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Author: Judith Janzen

“Reprehensible” Conduct in Family Law Case Draws Over $1.2 Million Costs Award

A wealthy businessman adopted a battle plan designed to punish his estranged wife on multiple fronts in protracted Vancouver family litigation. The BC court found that the husband’s conduct amounted to use of his superior resources in an attempt to wear down his wife. His “litigation war” strategy and the unsustainable positions he took throughout the proceedings unnecessarily lengthened the duration of the case—precisely the type of conduct that justifies a special costs order in Vancouver family litigation and estate litigation matters alike. To censure his misconduct, the husband was ordered to pay over $1.2 million in special costs to his wife, plus post-judgment interest.

High-conflict Vancouver family litigation

The family law claim in Negus v. Yehia, 2021 BCSC 254 began when Sally Negus and Sam Yehia’s marriage broke down in October 2014 after a 21 year relationship. Sally and Sam had significant assets. Sam owned a group of companies that owned and operated pubs, liquor stores, and hostels. Family property was valued at about $19,605,000. Sally filed a notice of family claim in November 2014 and the parties were involved in litigation almost continuously for the next four years. More than 20 interim orders were made before the case proceeded to trial in 2017. The trial judge issued reasons for judgment in December 2018. The wife’s approach on the valuation of family property prevailed and she was awarded half of that family property. The wife also obtained awards of child support and spousal support based on her position concerning Mr. Yehia’s income. The trial judge also found that Sally was entitled to special costs throughout as rebuke for Sam’s “reprehensible conduct” which unnecessarily lengthened the duration of the case.

Purpose of special costs in family law cases

Rule 16-1 of the Supreme Court Family Rules, B.C. Reg. 169/2009 (the “Rules”) governs costs in family law cases. Under Rule 16-1(1), costs must be assessed as party and party costs, in accordance with Appendix B of the Rules, unless specified circumstances exist. One of the excepted circumstances is when the court orders that costs be assessed as special costs (Rule 16-1(b)(i)).  Special costs provide a much greater degree of indemnity than party and party costs. Special costs are not compensatory; they are punitive. The purpose of special costs is to censure and deter litigation misconduct.

Assessment of special costs in family law cases

The factors in Rule 16-1(2)(b) must be considered on an assessment of special costs, which are as follows:

(i)         the complexity of the family law case and the difficulty or the novelty of the issues involved;

(ii)        the skill, specialized knowledge and responsibility required of the lawyer;

(iii)       the amount involved in the family law case;

(iv)       the time reasonably spent in conducting the family law case;

(v)        the conduct of any party that tended to shorten, or to unnecessarily lengthen, the duration of the family law case;

(vi)       the importance of the family law case to the party whose bill is being assessed, and the result obtained;

(vii)      the benefit to the party whose bill is being assessed of the services rendered by the lawyer;

(viii)     Rule 1-3.

Assessment of special costs in Negus v. Yehia

In this particular Vancouver family litigation matter, the key factors on the assessment of special costs which warranted an award of over $1.2 million included:

  • It was a complex family law case with a high degree of difficulty. The husband had a complicated corporate structure with a number of inter-related companies. There were significant issues with respect to the valuation of property and determination of the husband’s income for his support obligations. Many matters were contested during the litigation.
  • It was a very active file on which difficult issues often arose. The case required near constant attention. The wife’s lawyers often had to initiate proceedings to move the case forward. Steps had to be taken to overcome the husband’s resistance to orderly resolution of matters.
  • In these circumstances, it was appropriate for the wife to have a team of lawyers with differing ranges of experience, skill and availability assume responsibility for various tasks. The time spent by the wife’s lawyers over the period of over four years was reasonable, and included steps made necessary to move the matter forward given the husband’s misconduct.
  • The husband adopted unsustainable positions on several issues. His conduct unnecessarily lengthened the duration of the case, where there was no indication that the wife engaged in similar conduct.
  • The amount involved was significant (total value of family property assessed at approximately $19,605,000), and the outcome of the family law case was very important to the wife, who sought support for herself and her children and her share of the family property.

Take home point on special costs in family litigation

Special costs may be ordered against a party in a family law case to rebuke litigation misconduct. The award of special costs in the Negus v. Yehia matter was made, at least in part, because of the way the husband dealt with the litigation. The trial judge indicated that the husband’s conduct amounted to use of superior resources in an attempt to wear down his estranged wife and found his conduct throughout the pre-trial proceedings to be reprehensible.

Do you have any questions about special costs in estate litigation? Contact us today.

BC Family Lawyers on Using Unjust Enrichment to Obtain Share of Property

In a recent post, our BC family lawyers discussed Judge v. Judge, 2015 BCSC 1764, a family law case in which the court determined that properties acquired by contributions of a husband, wife, and the husband’s parents, but held in the name of the husband’s parents alone, should be reapportioned in the wife’s favour. Throughout the marriage, the husband, the wife, and the husband’s parents bought or built real estate, and applied the rental income and equity in each property towards the buying or building of the next property. All four parties also worked together at the family’s business. The extended family was an economically integrated unit that pooled assets and applied them to the common end of maximizing wealth for the benefit of all parties to the joint venture.

BC family law claim for share of properties

Throughout the marriage, the husband managed the pool of money and made decisions about who would hold title to the properties. When the husband and wife separated, title to three of the properties was held in the names of the husband’s parents. The wife brought a BC family law claim seeking a share in those properties. As our BC family lawyers discussed in last week’s post, the wife’s claim succeeded on the basis that the properties were the product of a joint venture such that they were family assets to which the wife had a proportionate claim.

Using unjust enrichment to obtain share in property

In the alternative, the court in Judge v. Judge found that the wife could have established grounds for an equitable remedy based on unjust enrichment. The court noted that unjust enrichment has become the primary vehicle to address claims of inequitable distribution of assets on the breakdown of domestic relationships. To obtain a remedy, the plaintiff must establish the three elements of unjust enrichment:

  1. An enrichment of or benefit to the defendant;
  2. A corresponding deprivation of the plaintiff; and
  3. The absence of a juristic reason – in law or justice – for the enrichment.

