Supreme Court Judgments

Hartshorne v. Hartshorne, [2004] 1 S.C.R. 550, 2004 SCC 22

Robert Kenneth Hartshorne                                                                            Appellant

v.

Kathleen Mary Mildred Hartshorne                                                           Respondent

Indexed as:  Hartshorne v. Hartshorne

Neutral citation:  2004 SCC 22.

File No.:  29531.

2003:  November 6; 2004: March 26.

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

on appeal from the court of appeal for british columbia

Family law — Division of property — Marriage agreement — Parties electing separate property regime in marriage agreement — Whether marriage agreement unfair — Whether judicial reapportionment should be upheld — Family Relations Act, R.S.B.C. 1996, c. 128, s. 65(1).

Family law — Family assets — Law practice — Wife contributing indirectly to husband’s law practice through household management and childrearing — Whether law practice should be considered a family asset — Family Relations Act, R.S.B.C. 1996, c. 128, ss. 58(3)(e), 59(2).

Family law — Maintenance — Division of property — Double recovery — Parties electing separate property regime in marriage agreement — Whether judicial reapportionment of asset constituting main source of income resulted in double recovery.

The parties began to cohabit in 1985 and their first child was born in 1987.  They married in 1989, a second marriage for both, and a second child was born later that year.  Nine years later, they separated.  From the time of the birth of their first child, the respondent wife withdrew from the practice of law to remain at home to raise the children.  The appellant husband, also a lawyer, had made it clear to the respondent prior to the marriage that he would never again allow a division of his property.  He brought assets worth approximately $1.6 million into the marriage, including his law practice, while the respondent entered the relationship with no assets and heavily in debt.  On the day of the wedding, the appellant insisted that the respondent sign a marriage agreement that rendered the parties separate as to property, but with a provision that the respondent would be entitled to a 3 percent interest in the matrimonial home for each year that the parties were married up to a maximum of 49 percent.  The parties obtained independent legal advice and the respondent was advised that the agreement was grossly unfair.  She nevertheless signed the agreement with a few amendments, including a clause confirming her right to spousal support.  Pursuant to the agreement, the respondent was entitled to property valued at $280,000 on separation, while the appellant was entitled to property worth $1.2 million.  In divorce proceedings, the appellant relied upon the agreement to avoid the operation of the statutory family property regime while the respondent argued that the agreement should be set aside on common law principles or that the distribution of assets should be reapportioned because the agreement was unfair pursuant to s. 65(1) of the British Columbia Family Relations Act (“FRA”).  The trial judge concluded that the agreement was unfair and ordered a reapportionment on a 60/40 basis in favour of the appellant of most of the family assets including the appellant’s law practice.  Each party was held to be entitled to a half interest in the matrimonial home and contents.  In addition, the appellant was ordered to pay spousal support.  This judgment was upheld by the Court of Appeal.

Held (Binnie, LeBel and Deschamps JJ. dissenting in part):  The appeal should be allowed.

Per McLachlin C.J. and Iacobucci, Major, Bastarache, Arbour and Fish JJ.:  The primary policy objective guiding the court’s role in division of assets on marital breakdown in British Columbia is fairness.  The FRA explicitly recognizes marriage agreements as a mechanism to govern a division of property upon the dissolution of marriage.  To be enforceable, however, any such agreement must operate fairly at the time of distribution.  If it does not, judicial reapportionment of property will be available to achieve fairness.  Although the statutory scheme in British Columbia sets a lower threshold for judicial intervention than the schemes in the other provinces, courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship particularly where the agreement in question was negotiated with independent legal advice.  Individuals may choose to structure their affairs in a number of different ways and courts should be reluctant to second-guess the arrangement on which they reasonably expected to rely. 

Marital cases must reconcile respect for the parties’ intent, on the one hand, and the assurance of an equitable result, on the other.  There is no “hard and fast” rule regarding the deference to be afforded to marriage agreements as compared to separation agreements.  The court must determine whether the marriage agreement is substantively fair when the application for reapportionment is made.  The essence of this inquiry is whether the circumstances of the parties at the time of separation were within the reasonable contemplation of the parties at the time the agreement was formed, and whether at that time the parties made adequate arrangements in response to these anticipated circumstances.  In determining whether a marriage agreement operates unfairly, a court must first apply the agreement, assessing and awarding those financial entitlements provided to each spouse under the agreement and from other sources, including spousal and child support.  Secondly, the court must consider the factors listed in s. 65(1) of the FRA, and make a determination as to whether the contract operates unfairly, and whether a different apportionment should be made.  At this stage, consideration must be given to how the parties’ personal and financial circumstances evolved over time.

Here, the financial and domestic arrangements between the appellant and the respondent unfolded just as the parties had expected, so that the burden to establish unfairness is heavier.  They were living out their intention to “remain completely independent of the other as regard to their own property, both real and personal”, the main feature of the agreement.  There was no commingling of funds, there were no joint accounts of significant value, and the assets that the appellant brought into the marriage remained in his name.  As planned they had a second child and the respondent remained at home to raise the  children.  While the duration of the marriage was a significant factor, it had to be considered in light of the fact that the vast majority of the property was acquired by the appellant prior to the commencement of the relationship.  In addition, before making a determination that the agreement operated unfairly, the trial judge should have considered the impact of the spousal and child support to which the respondent was entitled under the agreement, which would have recognized the economic disadvantage suffered by the respondent in sacrificing her career for her family, the lingering effects of the sacrifice, and the true onus of the respondent’s parental responsibilities.  The trial judge should have first applied the agreement, then determined the need for spousal support, and finally decided whether the result warranted a different apportionment of property in light of the s. 65 factors.

The agreement was fair at the time of the triggering event, in light of the provisions of the FRA, the provisions of the agreement and the circumstances of the parties at the time of separation, and the trial judge erred in finding otherwise.  The implications of the agreement were understood, the respondent having specifically reviewed its shortcomings with her lawyer.  The explicit preservation of a right to spousal support was an amendment made to the draft agreement at the respondent’s insistence, supporting an understanding on her part that her future needs could be met through support.  Moreover, by signing the agreement, the appellant and the respondent entered their marriage with certain expectations on which they were reasonably entitled to rely.  With respect to the appellant’s law practice, considering the provisions of s. 59(1) and that the value of the practice had not increased since the time of the marriage, it was not a family asset.

Per Binnie, LeBel and Deschamps JJ. (dissenting in part):  A marriage agreement is merely a presumptive entitlement.  Under the FRA the deciding inquiry is whether the agreement is substantively fair at the time of application to the court, considering the parties’ rights, entitlements and obligations at that moment, in light of the factors set out in s. 65(1) and the other separation conditions of custody and maintenance.  While the circumstances at the time of the negotiation or execution of the agreement may provide indicators that it is either fair or unfair, the s. 65(1) factors in no way suggest that fairness during this time is determinative.  Fairness must be based on a contemporaneous evaluation of the s. 65(1) factors, rather than the original intention of the parties.  Various public policy concerns support this interpretation, such as the fact that marriage agreements are often executed years prior to separation at a time when the risk of the provisions ever coming into effect may be assumed to be low.  Fairness is not always synonymous with equal division.  If the agreement is fair in light of the s. 65(1) factors, it will stand; if not, a judge will redress it.  Once a judge has redressed the unfairness, the s. 65(1) reapportionment may be compared to the division that would have been ordered absent any contract.  Since marriage agreements are not included in the s. 65(1) factors for the court to consider, giving an unfair agreement any weight in the reapportionment process would defeat the fairness objective and parties would not be encouraged to make genuine efforts to conclude and update fair agreements.  However, once the judge has reapportioned the total value of  family assets, the marriage agreement will affect which specific assets will be awarded to each spouse.

Questions of reapportionment should generally be settled before turning to a consideration of maintenance as it is easier to deal with the parties’ need to become economically independent after a fair division of capital family assets.  Imbalances in resources and independence after separation must be addressed in a principled and systematic manner.  As a general rule, the trial judge should try to address in sequence (1) the apportionment of matrimonial property, (2) the existence of a right to maintenance and support and, if such a right exists, (3) the extent of the need for such maintenance or support.  However, failure to follow this sequence, as in this case, does not amount to an error in law or principle, although it may lead to unforeseen hazards in the evaluation process.

Here, the trial judge properly concluded that the division of property provisions in this agreement were unfair, based on a consideration of s. 65(1) factors:  the 12½-year relationship (s. 65(1)(a)), the fact that almost all of the property was acquired by the appellant prior to the relationship (s. 65(1)(c)), the respondent’s need to become or remain economically self-sufficient (s. 65(1)(e)), and the effect that the respondent’s assumption of homemaking responsibilities had on the appellant’s ability to focus on his law practice and on her own future career development (s. 65(1)(f)).  Moreover, there were indications that the agreement was unfair at the time of negotiation and execution.  That the respondent signed it knowing it to be unfair does not cure the agreement of its substantive unfairness.  Married spouses must fully assume the responsibilities flowing from their decision to get married.  By choosing to marry the respondent, to have children, and to support and benefit from his wife’s domestic work, the appellant agreed to bear all the consequences of the legislative regime regulating his decisions, including the judicial review under s. 65 of the FRA. 

The trial judge’s reapportionment of the family assets should be shown deference, particularly as the litigation resulted in a protracted trial and the judgment involved complex factual assessments.  Except for her reapportionment of the law practice, the trial judge did not commit any error.  The respondent provided an indirect contribution to the appellant’s law practice through the assumption of full-time responsibility for child care and homemaking, allowing the appellant to continue to practice full time.  The appellant’s interest in the law partnership was therefore a family asset capable of judicial reapportionment.  Nevertheless, the trial judge erred in reapportioning the law practice, as it was the appellant’s main source of revenue, from which he had been previously ordered to pay significant spousal support.  This resulted in double dipping.  The respondent may apply for a reevaluation of her need for spousal support.

Cases Cited

By Bastarache J.

Approved:  Toth v. Toth (1995), 13 B.C.L.R. (3d) 1; Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314; considered:  Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24; distinguished: N. (D.K.) v. O. (M.J.) (2003), 41 R.F.L. (5th) 142; referred to: Clarke v. Clarke (1991), 31 R.F.L. (3d) 383; Gold v. Gold (1993), 82 B.C.L.R. (2d) 165; Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83; Moge v. Moge, [1992] 3 S.C.R. 813.

By Deschamps J. (dissenting in part)

Gold v. Gold (1993), 82 B.C.L.R. (2d) 165; Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24; Stark v. Stark (1990), 71 D.L.R. (4th) 446, leave to appeal refused, [1991] 1 S.C.R. xiv; Toth v. Toth (1995), 13 B.C.L.R. (3d) 1; Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314; Bracklow v. Bracklow, [1999] 1 S.C.R. 420; Moge v. Moge, [1992] 3 S.C.R. 813; Davidson v. Davidson (1986), 2 R.F.L. (3d) 442; Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33; Underhill v. Underhill (1983), 45 B.C.L.R. 244; Elsom v. Elsom (1982), 35 B.C.L.R. 293, aff’d (1983), 37 R.F.L. (2d) 150, leave to appeal refused, [1984] 1 S.C.R. vii; Gillespie v. Gillespie (1995), 1 B.C.L.R. (3d) 28; Peter v. Beblow, [1993] 1 S.C.R. 980; Piercy v. Piercy (1991), 31 R.F.L. (3d) 187, supplementary reasons (1993), 86 B.C.L.R. (2d) 285; Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43.

