By Rebecca Winninger, Senior Associate Lawyer, Lam Family Law*

In February of this year, I contributed an article to the Family Law Section of the Ontario Bar Association’s Newsletter on Torgersrud v. Lightstone, 2022 ONSC 7084 (CanLII). In this case, the Superior Court grappled with the effect of a Quebec marriage contract that addressed ownership of property during the marriage and upon separation, but not equalization. The application judge followed existing case law holding that there is a “high threshold” for a foreign marriage contract to oust Ontario’s equalization provisions. The wife’s claim for equalization could proceed because the husband had failed to meet this threshold. In my case comment, I concluded that “[t]he decision suggests that if the parties did not expressly contract out of equalization, then their contract offers no protection against equalization claims unless it contains very clear waivers and releases as to all rights on separation.”

The husband appealed to the Court of Appeal for Ontario (“ONCA”), which recently released its decision (Torgersrud v. Lightstone, 2023 ONCA 580 (CanLII)). The ONCA declined to address the issue of when a Quebec contract will oust equalization, because the application judge provided an alternative analysis which the ONCA upheld. So, even if the husband were correct that the Quebec contracts do oust the Family Law Act’s equalization provisions, the appeal could not succeed.

The Decision Below

The parties signed two marriage contracts while living in Quebec, but later moved to Ottawa, where they separated. The first marriage contract, signed in 1988, stated that the parties agreed to a “partition of acquests” and that the parties were “separate as to property”. In 1990, they signed a second contract to opt out of the “family patrimony” regime that had recently been enacted in Quebec.

The experts who testified agreed that, under the first agreement, there would be no division of assets upon marriage breakdown under Quebec law. Each party would keep their own property: para 32. Justice Doyle accepted that the 1990 agreement “confirmed this choice of matrimonial regime”: para 119.

Even so, Justice Doyle held that the wife’s claim for equalization could proceed, because the Quebec agreements did not “oust the application of Part 1 of the [Family Law Act, or FLA]”. The court followed Webster v. Webster, 2006 CanLII 22941 (ON SC), which held that there is “a high threshold that must be met before finding that an out of jurisdiction marriage contract…prevails over the equalization provisions of the FLA.” The husband had failed to meet this threshold, because neither agreement contained “direct and cogent language” to oust equalization, nor expressly addressed substantive rights to equalize property upon the dissolution of marriage. There was no clear language as to what would happen on marriage breakdown nor a clear renunciation of their property rights. There were no specific clauses or waivers and releases confirming that the parties had renounced their future rights: paras 167-180.

In addition, the court also set aside the marriage contracts on the basis that the husband failed to disclose significant assets, and the wife did not understand the nature or consequences of the agreements: paras 244-245 & 259. Fairness dictated that the agreements be set aside – if they were valid, then the wife would receive no property settlement after a 29-year traditional marriage: paras 296-297.

The Appeal Decision

On appeal, the ONCA held that the application judge’s analysis in setting aside the agreements involved “discretionary decisions, which are entitled to deference and disclose no error.” As mentioned above, the ONCA felt it was unnecessary to consider the additional issue of whether the Quebec agreements ousted equalization: para 10.

I think it is unfortunate that the ONCA did not take the opportunity to provide guidance on this issue, even if it would not have affected the outcome. The seminal case on when a marriage contract ousts equalization was an ONCA decision: Bosch v. Bosch, 1991 CanLII 7177 (ON CA). Arguably, some of the nuance from that case has been lost with the introduction of the “high threshold” terminology in Webster v. Webster, referenced above. A majority of the ONCA in Bosch held that a marriage contract dealing with ownership of property during marriage or even after its dissolution may not be sufficient to oust equalization, but there was a strong dissent from Justice Finlayson. Additionally, the majority’s reasons acknowledged that a marriage contract may “prevail over the equalization provisions of the FLA” if the contract deals “explicitly or by necessary implication, with ‘a matter’ akin to the equalization provisions of the FLA”. This can be done either through an agreement that excludes a given property from a spouse’s net family property, or through an agreement which deals with “equalization-type rights”.

In Torgersrud, Justice Doyle found that Quebec’s “family patrimony” regime is based on partitioning the value of certain property (as opposed to property division): para 34. As I pointed out in my earlier article, there is arguably some similarity then between the family patrimony system and Ontario’s equalization regime. There could be an argument that the second contract dealt with a matter “akin” to the equalization provisions of the FLA, or dealt with “equalization-type rights”, which was the standard for ousting equalization set out in Bosch.

Whatever the standard for ousting equalization, spouses should make new domestic contracts in Ontario if they move during the marriage.

*with thanks to Vanessa Lam for her suggestions and edits.