Family Law Agreements / Domestic Contracts

1

Divorce and Separation

People marry and hope to live together in happier times in the future. Sometimes the union does not work for a variety of issues. Divorce and Separation is inevitable to some relationship. Relationships may be for a short period and then the couples separate.

It could be a long marriage and then separation comes. The parties may have gathered properties over the years, they may have gathered debts. They may have minor children whom they are responsible to

2

Domestic Contracts / agreements

Couples however have agreement options. They can enter into agreements that will define the terms of their union or the terms of their separation upon the breakdown of their marital union. Suffice it to say these agreements come in different forms. Parties can agree by entering into a domestic contract to opt out of the equalization payment under Part I of the FLA or make modifications as per the terms of the contract.

3

Marriage Contracts

Oftentimes couples who intend to marry or contemplate marriage want to enter into an agreement as to how their financial affairs or properties shall be dealt with in the eventual breakup of their union. This is called a Marriage contract.

Tip:

Marriage contracts must be negotiated and signed well in advance of the wedding date to avoid a claim of duress. The parties must also consider the need for independent legal advice.

4

Separation Agreement

Other couples may not have a marriage contact in anticipation of marriage or during marriage. They marry and separate. They still want to settle their affairs or issues on a breakdown of their marriage. In these circumstances they can do so by entering a separation agreement.

5

Equalization Regime In Family Law

In Ontario, only married spouses are entitled to a division of property (sections 1 and 5, FLA). Common law spouses can still make claims for property, but only on the basis of common law trust principles, which may also be available to married spouses in rare circumstances (Rawluk v Rawluk 1990 CarswellOnt 217 (S.C.C.) and Martin v Sansone 2014 ONCA 14).

6

Married spouses can make a claim for equitable rights in property held by the other, but there are special circumstances that address this issue.

7

What can be equalized: – the value of all property is equalized in Ontario; that includes, monies in bank accounts , RRSP, pensions, corporate assets and any other type of interest in property. Property is given a very broad definition.

8

The Courts in Ontario do not have jurisdiction to divide property individually or separately . All property acquired by the spouses during the marriage must be equalized at separation by the transfer of money from the spouse who, during the marriage, accumulated more and, at separation, owns property with a greater value, to the other spouse.

9

Factors relevant to the exercise of the court's powers under the equalization model include:

A. The property in issue is that owned by the spouses on the valuation date. The valuation date is defined as “the date of separation, the date of divorce or a declaration of nullity, the day before the date of the death of a spouse or the date of commencement of an application for improvident depletion” (section 4, FLA).

B. The court must determine each spouse’s net family property (defined as the value of all the property a spouse owns at separation after deducting the spouse’s debts and liabilities and the value of property, other than a matrimonial home, that the spouse owned on the date of marriage). There is also provision for the exclusion of the value of certain property from a spouse’s net family property calculation.

C. A spouse’s net family property cannot be less than zero.
d. The spouse whose net family property is the lesser of the two is entitled to ½ or 50% of the difference between them. Essentially, the spouse with the greater amount pays money to the spouse with the smaller sum to ensure that they leave the marriage with assets, whether property or money, of equal value (Rawluk v Rawluk 1990 CarswellOnt 217 (S.C.C.)).

D. The court also retains some limited discretion to order an unequal division where it would otherwise be unconscionable (sections 4 and 5, FLA). Unconscionable means more than unfair or inequitable; it must “shock the conscience of the court” (Ward v Ward 2012 CarswellOnt 8658 (Ont. C.A.).

E. Equalization. The spouses’ assets are equalized. Each spouse’s assets are equalized based on the value of each asset at the valuation date not the date of trial. Therefore, if a non-titled spouse has made contributions to a property which has increased in value after the date of valuation, that spouse would not be entitled to share in the increase.