Statutes and Regulations Cited

Canadian Charter of Rights and Freedoms , s. 15(1) .

Divorce Act , R.S.C. 1985, c. 3 (2nd Supp .), ss. 15.2 [am. 1997, c. 1, s. 2], 15.2(4) [formerly s. 15(5)].

Family Law Act, R.S.N.L. 1990, c. F-2, s. 66(4).

Family Law Act, R.S.O. 1990, c. F.3, s. 56(4).

Family Law Act, S.P.E.I. 1995, c. 12, s. 55(4).

Family Property Act, S.S. 1997, c. F-6.3, s. 24(2).

Family Relations Act, R.S.B.C. 1996, c. 128, Part 5, ss. 56, 58, 59, 61, 65, 68, 89.

Federal Child Support Guidelines, SOR/97-175.

Marital Property Act, S.N.B. 1980, c. M-1.1, s. 41.

Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 29.

Authors Cited

British Columbia.  Law Reform Commission.  Working Paper No. 63.  Property Rights on Marriage Breakdown.  Vancouver:  The Commission, 1989.

Grassby, Miriam.  “Women in Their Forties:  The Extent of Their Rights to Alimentary Support” (1991), 30 R.F.L. (3d) 369.

Payne, Julien D.  Payne on Divorce, 4th ed.  Scarborough, Ont.:  Carswell, 1996.

Shaffer, Martha, and Daniel S. Melamed.  “Separation Agreements Post-Moge, Willick and L.G. v. G.B.:  A New Trilogy?” (1999), 16 Can. J. Fam. L. 51.

Weitzman, Lenore J.  The Divorce Revolution:  The Unexpected Social and Economic Consequences for Women and Children in America.  New York:  Free Press, 1985.

APPEAL from a judgment of the British Columbia Court of Appeal (2002), 6 B.C.L.R. (4th) 250, 220 D.L.R. (4th) 655, 174 B.C.A.C. 129, 31 R.F.L. (5th) 312, [2002] B.C.J. No. 2416 (QL), 2002 BCCA 587, affirming a decision of the British Columbia Supreme Court (2001), 89 B.C.L.R. (3d) 110, [2001] B.C.J. No. 409 (QL), 2001 BCSC 325, and [1999] B.C.J. No. 2861 (QL).  Appeal allowed, Binnie, LeBel and Deschamps JJ. dissenting in part.

Megan Rehill Ellis, for the appellant.

Charlene E. Le Beau, for the respondent.

The judgment of McLachlin C.J. and Iacobucci, Major, Bastarache, Arbour and Fish JJ. was delivered by

            Bastarache J. —

I.       Introduction

1                                   Domestic contracts are explicitly permitted by the matrimonial property regime in British Columbia.  They allow spouses to substitute a consensual regime for the statutory regime that would otherwise be imposed on them.  Domestic contracts are, however, like the statutory regime itself, subject to judicial intervention when provisions for the division of property which they contain are found to be unfair at the time of distribution, after considering the various factors enumerated in s. 65 of the Family Relations Act, R.S.B.C. 1996, c. 128 (the “Act” or the “FRA”). 

2                                   At issue in this appeal is whether a marriage agreement respecting the division of property, entered into after receiving independent legal advice, without duress, coercion or undue influence, can later be found to be unfair and set aside on the basis that it failed to provide anything “for the respondent’s sacrifice in giving up her . . . law practice and postponing [her] career development”,  notwithstanding that the parties’ agreement preserved the right to spousal support.  The parties in this appeal also raised the issues of whether an agreement entered into prior to or at the time of marriage should be subject to the same review on appeal as a separation agreement, and whether, where provisions for the division of property in a marriage agreement  are found to be unfair at the time of distribution, the whole agreement should simply be ignored.

3                                   The appellant and the respondent began to live together in 1985 after becoming romantically involved with each other in 1982.  Their first child was born in July 1987 and the parties married on March 11, 1989 (a second marriage for both).  Their second child was born in November 1989.  The parties separated in January 1998 and were divorced on July 29, 1999.

4                                   The appellant is 57 years old and was called to the Bar of British Columbia in 1972.  He has provided support for his two children from a previous marriage who were born in 1976 and 1979.  The respondent is 50 years of age and was called to the Bar of British Columbia in 1981.  She articled with the appellant’s firm and practised there as an associate until June 1987, when she left on maternity leave.  Her annual salary at the time was $48,000.  From that time, the respondent remained at home as the full-time caregiver for both children, one of whom has special needs.  The respondent did not return to practice until after the parties had separated, when she took the necessary steps to become requalified to practise law.

5                                   Prior to the marriage, the appellant had made it clear to the respondent that, given the division of property that occurred after he and his first wife separated, he would never again allow a division of his property.  He brought several assets into the marriage with the respondent, including a home, two recreational properties, RRSPs and savings, and his law practice.  His assets were valued at approximately $1.6 million.  The respondent did not bring any assets into the marriage, but instead entered the relationship heavily in debt. 

6                                   The appellant arranged for a marriage agreement (the “Agreement”) to be drawn up, the terms of which clearly stipulated that the parties would be separate as to property.  However, the Agreement provided that the respondent would be entitled to 3 percent interest in the family home for each year the parties were married, up to a maximum of 49 percent.  The parties obtained independent legal advice.  The respondent was told by her lawyer that the Agreement was unfair and that the courts would likely set it aside if the parties separated.  The respondent nevertheless signed the Agreement (after making a few small amendments) on their wedding day, at the appellant’s insistence.

7                                   After 12½ years of cohabitation, nine of which they spent married, the parties separated in January 1998.  During the divorce proceedings, custody and access, spousal and child support, and division of property were at issue.  The appellant relied upon the Agreement to avoid the operation of the statutory family property regime, while the respondent argued that the Agreement should be set aside on common law principles or that the court should reapportion the distribution of family assets because the Agreement was unfair.

8                                   The primary policy objective guiding the courts’ role in division of assets on marital breakdown in British Columbia is fairness; it is achieved by reviewing either the presumptive division provided for in the Act itself, or the parties’ private agreement, in light of the factors set out in s. 65 of the FRA.  To give effect to legislative intention, courts must encourage parties to enter into marriage agreements that are fair, and to respond to the changing circumstances of their marriage by reviewing and revising their own contracts for fairness when necessary.

9                                   The authorities generally agree that courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship.  This is particularly so where the agreement in question was negotiated with independent legal advice.  The difficulty of course is in determining the proper approach to deciding, at the time of distribution, what is fair under the terms of s. 65 of the FRA.  A domestic contract constituting a derogation from the statutory regime, it is obvious that its fairness cannot be determined simply on the basis of its consistency with the said regime.  In fact, s. 65(1) also provides for judicial reapportionment on the basis of fairness in the case of the statutory regime in s. 56(2).  The appellant in these proceedings argues that the majority of the Court of Appeal effectively found the Agreement to be unfair on the  basis that it derogated from the statutory regime.  After reviewing the provisions of the FRA as well as the Agreement, it is my opinion that said Agreement operated fairly at the time of distribution.

II.      Overview of the Family Relations Act

10                               Part 5 of the FRA deals with division of assets on marital breakdown. It provides for presumptive entitlements which can themselves be reviewed for fairness on application to the court, and for reapportionment if a finding of unfairness is made. 

11                               Domestic contracts are also permitted under the FRA’s matrimonial property regime.  Indeed, when there is a marriage agreement, the terms of the agreement represent the spouses’ presumptive entitlement.  Accordingly, under s. 56, the presumption that each spouse is entitled to a one‑half interest in each family asset as a tenant in common is subject to any marriage agreement upon the occurrence of a triggering event, such as divorce.  A “marriage agreement”  is statutorily defined under s. 61(2); its definition is not at issue in this appeal.

12                               While s. 61 permits parties to avoid the statutory default regime by entering into binding contractual arrangements to govern their relationship during and upon dissolution of the marriage, s. 65 limits this freedom by permitting the court to vary the contractual terms if the division of property under the agreement is unfair at the time of distribution. 

13                               Specifically, s. 65(1) provides that if the provisions for division of property between spouses either under their marriage agreement or under the statutory regime would be unfair having regard to: (a) the duration of the marriage; (b) the duration of the period during which the spouses have lived separate and apart; (c) the date when property was acquired or disposed of; (d) the extent to which property was acquired by one spouse through inheritance or gift; (e) the needs of each spouse to become or remain economically independent and self-sufficient; or (f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse, the Supreme Court, on application, may order that the property covered by such agreement or statutory regime be divided into shares fixed by the court.

14                               Most of the provinces provide for judicial oversight of marriage agreements.  For example, s. 56(4) of the Ontario’s Family Law Act, R.S.O. 1990, c. F.3, permits a court to set aside a domestic contract or a provision thereof if a party failed to disclose significant assets or liabilities, if a party did not understand the nature or consequences of the contract, or otherwise, in accordance with the law of contract.  See also Family Law Act, R.S.N.L. 1990, c. F‑2, s. 66(4); Family Law Act, S.P.E.I. 1995, c. 12, s. 55(4), for this language.  The threshold in Nova Scotia is a finding that any term is “unconscionable, unduly harsh on one party or fraudulent”: see Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 29.  Saskatchewan allows a court to redistribute property where an interspousal contract was unconscionable or grossly unfair at the time it was entered into: see Family Property Act, S.S. 1997, c. F‑6.3, s. 24(2).  New Brunswick permits a court to disregard a provision of a domestic contract where a spouse did not receive independent legal advice and application of the provision would be inequitable: see Marital Property Act, S.N.B. 1980, c. M-1.1, s. 41.  By contrast, in British Columbia, as earlier noted, a court may reapportion assets upon finding that to divide the property as provided for in the agreement or the FRA would be “unfair”.  Clearly, the statutory scheme in British Columbia sets a lower threshold for judicial intervention than do the schemes in other provinces.  

III.    Judicial History

A.     Supreme Court of British Columbia, [1999] B.C.J. No. 2861 (QL) and (2001), 89 B.C.L.R. (3d) 110, 2001 BCSC 325

15                            Although the appellant sought joint custody of the children, after considering that the parties were unable to communicate, their different parenting styles and the different roles they assumed in caring for the children, Beames J. ordered sole custody in favour of the respondent with joint guardianship of the children.  On the issue of child support, despite having found the appellant’s income to be in excess of $150,000, Beames J. ordered the appellant to pay the amount set out in the Federal Child Support Guidelines, SOR/97-175, and the extraordinary expenses until such time as the respondent began to earn in excess of $2,000 per month.

