Cohabitation Agreements and Release of Spousal Support
Smith v Smith, 2017 ONCA 759
In this case, the Applicant Wife is trying to overturn a cohabitation agreement that she and the Respondent Husband had signed prior to their eighteen year marriage. In the cohabitation agreement, the Wife released her claim to spousal support. Notably, the agreement was signed by the wife without obtaining legal advice, despite being given the opportunity to do so.
The parties had two children together. Furthermore, at the time the parties signed the cohabitation agreement, the Applicant was employed; she stopped working to care for the children sometime during the parties' marriage.
The trial judge upheld the cohabitation agreement thereby dismissing the Applicant Wife's claim for spousal support. The trial judge further determined the parties' income for child support purposes.
The Applicant Wife appealed the trial judge's decision. She alleges that the trial judge erred because the release of support does not meet the objectives of the Divorce Act. That is, the trial judge failed to recognize the economic disadvantage experienced by the Applicant wife as a result of the breakdown of the marriage. The Applicant Wife further submits that the trial judge erred in calculating child support.
The Court of Appeal was faced with two questions:
- Did the trial judge err by upholding the cohabitation agreement?
- Did the trial judge miscalculate the Respondent Husband's income?
In addressing the first question, the Court of Appeal referenced Supreme Court of Canada's decision, Miglin v Miglin, 2003 SCC 24. The Court of Appeal cited the two stage test that is to be applied in dealing with initial applications for spousal support, in the face of a release:
- A consideration of the circumstances surrounding negotiation and execution of the agreement to determine whether there is any reason to discount it
- A consideration of the substance of the agreement to determine whether it was in substantial compliance with the general objectives of the Divorce Act at the time of its formation. This requires the court to consider whether the applicant has established that the agreement no longer reflects the intention of the parties.
In the case at hand, the Court of Appeal ruled in favour of the Respondent Husband, holding that the Applicant Wife failed to establish that the trial judge committed an error of fact or law. Further, the Court of Appeal found that the contract is in accordance with the Divorce Act.
However, the Court of Appeal found that the trial judge's reasons were problematic, because the trial judge failed to consider the objectives of Miglin and the Divorce Act. Specifically, the trial judge's analysis emphasized the objectives of "certainty" and "autonomy" of the contracting parties. However, the trial judge merely referred to the objectives of the Divorce Act for remedying economic disadvantage arising from the marriage, without genuinely pursuing those objectives further. That is, the trial judge did not carefully consider the fact that the parties were in an eighteen year marriage and had two children together. While the agreement may have been in compliance with the Divorce Act when it was signed, the Applicant Wife was also working and earning a reasonable income at the time. The Court of Appeal recognized that the parties' situations had changed since the cohabitation agreement was signed; both the Miglin objectives and those found in the Divorce Act require the Court to consider those differences before upholding a release.
Furthermore, the Court found that even if the cohabitation agreement did not exist, the wife would not be entitled to spousal support. The Court of Appeal held that both parties suffered economic disadvantages arising from the marriage and that there was no stark economic inequality caused by the breakdown of marriage that requires a remedy. However, the Court of Appeal noted that at the time of the separation, the Husband's income was more than double that of the Wife's income. This is an important consideration and would normally lead the court to review the Spousal Support Advisory Guidelines, which they refused to do in the case at hand.
In addressing the second question, the Court of Appeal held that child tax benefits are not considered income for the purposes of determining a parent's child support obligations. The Court of Appeal found that the trial judge' were entitled to deference.