Hartshorne v. Hartshorne, (2004) 194 B.C.A.C. 161 (SCC)

• Judge: McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish, JJ.
• Court: Supreme Court (Canada)
• Case Date: March 26, 2004
• Jurisdiction: Canada (Federal)
• Citations: (2004), 194 B.C.A.C. 161 (SCC);2004 SCC 22;[2004] 6 WWR 1;[2004] 1 SCR 550;194 BCAC 161;318 NR 1;[2004] CarswellBC 603;[2004] SCJ No 20 (QL);236 DLR (4th) 193;129 ACWS (3d) 748;47 RFL (5th) 5;25 BCLR (4th) 1;[2004] ACS no 20;317 WAC 161;JE 2004-723

Hartshorne v. Hartshorne (2004), 194 B.C.A.C. 161 (SCC);

    317 W.A.C. 161

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2004] B.C.A.C. TBEd. MR.094

Robert Kenneth Hartshorne (appellant) v. Kathleen Mary Mildred Hartshorne (respondent)

(29531; 2004 SCC 22; 2004 CSC 22)

Indexed As: Hartshorne v. Hartshorne

Supreme Court of Canada

McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish, JJ.

March 26, 2004.

Summary:

The 52 year old husband and the 46 year old wife separated in 1998 after 3.5 years' cohabitation and nine years' marriage. They had two children. Both spouses were lawyers and were previously married. The wife practised law for six years until their first child was born. Thereafter she stayed home with the chil­dren. The husband, who brought $1.6 million in assets into the marriage, had the wife, who brought substantial debt and no assets into the marriage, sign a marriage contract. The wife's independent legal advisor advised against signing it, but also advised that the courts would set it aside on the grounds of unfairness. The contract provided that each spouse retain their own property, depriving the wife of any share of the husband's assets, except for three percent of the value of the marital home for each year of mar­riage and a provision for marital home contents and family vehicles. The contract did reserve the wife's entitlement to spousal and child support. The spouses sought a divorce. At issue was custody and access, the quantum of child support (includ­ing extra­ordinary expenses), spousal support and the enforce­ability of the contract, which the wife claimed was signed under duress and was un­fair.

The British Columbia Supreme Court, in a decision reported at (2001), 22 B.C.T.C. 288, granted a divorce, awarded sole custody of the children to the wife and access to the husband, fixed child support and extraordi­nary expenses under the Federal Child Sup­port Guidelines and awarded the wife $2,500/month spousal support (to be reduced to $1,500/month when the wife's income reached $2,000/month). The court held that the marriage contract was not unconscionable or entered into under duress, coercion or undue influence. However, the contract was "unfair" within the meaning of s. 65 of the Family Relations Act and the court reappor­tioned the marital assets more equi­tably. The court ordered an equal division of the marital home and its contents and a division of va­ca­tion property, RRSPs and savings at 60 percent in favour of the hus­band and 40 per­cent in favour of the wife. In reasons report­ed at [2001] B.C.T.C. Uned. 72, the Su­preme Court conducted a valuation of assets. The husband appealed both deci­sions.

The British Columbia Court of Appeal, Thackray, J.A., dissenting in part, in a judg­ment reported (2002), 174 B.C.A.C. 129; 286 W.A.C. 129, dismissed the appeal. The hus­band appealed.

The Supreme Court of Canada, Des­champs, Binnie and LeBel, JJ., dissenting in part, allowed the appeal. Enforcement of the contract was not unfair given the circum­stances present at the time of distribution. Any economic disadvantage suffered by the wife could be compensated for by way of spousal support.

Family Law - Topic 853

Husband and wife - Marital property - Dis­tribution orders - Contracting out - Effect of - [See first Family Law - Topic 3384 ].

Family Law - Topic 855

Husband and wife - Marital property - Dis­tribution orders - Contracting out - Grounds for attack on agreement - [See first Family Law - Topic 3384 ].

Family Law - Topic 880.30

Husband and wife - Marital property - Dis­tri­bution orders - Particular property - Professional practice - A husband entered the marriage with a law practice - When the spouses separated nine years later, the law practice was worth less than at the time they married - The Supreme Court of Canada stated that "the trial judge erred in finding the [husband's] law corporation to be a family asset. Under s. 59(1) [Family Relations Act], property is not a family asset if it 'is owned by one spouse to the exclusion of the other and is used primar­ily for business purposes and if the spouse who does not own the property made no di­rect or indirect contribution to the acqui­sition of the property by the other spouse or to the operation of the business'. It is also noteworthy that the value of the prac­tice has not increased since the time of the marriage. Under these circumstances, the law practice must not be considered a fam­ily asset." - See paragraph 66.