16                            In quantifying spousal support, Beames J. considered the evidence in light of the factors set out in s. 89 of the FRA and s. 15.2(4)  of the Divorce Act , R.S.C. 1985, c. 3 (2nd Supp .).  She awarded the respondent $2,500 per month in support, to be reduced to $1,500 per month after the respondent received at least $2,000 per month in employment income.  In addition, the appellant was ordered to pay a lump sum to the respondent in the amount of the fees required by the Law Society in order to be reinstated as a member.  Beames J. determined that, though she had been out of the work force for 12 years, the respondent had a good chance of securing employment at a reasonable rate of remuneration and left either party at liberty to apply for a review of spousal support any time after July 1, 2001.  Despite this finding, Beames J. recognized that the respondent had given up her career to assume full-time responsibility for child care and homemaking, and was completely dependent on the appellant for her support.  She observed further that the respondent had suffered an economic disadvantage that would continue as long as she had custodial responsibilities.  The appellant, on the other hand, had pursued his practice without interruption, secure in knowing that the respondent was caring for the home and children.  Beames J. accepted that it was improbable that the respondent would ever enjoy the appellant’s earning capacity.  On the other hand, she recognized that the respondent may not have attained the same earning capacity in any event.

17                            With respect to the division of property, the appellant sought to rely upon the provisions of the Agreement.  The respondent, on the other hand, denied that there was a valid marriage agreement or, in the alternative, argued that it was unenforceable as it was entered into under duress.  The respondent argued in the further alternative that the Agreement was unfair and that there should be a reapportionment pursuant to the applicable provisions of the FRA.  Reviewing the evidence surrounding the circumstances of the signing of the Agreement, Beames J. determined that the respondent failed to establish that the Agreement was unconscionable, or that it was entered into by the respondent under duress, coercion or undue influence.  Beames J. did, however, conclude that the Agreement was unfair.   

18                            Beames J. examined the terms of the Agreement as well as the terms the parties had deleted from it.  She also reviewed the letter the respondent received from her lawyer advising her not to sign the Agreement as it was “grossly unfair” and alerting her to the possible consequences of the unfairness.  Beames J. noted that, despite this advice, no substantial changes were made to the Agreement and the appellant insisted that his original substantive proposal be accepted. 

19                            Under the terms of the Agreement, as signed by the parties, the most that the respondent could receive was a 49 percent interest in the family home (after 16 years of marriage), a joint interest in the household contents, and an interest in the family vehicles.  Beames J. was struck by the fact that the Agreement provided nothing for the sacrifices that the respondent had made by giving up her own law practice and, in particular, that no provision was made for any entitlement to pension or retirement savings.  By the time of separation, the terms of the Agreement provided that the respondent’s interest in the family home was 27 percent, using a period of cohabitation following marriage of 9 years, at 3 percent per year.

20                            Beames J. reviewed ss. 56(1), 61, 65 and 68 of the FRA.  She held that the court may review marriage agreements to determine whether or not the terms are fair.  She stated that it was critical to bear in mind that domestic contracts were not to be treated the same way as commercial contracts (Clarke v. Clarke (1991), 31 R.F.L. (3d) 383 (B.C.C.A.)), and held, at para. 57 of her 1999 judgment:

In assessing fairness in this case, the most relevant factors in my view are section 65(a), (c), (e), and (f).  The duration of the marriage, excluding the period of cohabitation, the relationship [sic] was almost nine years, and including the period of cohabitation, was approximately 12½ years.  This was not a short term relationship.  On the other hand, the vast majority of the property was acquired by the plaintiff, prior to the commencement of his relationship with the defendant, although the property which is now the matrimonial home was acquired while the parties were cohabiting, albeit with the plaintiff’s financial resources.  For the reasons I have already dealt with concerning the issue of spousal support, I consider the need of the defendant to become or remain economically independent and self‑sufficient to be a significant factor in this case.  I am also cognizant of the evidence with respect to the defendant’s efforts concerning the construction of the family home, and her involvement therein, and the effect her assumption of home and child care responsibilities and the effect that had on the plaintiff’s ability to concentrate on the maintenance and improvement of his law practice.

21                            Having concluded that the Agreement was unfair, Beames J., at para. 60 of her 1999 decision, considered the judgment in Gold v. Gold (1993), 82 B.C.L.R. (2d) 165  (C.A.), at para. 36, regarding the reapportionment of property between the spouses:

With respect, unless bound by authority to decide otherwise, I would conclude that subss. (a) to (f) of s. 51 [now s. 65] provide the grounds upon which a finding of unfairness must be based, but such a finding need not lead inevitably to an equal redistribution.  In many cases, equality may be the only fair result.  There will, however, be other cases, with or without a marriage agreement, where only an unequal division of family assets in favour of one spouse or the other will be fair.  All that Clarke [v. Clarke (1991), 31 R.F.L. (3d) 383 (B.C.C.A.)] decides is that when an agreement is unfair, the party having the advantages provided by the unfair agreement must expect that the Court will reapportion the assets for the purpose of achieving fairness.  Fairness will not always be synonymous with equality.

22                            Beames J. explained that as she did not have many of the asset valuations before her, she would merely define those assets that were family assets and, where possible, fix the percentage apportionments.  On the evidence, she held that the family home, the contents, the RRSPs and savings, term deposits, the 1968 Mercedes, the Osoyoos vacation property, and the appellant’s law practice were all family assets as defined by the FRA.  The appellant’s motorcycle, the lot in the State of Washington, and the appellant’s interest in Commercial Appliance Centre Ltd. were held not to be family assets.  Beames J. determined that the home and its contents should be divided on an equal basis.  With respect to the vacation property, RRSPs and savings, and law practice, she ordered that the appellant retain 60 percent, with the respondent receiving 40 percent.  The appellant was ordered to have his law corporation transfer the Ford Expedition to the respondent.

23                            The trial judge subsequently heard evidence on the valuation of assets.  On evidence that the home had depreciated in value since the date of trial, Beames J. noted that the respondent had been residing in the mortgage-free home for over three years with no rent.  She was satisfied that the date of valuation should be July 1999 at a value of $755,000.  Each party’s one-half interest was held to be $377,500.  Beames J. ordered that the respondent keep the family residence (by agreement of the parties), subject to a first mortgage in the amount of $265,318 in favour of the appellant, most of its contents, and the Ford Expedition.  The RRSPs were dealt with by permitting the respondent to retain those valued at $16,391 in her own name and by ordering the appellant to roll over to the respondent RRSPs in the amount of $87,018 in order to effect a 60/40 division in favour of the appellant. 

24                            At the appellant’s request, the trial judge reconsidered her previous decision with respect to the reapportionment of the appellant’s law practice.  She considered that the appellant had built it up before the parties had commenced their relationship, that the respondent had a law degree and was already leaving the marriage with substantial assets, and with significant child and spousal support.  In deciding to maintain the original 60/40 division of this asset, Beames J. considered the factors on which she had originally relied.  She weighed the evidence as to the value of the practice, including tax issues and loans, and determined that the final net value was $261,624, to which the respondent was entitled to a 40 percent share.

25                            The net effect was that the respondent received an interest in the family assets with a value of approximately $654,000, about 46 percent of the family assets valued at approximately $1,415,000.  Under the Agreement, she would have received about 20 percent of the family assets with a value of about $280,000.

B.      Supreme Court of British Columbia, [2001] B.C.J. No. 2854 (QL), 2001 BCSC 1678

26                            With the respondent past the probationary period at her law firm and earning a salary of $52,000, Melnick J., on application by the appellant, ordered the spousal support of $1,500 per month to terminate at the end of December 2002.  The respondent initially appealed this decision, but filed a notice of abandonment on November 5, 2002 (following the judgment of the Court of Appeal affirming Beames J.’s order with respect to the division of family assets).  Melnick J. noted that if there was some dramatic change in her circumstances as a result of the decision of the Court of Appeal with respect to the division of the parties’ matrimonial assets, then it would be open to the respondent to bring a new application for spousal support.

C.     Court of Appeal for British Columbia (2002), 6 B.C.L.R. (4th) 250, 2002 BCCA 587

(1)        Rowles J.A. (Huddart J.A. concurring)

27                            The majority found no error in principle in the approach that the trial judge took to determine whether the Agreement was unfair having regard to the factors listed in s. 65(1) of the FRA.  Affirming that the preservation of spousal support clause should be ignored, the majority agreed with the trial judge that the most serious deficiency with the Agreement was that it failed to compensate the respondent’s sacrifice in giving up her law practice and postponing her career development.  Further, the Agreement did not consider sufficiently either the respondent’s need to become economically independent or the contribution she made to the appellant’s career by her sacrifice of career development to homemaking and child care responsibilities.  Although the majority recognized that the way the issues were presented and decided at trial made it difficult to discern how the trial judge evaluated the factors she found relevant under s. 65, they found no error that would permit the court to intervene with the reapportionment that the trial judge ordered.

28                            The court analysed the matrimonial property regime and explained, at paras. 33-34, that:

It is important to note that s. 56 of the FRA does not set out the prima facie presumption that each spouse is entitled to an undivided half interest in each family asset, subject to judicial reapportionment under the FRA.  It states that each spouse is entitled to an undivided half interest in each family asset as a tenant in common on the occurrence of a triggering event, subject to a marriage agreement or separation agreement.  The relevant question is not whether the agreement strays too far from an equal division, but whether the agreed division is unfair in the circumstances of the spouses, considering all the factors in s. 65, and all the provisions of the agreement.  If the agreed division would be unfair, the ultimate question is what variation to the agreement the listed factors require, in the context of the entire agreement, to make the property division fair. 

A determination as to whether a division under a marriage agreement is unfair at the triggering event is a two‑step inquiry.  The first step is to determine the division of property under the agreement.  The next step is to determine whether that division would be unfair having regard to the factors set down in s. 65.  At the second step, the court must take into account all the provisions of the agreement, including any that relate to spousal support or provide a future income stream by some other vehicle.  Trusts, insurance, deferred annuities, and pensions come to mind.  The court must also be mindful of the context in which the agreement was made.

29                            On the issue of fairness, generally, the majority stated, at paras. 61 and 64,  that:

What the parties view as fair at the time of executing the agreement may become unfair as the relationship evolves, and as circumstances change. It does not follow that the agreement, and the considerations underlying it, can be ignored. . . .

                                   . . .

The fairness of a marriage agreement at the time it was made may be an important factor to consider in reapportionment. If an agreement was fair in the circumstances of the parties when it was made and subsequent, unforeseen circumstances make it unfair, the extent of the variation may be limited to that required to redress the unfairness that change produced. [Emphasis added.]

30                            The majority also held that while the court should respect private agreements, particularly where they are negotiated with legal advice, common sense dictates that there is a difference between a separation agreement and a marriage agreement.  In their opinion, however, even an unfair marriage agreement merits deference.  The question really comes down to what level of deference is appropriate.

(2)    Thackray J.A. (dissenting)

31                            Thackray J.A. agreed that the Agreement was unfair, but he found that the trial judge erred by failing to give any deference to the Agreement.  In his opinion, this led to an unfair reapportionment of the family assets.  He noted that the intention of the parties was not only spelled out in the Agreement but was demonstrated during their marriage.  In his view, people should be encouraged to resolve their marital economic issues by way of contract and that their initiative should be respected.  Further, he stated that the courts should promote the view that once an agreement is reached, the parties are expected to fulfill the obligations they have undertaken. 

32                            Thackray J.A. also agreed that marriage agreements are different from separation agreements in that marriage agreements may become unfair over the passage of time.  Even so, in his view, marriage agreements and the considerations underlying them cannot be ignored.

