will step in to "protect him, not against his own folly or carelessness, but against his being taken advantage of by those in a position to do so because of their position."
[92] The court must look not at which party made the better bargain but rather, to whether one party took advantage of their ability to make a better bargain. In that taking of advantage is to be found the possibility of unconscionability. See Rosen v. Rosen (1994), 1994 CanLII 2769 (ON CA), 3 R.F.L. (4th) 267 (ONCA)
[93] The test for unconscionability is not weighing the end result, but rather the taking advantage of any party due to the unequal positions of the parties. See Mundinger v. Mundinger (1968), 1968 CanLII 250 (ON CA), [1969] 1 O.R. 606 (Ont. C.A.); Rosen v. Rosen (1994), 1994 CanLII 2769 (ON CA), 3 R.F.L. (4th) 267 (Ont. C.A.).
[94] The onus is on the party seeking to set aside the domestic contract to demonstrate that at least one of the circumstances set out in subsection 56(4) has been met; then the court must determine whether the circumstances complained of justify the exercise of the court's discretion in favour of setting aside the contract. It is a discretionary exercise. See LeVan v LeVan. 2008 ONCA 388 (CanLII), 2008 CarswellOnt 2738, ONCA. (emphasis added)
Decision
Justice Black held that Mr. Singh “falls short at every turn” (para. 59) and that there was “no reasonable basis on which to find the Marriage Contract invalid, or to set it aside.” (para. 72)
While it was accepted that Mr. Singh did not read the marriage contact, he was aware of its potential effect, and still made the decision not to read the contact. Justice Black noted that Mr. Singh had previous experience with legal proceedings, including family law in British Columbia.
Justice Black held the following:
[…] the Marriage Contract does not appear to be unfair or the product of unequal bargaining power. On its face it seems to be a valid domestic contract, signed by both parties. I start from the proposition that the court should be loathe to interfere where parties are settling their own affairs. (at para. 64) (emphasis added)
By his own admission, Mr. Singh failed to undertake due diligence is relation to the Marriage Contract… As McGee J. wrote, a party cannot fail to ask the correct questions and then rely on a lack of disclosure. Here, having not even read the agreement, Mr. Singh exercised no diligence whatsoever. (para. 65) (emphasis added)
There is no credible evidence that Ms. Khalill had or exploited any financial or other advantage over Mr. Singh, or took advantage of any inequality of bargaining power between them . Mr. Singh’s own evidence is that at the time he was at least as financially well-off as Ms. Khalill. His purported vulnerability was that he had to sign whatever Ms. Khalill wanted in order to save their marriage. This alleged basis of vulnerability has been considered and rejected by at least one court in the past and has been found not to amount to duress (Campbell v. Campbell, 1990 NLSC 7150). I find that there is no evidence of duress here. (para. 66) (emphasis added)
Ms. Khalill was ultimately successful and was awarded $15,000 in costs (on a scale higher than partial indemnity but not full indemnity.)
A few takeaways:
- Counsel should test their own client’s credibility before bringing a claim to set aside a marriage contract to court (see paras. 67 to 71).
- Prior to signing a marriage contact, parties are expected to undertake due diligence – what this is may depend on their level of sophistication.
- The failure to read a marriage contract prior to signing it does not, in and of itself, invalidate the marriage contract.
- Feeling forced to sign a marriage contact in order to “save the marriage” is not sufficient to invalidate or set aside the contract.