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

You may be familiar with the standard reconciliation clause that appears in many separation agreements prepared on Divorcemate: if the parties “attempt to reconcile their relationship, but cohabit for no longer than 90 days, this Agreement will not be affected. If they cohabit for more than 90 days, this Agreement will become void, except that any transfers or payments made to that time will not be affected or invalidated.”

But what does the standard clause mean, and what happens if it’s not there? The answer depends on several factors, including the type of agreement (marriage contract vs. separation agreement) and the specific term a party wishes to enforce. In many cases, the issue is whether a property or support release survives reconciliation. To summarize, the ONCA has said that:

  1. The common law rule is that reconciliation voids a separation agreement, unless a clause in the agreement provides otherwise, or there is an express or implied clause that transactions carried out under the agreement will remain in place.
  2. In a separation agreement with a reconciliation clause like the Divorcemate precedent, the agreement is void if the parties cohabit for more than 90 days. Individual terms only survive if voiding them would invalidate a payment or transfer.
  3. In a separation agreement without a reconciliation clause, the common law rule applies. A specific release in the agreement could show that the parties viewed the disposition of a given property as final and binding, regardless of reconciliation. A general release does not have this effect.
  4. For cohabitation agreements and marriage contracts, there is no presumption that the agreement survives reconciliation or that it becomes void. The court must interpret the agreement to determine the parties’ intention.

The ONCA has also reminded lawyers that they are not limited to the boilerplate clause, and it is possible to be much more specific about which parts of the agreement (if any) will survive reconciliation.

Separation Agreements

The Common Law Rule on Reconciliation

There is a common law rule that reconciliation voids a separation agreement, unless there is “(a) a clause in the agreement that provides to the contrary or (b) a clause that indicates the intent of the parties that transactions carried out under the agreement will remain in place”: Miaskowski v. MacIntyre, 2020 ONCA 178 (CanLII), at para 19, citing Sydor v. Sydor, 2003 CanLII 17626 (ON CA), at para 22.

The rationale for the rule is that “the raison d’être of the agreement is separation”, and when “the parties reconcile, the foundation of the separation agreement dissolves.”: Krebs v. Cote, 2021 ONCA 467 (CanLII), at para 20.

Separation Agreements With a Standard Precedent Clause

In Miaskowski v. MacIntyre (2020), the ONCA considered a reconciliation clause with wording similar to the Divorcemate precedent (the clause is reproduced at para 7 of the decision). The issue was whether a pension release survived reconciliation. The ONCA began by discussing the purpose of the reconciliation clause:

By preserving the agreement if the reconciliation is very short-lived, it encourages the parties to attempt to reconcile without fear of the effect of the common law undoing the separation agreement. However, where the reconciliation is successful and lasts for more than 90 days, it essentially confirms the common law result. That is, in the event of a successful reconciliation, the separation agreement is void, except that payments, conveyances or acts that have been completed to carry out the agreement will not be invalidated: Miaskowski v. MacIntyre, 2020 ONCA 178 (CanLII), para 20 [underlining added].

Later in the reasons, the ONCA added that the voiding clause at issue “clearly demonstrates the intent on reconciliation to return the parties to the position they were in prior to separation. The bargain they made on separation, whereby they released each other from future rights and obligations, is set aside and becomes void.” That said, it is “not necessary, in order to give effect to that intent, to undo conveyances or transfers that have been completed. For example, it may not be in the spouses’ control to obtain a reconveyance of a property that has been sold or transferred to a third party.”: paras 29-30 [underlining added].

The ONCA held that the wife’s release of any rights to the husband’s pension did not survive the reconciliation because the husband did not specifically pay for the release. The exception to the voiding clause only includes a “payment, conveyance or act” completed under the agreement. The pension release was part of the “overall bargain”, but voiding it would not “invalidate any conveyance, payment or act…No money could be returned because no money was paid.”: paras 26-27.

The ONCA discussed the potential for unfairness if a payment or transfer survives reconciliation, but a release does not. The party who received the payment and gave the release may be over-compensated. The court stated that this unfairness will only arise “exceptionally”, since the payment will be equalized in any event, and both parties will end up with half the value: para 33. However, this assumes that the funds from the payment still exist. Parties may separate for years before they reconcile, and then cohabit for years before separating again. Liquid assets may be spent in the meantime.

The court acknowledged there may still be unfairness in some cases, and considered several ways of addressing this, including treating certain assets as excluded property, giving effect to releases where they were given as consideration for payments under an agreement, invoking the presumption of resulting trust, and unequal division of net family property: paras 34-41.

Justice Feldman’s analysis ends with the observation that the reconciliation clause in that case had been “a precedent for over 30 years”, and that it would be helpful for lawyers to draft more precise clauses that address the impact of reconciliation on “specifically contemplated transfers” (and presumably, the impact of reconciliation on any releases in the agreement): para 44.

Separation Agreements With No Reconciliation Clause

In Sydor v. Sydor (2003), the ONCA considered a separation agreement that did not contain a specific clause about the effect of reconciliation. The court reiterated the common law rule that the agreement is void, except if there is (a) a specific clause that overrides the common law or (b) an implied clause that the parties intended that transactions carried out under the agreement would remain in place: Sydor v. Sydor, 2003 CanLII 17626 (ON CA), paras 20 & 22.

The court held that a specific release to a particular property “can be viewed as evidence that the parties considered the disposition of that property final and binding, regardless of what may occur in the future.” This is especially so where the agreement also contains a severability clause: paras 24-25.

However, a general release, without more, does not show that the parties intended the property provisions of their separation agreement to survive. It does not indicate that the parties turned their minds to what would happen if they were to reconcile: para 23.

The Ontario Superior Court of Justice has also held that public policy generally weighs against the continuation of a spousal support release after reconciliation when there is no reconciliation clause, although the court will consider the parties’ intention: Emery v. Emery, 2008 CanLII 8605 (ON SC), paras 50, 66, & 71-76.

Marriage Contracts and Cohabitation Agreements

Marriage contracts and cohabitation agreements are less likely to address reconciliation directly. The Divorcemate cohabitation agreement/marriage contract does not contain a precedent clause on reconciliation.

In Krebs v. Cote (2021), the ONCA has said that the common law rule that a separation agreement becomes void upon reconciliation does not apply to cohabitation agreements: Krebs v. Cote, 2021 ONCA 467 (CanLII), paras 14-15. It makes sense that an agreement directed at separation would dissolve if the parties are no longer separated. However, a cohabitation agreement is directed at the parties’ cohabitation. When parties reconcile, they return “to the very state contemplated by the cohabitation agreement”: para 20. If cohabitation agreements were voided by resumption of cohabitation, that could lead to strategic separations and reconciliations to nullify agreements: para 21.

However, there is no presumption of the “continued validity” of a cohabitation agreement following reconciliation. The court must interpret the agreement to determine “the objective intent of the parties”: paras 22-23. In Krebs v. Cote, the parties had experienced “multiple separations” before signing the agreement, and the ONCA found that if they intended to limit their agreement so it would not apply after a reconciliation, they would have included language to that effect: para 27.

*with thanks to Kayleigh Pink for her suggestions and edits.
 

This blog is informational only and should not be relied on as legal advice.