33                            Thackray J.A. held that the legislative concept of fairness supported the trial judge’s decision regarding the family home and its contents, the RRSPs, motor vehicles and savings.  Nevertheless, he would have left the rest of the Agreement  intact which, according to his calculation, would result in approximately $525,000 or about 37 percent of the family assets being awarded to the respondent.  In his opinion, such a division would provide the respondent with sufficient funds to re‑establish herself, resolve the unfairness of the Agreement and, in deference to the Agreement, leave the appellant’s law firm in his hands.

IV.    Analysis

A.     The Purpose of the FRA

34                            The primary policy objective guiding the courts’ role in a division of property on marital breakdown in British Columbia is fairness.   

35                            The FRA explicitly recognizes marriage agreements as a mechanism to govern a division of property upon the dissolution of marriage.  To be enforceable, however, any such agreement must operate fairly at the time of distribution.  If it does  not,  judicial reapportionment of property will be available to achieve fairness. 

36                            To give effect to legislative intention, courts must encourage parties to enter into marriage agreements that are fair, and to respond to the changing circumstances of their marriage by reviewing and revising their own contracts for fairness when necessary.  Conversely, 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 the arrangement on which they reasonably expected to rely.  Individuals may choose to structure their affairs in a number of different ways, and it is their prerogative to do so: see generally Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83.

37                            It is important to note at this point that while both the parties and the courts speak of the contract being fair or unfair, it is really the apportionment under the contract that is under scrutiny.  One must be careful when suggesting that the contract is unfair not to inadvertently suggest bad faith, or an intention on the part of one or both parties to cheat.  At no point have allegations of this sort been made.  One must  instead consider the fairness of the division of property as contracted under the marriage agreement at a specific point in time.  The provisions of a contract could well be fair if the marriage lasted one year and unfair if the marriage lasted 30 years. 

B.      Marriage Agreements vs. Separation Agreements

38                            Marital cases must reconcile respect for the parties’ intent, on the one hand, and the assurance of an equitable result, on the other.  The parties here adopted opposite views as to the degree of deference to be afforded marriage agreements; the appellant submitted that more and the respondent submitted that less deference should be paid to marriage agreements than to separation agreements.  

39                            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.  Marriage agreements define the parties’ expectations from the outset, usually before any rights are vested and before any entitlement arises.  Often, perhaps most often, a desire to protect pre‑acquired assets or an anticipated inheritance for children of a previous marriage will be the impetus for such an agreement.  Separation agreements, by contrast, purport to deal with existing or vested rights and obligations, with the aggrieved party claiming he or she had given up something to which he or she was already entitled with an unfair result.  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 M. Shaffer and D. S. Melamed, “Separation Agreements Post‑Moge, Willick and L.G. v. G.B.: A New Trilogy?” (1999), 16 Can. J. Fam. L. 51, at pp. 67‑68; Payne on Divorce (4th ed. 1996), at pp. 307‑8. 

C.     Miglin v. Miglin and the Issue of Deference

40                            In addressing the issue of deference, this Court may apply Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24, for its general legal proposition that some weight should be given to marriage agreements.  Miglin raised the question of the proper weight to be given to a separation agreement that one of the parties subsequently wishes to have modified through an initial application in court for support.  In that case, the agreement in issue was a separation agreement and the relevant provision was s. 15.2  of the Divorce Act .  At paras. 45 and 46 of Miglin, in addressing the proper weight to be accorded to the agreement, Arbour J. and I stated:

. . . the answer to these questions does not lie in adopting a near‑impermeable standard such that a court will endorse any agreement, regardless of the inequities it reveals.  Neither, however, does the solution lie in unduly interfering with agreements freely entered into and on which the parties reasonably expected to rely. . . .

                              . . .

Nevertheless, the language and purpose of the 1985 [Divorce] Act  militate in favour of a contextual assessment of all the circumstances.  This includes the content of the agreement, in order to determine the proper weight it should be accorded in a s. 15.2 application.  In exercising their discretion, trial judges must balance Parliament’s objective of equitable sharing of the consequences of marriage and its breakdown with the parties’ freedom to arrange their affairs as they see fit.  Accordingly, a court should be loathe to interfere with a pre‑existing agreement unless it is convinced that the agreement does not comply substantially with the overall objectives of the Divorce Act . [Emphasis added.]

At para. 67, we continue by stating:

. . . we are of the view that there is nevertheless a significant public interest in ensuring that the goal of negotiated settlements not be pursued, through judicial approbation of agreements, with such a vengeance that individual autonomy becomes a straitjacket. Therefore, assessment of the appropriate weight to be accorded a pre‑existing agreement requires a balancing of the parties’ interest in determining their own affairs with an appreciation of the peculiar aspects of separation agreements generally and spousal support in particular.

41                            At paras. 79 to 91, we set out a two‑stage approach requiring that courts look first to the circumstances of the negotiation and execution of the agreement to determine if one party took advantage of the other’s vulnerability, or if the substance of the agreement at formation failed to comply substantially with the general objectives of the Divorce Act .  Second, viewed from the time the application is made, courts should inquire if the agreement still reflects the original intentions of the parties and if it is still in substantial compliance with the objectives of the Divorce Act . 

42                            The appellant seeks to rely on Miglin, supra, suggesting that the same process be followed in assessing the fairness of marriage agreements under the FRA.  I agree that Miglin is helpful for its general propositions that “a court should be loathe to interfere with a pre‑existing agreement unless it is convinced that the agreement does not comply substantially with the overall objectives” of the Act in question (para. 46), and that “[t]he court must not view spousal support arrangements in a vacuum, . . . it must look at the agreement or arrangement in its totality, bearing in mind that all aspects of the agreement are inextricably linked and that the parties have a large discretion in establishing priorities and goals for themselves” (para. 84).  However, in my opinion, adopting Miglin without qualification would distort the analytical structure already provided in the British Columbia legislation. 

43                            In the very recent case of N. (D.K.) v. O. (M.J.) (2003), 41 R.F.L. (5th) 142,  at para. 26, the Court of Appeal for British Columbia held that “an agreement may be unfair as contemplated by s. 65(1) not only in its formation, but in its operation”.  In that case, the agreement’s provisions might have been fair had the parties’ post‑separation lives unfolded as originally anticipated.  However, changes in plans resulted in the wife bearing the financial brunt of the breakdown.  Court intervention to ensure fairness was warranted.  That case, in my opinion, is factually distinguishable from the case at bar.  However, it is helpful in highlighting the relevant inquiry under s. 65(1), namely, the operation of the contract.  The court must determine whether the marriage agreement is substantively fair when the application for reapportionment is made.  The essence of this inquiry is whether the circumstances of the parties at the time of separation were within the reasonable contemplation of the parties at the time the agreement was formed, and, if so, whether at that time the parties made adequate arrangements in response to these anticipated circumstances.  As Arbour J. and I stated at paras. 88 and 89 of Miglin, supra:

We note that it is unlikely that the court will be persuaded to disregard the agreement in its entirety but for a significant change in the parties’ circumstances from what could reasonably be anticipated at the time of negotiation.  Although the change need not be “radically unforeseen”, and the applicant need not demonstrate a causal connection to the marriage, the applicant must nevertheless clearly show that, in light of the new circumstances, the terms of the agreement no longer reflect the parties’ intentions at the time of execution and the objectives of the Act.  Accordingly, it will be necessary to show that these new circumstances were not reasonably anticipated by the parties, and have led to a situation that cannot be condoned.

We stress that a certain degree of change is foreseeable most of the time. . . . The test here is not strict foreseeability; a thorough review of case law leaves virtually no change entirely unforeseeable.  The question, rather, is the extent to which the unimpeachably negotiated agreement can be said to have contemplated the situation before the court at the time of the application.

See also Miglin, at paras. 56, 63 and 87. 

44                            Thus, 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 FRA 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.

45                            In the present case, the majority of the Court of Appeal refers to a change in circumstances or subsequent, unforeseen circumstances as a reason why a marriage agreement that was fair at the time of its execution may no longer be fair at the time of separation.  This accords with the approach adopted in Miglin, supra.  But the majority of the court failed to recognize that this criterion is not a factor in the case at bar.  At the time of the triggering event, both the financial and domestic arrangements between the appellant and the respondent were unfolding just as the parties had expected.  With respect to their financial arrangement, they were living out their intention to “remain completely independent of the other as regard to their own property, both real and personal”.  There was no commingling of funds, there were no joint accounts of significant value, and the assets that the appellant brought into the marriage remained in his name.  On a personal level, as planned, the appellant and respondent had a second child and, as decided by the respondent, she did not resume her position at the law firm but remained at home to raise their two children.

46                            Where, as in the present case, the parties have anticipated with accuracy their personal and financial circumstances at the time of distribution, and where they have truly considered the impact of their choices, then, without more, a finding that their Agreement operates unfairly should not be made lightly.  This does not mean that no attention should be given to the possible deficit in the assets and future income of the spouse who chose to stay at home and facilitate the professional development of the other spouse, compared to what they would realistically have been otherwise.  Section 65 mandates as much.  A fair distribution of assets must of course take into account sacrifices made and their impact, the situation of the parties at the time of distribution, their age, education and true capacity to reintegrate into the work force and achieve economic independence in particular.  But this must be done in light of the personal choices made and of the overall situation considering all property rights under the marriage agreement and other entitlements.  In the present case, the main feature of the Agreement was the desire that each spouse retain the assets earned before the marriage, sharing equitably assets acquired afterwards being the rule.  This will be fair on dissolution of the marriage if Mrs. Hartshorne is not left without means and facing true hardship in reclaiming her professional status and income, in light also of her parental obligations.  Consideration must be given to the actual situation as it unfolded.  I am not inattentive to the systemic problems discussed in Moge v. Moge, [1992] 3 S.C.R. 813, and agree that the Court must proceed with caution in applying s. 65.  But, ultimately, it is fairness between the parties that is at issue here.

47                            The ultimate point then is this: in determining whether a marriage agreement operates unfairly, a court must first apply the agreement.  In particular, the court must assess and award those financial entitlements provided to each spouse under the agreement, and other entitlements from all other sources, including spousal and child support.  The court must then, in consideration of those factors listed in s. 65(1) of the FRA, make a determination as to whether the contract operates unfairly.  At this second stage, consideration must be given to the parties’ personal and financial circumstances, and in particular to the manner in which these circumstances evolved over time.  Where the current circumstances were within the contemplation of the parties at the time the Agreement was formed, and where their Agreement and circumstances surrounding it reflect consideration and response to these circumstances, then the plaintiff’s burden to establish unfairness is heavier.  Thus, consideration of the factors listed in s. 65(1) of the FRA, taken together, would have to reveal that the economic consequences of the marriage breakdown were not shared equitably in all of the circumstances.  This approach, in my view, accords with the underlying principle of the FRA, striking an appropriate balance between deference to the parties’ intentions, on the one hand, and assurance of an equitable result, on the other.

D.     Section 65 Factors

48                            Section 65 provides a list of factors for courts to consider when assessing the fairness of a marriage agreement governing a division of property.  In assessing fairness in this case, Beames J. held that the most relevant factors were those listed in s. 65(1)(a), (c), (e), and (f), namely, the duration of the marriage; the date when property was acquired or disposed of; the needs of each spouse to become or remain economically independent and self-sufficient; and, any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse, respectively. 

