Recently the British Columbia Supreme Court deliberated on the validity of a marriage agreement and its impact on the involved parties (Bradley v. Callahan, 2024 BCSC 163).
Before tying the knot, Ms. Bradley and Mr. Callahan each engaged with their respective legal counsels for over a month to thoroughly discuss and negotiate their marriage agreement prior to signing. Upon signing, Ms. Bradley’s legal counsel provided Mr. Callahan’s counsel with a certificate confirming independent legal advice. Seventeen years later, and with no updates to the original agreement, their marriage ended in separation in 2014.
A pivotal clause in the agreement dictated that Mr. Callahan’s business interests, dubbed the “Argus Group” would not be subject to division upon separation. When the agreement was signed, Argus Group had interests in 11 corporations valued at approximately $2 million. By the time of their separation, the Argus Group’s value had soared to around $87 million, and skyrocketed to approximately $186 million at the time of the trial. Both parties acknowledged that the value continued to appreciate thereafter.
Although the marriage agreement excluded the Argus Group’s value and assets from division, upon separation, nearly two decades after the agreement was made, Ms. Bradley pursued an equal division of assets.
Property Division – Application of the Marriage Agreement:
In the event of separation, the Family Law Act provides that each spouse has an equal interest in family assets, with exceptions such as those outlined in a marriage agreement.
However, a court may intervene if it deems that an otherwise valid agreement unfairly impacts property division considering the specific circumstances of the case. In assessing fairness, the Court must weigh the agreement against certain factors listed in the Family Law Act including the length of time that has passed, the intention of the spouses to achieve certainty, and the degree the spouses relied on the terms of the agreement.
The Validity of the Marriage Agreement:
Ms. Bradley contested the validity of the marriage agreement, citing concerns over the legal advice she received and its impact on the preparation of the marriage agreement. She also challenged the agreement due to inadequate disclosure from Mr. Callahan regarding his business assets.
The Court ruled against Ms. Bradley’s arguments, noting the comprehensive nature of the agreement, which underwent negotiations with experienced legal representation for both parties. Furthermore, Ms. Bradley received ample time to review and revise the agreement with her legal counsel highlighting the “grossly unfair” nature of the agreement and confirming her understanding of it. The Court also found Mr. Callahan’s disclosure to be satisfactory. Despite lacking formal valuations, the agreement stipulated that business assets would remain non-divisible, irrespective of their worth. Consequently, the agreement stood as valid and binding.
To find validity, the Court applied the guidance of Hartshorne v Hartshorne, 2004 SCC 22, where the Supreme Court of Canada highlighted the importance of reviewing a marriage agreement over time to avoid the same fate as Ms. Bradley. The Court in Hartshorne ruled that a fair agreement does not necessarily require equal division and that courts should respect private arrangements that spouses make for the division of their property. Marriage agreements, despite the passage of time, do not have a “shelf life” that allows for expiry.
Fairness of the Marriage Agreement:
The Court considered various factors, including the duration of the marriage, separation period, acquisition dates of property, and spousal economic independence.
Ms. Bradley argued that the agreement unfairly disadvantaged her due to unforeseen financial circumstances and career constraints stemming from familial obligations.
However, the Court upheld the agreement, reasoning that both parties were aware that Mr. Callahan’s business assets would remain independent. It was deemed reasonable that these assets would appreciate in value given Mr. Callahan’s expertise in real estate.
The Court upheld the original intentions outlined in the marriage agreement seventeen years prior to the separation, affirming that Mr. Callahan’s business assets were exempt from division. Ms. Bradley was awarded a lump sum of spousal support to ensure a satisfactory standard of living, totaling approximately $8 million.
This case underscores the importance of meticulously crafted marriage agreements, particularly in safeguarding business interests. Not only does it reaffirm that agreements will not be overturned if properly formulated and executed, it also highlights the importance of revisiting and revising past agreements.
If you have questions or are interested in a Marriage Agreement, please contact our Family Law team.