BC family lawyers analyze the result in Judge v. Judge

Applying the elements of an unjust enrichment claim to the facts in Judge v. Judge, the necessary link between the wife’s contributions and the acquisition and preservation of the properties had been established:

  • The husband’s parents were enriched by the wife’s efforts. The wife made substantial contributions to the pool of wealth which, in turn, permitted the acquisition of the three investment properties. 
  • The wife suffered a corresponding deprivation. She had fewer assets and savings because her contributions were diverted away from her to the acquisition of the disputed properties held by her parents-in-law. 
  • There was no juristic reason for this enrichment.

The wife had made substantial direct and indirect contributions to the acquisition and preservation of the properties held in the names of her parents-in-law. Those contributions included  the application of jointly held funds to the first investment property; the application of income to the accumulation of wealth; the provision of vastly underpaid labour enhancing the pool of funds available for payout, primarily to the husband’s parents; and the pledging of jointly held assets to obtain financing. Thus, the wife was entitled to a remedy rooted in unjust enrichment.

Conferring mutual benefits

In applying the doctrine of unjust enrichment, the court did not overlook the fact that all parties in Judge v. Judge conferred mutual benefits upon one another in the context of the joint family venture. The parents-in-law had shown substantial direct and indirect contributions to the acquisition and preservation of the three disputed properties. Specifically, they made some contribution from their own funds to the acquisition of the disputed properties. In addition, the mother-in-law looked after the children and cooked, permitting the other members of the venture, particularly the husband and wife, to work long hours and maximize their earnings. So, in that way, the husband and wife were enriched by the efforts of his parents, there had been a corresponding deprivation, and there was no juristic reason for this enrichment. Thus, the husband’s parents had also demonstrated entitlement to a remedy rooted in unjust enrichment. That being said, the contributions of the parents-in-law to the acquisition and preservation of the properties were modest, and in return for those contributions, they lived in this residence rent-free for a substantial time. 

Remedy if unjust enrichment is established

A successful claimant may be entitled to a monetary or a proprietary award. The first remedy to consider is always a monetary award (i.e., money). The onus rests on the claimant to show than a monetary award would be insufficient. In this regard, the court may consider the probability of recovery as well as whether there is reason to grant the claimant additional rights flowing from the recognition of proprietary rights. Where a proprietary remedy is granted, the extent of the constructive trust interest should be proportionate to the claimant’s contributions. Similarly, where a monetary award is granted, it should reflect the proportionate contribution of the claimant to the accumulation of wealth. There is no presumptive entitlement to an equal sharing of wealth.

On the facts in Judge v. Judge, the court determined that had it needed to apply the doctrine of unjust enrichment, the result would have been the same: the wife was entitled to a 40% share of the three disputed properties. The court further concluded that it would be necessary to grant the wife a proprietary remedy (i.e., impressing the properties with a constructive trust in the wife’s favour). A proprietary remedy was required not so much because of the probability of recovery, but because the wife had an interest in the post-separation net rental income generated from the three disputed properties and the family residence. 

The bottom line from our BC family lawyers

Unjust enrichment has become a primary vehicle to address claims of inequitable distribution of assets on the breakdown of domestic relationships (whether common-law or married). Upon separation or divorce, if legal title to property does not reflect the spouse’s contributions to the property, it is open to a spouse to claim for an equitable remedy for basis of unjust enrichment. If the test for unjust enrichment is met, the court can order that money be paid to the spouse in an amount that is proportionate to their contribution, or the court can order that the property be impressed with a constructive trust in favour of the non-titled spouse. Contact Onyx Law Group’s team of BC family lawyers at (604) 900-2538 if you have questions.

Divorce Law BC: Dividing Assets Acquired by Joint Family Venture

Where spouses contribute in various ways, and in different measures, to the acquisition of family wealth and assets, how does BC divorce law apply to divide that property on breakdown of the marriage? In many cases, title to the property is in only one spouse’s name, despite the other spouse’s contributions. It might also be the case that title to property is in the name of other family members, such as one spouse’s parents. That was precisely the situation in Judge v. Judge, 2015 BCSC 1764, where a number of properties were acquired by the efforts of four people: a husband, wife, and the husband’s parents.

Let’s examine Judge v. Judge to find out how BC divorce law applies to divide property acquired by joint family venture.

Facts in BC divorce law case

A husband and wife separated after a 20-year marriage. One of the major issues in this BC divorce law case was ownership and division of residential properties located in Kamloops, BC. The husband’s parents were included as parties to the divorce proceedings as they held title to three of those properties. The evidence established that the husband, the wife, and the husband’s parents had embarked on a venture wherein real estate was acquired, or built, and rented. The rental income and equity in each property was then used to fund acquisition or building of the next. In other words, both the income earned from a property and its value as an asset became the platform upon which the next step in the venture rested. The venture expanded to include the opening of what became a very successful convenience store. Earnings from the store formed a common fund of resources controlled by the husband. Revenues from the store (along with other sources of funds) were applied to the acquisition of additional properties.

Wife’s claim in BC divorce law

In her claim for divorce, the wife sought a judicial reapportionment of family assets in her favour. The husband’s parents claimed that the disputed properties were purchased with their own funds and that they should keep legal and beneficial title. The court examined the evidence and concluded that the husband controlled the pooled resources of the extended family household and determined how the funds would be applied, including the allocation of income and the acquisition of real property. The husband determined who would hold title to real property, and his decisions about who would hold title were unrelated to the contributions the parties made to the acquisition of the properties. The wife was subservient to the husband and unaware of how he was structuring the financial affairs of the extended family unit.

Joint family venture under BC divorce law

The court found that the husband’s parents made direct financial contributions to the acquisition of the properties and also provided indirect contributions by way of child care assistance to the husband and wife that permitted them to work long hours, particularly after the convenience store opened. However, those contributions were secondary to the joint contributions by the husband and wife. The wife made substantial and direct contributions to the acquisition of each asset encompassed by the joint venture through her employment earnings, her share of rental income derived from the properties, and the revenues generated by the convenience store. She also contributed indirectly through management of the household and child-rearing, and in addition, she permitted her interest in the properties to be pledged as security by her husband to obtain financing to further the joint family venture. In light of all of the facts, the court was satisfied that the properties in question were family assets acquired by joint family venture and should be reapportioned in the wife’s favour.