49                            The duration of the marriage, excluding the period of cohabitation, was almost nine years, and including the period of cohabitation, was approximately 12½ years.  As noted by Beames J., “[t]his was not a short term relationship” (para. 57 of her 1999 decision).  However, in my view, the duration of the marriage cannot be considered apart from the date at which property was acquired.  In this regard, it is noteworthy that the vast majority of the property was acquired by the appellant prior to the commencement of his relationship with the respondent.  Even the property that was acquired while the parties were cohabiting and that became the matrimonial home was purchased with the appellant’s earlier financial resources.  In summary, the appellant brought into the marriage assets valuing approximately $1.6 million, including a home, two recreational properties, RRSPs and savings and his law practice.  The respondent did not bring any assets into the marriage, but instead entered the relationship heavily in debt.

50                            Beames J. was of the view that the need of the respondent to become or remain economically independent and self‑sufficient was a significant factor in this case.  The respondent had given up her career to assume full time responsibility for child care and homemaking.  She was completely dependent on the appellant for her support.  Furthermore,  the respondent suffered an economic disadvantage that would continue as long as she had custodial responsibilities.  It is also important to consider that though the respondent had been out of the work force for 12 years, Beames J. determined that she had a good chance of securing employment at a reasonable rate of remuneration.  Indeed, the respondent did secure an associate position with a Richmond law firm on July 3, 2001, earning a salary of $52,000 per annum at the time of distribution.

51                            In my view, and for reasons which will be elaborated in the following section, Beames J.’s analysis was insufficient.  Before making a determination that the Agreement operated unfairly, she should have considered the impact of those financial awards to which the respondent was entitled under the Agreement or otherwise, including spousal and child support.  Thus, an appropriate spousal support award would recognize both the economic disadvantage suffered by the respondent in sacrificing her career for her family, as well as the effects of said sacrifice which would linger following the dissolution of the marriage.  Further, the true onus of the respondent’s parental responsibilities must be recognized in light of the award for child support.  These various amounts had to be considered in making a determination regarding the fairness of the Agreement, since the need of the respondent to become economically self-sufficient is largely fulfilled by these awards.

52                            In this regard, I find it troublesome that the parties agreed to proceed to trial without having professional valuations of certain assets.  To meet the objectives of the legislation, in my opinion, it is problematic for the trial judge to apportion property with no more than “a good idea” of the value of some of the assets.  The trial judge must be in a position to determine the exact position of the parties as provided for in the Agreement, together with entitlement to spousal and child support, before he or she can decide whether there is unfairness under the terms of s. 65.

53                            Finally, the trial judge discussed a fourth factor — “any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse”.  In my view, there was no evidence in the present case of any such circumstance which bears particular significance.  That the respondent was highly involved in the construction of the family home is, in my view, much less significant than that the appellant alone provided, from his premarital financial resources, the capital required for the home’s construction. 

E.      The Relationship Between Spousal Support and Property Division

54                            In Toth v. Toth (1995), 13 B.C.L.R. (3d) 1 (C.A.), Prowse J.A., in concurring reasons, addressed the relationship between support and property division, as well as the proper sequence in which they should be determined.  In that case, as in this case, the trial judge resolved the issue of maintenance without having initially dealt with the division of property.  At paras. 57 and 59, Prowse J.A. explained that:

It is well established that an appropriate disposition of property under Pt. 3 of the FRA, including any question of reapportionment under s. 51 [now s. 65], must be settled before turning to the question of maintenance.  Depending on the division of property, a lump sum award of maintenance may, or may not, be appropriate. . . .

                               . . .

In discussing the relationship between maintenance and the division of property under Pt. 3 of the FRA, it is useful to note that s. 51(e) and (f) of the FRA [now s. 65(1)(e) and (f)], relating to reapportionment of property, incorporate concepts which are also found in the maintenance provisions of both the Divorce Act , 1985 and the FRA.  Thus, property division and maintenance are closely intertwined.  One advantage of this legislative tie is that s. 51 [now s. 65] may be utilized in the division of property to reflect the relative abilities of the parties to become or remain economically independent and self-sufficient (s. 51(e)) [now s. 65(1)(e)], and the respective capacities and liabilities of the parties (s. 51(f)) [now s. 65(1)(f)].  These concepts are also relevant to determinations of spousal maintenance.  The potential pitfall presented by this legislative link between property and maintenance, however, is the danger of double recovery where, for example, property is reapportioned under s. 51 [now s. 65] and then further reapportioned by an award of lump sum maintenance. [Emphasis added.]

55                            Furthermore, in Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314 (C.A.), McEachern C.J.B.C. acknowledged that it was necessary to determine the division of property before deciding the quantum of maintenance.  He pointed out, at para. 40, that “it is permissible to recognize, at the division of property stage, that the husband has a substantial income and that any shortfall on independence or self sufficiency may be made up by an appropriate order for maintenance”.

56                            As mentioned above, Beames J. found the need of the respondent to become or remain economically independent and self‑sufficient to be a significant factor in this case.  While this is true, when such factors are considered in determining a party’s spousal award, as they were in this case, they should not be determinative a second time with regard to the division of property.    Indeed, as explained by Prowse J.A., such an approach has the potential to fall prey to the danger of double recovery.  In my opinion, this is exactly what originally happened in this case.  Beames J. first awarded spousal support and then reapportioned the family assets.  In doing so, she considered the respondent’s need to become or remain economically independent and self‑sufficient twice.  This was an error in law.  It is true that the award of spousal support was terminated by Melnick J., subject to reinstatement should the division of assets be modified.  This is, however, an unsatisfactory approach.  In my view, the trial judge should have first applied the Agreement, then determined the need for spousal support, which was preserved under the Agreement, and finally decided whether the result warranted a different apportionment of property in light of the s. 65 factors.

57                            Throughout the marriage, there had been no commingling of funds.  The evidence also indicates that, over the course of the marriage, the appellant’s savings decreased from approximately $167,000 to $25,000.  Most of the appellant’s income, then, went to supporting the family’s lifestyle.  The explicit preservation of a right to spousal support was an amendment made to the draft Agreement at the respondent’s insistence.  This supports an understanding on her part that, in light of the provisions regarding division of property, her future needs and self-sufficiency could be met through support.  Spousal support could continue the financial arrangement they lived out during the relationship.  The majority of the Court of Appeal was wrong to ignore the spousal support clause when considering the fairness of the Agreement.

58                            It is highly significant that the Agreement explicitly preserves a right to spousal support and that, in this case, as in Metzner, supra, the appellant has a healthy and continuous flow of income.  In looking at the division of property under the Agreement, Beames J. should have assessed fairness in light of the preservation of a right to spousal support.  Only after determining that the factors of self-sufficiency and need could not be met through an order of spousal support, should the trial judge have concluded that the Agreement operated unfairly.

59                            By reversing the trial judge’s reapportionment of the division of property, I recognize that the respondent’s entitlement to spousal support is reopened.  As held by Melnick J., in the event of some dramatic change in the respondent’s circumstances with respect to the division of the parties’ matrimonial assets, she may bring a new application for spousal support.

F.      Independent Legal Advice

60                            Independent legal advice at the time of negotiation is an important means of ensuring an informed decision to enter an agreement.  In the case at bar, the respondent’s lawyer prepared a written legal opinion for her.  In that opinion letter, the lawyer: (1) confirmed that the respondent was in agreement with the principle that the appellant would retain ownership of the assets which he acquired prior to the relationship, but that she wished that any agreement be fair to both parties and to any children born of the marriage; (2) concluded that the Agreement proposed by the appellant was “grossly unfair”; (3) advised the respondent that, in the event that the marriage broke down, under the FRA she would have a prima facie right to an undivided one-half interest in all family assets, which would include any matrimonial home, furnishings, vehicles, savings and pensions; (4) informed the respondent that the Agreement was such that she would not “earn” even close to a one-half interest in the matrimonial home unless the marriage continued for approximately 20 years; (5) advised the respondent that “a Court would easily find such provision to be unfair and would intervene to redistribute the property on a more equitable basis”; (6) strongly recommended that the respondent not execute the Agreement “in its present form”; (7) recommended that in order to achieve a fairer result and yet still satisfy the desires of the appellant to retain the majority of his property separately, that the following assets remain the appellant’s separate property — (a) bank deposits or securities, (b) the apartment at Osoyoos, (c) the Oroville lot, (d) interest in law firm and management company, (e) the 1968 Mercedes, (f) the boat, and (g) the motorcycle; and (8) strongly recommended that any agreement which the respondent executes makes it clear that there is nothing to bar any claim for maintenance or support for herself or for any children of the marriage. 

61                            It is clear from the detail in this opinion letter that the respondent was forewarned of the Agreement’s “shortcomings”.  Indeed, the respondent made a few changes to the Agreement in response to her lawyer’s advice, including the inclusion of the preservation of spousal support clause.  The respondent was advised that the Agreement was “grossly unfair” and that a court would “easily find” the provision relating to interest in the matrimonial home to be unfair and would redistribute the property on a more equitable basis.  Despite this advice, or because of it, as expressed by counsel for the respondent during the hearing before our Court, the respondent signed the Agreement.  The respondent cannot now rely on her lawyer’s opinion to support her allegation that because she thought the Agreement was unfair from its inception, for all intents and purposes, she never intended to live up to her end of the bargain.  It is trite that a party could never be allowed to avoid his or her contractual obligations on the basis that he or she believed, from the moment of its formation, that the contract was void or unenforceable.

G.     Application to This Appeal

62                            The appellant brought into the marriage assets valuing approximately $1.6 million, including a home, two recreational properties, RRSPs and savings, and his law practice.  At the time of separation, there had been no increase in these assets.  Indeed, there had been, on the basis of the evidence before the Court, a depreciation in the values of the family home and the law practice.  At the time of the Agreement, the appellant had estimated the value of the family home to be $800,000 and the law firm, $300,000.  At the time of trial, after hearing expert opinions, the trial judge held that the value of each had decreased to $755,000 and $255,000, respectively.  Accordingly, I accept these estimates. 

63                            The respondent did not bring any assets into the marriage, but instead entered the relationship heavily in debt.  As per the division of property in the Agreement, the appellant would come out of the marriage with $1.2 million and the respondent with $280,000.  It has not been overlooked that the respondent gave up her own law practice to take primary care of their two children and postponed any further career development.  However, these were decisions that the respondent herself made prior to the marriage.  It is not realistic to assume that the consequences of such a choice were not understood and that the decision made should now be totally ignored.   The implications of the Agreement were understood as well, the respondent having specifically reviewed its shortcomings with her lawyer.  The appellant argues that the overall result is not unfair, pointing out that though the parties’ “shares” under the Agreement are disproportionate, there is no indication that 12 years of practising law would have yielded the respondent more assets than those with which she is leaving this marriage.  In my view, the disadvantage is not demonstrated.

64                            What is more important, in my view, is that any economic disadvantage that the respondent suffered as a result of this decision can be compensated through spousal support.  As mentioned earlier, this is significant with regard to the application of s. 65(1)(e) of the FRA, which deals with the need to become or remain economically independent. 