F. The definition of a spouse’s “net family property” refers to the value of property after deducting debts and liabilities. The FLA t was revised (effective 14 May 2009) to expressly include contingent tax liabilities in respect of property (section 4(1.1), FLA).

Exclusions from the calculation of Net Family Law Property
h. Certain types of property are excluded from the calculation, (for example, gifts and inheritances received from a third person during the marriage provided the donor makes it clear that it should not be included in the equalization process) from a spouse’s accumulation of net worth

G. Special provisions apply for matrimonial homes (a matrimonial home is a home in which either spouse had an interest and both spouses ordinarily occupied at the time of their separation).

H. The spouse with the greater benefit makes a payment to the other to equally share the value of property accumulated during the marriage; this payment is called an “equalization payment”.

Procedure
I. Married spouses must prepare and exchange a financial statement listing one’s own assets and debts on the date of marriage and date of separation to calculate the appropriate equalization payment.

K. The Ontario Court of Appeal has held that in the vast majority of cases, any unjust enrichment that arises as a result of the marriage will be fully addressed by the equalization provisions of the FLA (see Martin v Sansome, 2014 ONCA 14, paragraphs 46 to 67 and McNamee v McNamee, 2011 ONCA 533 at paragraph 66).

L. In Serra v Serra, [2009] O.J. No. 432 (Ont. C.A.), the Ontario Court of Appeal considered the situation where, after separation, the husband suffered a substantial decline in the value of his business, the major asset, as a result of market factors and had been prevented from disposing of this asset by an interlocutory order. Equalization was determined on the value of each spouse’s property on the valuation date. By the time the amount of the payment was calculated, it was actually more than (possibly even double) the husband’s net worth. The Court found that equalization would be unconscionable and instead ordered an unequal division.

M. equalization payments and other property-related financial orders arising from the dissolution of a marriage cannot be enforced through the FRO and must be enforced privately. Under section 9 of the FLA, an Ontario court has extensive powers to enforce an equalization payment, including orders for:
• Money to be paid.
• Security, including a charge on property, to be given.
• Payment to be deferred for or made in instalments over a period of up to ten years.
• Transfer of property in specie.
• Partition and sale of property.

10

Cohabitation agreements / UNMARRIED COUPLES

Cohabitation agreements are for unmarried couples or couples who are in a common law relationship. marry and enter into a common law union / relationship. They may decide to settle their issues via a cohabitation agreement.

11

Note that there is no legislation or legal instrument in Ontario governing the division of property for unmarried couples on the breakdown of the relationship.

12

Before the Supreme Court of Canada’s 2011 decision in Kerr v Baranow, 2011 Carswell BC 240 (S.C.C.), common law couples, in making a claim to property held by the other spouse, invoked various trust principles, including the resulting trust and constructive trust.

13

In Kerr v Baranow, the Supreme Court of Canada:

• Made it clear that the resulting trust, and its concomitant “common intention” of the parties no longer has any role to play. The Supreme Court held that their remedy lay in unjust enrichment. Accordingly where a claim for umjust enrichment was made by a common law partner , the aggrieved partner is fronting the following.

That there has been an unjust retention of a disproportionate share of assets accumulated during the course of… a ‘joint family venture’ to which both partners have contributed, the monetary remedy should reflect that”. Factors which point to the existence of a joint family venture include:
• Mutual effort
• Economic integration
• Actual intent; and
• Priority of the family

14

In Ontario, the Family Law Act recognizes that couples can settle their financial and other affairs in agreement form. Whether it is a marriage contract, separation agreement or a cohabitation agreement. In Ontario, separation, marriage and cohabitation agreements of the couples are called Domestic contracts.

15

We are providing you the legal definition to assist you in determining what kind of services you need and the legal requirements for such an agreement and what such an agreement can contain.

Domestic Contracts

Marriage, cohabitation, prenuptial, and separation agreements are governed by the provincial law i.e. the Ontario Family Law Act rules and provisions.

Book Appointment
error: Content is protected !!