How much is each party entitled to?

The court next had to determine the proportionate interest of the four parties to the properties held in the name of the husband’s parents. There was an absence of clear financial records.  As noted, the court concluded that the husband and wife made the most significant contributions to the venture, and that the husband’s parents played secondary roles. In all the circumstances, the court concluded that 80% of the value of the disputed properties was properly apportioned to the husband and wife, and that each was entitled to a 40% interest in those assets.

Applying BC divorce law to divide assets acquired by joint family venture

Upon the breakdown of a marriage where title to property or assets is disputed, BC divorce law may apply such that the property is found to be a family property acquired by joint venture. Contribution to the acquisition of property can be direct or indirect. Where the facts support such a finding, the court will then consider each parties’ contribution to determine their proportionate interest in the disputed property.

BC Divorce Law: Help! My Spouse Drained Our Joint Line of Credit

Under BC divorce law, the rules about division of family property and debt apply to both married couples and unmarried couples who have been living together in a marriage-like relationship for at least two years. Many spouses have joint bank accounts or joint lines of credit, intended to be used to pay for various things that are part of their life together. What happens when one spouse takes money out of a joint account or line of credit for their own use, in contemplation of separation? That was precisely the situation in Toth v. Lehman, 2016 BCCA 514, where one spouse “cleaned out” a joint line of credit 10 days before separating from her spouse. She spent the money and then declared bankruptcy. The issue for the court was whether the debt that arose survived the bankruptcy.

Facts in BC divorce law case: Toth v. Lehman

Ms. Lehman and Mr. Toth began living together in January 2005. In 2007, they bought a home in joint tenancy, applying for a mortgage and a line of credit jointly. Later in 2007, the relationship deteriorated. In December 2007, Ms. Lehman withdrew $157,044.47 from the joint line of credit. Ten days later, she left the relationship. Mr. Toth brought a successful action against Ms. Lehman for reimbursement of the funds. Shortly thereafter, Ms. Lehman made a voluntary assignment in bankruptcy. Mr. Toth argued that the debt that arose survived the discharge because Ms. Lehman misappropriated the funds while acting in a fiduciary capacity.

Findings in BC divorce law case

The key issue for the BC Court of Appeal in Toth v. Lehman was whether the debt survived the discharge from bankruptcy. The BC Court of Appeal said yes, it did, because a discharge order does not release a bankrupt from debt arising out of misappropriation while acting in a fiduciary capacity. A spouse may owe his or her spouse a fiduciary duty with respect to funds in a joint account. If a spouse misappropriates funds while acting in a fiduciary capacity, the debt will not be discharged by bankruptcy.

Wrongdoers can’t benefit from the bankruptcy regime’s protection

The starting point in the analysis is the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 [“BIA”], which is a comprehensive code relating to insolvent persons. Section 178(2) of the BIA provides that:

An order of discharge releases the bankrupt from all claims provable in bankruptcy.

Section 178(1) of the BIA creates limited exceptions to this general rule, designed to ensure that certain wrongdoers cannot take unjustified advantage of the bankruptcy regime’s protection. One of those exceptions is found in s. 178(1)(d). It reads:

178 (1) An order for discharge does not release the bankrupt from

(d)  any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity…

The exceptions in s. 178(1) have been interpreted in a purposeful way to ensure that a bankrupt does not benefit from their dishonesty.  The Courts have held that s. 178(1)(d) is concerned with morally unacceptable conduct which is seen as unacceptable to society, such that a bankrupt will not be rewarded for such conduct by release of liability.

What is misappropriation of money?

The leading case in British Columbia on misappropriation and fiduciary capacity in the context of s. 178(1)(d) of the BIA is Valastiak v. Valastiak, 2010 BCCA 71. Misappropriation is the act of misappropriating or turning to a wrong purpose. For misappropriation, the following elements must be proven:

(a)  the money taken by the debtor to create the debt must have belonged to someone other than the debtor;

(b)  the taking must involve a wrongful use of the money; and

(c)  the debtor must have received the money as a fiduciary.

What is the test for finding a fiduciary relationship?

There are certain categories of relationship where fiduciary duties are innate, but the relationship between spouses is not one of them. As such, the existence of a fiduciary relationship between spouses in any given case is a question of fact. The test emphasizes whether there is an undertaking to act in the beneficiary’s interest, where the beneficiary is vulnerable, and where the fiduciary has the discretionary power to impact an identifiable interest of the beneficiary.

Was the money misappropriated while acting in a fiduciary capacity?

On the facts in Toth v. Lehman, the BC Court of Appeal was satisfied that Ms. Lehman’s debt obligation should survive her bankruptcy. Ms. Lehman was acting in a fiduciary capacity when she misappropriated the money from the line of credit that belonged to both her and Mr. Toth, and then used those funds solely for her own purpose in breach of that fiduciary duty. The evidence was clear that both spouses had the right to remove monies from the joint line of credit and they did so during the relationship. That was the intent of the line of credit – it was to be used for “various things that were part of their life together.” The parties ran it up to about $75,000 on various things that were part of their life together. Neither party contemplated the other using the money for separate purposes. Essentially, Ms. Lehman was attempting to impose a separation agreement by removing the funds from the joint line of credit and then immediately leaving the relationship, and spending the money. Ms. Lehman’s action in cleaning out the line of credit in order to impose her terms of separation was not justified. Ms. Lehman had an obligation to act in the best interest of Mr. Toth which she clearly failed to do.

Take home point on debt under BC divorce law

BC divorce law imposes a duty on both spouses to preserve family assets and not unilaterally remove those assets in contemplation of a separation and not to waste those assets before a judicial determination as to the entitlement to those assets. Where one spouse wrongfully withdraws funds from a joint account and then declares bankruptcy, the other spouse can argue that the debt should survive the bankruptcy. The types of debt which survive bankruptcy are any debts arising out of fraud, dishonesty, or misconduct while acting in a fiduciary capacity. A spouse may owe his or her spouse a fiduciary duty with respect to funds in a joint account. If the spouse misappropriated the funds while acting in a fiduciary capacity, the debt will not be discharged by bankruptcy.