65                            Moreover, by signing the Agreement, the appellant and the respondent entered their marriage with certain expectations on which they were reasonably entitled to rely.  If the respondent truly believed that the Agreement was unacceptable at that time, she should not have signed it.  In this case, the intention of the parties, as expressed in the Agreement, was to leave with each party that which he or she had before the marriage.  The question is not whether there is something fundamentally unfair about that, but whether the operation of the Agreement will prove to be unfair in the circumstances present at the time of distribution.  In light of the provisions of the FRA, and after examining all of the provisions of the Agreement as well as the circumstances of the parties at the time of separation, it is my opinion that the Agreement was fair at the time of the triggering event.  The trial judge erred in finding otherwise.  The Agreement should be left intact.

66                            Under s. 59 of the FRA, in absence of a marriage agreement, a law corporation could potentially be classified as a family asset.  Indeed, the trial judge found this to be the case and fixed a 60/40 split in favour of the appellant.  In any event, in this case, the trial judge erred in finding the appellant’s law corporation to be a family asset.  Under s. 59(1), 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.  The appellant is entitled to keep the law corporation in full, after transferring out the Ford Expedition. 

V.     Conclusion

67                            Once an agreement has been reached, albeit a marriage agreement, the parties thereto are expected to fulfill 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 FRA 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.

68                            The appeal is allowed with each party bearing his or her own costs.

The reasons of Binnie, LeBel and Deschamps JJ. were delivered by

69                            Deschamps J. (dissenting in part) — Contrary to what was argued before us by the appellant, this appeal is not about whether two people can enter into a prenuptial arrangement which will determine, or even influence, the division of family assets upon their separation.  Rather, this case is about giving effect to the explicit legislative intention that only fair agreements be upheld.  Furthermore, to construe the issue in the way suggested by the majority presupposes that even unfair agreements will be given weight.  With respect, I have reached a different conclusion.

70                            The primary policy objective guiding the courts’ role in division of assets on marital breakdown in British Columbia is fairness, regardless of whether the presumptive entitlement arises statutorily or through contract.  The Family Relations Act, R.S.B.C. 1996, c. 128, Part 5 (hereinafter the “FRA”), does permit couples to sign marriage agreements on division of assets.  However, to be enforceable, any such agreement must be fair; if it is not, it will be judicially reapportioned to achieve a fair division.  To give effect to legislative intention, courts ought to encourage parties to enter into marriage agreements that are fair, and to respond to the changing circumstances of their marriage by reviewing and revising their own contracts for fairness over time. Telling parties that their unfair apportionment will nonetheless be given weight as a factor in reapportionment would defeat this objective.

71                            In the case at bar, the trial judge found the agreement unfair at the outset and at the time of application to the court. Deference must be given to the reapportionment she ordered.  As stated by the British Columbia Court of Appeal in Gold v. Gold (1993), 82 B.C.L.R. (2d) 165, at para. 59, deference is paramount when dealing with division of property:

. . . fairness is not an absolute quality. If the trial judge proceeded upon an incorrect view of the law, or upon some improper principle, then we could possibly substitute our views for what . . . [makes] this division of property fair. In the absence of such error, it is not our function to second guess the trial judge on what specific redistribution was required in order to achieve fairness in the circumstances of this case . . . .

Deference is further warranted when the litigation resulted in a protracted trial and the judgment involved complex factual assessments, as is the case here.  The present case was heard by Beames J. in two installments.  Over a period of six days in July 1999, she heard arguments dealing with the issues of divorce, custody and access, child support, spousal support, the effect of an agreement the parties had entered into on the day of their marriage, and the division of assets.  Beames J. rendered judgment in November 1999 ([1999] B.C.J. No. 2681 (QL)), but in February 2001 ((2001), 89 B.C.L.R. (3d) 110, 2001 BCSC 325), she delivered another set of reasons after having heard further evidence and argument on the issue of valuation.  Since she did not commit any palpable and overriding error in coming to her factual conclusions, I would leave most of her redistribution intact.  I would, however, allow the appellant to retain a 100 percent interest in the law partnership (without disturbing the trial judge’s prior transfer of the ownership of the Ford Expedition to the respondent) given that the reapportionment order coupled with the spousal support order amounted, in this case, to double recovery.

I.       Analysis of the Applicable Legal Principles

72                            Part 5 of the FRA deals with division of assets on marital breakdown.  It provides for presumptive entitlements which can be reviewed for fairness by a judge on application to the court, and reapportioned if found lacking.  If there is a marriage agreement (ss. 61(2) and 61(3)), the terms of the agreement represent the spouses’ presumptive entitlement.  If there is no marriage agreement, s. 56 deems each spouse to be presumptively entitled to an undivided half interest in each family asset as defined in s. 58.  However, in either case these presumptive entitlements are subject to s. 65(1), which indicates that:

65 (1)   If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to

(a) the duration of the marriage,

(b) the duration of the period during which the spouses have lived separate and apart,

(c) the date when property was acquired or disposed of,

(d) the extent to which property was acquired by one spouse through inheritance or gift,

(e) the needs of each spouse to become or remain economically independent and self sufficient, or

(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,

the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court. [Emphasis added.]

Thus, a marriage agreement or a deemed undivided half entitlement provides the starting point for the court, but both are subject to review for fairness under s. 65.  Neither starting point is determinative of the entitlement if such apportionment is unfair.  The court must ensure that the apportionment is fair in accordance with the criteria set out in s. 65.

73                            In Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24, while discussing spousal support and the level of deference applicable to separation agreements under the Divorce Act , R.S.C. 1985, c. 3 (2nd Supp .), this Court recognized that “inequitable” ought not to be equated with “unconscionable” (para. 73).  Similarly, in the case of the FRA, there is no apparent reason why “unfairness” should be assimilated to “unconscionability”.  Rather, it constitutes a less deferential standard.

74                            Many other jurisdictions provide for judicial oversight of the provisions of marriage agreements.  The standard of review applicable in British Columbia can be better understood when compared with the schemes of other Canadian provinces. As recognized in Property Rights on Marriage Breakdown (1989), Law Reform Commission of British Columbia’s Working Paper No. 63, at p. 34, fn. 2:

All Canadian common law provinces provide the courts with jurisdiction to depart from equal sharing, but British Columbia is the only province to define that jurisdiction by use of a general term with no fixed legal meaning. All other Canadian common law provinces use technical terms which indicate that the level of unfairness must be significant.

British Columbia’s legislative choice to provide for a different, less restrictive, standard ought to be recognized by the courts.

75                            The threshold in Nova Scotia is a finding that any term is “unconscionable, unduly harsh on one party or fraudulent” (emphasis added): see Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 29.  In New Brunswick a court may disregard a provision of a domestic contract where a spouse did not receive independent legal advice and application of the provision would be inequitable: see Marital Property Act, S.N.B. 1980, c. M-1.1, s. 41.  In Saskatchewan a court may reapportion property where a marriage contract was unconscionable or grossly unfair at the time it was entered into: see Family Property Act, S.S. 1997, c. F-6.3, s. 24(2).  Ontario’s Family Law Act, R.S.O. 1990, c. F.3, allows a court, on application, to set aside a domestic contract or a provision if a party failed to disclose significant assets or liabilities, if a party did not understand the nature or consequences of the contract, or otherwise in accordance with the law of contract (s. 56(4)).  Such restrictive language is also found in Newfoundland and Labrador’s Family Law Act, R.S.N.L. 1990, c. F-2, s. 66(4), and in Prince Edward Island’s Family Law Act, S.P.E.I. 1995, c. 12, s. 55(4).  In contrast, British Columbia courts have been explicitly empowered to reapportion assets upon finding that the division of property in the agreement is “unfair”.  This is clearly a less deferential standard than what is required in other jurisdictions, and it should not mechanically be assimilated to a more exacting standard, such as unconscionability. 

76                            Courts must defer to this legislative choice and respect the lower threshold, as is now well established in British Columbia.  As stated by McEachern C.J.B.C., writing for the court in Gold, supra, at para. 56:

. . . it is not in keeping with contemporary family law thought or jurisprudence for the Court to offer much deference to an agreement which is objectively unfair to its core.

77                            Drawing on Miglin, a fairness-based review might be read to require that the circumstances surrounding negotiation and execution of provisions on division of assets in a prenuptial agreement be taken into account by the reviewing judge.  However, I believe that the deciding inquiry under s. 65(1) of the FRA is whether or not the agreement is substantively fair at the time of application to the court.  The enumerated factors do not in any way suggest that procedural or even substantive fairness during negotiation or execution is determinative.  Admittedly, the circumstances of negotiation and execution may provide indicators that an agreement has the characteristics of either a fair or an unfair bargain.  That being said, an agreement negotiated under circumstances unfair to one party could still create a fair division of property years later upon separation.  Conversely, an agreement may become unfair with the passage of time, as spouses’ interdependence increases.  Thus, under the FRA, the judge must review the fairness of the marriage agreement at the time of application to the court, considering the parties’ rights, entitlements and obligations at that very moment, in light of the s. 65(1) factors.  The legislation, both in its specific wording and taken as a whole, does not indicate otherwise.  It is also clear from the nature of marriage agreements that their fairness only genuinely matters when they are invoked before a court.  Finally, a judge can only review the fairness of such a prenuptial arrangement by considering it alongside the other conditions of separation covered by the FRA.  These include custody as well as potential maintenance and support orders.  This will only be feasible after an application has been made to the court.

78                            What does fairness at the time of application to the court entail?  Although the statutory regime provides for equal sharing, it is only a starting point, just as it is for marriage agreements. Fairness will not always be synonymous with equal division. In some marriages, the contributions of each spouse will not be equal.  For example, one party may come into the marriage substantially wealthier, in an economic sense, than the other; the marriage may be very brief, indicating that an equal partnership never really came into being; or, a party may have transferred ownership of valuable personal assets.  The various factors set out in s. 65(1) of the FRA reflect this reality.  I believe the proper approach to determining whether a division of family assets under a marriage agreement is fair is for a judge to assess the division in light of the s. 65(1) factors.  The original intention of the parties is relevant insofar as it points the court towards how the parties chose to address the requirements of fairness. If the parties fairly addressed the enumerated factors through other provisions in the agreement, that should be taken into account.  That being said, the parties’ original intention is not determinative at this stage.  Fairness is a concept that is independent of any agreement. If a court establishes that a marriage agreement is fair in light of the s. 65(1) factors, it will stand.  If it is not, the court will redress it.  For greater certainty, a judge redressing the unfairness resulting from a marriage agreement may want to test the result of his or her s. 65(1) reapportionment by comparing it to the division the judge would have established had there been no agreement.  Since the criteria are the same, the share apportioned to each spouse should be similar whether there is a contract or not.

79                            It is true that s. 56(3) of the FRA refers to parties’ ability to regulate, by contract, the division of family assets upon dissolution of a marriage. The parties are admittedly better placed than a judge to evaluate what suits them. The analysis I have outlined above does not disregard this.  Section 56(3) does not entitle one of the parties to stipulate that he or she receive more than his or her fair share of the total family wealth, in abstracto.  What it does permit is for the parties to determine the manner in which that fair share should itself be apportioned between the parties, in concreto.  In other words, if the court finds that the agreement is fair, it will uphold it.  If it finds it to be unfair, it will reapportion the total value of the family assets.  The parties’ agreement will affect which specific assets can be awarded to a given spouse.

