Enforcing Informal Domestic Contracts: Anderson v Anderson
In Anderson v Anderson, 2023 SCC 13 [Anderson], the Supreme Court of Canada (“SCC”) clarified the approach to considering non-presumptively enforceable domestic contracts. In partially departing from the Saskatchewan Court of Appeal, the Court unanimously ruled that while the overarching principles established in Miglin v Miglin, 2003 SCC 24 [Miglin], can be used in the interpretation of informal domestic contracts, any such interpretation must be directed by the objectives and structures of the underlying statute.
Diana Anderson (“D”) and James Allan Anderson (“J”) were married for three years and separated on May 11, 2015. On July 19, 2015, during a meeting with friends, the parties executed an agreement, prepared by D, which divided the family property (Anderson, para 12). The agreement largely provided that each party keep their respective property and give up all rights to the other’s property, except for the family home and household goods. There was no financial disclosure between the parties and neither consulted independent legal counsel prior to signing. Notably, D told J to “think it over and talk to a lawyer,” though he declined and signed immediately. (Anderson, para 12).
In Saskatchewan, the Family Property Act, SS 1997, c F-6.3 (FPA) is the chief family property legislation. Under the FPA, there are two recognized types of domestic contracts dealing with family property: those that are presumptively enforceable and those that are subject to judicial interpretation. For a contract to be presumptively enforceable, it must conform to statutory formalities set out in s 38–namely, for the agreement to be in writing, signed by each spouse, in presence of witnesses, and after consultation with a lawyer detailing the nature and effects of the agreement. In agreements where there is no such conformity, the court can assign the domestic contract “whatever weight it considers reasonable” per s 40.
Following the meeting, the parties began to perform the terms of the agreement. J retrieved his furniture, and D reconveyed the truck to J; however, J was not responsive to D’s attempt to deal with the family home. D’s lawyer contacted J to formalize the agreement per s 38 requirements. However, J neither responded nor challenged the agreement (Anderson, para 16).
On December 10, 2015, D petitioned the court seeking a divorce and costs, but not spousal support or property division. On May 5, 2017, J issued an answer and counter-petition, claiming for property division and arguing that the agreement was signed without counsel and under duress (Anderson, para 17).
Queen’s Bench for Saskatchewan
At the trial level, the judge found the domestic contract unenforceable given the lack of independent legal advice. He found the agreement to fail to reach the threshold of a contract and so he did not consider its substance when dividing family property, instead equalizing the assets under the FPA and ordering costs to D. In doing so, he gave no weight to the domestic contract (Anderson, para 18).
Court of Appeal for Saskatchewan
At the appellate level, the Saskatchewan Court of Appeal set aside the trial judge’s order, finding that he erred in his interpretation of the agreement, mainly in relying heavily on the lack of independent legal advice. Drawing inspiration from Miglin the Court of Appeal developed a framework for assessing consideration under s 40. The first hurdle is for courts to assess whether the agreement is valid according to contract law principles. If it is valid, then the party seeking to discredit it must show that (1) there were inequities in the bargaining process; (2) the unfair substance of the agreement departs substantially from objectives of the FPA; and, (3) there have been new or changed circumstances so that the agreement no longer reflects the parties’ intentions or so that the agreement is no longer compliant with statutory objectives (Anderson, para 21). In applying this framework to the Anderson context, the Court of Appeal found the property agreement binding and afforded it great weight. Thus, they divided property according to the contract and ordered costs to J (Anderson, para 19). Following my colleague’s appeal watch article, the SCC decision has now been released.
Issue on Appeal
How should courts evaluate domestic contracts that opt out of a provincial property scheme, but fail to meet the statutory requirements necessary for presumptive enforceability? More specifically, does the analytical framework developed in Miglin apply to such domestic contracts? (Anderson, para 2).
Writing for a unanimous court, Karakatsanis J. begins by categorizing the agreement between D and J within the FPA scheme. She finds that the agreement lacked the formalities set out in s 38, since there was no independent counsel to ensure full recognition of the agreement. Failing to be presumptively enforceable, the agreement is then subject to judicial interpretation under s 40. In making a determination as to the weight of the agreement, Karakatsanis J. partially departs from the Court of Appeal framework, finding that their framework imported Miglin without due modification given the objectives of the FPA (Anderson, para 23).