Joint Family Ventures and Sharing of Family Assets

As our BC family lawyers have discussed, an unjust enrichment claim in the family context can be used to prevent one spouse from leaving the relationship with a disproportionate share of the wealth accumulated as a result of joint efforts of the spouses. In a recent Alberta case involving a wife’s claim to farm property, the court allowed a wife’s unjust enrichment claim, finding that the common-law spouses had been involved in a “joint family venture” and that the husband was enriched by the wife’s provision of domestic services, child rearing, and farm help during the couple’s 14 years of co-habitation (see Lemoine v. Griffith, 2012 ABQB 685, aff’d, 2014 ABCA 46).

Ask a BC family lawyer: What is a joint family venture?

The concept of proportionate sharing of property acquired through the joint efforts of spouses or common-law partners is well-established in BC family law. As such, a finding that spouses were involved in a joint family venture can form the basis for an unjust enrichment claim. To determine whether the spouses were engaged in a joint family venture, the court will consider concepts such as mutual effort, economic integration, and the actual intent of the spouses. Factors such as the pooling of effort and teamwork, the decision to have children together, and the length of the relationship will be considered to determine whether and to what extent the spouses have formed a partnership and jointly worked toward mutual goals. Let’s examine the facts of Lemoine, a successful unjust enrichment claim arising from a joint family venture, to demonstrate the concept.

BC family lawyers summarize the facts in Lemoine

Mr. Griffith and Ms. Lemoine began living together in 1995 on a farm property owned by Mr. Griffith’s father and soon thereafter became engaged to be married. When the parties started living together, Mr. Griffith was involved in a ranching and farming partnership with his father. In 1999, more than three years after their engagement, the parties entered into a Matrimonial Property Agreement (MPA), stated to be effective whether or not the contemplated marriage took place. The parties never married but did have a child together. In the years that followed, Mr. Griffith sold and acquired land. Certain of the properties which he sold were listed in Schedule “A” of the MPA, and these transactions considerably increased his personal net worth. When the parties separated in 2009 after 14 years together, Ms. Lemoine commenced an action claiming unjust enrichment.

A trial judge found that the MPA was of no force and effect because of undue influence. She further found that the parties, throughout their relationship, were involved in a joint family venture that formed the basis of an unjust enrichment claim. Ms. Lemoine was found to be an equal partner in the family. In assessing the “overall domestic and economic activity engaged in by the family unit”, the court awarded Ms. Lemoine a 30% share of the increase in Mr. Griffith’s net worth during the parties’ cohabitation for her contribution to their family venture – a sum of $915,440.

Domestic services and contribution to increase in value of property

Mr. Griffith appealed the unjust enrichment award, arguing that there was no causal link between the increased value of his property and Ms. Lemoine’s contribution to the joint family venture. In particular, he argued that the bulk of the wealth which he accumulated during the parties’ cohabitation was attributable to profits made from his land holdings, and his trading in land, and that the profit made from his various land sales was due solely to inflation and market forces. The court held that increases due to outside influences, such as inflation, are not excluded where neither party contributed any more than the other to the increase. Further, the court dismissed his appeal, rejecting the argument that there was no link between the husband’s accumulation of wealth and the wife’s contributions to the joint family venture. The courts have been clear that domestic services are linked to the family’s accumulation of wealth. For example, the courts recognize that Spouse A may not have been able to make the efforts he or she did to build up a company were it not for Spouse B’s assumption of household and child-rearing responsibilities. Spouse A reaped benefits of Spouse B’s efforts by being able to focus time, energy and efforts on building a company.

BC family lawyers discuss other important points from Lemoine

The court held that where there is a joint family venture, each individual asset does not have to be assessed separately and there is no requirement to demonstrate a direct contribution relating to a particular asset. Rather, the overall domestic and economic activity engaged in by the family unit can be assessed as a form of joint family venture and dealt with in a fashion that will take practical realities into account. Unless it can be demonstrated that the parties to a joint family venture intended to place specific property outside the joint venture (e.g. through a valid marriage agreement) it is not appropriate to consider a party’s contribution to individual assets.

Take home points on joint family ventures from our BC family lawyers

An unjust enrichment claim can be used to prevent one spouse from leaving the relationship with a disproportionate share of the wealth accumulated as a result of the joint family effort. Contributions need not be direct as long as they are made to the overall value of the joint family venture, so can include domestic services that enable one spouse to focus on increasing the family’s wealth. Increases due to outside influences, such as inflation, are not excluded where neither spouse contributed any more than the other to the increase. If you need more information bringing an unjust enrichment claim, contact Onyx Law Group at 604-900-2538 to schedule your initial 30-minute complementary consultation with one of our BC family lawyers.

Can I Challenge a BC Marriage Agreement if I got Legal Advice Before Signing?

A BC marriage agreement may be unenforceable if one or both of the spouses did not obtain independent legal advice before signing the agreement. Without independent legal advice, there is a risk that the court will set the BC marriage agreement aside on the basis that one or both of the spouses did not know their legal rights or understand what they were agreeing to.

Effective independent legal advice can remove any taint of unfairness, undue influence, unconscionability or duress from the circumstances leading to the signing of a BC marriage agreement. That being said, are there situations where a spouse can challenge a BC marriage agreement even if legal advice was obtained? Will the court look behind a certificate of independent advice and consider the effectiveness of the legal advice provided? The answer is yes.

Independent legal advice and BC marriage agreements

BC marriage agreements are typically drafted to include a statement that each party has been advised of their rights and has obtained independent legal advice (or has chosen not to obtain independent legal advice). Where independent legal advice has been provided, a BC marriage agreement will typically include a schedule to the agreement called a “Certificate of Independent Advice” signed by the lawyer who gave the advice. If the certificate was signed without really explaining the extent and effect of the BC marriage agreement or applicable BC family law, then it may be that independent legal advice was not truly provided.