Family Law - Topic 3350

Separation agreements, domestic contracts and marriage contracts - Effect of agree­ment - General - The Supreme Court of Can­ada stated that "this court has not es­tablished, and in my opinion should not establish, a 'hard and fast' rule regarding the deference to be afforded to marriage agreements as compared to separation agree­ments. In some cases, marriage agree­ments ought to be accorded a greater de­gree of deference than separation agree­ments. ... In other cases, however, mar­riage agreements may be accorded less deference than separation agreements. The reason for this is that marriage agreements are anticipatory and may not fairly take into account the financial means, needs or other circumstances of the parties at the time of marriage breakdown." - See para­graph 39.

Family Law - Topic 3384

Separation agreements, domestic contracts and marriage contracts - Grounds for set­ting aside - Inequitable result or unfair­ness - A husband and wife, now 57 and 50, decided to marry after living together for 3.5 years - Both were lawyers who had been mar­ried before - The husband brought $1.6 million in assets into the marriage and insisted the wife, who brought substantial debt and no assets into the marriage, sign a marriage contract - The contract limited the wife's entitlement to the husband's assets to 3% of the value of the marital home for each year of the marriage to a maximum of 49%, plus a sharing of mari­tal home contents and vehicles - The con­tract, at the wife's insistence, reserved her right to spousal and child support - The wife's independent legal adviser advised her not to sign it, but also advised that the court's would set it aside on the grounds that it was unfair (Family Relations Act, s. 65) - The wife signed the contract on their wedding day - Nine years later (1998) they separated - Although the wife had been out of the workforce for 12 years, she returned to practice law at a salary of $52,000 per year - The trial judge (affirmed on appeal) set aside the marriage contract on the grounds that given the duration of the mar­riage, the contract was unfair in failing to provide anything to the wife for sacri­ficing her own law practice and career develop­ment - The trial judge reap­portioned mari­tal property - The Supreme Court of Can­ada held that the spouses were bound by the marriage con­tract - Given that any economic disadvan­tage to the wife was com­pensated for by spousal support, and the expectations of the parties had been fulfilled, the courts below erred in failing to find that the division of property under the marriage contract was fair at the time of distribution - See paragraphs 1 to 67.

Family Law - Topic 3384

Separation agreements, domestic contracts and marriage contracts - Grounds for set­ting aside - Inequitable result or unfair­ness - The Supreme Court of Canada stated that "once an agreement has been reached, albe­it a marriage agreement, the parties there­to are expected to fulfil the obliga­tions that they have undertaken. A party cannot simply later state that he or she did not intend to live up to his or her end of the bargain. It is true that, in some cases, agreements that appear to be fair at the time of execution may become unfair at the time of the triggering event, depend­ing on how the lives of the parties have un­folded. It is also clear that the [Family Relations Act] permits a court, upon appli­cation, to find that an agreement or the statutory regime is unfair and to reap­portion the assets. However, in a frame­work within which private parties are per­mitted to take personal responsibility for their financial well-being upon the disso­lution of marriage, courts should be reluc­tant to second-guess their initiative and arrangement, particularly where inde­pen­dent legal advice has been obtained. They should not conclude that unfairness is proven simply by demonstrating that the marriage agreement deviates from the statutory matrimonial property regime. Fairness must first take into account what was within the realistic contemplation of the parties, what attention they gave to changes in circumstances or unrealized implications, then what are their true cir­cum­stances, and whether the discrepancy is such, given the s. 65 factors, that a differ­ent apportionment should be made." - See paragraph 67.

Family Law - Topic 3384

Separation agreements, domestic contracts and marriage contracts - Grounds for set­ting aside - Inequitable result or unfair­ness - The Supreme Court of Canada stated that "the determination that a mar­riage agree­ment operates fairly or unfairly at the time of distribution cannot be made without regard to the parties' perspectives. A con­tract governing the distribution of property between spouses reflects what the parties be­lieved to be fair at the time the contract was formed (presuming the absence of duress, coercion, and undue influence). The parties would usually not be expected to deal with their present situation without any consideration of how they expect their situation will evolve over time. If the parties' lives unfold in precise­ly the man­ner they had contemplated at the time of contract formation, then a finding that the contract operates unfairly at the time of distribution constitutes, in essence, a sub­stitution of the parties' notion of fairness with the court's notion of fairness, provid­ing that nothing else would suggest that the parties did not really consider the impact of their decision in a rational and comprehensive way. Thus, central to any anal­ysis under s. 65(1) of the [Family Rela­tions Act] is consideration of how accurately the parties predicted, at the time of contract formation, their actual circum­stances at the time of distribution, whether they truly considered the impact of their decision and whether they adjusted their agreement during the marriage to meet the demands of a situation different from the one expected, either because the circum­stances were different or simply because implications were inadequately addressed or proved to be unrealistic." - See para­graph 44.

Family Law - Topic 3386

Separation agreements, domestic contracts and marriage contracts - Grounds for set­ting aside - Unconscionable bargain - [See first Family Law - Topic 3384 ].

Cases Noticed:

Clarke v. Clarke (1991), 31 R.F.L.(3d) 383 (B.C.C.A.), refd to. [para. 20].