80                            Unlike s. 15.2(4) (c) of the Divorce Act , which was in issue in Miglin, supra, and requires courts to take into consideration “any order, agreement or arrangement relating to support of either spouse”, s. 65(1) makes no mention of the agreement in the list of factors for courts to consider when assessing the substantive fairness of a division of assets.  Consideration of the marriage agreement is not even implicitly alluded to.  This is not surprising given that what is under review is the agreement itself.  It would be a useless exercise if the fairness test were to be based on an unfair agreement.  Thus, in British Columbia, spouses may not seek to rely on unfair provisions for the division of assets on marital breakdown.  Those are the bounds of meaningful choice for spouses in that province.

81                            Public policy supports this conclusion.  The approach favoured by the majority would fail to encourage spouses to make genuine efforts to conclude fair agreements (and to update them for fairness as circumstances change), if a potentially intransigent party could tell himself or herself: “This may turn out to be unfair, but at least a court would still take it into account.”  In this case, the appellant testified that, on being informed that the respondent’s lawyer considered the agreement “grossly unfair”, he considered it “interesting”, but refused to make substantive changes to render the agreement fair.  Parties have many fair options about how to arrange their affairs and protect particular assets, and they need an incentive to consider them and take them seriously.

82                            Moreover, with regard to assessing fairness, the original intentions of the parties may be particularly problematic in the case of premarital agreements, often executed years prior to separation.  Most people enter into a marriage hoping that it will succeed, and their cost-benefit analysis before execution may be based on the assumption that the risk of the provisions ever coming into effect is low.  Fairness must be established based on a contemporaneous evaluation of the factors set out in the FRA.  As acknowledged by the majority of the British Columbia Court of Appeal in this case: “What the parties view as fair at the time of executing the agreement may become unfair as the relationship evolves, and as circumstances change” (para. 61).  This is exactly what the judge ought to evaluate under s. 65(1).

83                            I would like to address a final issue before moving on to an analysis of the aforementioned principles in light of the facts of this case.  The appellant argued before this Court that when an agreement contains unfair provisions on division of property, the court is not authorized to set aside the entire agreement.  As I explained before, I agree that the existence of a marriage agreement cannot be ignored, although, as stated by the Court of Appeal in Gold, supra, at para. 57, “the difference between reforming an unfair agreement in order to make it fair and setting such an agreement aside will sometimes be more semantic than real”.  The principle was well articulated in Stark v. Stark (1990), 71 D.L.R. (4th) 446 (B.C.C.A.) (leave to appeal refused, [1991] 1 S.C.R. xiv), when the Court of Appeal affirmed that under s. 65(1) “the court does not have to set aside the separation agreement; it merely reapportions the family assets of the spouses, a jurisdiction unknown at common law” (p. 453).  Further, “it is not necessary to ‘set aside’ the separation agreement although reapportionment may have that effect as to some of its terms”.

II.      Application to the Facts of This Case

84          In my view, the trial judge properly considered the factors listed in s. 65 to conclude that the provisions on division of property in the Hartshornes’ agreement were unfair. Except for Mr. Hartshorne’s law partnership with which I will deal later, she was justified to reapportion the assets as she did, without regard to the unfair provisions of the agreement.  The Court should consequently defer to her conclusions. 

A.     The Trial Judge Did Not Err as a Matter of Principle

85                            As I mentioned at the outset of this opinion, the first instance proceedings took place over an extended period of time. The trial, dealing with the issues of divorce, custody and access, child support, spousal support, the effect of a marriage agreement, and the division of assets, lasted six days in July 1999.  During the trial, counsel agreed that the valuation of the family assets would be dealt with at a later date, if necessary.  Consequently, Beames J. gave reasons for judgment in November 1999 but was, for the most part, limited to defining which assets were family assets and making percentage apportionments.  Over a year later, in February 2001, after having heard evidence and argument with respect to valuation, she gave reasons for judgment on outstanding issues which included the division of assets.

86                            The majority cites Prowse J.A.’s opinion in Toth v. Toth (1995), 13 B.C.L.R. (3d) 1 (C.A.), at paras. 57 and 59, which supports the contention that questions of reapportionment under s. 65 should generally be settled before turning to the question of maintenance: see also Metzner v. Metzner (1997), 34 B.C.L.R. (3d) 314 (C.A.), at para. 40.  I agree with the wisdom of this position since it will sometimes be possible and easier to deal with the parties’ need to become or remain economically independent through a fair division of capital family assets.  As recognized by the B.C. legislature in s. 65(1)(e) of the FRA, and as was reaffirmed by this Court in Bracklow v. Bracklow, [1999] 1 S.C.R. 420, at para. 32, “[i]t is critical to recognize and encourage the self-sufficiency and independence of each spouse” at the time of and after their separation: see also Moge v. Moge, [1992] 3 S.C.R. 813, at pp. 860-61.  Self-sufficiency will sometimes be intrinsically linked to matrimonial property:

It is the choices made about employment, savings, and spending which will determine if a family will be self-sufficient or, to use an equivalent financial planning term, financially independent. To be financially independent means to be able to meet future needs from the resources that have been acquired during the years of employment. This is the same definition that must be used to measure self-sufficiency in divorce. Can the wife meet her current and future needs from the resources acquired during the years of employment? Can she do so in accordance with the same standard of living as she would have had if the family unit had remained intact? [Emphasis added.]

(M. Grassby, “Women in Their Forties: The Extent of Their Rights to Alimentary Support” (1991), 30 R.F.L. (3d) 369, at pp. 372-73)

Often, if one spouse was unemployed during all or part of the marriage relationship, staying at home to take care of his or her children, he or she will not have acquired the resources needed to become or remain independent post separation.  Such an imbalance needs to be rectified in a principled and systematic manner.  As a general rule, then, the trial judge should try to address in sequence (1) the apportionment of matrimonial property, (2) the existence of a right to maintenance and support and, if such a right exists, (3) the extent of the need for such maintenance or support.  This sequence is not, however, a rule of law.  Trial courts must not be straitjacketed.

87                            A failure to proceed in this manner does not amount to an error in law or principle, but when it is not followed the evaluation process is rendered more hazardous.  Consequently, Beames J. did not err by proceeding otherwise.  She did so with the consent of the parties, presumably to avoid delaying the proceedings any further and to encourage a settlement.  However, to assess the fairness of an agreement and reapportion family assets in a way that addresses the parties’ economic self-sufficiency, one needs to have adequate valuation information.  In the case at bar, the trial judge commented at the valuation stage that the preliminary figures in front of her during the earlier 1999 trial allowed her to make some percentage apportionments, and that nothing had arisen since to justify changing them.  Thus, without fully appreciating it, she found herself in a difficult situation. However, she proceeded systematically, and in a principled manner, and achieved, on the whole, a fair and reasonable outcome, with only one exception.  Indeed, it is solely with respect to the reapportionment of the law partnership that Beames J.’s unconventional approach caused her to err in law by failing to apply the rule against double recovery (I shall elaborate upon this matter further under the next heading).

88                            Therefore, I disagree with the majority’s statement that the trial judge should first have applied the marriage agreement, then determined the need for spousal support, and finally decided whether the result warranted a different apportionment of assets in light of the s. 65 factors (para. 56).  To proceed in this manner gives undue weight to the agreement, be it fair or unfair, when the whole purpose of the exercise provided for in s. 65(1) is to assess its fairness.  A marriage agreement is merely a presumptive entitlement.  The assessment of its fairness under s. 65 and of the extent to which it needs to be reapportioned are judicial prerogatives.  Although, as a matter of logic for the reasons I have canvassed above, it will often be preferable to address the issue of division of matrimonial property before assessing needs for maintenance and support, ultimately the trial judge is best placed to know in what order to proceed.  Therefore, despite the fact that Beames J. did not proceed in a conventional manner, unlike the majority I do not believe this constituted an error per se.

B.      Evaluation of the Trial Judge’s Findings of Fact

(1)    The Bulk of the Family Assets

89                            The circumstances of negotiation and execution supported turning a keen eye to the Hartshornes’ prenuptial agreement.  The respondent was warned in a letter obtained through independent legal advice that the agreement might be “grossly unfair” and that she should not execute it in its present form.  She raised her concerns with the appellant who declined to address them in any substantive way.  The essential elements of this letter are summarized at para. 60 of the majority’s opinion and I shall not repeat them here.  Suffice it to say that, although this letter does not per se establish that the agreement was unfair, it underlines its shortcomings.  For example, no matter how long the marriage lasted the respondent could not obtain more than a 49 percent interest in the family home.  The majority states that by choosing to execute the agreement despite having noticed that it might be unfair, the respondent signalled that she was not concerned.  This analysis, in my view, is not acceptable and confuses fairness with unconscionability.  While it is true that the agreement’s shortcomings were apparent to some degree at the time of execution, foreseeability (or simply “signing” the agreement) does not cure its substantive unfairness.  Although it may constitute a bar to setting the agreement aside on the ground of unconscionability, independent legal advice prior to execution does not render it fair nor does it leave the trial judge powerless: see Davidson v. Davidson (1986), 2 R.F.L. (3d) 442 (B.C.C.A.); Gold, supra; Stark, supra.  As emphasized above, the fairness of marriage agreements must be assessed at the time of application to the court, in light of the factors contained in s. 65(1) of the FRA.

90                            There are indications that the respondent was in a vulnerable position in negotiation — not enough for the agreement to be unconscionable, but enough to suggest that the trial judge should be alive to the possibility that the agreement was unfair.  The respondent had already been out of the workforce and dependent on the appellant for almost two years and had only ever worked as a lawyer (and before that, an articling student) in the appellant’s firm. The agreement was concluded under pressure with the wedding fast approaching.  The respondent sought changes to the agreement before execution but was unable to persuade the appellant to agree, except with respect to minor changes, such as the insertion of a clause to the effect that her signature was not voluntary and was at his insistence.  These circumstances illustrate the appellant’s position of power within the relationship, as well as the respondent’s correlative dependence.  That she remained at home for the rest of the marriage relationship to take care of the couple’s children further illustrates the power dynamics at play.  Taken as a whole, these circumstances justify reviewing the agreement with increased scrutiny.

91                            Referring to “traditional” marriages, L. J.  Weitzman stated in  The Divorce Revolution: The Unexpected Social and Economic Consequences for Women and Children in America (1985), at p. 342, that:

Marriage gives men the opportunity, support, and time to invest in their own careers. Thus marriage itself builds and enhances the husband’s earning capacity. For women, in contrast, marriage is more likely to act as a career liability. Even though family roles are changing, and even though married women are increasingly working for pay during marriage, most of them nevertheless subordinate their careers to their husbands’ and to their family responsibilities. This is especially true if they have children. Thus women are often doubly disadvantaged at the point of divorce. Not only do they face the . . . income gap that affects all working women, they also suffer from the toll the marital years have taken on their earning capacity.