Hallmarks of effective independent legal advice

Independent legal advice is a serious matter and should not be approached in an “off-the-cuff” or perfunctory manner such that no actual independent legal advice is given. The purpose of independent legal advice is to ensure the client understands the scope and purpose of what they are signing, the nature of any risks being assumed, and how the BC marriage agreement impacts their legal rights and obligations should the marriage break down. A court will look at the effectiveness of the independent legal advice given prior to signing a BC marriage agreement. For example, the court may consider:

  • Who retained, briefed, and paid the lawyer purporting to provide the legal advice (e., was the lawyer truly independent of the other party and the other party’s lawyer)?
  • Was the client given the opportunity to review the draft of the BC marriage agreement prior to meeting with the lawyer?
  • Did the lawyer ask the client to describe his or her own understanding of the BC marriage agreement and its implications to ensure that the agreement as drafted lines up with the client’s understanding?
  • Did the lawyer who provided the advice diligently interview the client, gather information, and provide legal advice tailored to the circumstances of the client and the agreement in question?

Note as well that the fact that a lawyer does not charge for the advice given is not sufficient to affect the duty that a lawyer owes to a client.

Marriage agreement unenforceable despite provision of “legal advice”

In last week’s post, our BC family lawyers discussed Lemoine v. Griffith, 2012 ABQB 685, aff’d, 2014 ABCA 46 a case in which a marriage agreement was found to be unenforceable due to undue influence arising from the circumstances in which the wife signed the agreement. Having established that pressure amounting to undue influence was at play in the circumstances surrounding the execution of the agreement, it then fell to the husband to try to remove that taint so as to justify enforcement of the agreement. That can be achieved by proving that the person challenging the agreement had access to, and took advantage of, independent legal advice.

The court in Lemoine v. Griffith found that the wife did not receive independent advice to rebut the inference of undue influence. On the facts, the court concluded that there was nothing “independent” at all in the lawyer’s services. The wife did not retain the lawyer herself. Rather, the lawyer was presented to her by her husband’s lawyer. The wife was not given any opportunity to review the agreement prior to meeting with the lawyer, whom she had never met before. The lawyer did not open a file regarding the wife and instead sent his statement of account to the husband’s lawyer who paid it.

The court next considered whether legal advice was actually provided. Neither the husband nor the lawyer had any memory of what took place at the meeting. The only direct evidence on point was from the wife, who recalled spending no more than 10 or 15 minutes with the lawyer. The wife’s memory was supported by the fact that the lawyer billed only $75 for his services, despite having a stated hourly rate of $150 to $250. The court concluded that the lawyer could not possibly have had time to provide the wife with independent legal advice about the implications of the marriage agreement.

Take home point on BC marriage agreements and legal advice

The provision of independent legal advice prior to the execution of a BC marriage agreement is the most usual way to show that the agreement was entered into knowingly, voluntarily, and with a full understanding of what was being given up. However, the fact that a meeting with a lawyer took place or the presence of a Certificate of Independent Advice is not conclusive; the court will consider the effectiveness of the advice given if a BC marriage agreement is challenged. For example, undue influence may result in circumstances where the lawyer for one spouse is chosen by the other spouse and the legal advice is ineffective.

For more information about how this may apply to your BC family law claim, contact Onyx Law Group’s team of BC marriage agreement lawyers today at 604-900-2538 to schedule your initial 30-minute complementary consultation.

Challenging the Enforceability of a BC Marriage Agreement

If properly prepared, a BC marriage agreement effectively and efficiently deals with issues such as division of property, responsibility for debts, spousal support, and child support on breakdown of a relationship. However, if not properly prepared or fairly negotiated, a BC marriage agreement may be set aside (in other words, the agreement may be found to be unenforceable in whole or in part). General contract law principles, the BC Family Law Act, and a number of equitable principles may form the basis of a successful challenge. Our BC family lawyers will review just a few of the bases for challenging the enforceability of a BC marriage agreement below. If you need more information about challenging or defending the enforceability of a BC marriage agreement, contact us to schedule a free consultation.

Challenging a BC marriage agreement under BC family law

Section 93(3) of BC Family Law Act provides an option for a spouse to apply to challenge the enforceability of a BC marriage agreement respecting property division and debt. More particularly, a BC marriage agreement respecting property division and debt may be set aside or replaced by an order of the court if, at the time the parties entered into the agreement, one or more of the following circumstances existed:

  • a spouse failed to disclose significant property or debts, or other information relevant to the negotiation of the agreement;
  • a spouse took improper advantage of the other spouse’s vulnerability, including the other spouse’s ignorance, need or distress;
  • a spouse did not understand the nature or consequences of the agreement; and/or
  • other circumstances existed that would, under the common law, cause all or part of a contract to be voidable.

Even if none of the circumstances described above existed when the parties entered into the BC marriage agreement, by operation of s. 93(5) of the BC Family Law Act the court may still set the agreement aside if it finds that the agreement is “significantly unfair” given:

  • the length of time that has passed since the agreement was made;
  • the intention of the spouses, in making the agreement, to achieve certainty; and
  • the degree to which the spouses relied on the terms of the agreement.

It is also worth noting that the court’s willingness to interfere with a BC marriage agreement will generally increase in direct proportion with the degree to which the contract purports to depart from the general scheme provided for in the federal Divorce Act and provincial Family Law Act. For example, in Lemoine v. Griffith, 2012 ABQB 685, aff’d, 2014 ABCA 46 a marriage agreement was found to be invalid and unenforceable, with the court finding that it was a complete departure from the applicable statutory regimes. The marriage agreement in question purported to bar any claims the wife might ever have to share in the increase in value of the husband’s property. It also attempted to specifically exclude the operation of the Divorce Act and the Family Law Act, such that it could be interpreted as relieving the husband from any obligation to support the wife or their child on breakdown of the relationship.

