Overturning a Marriage Contract: Balsmeier v. Balsmeier, 80 R.F.L. (7th) 274 (Ont. S.C.J.)
In this case, Justice Fryer presided over a six-day trial in which the wife sought to overturn a marriage contract. Of particular interest is Justice Fryer’s comments with respect to marriage contracts as there are too many cases brought before the court in which one party attempts to set aside a marriage contract that was negotiated with independent legal advice and sufficient financial disclosure.
The Husband succeeded at trial because the marriage contract was upheld and Justice Fryer refused to award spousal support to the wife.
Leading up to the trial, the Husband delivered a number of offers to settle. The Husband sought costs in the amount of $95,000, close to full recovery costs, related to the trial. In response, the Wife argued that while the Husband was the successful party, r. 18 of the Family Law Rules does not apply and that the costs sought by the Husband were excessive. The wife asked the court to consider her poor financial position relative to the Husband.
Justice Fryer began with an overview of the leading case law on the subject of costs.
In Serra v Serra, 2009 ONCA 105, the Ontario Court of Appeal confirmed that modern costs rules are designed to foster three fundamental purposes:
- to partially indemnify successful litigants for the cost of litigation;
- to encourage settlement; and
- to discourage and sanction inappropriate behaviour by litigants bearing in mind that the awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party.
Generally, the starting point for an analysis of costs is a determination of success that incorporates offers to settle that have been delivered by each party as well as the position each party took at trial.
At trial, the husband’s position was that the marriage contract should be upheld and that he would continue to pay spousal support as per the terms of the contract. The Wife’s position at trial was that the marriage contract should be set aside permitting her to advance a claim for equalization of the parties’ property and increased spousal support. Alternatively, if the contract was upheld, she requested additional spousal support in the amount of $15,000 per month for a period of three years.
With respect to the offers to settle, the husband had delivered several. In two of his offers, the husband set out the terms of the proposed settlement, which included payment of spousal support. The wife delivered an offer to settle wherein, she offered $15,000 in spousal support payable for 24 months, plus a further $12,000 in medical expenses.
Pursuant to rule 18(6), an offer that is not accepted within the time frame set out in the offer is considered to have been withdrawn. As such, the husband’s second offer to settle was such that the offer was deemed to have been withdrawn prior to trial. Ultimately, as the husband’s offer was not open at the time of trial, Justice Fryer considered it under Rule 24(5).
Under Rule 24, Justice Fryer found that the Husband’s position was more reasonable than the Wife’s. Further, the legal issues raised at trial were not necessarily unique but the validity of a marriage contract is an issue of general importance.
In contemplating same, Justice Fryer referred to the Supreme Court of Canada judgment in Hartshorne v Hartshorne, 2004 SCC 22, in which the Court held that private agreements are to be given significant weight. However, Justice Fryer noted the following with respect to marriage contracts:
…there are still too many cases brought before the court wherein one party attempts to set aside an otherwise valid contract in the hopes of shaking loose a more favourable resolution from the wealthier party. Such cases frequently involve marriage contracts or cohabitation agreements and have significant negative repercussions. The party who succeeds in having the contract upheld rarely recovers the legal fees expended to defend the contract and this party loses confidence in the sanctity of contract. There is an associated chilling effect on the legal profession wherein family lawyers become increasingly reluctant to assist in negotiating marriage contracts for fear of triggering their professional liability insurance deductible. Lastly, these cases consume valuable court resources. These factors combine to negate the benefits of a private resolution of financial affairs.
Following same, Justice Fryer indicated that the aforementioned dynamic was present in the case at hand and therefore considered it as part of the quantum of costs awarded.
In the end, Justice Fryer held that the Wife was to pay the husband costs in the amount of $80,000. The amount substantially indemnified the husband, who was the successful party. Justice Fryer maintained that the Husband had made serious efforts to settle the matter well before the trial date, whereas, the wife did not deliver an offer to settle until the eve of trial. Justice Fryer urged that litigation positions such as the Wife’s should be discouraged.