This is exactly what happened in the case at bar. Nevertheless, at para. 63 of its opinion, the majority bluntly states that it is “not realistic to assume” that the respondent had not “understood” the consequences of her decisions to be the primary caregiver of her two children and to postpone any further career development, thus implying that she should now accept these consequences and live with them.  At this point, it is useful to recall Bastarache J.’s statement in Nova Scotia (Attorney General) v. Walsh, [2002] 4 S.C.R. 325, 2002 SCC 83, at para. 55, to the effect that a “decision not to marry should be respected because it . . . stems from a conscious choice of the parties”. In that case, it was decided that partners living in a conjugal relationship who chose not to get married did not have access to the protection of the matrimonial regime at stake, and that this did not violate s. 15(1)  of the Canadian Charter of Rights and Freedoms .  Bastarache J. held that a decision to live together was insufficiently indicative of “a positive intention to contribute to and share in each other’s assets and liabilities” (para. 54).  This necessarily implies that the conscious and solemn choice to enter a marriage relationship must be treated as such. Marriage is a “joint endeavour”, a socio-economic partnership: Moge, supra, at p. 870.  On the one hand, married spouses are entitled to the full protection of their matrimonial regime.  On the other, they must fully assume the responsibilities flowing from their decision to get married. By choosing to marry the respondent, to have children, and to support and benefit from his wife’s work in the private sphere, Mr. Hartshorne agreed to bear all the consequences of the legislative regime regulating his decisions, including judicial review under s. 65 of the FRA.  He cannot have his cake and eat it too.

92                            It is true that the trial judge’s reasons for judgment are not as detailed as they might have been on all of the factors that she mentioned in arriving at her determination that the marriage agreement was unfair.  However, she correctly focuses on the factors listed in s. 65.  She indicates that the most relevant factors corresponding to the s. 65(1) subsections were: (a) the 12½-year duration of the relationship, (c) the fact that almost all the property was acquired by the appellant prior to the relationship, (e) the respondent’s need to become or remain economically independent and self-sufficient, and (f) the respondent’s role in the construction of the family home, and the effect that her assumption of homemaking responsibilities had on the appellant’s ability to focus on his law practice.  Given these factors, Beames J. was satisfied that the agreement was unfair.  She makes particular reference to the respondent having postponed her own future career development, while having received no entitlement to any pension or retirement savings in the agreement, and an insufficient interest in the family home and its contents.  She writes, at para. 58 of her 1999 decision:

Under the terms of the agreement, as signed by the parties, the defendant could do no better, no matter how long the marriage lasted, than a 49% interest in the family home, a joint interest in the household contents, and an interest in family cars. Notwithstanding the fact that she had given up, by that time, her own law practice, and at least postponed any further career development, the agreement provided nothing for that sacrifice, and in particular, made no provision for any entitlement to pension or retirement savings. By the time of the separation, the terms of the agreement provided that the defendant’s interest in the family home was 27%, using a period of cohabitation following marriage of 9 years, at 3% per year.

This rightly takes into account concerns regarding the dependent spouse’s capital impairment on marital breakdown.  Thus, these are all appropriate considerations that reflect the substantive unfairness of the agreement at the time of application.  The trial judge’s conclusion with respect to the unfairness of the agreement was reasonable and should, therefore, be maintained, save for her findings on the law partnership.

93                            Beames J.’s reasoning on the figures she reached in reapportionment is once again rather succinct.  However, she makes it clear that her objective is to achieve fairness, which is correct.  As discussed above, it would have been incorrect for her to assign weight to provisions that she found to be unfair.  She did not do so. While one might disagree with the exact reapportionment she reaches, I believe that for the bulk of the family assets, Beames J. did not commit any palpable and overriding error.  As established by this Court in Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33, at para. 1 (per Iacobucci and Major JJ.), with respect to questions of fact and some questions of mixed fact and law, a “proposition that should be unnecessary to state is that a court of appeal should not interfere with a trial judge’s reasons unless there is a palpable and overriding error” (emphasis added). As I find that no such error was committed, I would not disturb the gist of her reapportionment. Thus, her conclusions regarding the family home and its contents, the RRSPs and savings, the vacation property, and the Ford Expedition should not be modified.  In his dissent Thackray J.A. came to a similar reapportionment.  This conclusion is fair overall and in its constituent elements.

(2)    The Law Partnership

94                            At para. 66 of its opinion, the majority recognizes that “a law corporation could potentially be classified as a family asset” capable of being reapportioned under s. 65(1) of the FRA.  In fact, the categorization of professional practices as family assets is consistent with British Columbia’s jurisprudence.  For example, in Underhill v. Underhill (1983), 45 B.C.L.R. 244, the British Columbia Court of Appeal held that the husband’s interest in a law partnership was a family asset.  In the case at bar, I disagree with the majority’s finding that the appellant’s interest in the partnership should not be categorized as a family asset.

95                            Family assets are defined in s. 58 of the FRA:

58 (1)   Subject to section 59, this section defines family asset for the purposes of this Act.

     (2)   Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.

     (3)   Without restricting subsection (2), the definition of family asset includes the following:

                                                                   . . .

(e)   a right, share or an interest of a spouse in a venture to which money or money’s worth was, directly or indirectly, contributed by or on behalf of the other spouse.

I am of the view that the appellant’s interest in the law firm falls squarely within the ambit of s. 58(3)(e) and is, consequently, a family asset.

96                            The majority states that it must be excluded under s. 59(1):

 59 (1)  If property 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, the property is not a family asset.

Based on this definition, for an asset to be excluded as a business asset, two conditions must be met: (1) it must be used primarily for business purposes, and (2) the non-owning spouse must have made no contribution to its acquisition or to the operation of the business.  The problem with the majority’s position is that, in this case, the respondent did contribute significantly to the operation of the law partnership.

97                            As explicitly recognized in s. 59(2):

(2)    In section 58(3)(e) or subsection (1) of this section, an indirect contribution includes savings through effective management of household or child rearing responsibilities by the spouse who holds no interest in the property.

A contribution can thus be inferred from the fact of participation in household management and child rearing: see Elsom v. Elsom (1982), 35 B.C.L.R. 293 (S.C.), aff’d (1983), 37 R.F.L. (2d) 150 (B.C.C.A.) (leave to appeal refused, [1984] 1 S.C.R. vii); Gillespie v. Gillespie (1995), 1 B.C.L.R. (3d) 28 (C.A.), at para. 56.  It is noteworthy that in Peter v. Beblow, [1993] 1 S.C.R. 980, at p. 1000 (per McLachlin J., as she then was) and at p. 1020 (per Cory J.), this Court has recognized that, in the context of common law unions, indirect services such as the provision of household services may justify the award of a proprietary interest in assets acquired over the course of a relationship.  Indirect contribution can also include other types of contributions.  For example, in Piercy v. Piercy (1991), 31 R.F.L. (3d) 187 (B.C.S.C.), supplementary reasons (1993), 86 B.C.L.R. (2d) 285, a wife was living in affluent circumstances, with considerable household help, and there were no children of the marriage.  The court found that she had made an indirect contribution in fulfilling the husband’s expectations that she occupy a largely social role and be a “confidante and sounding board” (para. 25).  In the case at bar, the respondent clearly provided a significant indirect contribution to the operation of the appellant’s law practice.  From 1987 to the date of separation, and indeed since the date of separation, she assumed full time responsibility for child care and homemaking, allowing the appellant to continue to practise full time, with significantly fewer concerns on his mind.  This is more than sufficient to fulfill the requirements of ss. 59(2) and 58(3)(e). Therefore, Mr. Hartshorne’s interest in the law partnership is a family asset capable of judicial reapportionment under s. 65(1) of the FRA.

98                            Obviously, concluding that the law partnership is a family asset does not provide guidance as to whether Beames J. erred in reapportioning Mr. Hartshorne’s interest in the law partnership in favour of the respondent.  In fact, unlike the rest of her analysis, Beames J.’s reasoning on this issue lacks some coherence.  In her initial analysis of the fairness of the marriage agreement and of the percentage of each family asset that should be reapportioned to achieve fairness, Beames J. did not mention the law corporation (1999 reasons, at paras. 63-64). She did, however, have an opinion on the matter at the time. In her second set of reasons, dealing with the issue of valuation, she writes, at para. 27:

During the course of this hearing, I advised counsel that it had been my view, at the time I provided Reasons following the first hearing, that the 60% to the plaintiff and 40% to the defendant distribution that I applied to all of the family assets, other than the home and contents, was appropriate for the law corporation as well.

The problem with this conclusion is that, during the first hearing, the trial judge did not have access to important valuation information that was introduced in the course of the second hearing, such as the decrease in value of the law firm relative to the value stated in the marriage agreement.  Despite this important new information, Beames J. chose to stick to her first impressions.  Compounded with the difficulties arising from the unconventional sequence in which she chose to address the issues of maintenance, support, division and valuation of property, her desire to remain faithful to her intuitions seems to have contributed to her failure to realize that she was committing an error.

99                            Indeed, it seems illogical for Beames J. to have reapportioned the appellant’s law practice, his main source of revenue, in a 3:2 ratio, while having previously demanded that he pay the respondent significant spousal support.  On the facts of this case, this would amount to the respondent biting the hand that feeds her and imposing an unreasonable burden on the appellant.  As noted by Major J., writing for the majority in Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43, at para. 1:

“Double recovery” or “double dipping” are terms that have come to describe the situation where, after an equal division of assets on marriage breakdown, one spouse claims continued support from the previously divided or equalized assets of the other spouse.

Double recovery can also happen when a capital family asset is reapportioned without considering the conditions of separation as a whole, including a prior spousal support order.  This principle applies equally in the context of s. 65(1) of the FRA. In exercising her discretion to apportion family assets under s. 65(1), a trial judge must not come to a solution which results in double-dipping.

100                        Admittedly, the order for spousal support was discontinued two years after the initial judgment (oral reasons for judgment of Melnick J., February 11, 2002).  This state of affairs cannot, however, be determinative since support orders, or discontinuation thereof, continue to be reviewable when the circumstances laid out in the Divorce Act  arise.  Moreover, what is being reviewed at this stage is the fairness of the trial judge’s judicial reapportionment per se.  At the time her reasons for judgment were released, the trial judge had no means to anticipate if, when and how her spousal support order would be modified.

101                        To assess the fairness of a division of family assets, one must look at it as a whole and consider it together with the parties’ other financial arrangements.  Had the trial judge first proceeded to the reapportionment of the law partnership and then tailored the amount of spousal support in consequence, my conclusion might have been different. Alternatively, had she been careful to reapportion the law partnership while giving full consideration to her prior spousal support order and to the decrease in value of the firm, I might also have been inclined to be more deferential.  She did neither, instead considering each issue in a vacuum. In this case, given the amount of spousal support ordered and the reapportionment of other family assets, the law partnership should simply not have been included in the redistribution.  The trial judge should have realized that it was inappropriate to deprive the appellant of 40 percent of his interest in his main source of income if he was to pay $2,500 per month to the respondent as spousal support. On the one hand, taken together, Beames J.’s orders for spousal support and for reapportionment of the law firm constituted “double-dipping” and are thus anomalous; on the other hand, the remaining family assets considered together can properly be viewed as the respondent’s fair share.  This conclusion does not prejudice any variation application that the respondent might bring for a reevaluation of her need for spousal support following this decision.

III.    Conclusion

102                        For the reasons given above, I would only allow the appeal in part, that is, to the extent that the appellant’s law firm should not have been reapportioned in favour of the respondent.  Costs should be awarded to the respondent in this Court.

Appeal allowed, Binnie, LeBel and Deschamps JJ. dissenting in part.

Solicitors for the appellant:  Megan Ellis & Company, Vancouver.

Solicitors for the respondent:  McLachlan Brown Anderson, Vancouver.