Equitable grounds for challenging a BC marriage agreement

A BC marriage agreement might be void or voidable as a result of duress, which is the coercion of another’s will so as to vitiate consent (in other words, a threat that impairs the validity of one’s consent). A BC marriage agreement may also be void or voidable as a result of undue influence. Undue influence considers the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power. Onyx Law Group’s team of BC lawyers have previously discussed undue influence in the BC estate law context. For example, see here for our discussion of the increasing common issue of dementia, undue influence and testamentary capacity; and see here for our discussion of challenging a gratuitous transfer of property from a parent to an adult child on the basis of undue influence.

In both family law and estate law contexts, undue influence may arise in two sets of circumstances:

  1. Where evidence can be adduced to prove that actual influence was exerted, unduly, in order to gain agreement to a particular transaction. “Strong persuasion” is not sufficient.
  2. From the nature of the relationship between the parties, particularly at the time the transaction is being negotiated and carried out.

In the Lemoine v. Griffith case referred to above, the court set aside the agreement as it found that undue influence was at play in the circumstances surrounding the signing of the marriage agreement. The wife was not told the truth about the purpose of the agreement and she was told she would have to leave the family farm if she did not sign it. The wife never got an advance copy of the agreement to review, she was taken to her husband’s lawyers’ offices where his lawyer “went through” the agreement, in her husband’s presence, and then she was sent off with another lawyer who spent approximately 15 minutes with her before she signed the agreement. (Check back for next week’s discussion of the importance of independent legal advice when negotiating and signing a BC marriage agreement).

The bottom line on enforceability of BC Marriage Agreements

On separation, BC marriage agreements (also known as marriage contracts, domestic agreements, or prenuptial agreements) can be effective and efficient if properly prepared and fairly negotiated. However, they will readily be set aside if not. If you need more information about challenging or enforcing a BC marriage agreement, contact Onyx Law Group at 604-900-2538 to schedule your initial 30-minute complementary consultation with one of our BC family lawyers.

Should You Seek Lump Sum BC Spousal Support?

On breakdown of a marriage, BC spousal support is commonly paid on a periodic basis, which means that one spouse pays the other spouse a set amount per month for a period of time – sometimes indefinitely. However, there are situations where it may be preferable to seek BC spousal support in a lump sum, which means that there is a one-time payment from one spouse to the other, after which there is no claim future spousal support. When making a BC spousal support award, the court must weigh the advantages and disadvantages of a spousal support order in lump sum form compared to those of an order made in the more common periodic payment form. This article will discuss the pros and cons of lump sum spousal support awards.

Advantages of BC spousal support in lump sum

In some cases, a lump sum BC spousal support award is preferable to an order for periodic payments. The advantages of making a lump sum spousal support award include:

  • Terminating ongoing contact or ties between the spouses for any number of reasons (for example, short-term marriage; domestic violence; second marriage with no children, etc.);
  • Providing capital to meet an immediate need on the part of a recipient spouse;
  • Assisting the recipient spouse to achieve self-sufficiency and an appropriate standard of living;
  • Ensuring adequate support will be paid in circumstances where there is a real risk of non-payment of periodic support or a lack of proper financial disclosure;
  • Ensuring adequate support where the payor spouse has insufficient income to pay spousal support on an ongoing basis, but has capital assets from which to make a lump sum payment; and
  • Immediately satisfying an award of retroactive spousal support.

For example, in Parton v. Parton, 2018 BCCA 273, the payor spouse had the ability to pay lump sum but not periodic spousal support. The spouses (both age 61) separated after a 33-year long marriage. The wife had given up her career to raise their now-adult children, while the husband had built up an insurance brokerage. At the time of trial the wife had been out of the workforce for 23 years and was partially disabled. The husband argued that since he was planning to retire within six months to three years, spousal support should be periodic and not payable beyond that short term. The court took into consideration that the husband would be unable to make periodic payments for long given his (voluntary) impending retirement, but also recognized that the husband had a capital asset base from which he could pay lump sum spousal support without undermining his future self-sufficiency.

Disadvantages of BC spousal support in lump sum

The disadvantages of a lump sum spousal support award can include:

  • The real possibility that the means and needs of the parties will change over time, leading to the need for a variation – when a lump sum award is made, the parties are effectively deprived of the right to later apply for a variation of the lump sum award;
  • The difficulties in calculating an appropriate amount of lump sum spousal support where lump sum support is awarded in place of ongoing indefinite periodic support; and
  • The potential that a lump sum payment may undermine the payor spouse’s future self-sufficiency.

Connection between division of property and BC spousal support orders

Property division and spousal support orders are closely connected, but the fact that a spouse has received assets via property division does not defeat a claim for BC spousal support. Even where property has been substantially reapportioned in favour of a support-seeker, he or she is entitled to adequate compensation for the economic consequences of the marriage and its breakdown, including any spousal support claims. For that reason, it is important to distinguish the purpose of a lump sum spousal support award from the effect of such an order (i.e., the transfer of property from one spouse to another).

The trial judge in Parton v. Parton erred by confusing the effect of the spousal support award with its purpose. In that case, the trial judge found that found equal division of family property would be significantly unfair and decided that instead of reapportioning assets, a lump sum spousal support could remedy the unfairness. However, in calculating the amount of the lump sum, the trial judge took into account the husband’s substantial excluded property claim, an ordered lump sum spousal support of $250,000 – an amount well below the low end of the Spousal Support Advisory Guidelines range (based on the spouses’ ages and current incomes, the range for BC spousal support provided by the SSAG was $334,209 at the low end and $413,364 at the high end.).

Wife entitled to compensation for economic consequences of marriage

On appeal, the lump sum spousal support award in Parton v. Parton was increased to $388,000 (the mid-point in the SSAG range). The Court of Appeal found that the trial judge’s $250,000 lump sum award coupled with the wife’s half share of the family property did not result in an equitable sharing of the economic consequences of the marriage and its breakdown, nor did it place the parties in roughly equal positions following their 33-year marriage. The objectives of spousal support were not met. It was an error for the trial judge to take into account the husband’s substantial excluded property claim when determining the quantum of spousal support. The “means” of a spouse for spousal support purposes include his or her capital base, employment income or earning capacity and any other available source of benefits or gains. The character of the assets from which the spousal support order may be paid (i.e., family, excluded, or other property) is irrelevant to the proper quantum of lump sum spousal support.

