Yes, You Need A Marriage Agreement- Here's Another $100M Reason Why

In a recent case, Bradley v. Callahan, 2024 BCSC 163, the BC Supreme Court considered whether or not a marriage agreement was binding on the parties.

Ms. Bradley and Mr. Callahan married, with a marriage agreement, in 1997. The marriage agreement was the result of negotiations between the parties, with each party having a lawyer engaged for over a month before the execution of the agreement. Upon execution of the marriage agreement, the lawyer for Ms. Bradley provided a certificate of independent legal advice to Mr. Callahan's counsel. The parties later separated in 2014.

The most impactful clause of the marriage agreement was that Mr. Callahan's business interests were not to be subject to property division if the parties were to separate. At the time of signing the agreement, Mr. Callahan listed interests in 11 corporations, with an estimated value of about $2 million. Mr. Callahan's business interests were referred to as the "Argus Group". By the time the parties separated in 2014, the Argus Group's value had grown to between $82.9 million to $87 million. At the time of the trial, the Argus Group's value had increased to approximately $186 million. Both parties agreed that the value continued to grow from there.

Despite the terms of the marriage agreement, Ms. Bradley sought an equal division of the value of the Argus Group and other property.

If the court disregarded the marriage agreement, Ms. Bradley would have had a claim to shared property that included Mr. Callahan's high-valued business assets. However, if the court followed the agreement, Ms. Bradley would not have any claim to these assets.

Property Division- Should the Marriage Agreement be Applied?

The general rule during a separation is that each spouse has an undivided one-half interest in the family assets. This is subject to exceptions, one being the terms of a marriage agreement.

However, a court may determine that an otherwise valid and binding agreement operates unfairly with respect to the division of property in light of the specific case circumstances and the court may then order a different division.

To be enforceable, the agreement must operate fairly at the time of distribution, as the court recognized in Hartshorne v. Hartshorne, 2004 SCC 22. To determine if an agreement operates fairly, a court must apply the agreement and then, in consideration of factors listed in s. 65(1) of the Family Relations Act, make a determination as to whether the contract operates unfairly.

Here, the court considers the parties' personal and financial circumstances, and how these circumstances evolved over time. If the current circumstances were reasonably foreseeable by the parties at the time the agreement was formed, and where the agreement reflects consideration and response to these circumstances, then the party seeking to move away from the marriage agreement has a heavier burden to establish unfairness.

Was the Marriage Agreement Valid?

Ms. Bradley argued the agreement should be set aside due to the adequacy of legal advice, the preparation and execution of the marriage agreement, or the sufficiency of disclosure.

The court found that none of these reasons were sufficiently established here. The agreement drafted was comprehensive and was negotiated with experienced lawyers for both parties. Ms. Bradley's lawyer also provided a certificate of independent legal advice.

Regarding the preparation and execution, Ms. Bradley was given time to review and make revisions to the agreement, and her lawyer was satisfied she understood the nature and effect of the agreement. The court also found that Mr. Callahan made proper disclosure. The agreement did not have formal valuation values included, but this was noted and did not make a difference as the parties agreed the business assets would not be subject to division, regardless of their value.

Therefore, the agreement was valid and binding on the parties.

Did the Marriage Agreement Operate Fairly?

The court considered the factors set out in s. 65(1) of the Family Relations Act in their assessment of whether the agreement operated fairly.

These factors included:

Duration of the marriage: The marriage lasted for almost 17 years, in addition to the 5 years the parties lived together before marriage.
• Duration of period during which spouses have lived separate and apart: The parties lived separate and apart for about 9 years at the time of trial.
• Date when property was acquired or disposed of: Mr. Callahan continued to hold the Argus Group corporate assets as they evolved.
• Extent to which property was acquired by one spouse through inheritance or gift: To a significant degree, Mr. Callahan's corporate assets resulted from his father being engaged in acquiring and developing real estate.
• Needs of spouse to become or remain economically independent and self-sufficient: Ms. Bradley would enjoy economic independence and self-sufficiency under the agreement. The agreement provided Ms. Bradley with, among other things, a principal residence that was similar to the one she shared with Mr. Callahan. The court found that any shortfall in independence or self-sufficiency may be made up by an appropriate order for maintenance.
• Any other circumstances relating to the acquisition, maintenance, improvement or use of property or capacity/ liabilities of a spouse: There were no other circumstances that would take away from the fact that the parties understood that Mr. Callahan's business assets would be his sole property as defined in the agreement.

Ms. Bradley claimed that the agreement was unfair due to the extraordinary discrepancy between the financial positions that could not have been contemplated and because she was unable to advance her career as a result of parenting and household obligations.

The court disagreed and found that the parties understood that Mr. Callahan's business assets would not be subject to division. It was within the reasonable contemplation of the parties that Mr. Callahan's business holdings had a high likelihood to increase in value, and significantly so, due to Mr. Callahan's expertise and experience in real estate.

Conclusion

The court found it should not disregard the parties' original intentions as reflected in the marriage agreement. Mr. Callahan's business assets were not subject to division. The court further found it was equitable to award Ms. Bradley a lump sum of spousal support for her to enjoy a more than reasonable standard of living in her community. She was awarded approximately $8 million after adjustments in spousal support. No retroactive spousal support was allowed because Mr. Callahan had provided Ms. Bradley with payments since separation.

Take Away

This case demonstrates the value of well-prepared marriage agreements and the importance of having one to protect your interest in business assets, even if those business assets are not worth a substantial amount at the time of drafting the agreement.

This judgment reinforces that an agreement will not be set aside for being "unfair", even when the difference between the value of family assets with or without the agreement is significant, so long as the agreement was drafted using the appropriate procedures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ms Chantal Cattermole
Clark Wilson LLP
900-885 West Georgia Street
Vancouver
BC V6C 3H1
CANADA
Tel: [phone]
Fax: [phone]
E-mail: [e-mail]
URL: www.cwilson.com

© Mondaq Ltd, 2024 - Tel. [phone] - http://www.mondaq.com, source Business Briefing