Gold v. Gold (No. 1) (1993), 32 B.C.A.C. 275; 53 W.A.C. 275; 82 B.C.L.R.(2d) 165 (C.A.), refd to. [paras. 21, 71].

Nova Scotia (Attorney General) v. Walsh - see Walsh v. Bona.

Walsh v. Bona, [2002] 4 S.C.R. 325; 297 N.R. 203; 210 N.S.R.(2d) 273; 659 A.P.R. 273; 2002 SCC 83, refd to. [para. 36].

Miglin v. Miglin, [2003] 1 S.C.R. 303; 302 N.R. 201; 171 O.A.C. 201; 2003 SCC 24, refd to. [paras. 40, 73].

D.K.N. v. M.J.O. (2003), 187 B.C.A.C. 129; 307 W.A.C. 129; 41 R.F.L.(5th) 142 (C.A.), dist. [para. 43].

Moge v. Moge, [1992] 3 S.C.R. 813; 145 N.R. 1; 81 Man.R.(2d) 161; 30 W.A.C. 161, refd to. [para. 46].

Toth v. Toth (1995), 64 B.C.A.C. 81; 105 W.A.C. 81; 13 B.C.L.R.(3d) 1 (C.A.), refd to. [paras. 54, 73].

Metzner v. Metzner (1997), 91 B.C.A.C. 241; 148 W.A.C. 241; 34 B.C.L.R.(3d) 314 (C.A.), refd to. [para. 55].

Stark v. Stark (1990), 71 D.L.R.(4th) 446 (B.C.C.A.), leave to appeal refused [1991] 1 S.C.R. xiv; 131 N.R. 398, refd to. [para. 83].

Bracklow v. Bracklow, [1999] 1 S.C.R. 420; 236 N.R. 79; 120 B.C.A.C. 211; 196 W.A.C. 211, refd to. [para. 86].

Davidson v. Davidson (1986), 2 R.F.L.(3d) 442 (B.C.C.A.), refd to. [para. 89].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 93].

Underhill v. Underhill (1983), 45 B.C.L.R. 244 (C.A.), refd to. [para. 94].

Elsom v. Elsom (1982), 35 B.C.L.R. 293 (S.C.), affd. (1983), 37 R.F.L.(2d) 150 (C.A.), leave to appeal refused [1984] 1 S.C.R. vii; 54 N.R. 236, refd to. [para. 97].

Gillespie v. Gillespie (1995), 54 B.C.A.C. 23; 88 W.A.C. 23; 1 B.C.L.R.(3d) 28 (C.A.), refd to. [para. 97].

Peter v. Beblow, [1993] 1 S.C.R. 980; 150 N.R. 1; 23 B.C.A.C. 81; 39 W.A.C. 81, refd to. [para. 97].

Piercy v. Piercy (1991), 31 R.F.L.(3d) 187, additional reasons (1993), 86 B.C.L.R.(3d) 285 (S.C.), refd to. [para. 97].

Boston v. Boston, [2001] 2 S.C.R. 413; 271 N.R. 248; 149 O.A.C. 50; 2001 SCC 43, refd to. [para. 99].

Statutes Noticed:

Family Relations Act, R.S.B.C. 1996, c. 128, sect. 58 [para. 95]; sect. 59(1) [para. 96]; sect. 59(2) [para. 97]; sect. 65(1)(a) [para. 72].

Authors and Works Noticed:

British Columbia, Law Reform Commis­sion, Property Rights on Marriage Break­down, Working Paper No. 63 (1989), p. 34, fn. 1 [para. 74].

Grassby, Miriam, Women in Their Forties: The Extent of Their Rights to Alimen­tary Support (1991), 30 R.F.L.(3d) 369, pp. 372, 373 [para. 86].

Payne on Divorce (4th Ed. 1996), pp. 307, 308 [para. 39].

Shaffer, Martha, and Melamed, Daniel S., Separation Agreements Post-Moge, Wil­lick and L.G. v. G.B.: A New Trilogy (1999), 16 Can. J. Fam. L. 51, pp. 67, 68 [para. 39].

Weitzman, Lenore J., The Divorce Revo­lution: The Unexpected Social and Eco­nomic Consequences for Women and Children in America (1985), p. 342 [para. 91].

Counsel:

Megan Rehill Ellis, for the appellant;

Charlene E. Le Beau, for the respondent.

Solicitors of Record:

Megan Ellis & Co., Vancouver, British Columbia, for the appellant;

McLachlan Brown Anderson, Vancouver, British Colum­bia, for the respondent.

This appeal was heard on November 6, 2003, before McLachlin, C.J.C., Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish, JJ., of the Supreme Court of Canada.

On March 26, 2004, the judgment of the Supreme Court of Canada was delivered in both official languages and the following opinions were filed:

Bastarache, J. (McLachlin, C.J.C., Iaco­bucci, Major, Arbour and Fish, JJ., concurring) - see paragraphs 1 to 68;

Deschamps, J. (Binnie and LeBel, JJ., concurring), dissenting in part - see paragraphs 69 to 102.