The bottom line on BC spousal support payable in lump sum

It is for the presiding judge to weigh the pros and cons in determining whether a lump sum award is appropriate and the appropriate quantum of such an award. In making an award for BC spousal support, what matters is the purpose of the spousal support order – that is, compensatory and non-compensatory support — not the effect of such an order (i.e., the transfer of property from one spouse to another) or the source from which the spousal support order may be paid.

Frequently Asked Questions About Entitlement to Spousal Support

At the end of a marriage, are you entitled to spousal support? The question of entitlement to spousal support in BC is a threshold question that must be answered before considering the amount of spousal support and its duration (i.e., limited term or indefinite) by reference to the Spousal Support Advisory Guidelines (“SSAG”).  The SSAG is a useful tool in guiding the determination of the appropriate quantum and duration of spousal support, but the SSAG formulas are not to be applied until the question of entitlement to spousal support is answered in the affirmative.

Are you entitled to spousal support because your ex has a higher income?

On its own, a difference of income does not automatically lead to entitlement. Before the formulas and the rest of the SSAG are applied, there must be a finding or an agreement on entitlement on one of the “conceptual bases” for entitlement: compensatory support, non-compensatory support (needs based) and contractual support. The contractual basis for support arises from a marriage agreement (such as a prenuptial agreement or marriage contract). The other two bases for entitlement – compensatory and non-compensatory – were recently discussed by the BC Court of Appeal in Parton v. Parton, 2018 BCCA 273 (a family law matter in which a wife was found to be entitled to lump sum spousal support of $388,000 on both compensatory and non-compensatory principles):

  • The goal of compensatory support is the equitable sharing of the economic consequences of a marriage or its breakdown. Compensatory support provides redress for economic disadvantage arising from the marriage (such as diminished earning capacity and sacrificed career opportunities to take on child care responsibilities) or the conferral of an economic advantage upon the other spouse (such as contributions to enhanced career development).
  • The goal of non-compensatory support is to narrow the gap between the needs and means of the spouses. For purposes of non-compensatory support, at least for longer marriages, “need” is generally measured against the marital standard of living. BC courts have recognized that the economic and non-economic lives of spouses become more intertwined the longer the marriage.

Are you entitled to spousal support in addition your claim for family property?

The fact that a spouse receives assets via property division does not defeat a spousal support claim, even where property has been reapportioned in favour of the support-seeker (i.e., where family property is divided unequally in favour of the spouse seeking spousal support). Where property has been reapportioned in favour of a support-seeking spouse, that spouse’s entitlement to and the quantum of support is determined by the extent to which the reapportionment adequately compensates for the economic consequences of the marriage and its breakdown, including any claims for compensatory and non-compensatory support. In some cases, property division may address all or most of the objectives of spousal support and thus eliminate or reduce the need for a spousal support award, but in others it may not. This is particularly so where entitlement to spousal support is based on compensatory grounds.

Are you entitled to spousal support if you stayed home to raise the kids?

When one spouse acts as the primary parent, significant economic advantages and disadvantages may arise that form the grounds for entitlement to spousal support on a compensatory basis. In such situations, the primary income earner will have been in a position to earn money to accumulate assets, often in large part because he or she was relieved of many aspects of raising children. On marriage breakdown, the primary earner has three benefits: the benefit of a share of the assets; the benefit of having had children; and the benefit of a higher income earning ability because of full participation in the work force, substantially unencumbered by child care responsibilities. On the other hand, the spouse who took on the role of primary parent typically has only two of these benefits: the benefit of a share of the assets accumulated; and the benefit of having had children. That spouse often does not have the same income earning ability at the time of separation because of the role played in the marriage. It is that disadvantage, and the concurrent advantage to the other spouse, that can be addressed by a compensatory spousal support award.

Bottom Line: Are You Entitled to Spousal Support?

The SSAG formulas take into account case-specific factors such as the length of the marriage, the parties’ ages and their respective incomes or capacities to earn income to provide a range for periodic payment or lump sum spousal support awards (check back soon, as I will be discussing lump sum spousal support in my next post). However, before the SSAG formulas can be applied, the threshold question of entitlement to spousal support must be answered in the affirmative. Entitlement to spousal support is established on compensatory, non-compensatory, or contractual bases.  If you would like to know if you are entitled to spousal support, contact Onyx Law Group at 604 900 2538 to arrange for your initial 30 minute complementary consultation.

Are You Entitled To Spousal Support in BC?

When your marriage comes to an end, are you entitled to spousal support? The answer depends on whether you can establish an entitlement to spousal support on one of the three recognized grounds:

  • Contractual (g. a marriage agreement);
  • Compensatory; and
  • Non-compensatory (also referred to as “needs-based”).

The basis for spousal support – contractual, compensatory, needs-based, or a combination thereof – impacts the quantum and duration of the award (in other words, how much spousal support you are entitled to and for how long).

Are you entitled to spousal support if you were in a common-law relationship?

Yes. A partner in a common law relationship can be entitled to spousal support if the relationship was “marriage-like” for a continuous period of at least two years, as I discussed here.  The same basis for spousal support applies whether the spouses were married or common-law.

The law that applies to answer “Are you entitled to spousal support”?

Orders for spousal support can be made under either BC’s Family Law Act, SBC 2011, c. 25 or Canada’s Divorce Act, (R.S.C., 1985, c. 3 (2nd Supp.)).

Factors that determine the amount and duration of spousal support

When analyzing a claim for spousal support, the court will consider the condition, means, needs and other circumstances of each spouse, including the following factors (as set out in s. 15.2(4) of the Divorce Act and mirrored in s. 162 of BC’s Family Law Act):

  • the length of time you cohabited;
  • the functions performed by each of you during cohabitation; and
  • any order, agreement or arrangement relating to support of either spouse.

Objectives of spousal support

In determining if you are entitled to spousal support, the court must consider the four objectives of a spousal support order (as set out in s. 15.2(6) of the Divorce Act and in s. 161 of BC’s Family Law Act). The objectives of a spousal support order are:

  1. To recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
  2. To apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
  3. To relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
  4. To promote the economic self-sufficiency of each spouse within a reasonable period of time.