Per Miglin, the framework relating to judicial interpretation of informal domestic contracts has two stages. The first stage examines fairness at the time the agreement was concluded, evaluating first the circumstances of the bargaining process and second the substance of the agreement to discern whether it is in compliance with general objectives of the legislation (Anderson, para 26). The second stage examines the substance of the agreement at enforcement to determine whether it still reflects the original intentions of the parties.
After canvassing cases following Miglin, Karakatsanis J. writes that the Miglin framework is not a one-size-fits-all approach, and that judicial interpretation regarding whether to give weight to an informal domestic contract must be informed by the underlying statutory scheme (Anderson, para 31). She notes that this is especially important given Canada’s constitutional makeup where certain domestic aspects, such as spousal support, are dealt with under the federal Divorce Act, whereas other aspects, such as family property division, are dealt with provincially. She writes:
To automatically import a structured analysis grounded in federal legislation to interpret a discretionary provision in a provincial statute risks undermining the province’s legislative authority (Anderson, para 31).
Still, Karakatsanis J. recognizes that the SCC has broadly relied on principles from Miglin to address common domestic contract concerns (Anderson, para 33). Thus, while the interpretative framework for assessing a domestic contract is statute-specific, the principles of Miglin aid in judicial assessment. Such principles stem from the deference paid to domestic contracts as a recognition of self-sufficiency, autonomy, and finality which are balanced against fairness concerns arising from the challenging environment surrounding the negotiation and conclusion of domestic contracts (Anderson, para 34).
In recognizing these considerations, Karakatsanis J. amends the Court of Appeal’s framework: first, the court must determine whether the agreement is valid according to ordinary contract law principles (Anderson, para 48); second, the court must examine the agreement’s merits as directed by the underlying statute (Anderson, para 49). If both the validity and procedural integrity thresholds are met, then the court may consider the agreement in determining the appropriate order for division of property (Anderson, para 50).
She then applies this framework to the facts at bar. With regard to the first prong of validity, the trial judge relied on communication attempts between the parties and the lack of legal advice to find the agreement unenforceable. In doing so, Karakatsanis J. states that the trial judge erred in principle, finding that communications between the parties pertained to the family home (as expressed in agreement itself), and involvement of counsel is only a prerequisite under s 38, and not s 40 (Anderson, para 66). Thus, the agreement is binding. With regard to the second prong of procedural integrity, again, she finds that neither the lack of disclosure nor the lack of legal advice led to unfairness in the bargaining process, given there is no evidence they led to the parties not understanding the terms of effect of their agreement (Anderson, para 69). Thus, the agreement is procedurally fair. Consequently, she enforces the agreement and allows the appeal but ordering each party to bear their own cost (Anderson, para 85).
In amending the Miglin-heavy framework proposed by the Court of Appeal, Karakatsanis J. strikes a better balance between addressing fairness concerns, and promoting freedom of contract. While there is an interest in protecting contacts in the family law context, this adjustment better grounds the judicial interpretation of informal agreements in legislative mandates, thereby ensuring courts only enforce high quality contracts. Applying this amended framework, the SCC correctly found that there were no fairness concerns in the bargaining process as alleged by J, since the lack of independent legal counsel did not lead to a misunderstanding of the nature and effects of the agreement by neither party. However, moving forward, this decision should encourage divorce lawyers and their clients to insist on legal representation prior to signing any agreement to ensure no perceived unfairness.
In my view, the more nuanced (and dare I say important) aspect of this decision is the Court’s recognition of Canada’s unique constitutional makeup when it comes to addressing domestic issues. As Karakatsanis J. notes, when certain domestic aspects are handled federally and others are handled provincially, courts must be alive not to import any federal interpretive frameworks into provincial schemes and vice versa. Given this complexity, I suspect courts will continue to struggle with when and how they should draw from federal interpretive frameworks in provincial contexts. In this case, it seems that the Court found the mandate in Miglin was broader than the mandate underlying the FPA, but will that always be the case? How should courts approach cases where the provincial mandate is broader than the federal interpretive frameworks allow? The SCC will have to speak again.
In Anderson, Karakatsanis J. clarifies the principles established in Miglin to better instruct future courts on how to interpret informal domestic contracts. In the case of J and D specifically, the Court finds that their agreement was both valid and procedurally fair, so it is enforceable.
This article was edited by Meredith Wilson-Smith.