Is there a marriage contract that answers whether you are entitled to spousal support?

The first consideration in answering whether you are entitled to spousal support is whether you and your spouse entered into a prenuptial or marriage contract that sets out what you agreed to with respect to spousal support. If there is a marriage agreement that deals with spousal support, it will apply (though it may be possible to contest its application; see here for my earlier discussion of applications to change spousal support agreements).

Are you entitled to spousal support on a compensatory basis?

Compensatory support is meant to address both economic disadvantages suffered by the spouse who will receive support and economic advantages enjoyed by the spouse who will pay support.  The most significant economic consequence of marriage or marriage breakdown usually arises from the birth of children. This generally requires that the wife cut back on her paid labour force participation in order to care for the home and the children, an arrangement which jeopardizes her ability to ensure her own income security and independent economic well-being. In such situations, spousal support is way to compensate such economic disadvantage and acknowledge that the disadvantage of one spouse has conferred economic advantage on the other spouse who was “freed up” to focus on building a career.

Are you entitled to spousal support on a non-compensatory basis?

Non-compensatory or “needs-based” support is grounded in s. 15.2(6)(c) and (d) of the Divorce Act. Need is defined by both the marital standard of living and the other spouse’s post-separation standard of living. Generally speaking, income disparity, without more, does not entitle a spouse to needs-based support.

A case example where wife asked: Am I entitled to spousal support?

The spouses in H.C.F. v. D.T.F., 2017 BCSC 1226 married in 2004, had a son in 2005, and were found by the court to have separated in November 2014. <add link to post on H.C.F. v. D.T.F. called Divorce Law BC: “Meeting of the Minds” Not Needed for Spouses to Separate> Throughout the marriage, the husband built a very successful career, earning an annual income of approximately $1 million from his employment with ScotiaMcLeod. The wife held a B.A. and a M.Sc. in Business Administration and worked as a consultant prior to the marriage, but had not been employed since 2004. After the spouses separated in 2014, the wife made no effort to seek employment. The court found her to be “quite indifferent to the positive obligation that lies with her to endeavour to become economically self-sufficient.” (at para. 191) and found it appropriate in the circumstances to impute income of $60,000 to her for the purposes of calculating child and spousal support.

Despite the court’s dim view of the wife’s efforts to seek employment, this was a long-term marriage and the court agreed that the wife was entitled to spousal support on both a compensatory and needs basis. Both, however, required some further explanation given the circumstances of the case.

Limit on compensatory basis: Wife unemployed by her own choice

In H.C.F. v. D.T.F. the compensatory basis was present, but it had a limit. The spouses agreed that the wife would initially leave the workforce while their home was being renovated and when their son was born in 2005. The spouses then agreed that the wife would not return to work until after the son was in school. The court acknowledged the fact that the wife cared for their home and for the son, which enabled the husband to work the long hours that he did. However, it was clear that for several years before the spouses separated, the husband wanted the wife return to work, but she “unilaterally” chose not to. The evidence at trial showed that this was a contentious issue and something the spouses talked about repeatedly. At the time of trial, the child of the marriage was about to start high school and the wife had been out of the workforce for 12 years. The undisputed evidence also established that at various times other people had been paid to perform child care and to take care of the garden at the family home.

In the court’s view, those factors were relevant to the wife’s compensatory claim. This was not, at least for the last number of years of the marriage, a case where both spouses agreed that one of them should stay at home to advance their interests as a family unit. Nor was this in the last years of the marriage, a measured decision made by the parties to help advance the husband’s career. Instead, this is a case where the wife, after a point in time, made the personal choice over the expressed wishes of her spouse, to stay at home rather than to return to work. The court viewed there to be a significant difference between an experienced, well-educated and intelligent person such as the wife being out of the workforce for perhaps six years (when their son would have started school) or ten years (when the spouses separated) or nearly 13 years (at the time of trial).While the wife was entitled to do as she wished, the court found it “would be curious if [the wife] could make a personal decision to stay out of the workforce and concurrently assert that that decision strengthened her compensatory claim for spousal support.” (at para. 211).

Standard of living and budget/expenses relevant to needs-based spousal support

In H.C.F. v. D.T.F. the spouses’ marital standard of living was modest compared to the husband’s high income. While they owned an expensive home in an exclusive part of Vancouver and a vacation property in Whistler, their lifestyle was comparatively modest because they did not have other expensive hobbies or interests. The Form 8 Financial Statements prepared by each of the spouses also demonstrated that their expenditures were not extravagant.

Using the wife’s calculations, the Spousal Support Advisory Guidelines (“SSAG”) suggested a spousal support order in the range of $21,500 at the low end and about $25,600 at the high end. The wife sought an order for spousal support toward the high end of the range. However, her current Form 8 Financial Statement estimated that her monthly expenses were only about $7,000. The husband’s own current living expenses and living standards were similar. In the court’s view, the amount the wife sought for spousal support could not be justified on a needs-based basis having regard to either her pre-separation standard of living or to her husband’s present standard of living.

Other factors: Division of family property and child support order

The court also noted that both spouses would receive significant funds from the eventual sale of their home and vacation property, and that the division of other family assets would provide the wife with various investments valued at approximately $1.2 million. The court has also ordered the husband to pay $7,123 per month in child support. Without in any way attaching a “budget” to the child support payments that the child will receive, the court noted the reality that those payments are generous. The son was not in private school, nor did he belong to and “elite” sports teams. The son’s ongoing expenses were comparatively modest.

Having regard to all of those the considerations discussed above, the court was satisfied that spousal support of $16,000 per month, payable for ten years, would enable the wife to generally maintain her current standard of living and address the other objectives of a spousal support order.

Are you entitled to spousal support? The bottom line

In determining if you are entitled to spousal support the court will examine the circumstances of your relationship in light of the factors and objectives discussed above. Entitlement to spousal support is a threshold issue, which means that you must establish that you are entitled to spousal support using a contractual, compensatory, or needs-based approach (or a combination thereof).  The court will only deal with the amount and duration of support after a finding of entitlement.

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