How final is your ‘final agreement’?

In family law, it can make all the difference

Family law disputes are often lengthy and emotionally wrought, making the individuals involved eager to get them over with.

Usually, that comes in the form of a written agreement setting out the rights and responsibilities of the parties against the backdrop of their separation.

But sometimes the finality of such a “final agreement” can itself become an issue.

That is precisely what happened in Bartch v. Bartch, a case heard by the Court of Appeal for British Columbia. In that case, the parties married in 1996 and their marriage ended in either January 2013 or August 2014 (for more on disputes regarding the date of separation, see my article of June 27).

In any event, during a meeting on Aug. 11, 2014, the parties met and signed an agreement that purported to divide their family assets on a final basis. The husband drafted the agreement without legal advice. The judge in the lower court made the following observation about the agreement:

”To say that it was a rudimentary agreement would be an understatement. It is one page and double-spaced. It does not mention or deal with (a company created and owned solely by the wife). At its conclusion, it states, ‘(the husband) will sign off any other assets and the above is final. Nothing else will come after that date.’ ”

Later that year, the husband no longer liked the terms of the settlement he reached with the wife, believing he was entitled to more money than the agreement set out. The husband sought to set the agreement aside on the basis that it was unconscionable, that the wife had made material misrepresentations and that the wife had breached and repudiated the agreement. He further took the position that the agreement was not witnessed and that it was never intended to be a final agreement between the parties. The wife, of course, disagreed and took the position the agreement was final and must be enforced. The husband commenced family law court proceedings.

At an interim stage of the litigation (before the enforceability of the agreement was determined), the husband applied for a distribution of family property in the amount of $150,000 payable by the wife to him. That relief was sought pursuant to sections 88 and 89 of British Columbia’s Family Law Act which permit a spouse to “make an application to the Supreme Court under this Division at any time before a final agreement or final order is made in relation to a family law dispute respecting property division.”

As long as it wouldn’t be harmful to the spouse, the court would in such cases have the power to order an interim dispersement for the purposes of funding certain activities related to resolving or contesting the family law dispute.

The issue before the court was whether the agreement signed by the parties in 2014 was a final agreement, which would have the effect of preventing the husband from obtaining an interim payment from the wife. Unfortunately, the term “final agreement” is not defined in the Family Law Act and Justice Saunders, writing for the Court of Appeal, had to embark upon a broad interpretation of the Family Law Act in order to determine the impact of the parties’ agreement.

Following a thorough and thoughtful review of the issues at play in this case and the legislative framework within which the issues were set, Justice Saunders concluded that the agreement between the parties was not a bar to the husband’s claim for an interim payment from the wife. Specifically, she noted:

“I consider the proper interpretation of ‘final agreement’ as it is deployed in s. 88 does not capture circumstances wherein there is a genuine dispute as to the finality of an agreement. Where it is at least arguable that there is no final agreement,

NOT FINAL WHERE THERE IS ... CONTEST AS TO ITS CHARACTER.

s. 88 will not bar an application for interim relief.”

The judge concluded that “an agreement is not final where there is a genuine contest as to its character.”

Ultimately, Justice Saunders accepted the husband’s argument and confirmed that the wife must pay him $150,000 at the interim stage notwithstanding the parties’ written agreement. The issue of whether that written agreement is valid and enforceable remains to be determined. With that result in mind, the real question becomes: what happens if the written agreement is found to be enforceable and the husband was not entitled to any further payments from the wife? Will he be forced to repay the $150,000 advance from the wife?

Under Ontario law, parties to a separation agreement should take care to ensure the requisite formalities are met: it must be made in writing, signed by the parties and witnessed. Further, through the exchange of full and frank financial disclosure, together with receipt of independent legal advice, the agreement will be substantially less vulnerable. Without these necessary ingredients, a separation agreement runs the real risk of being disregarded, potentially at an interim stage even before a finding that the agreement is set aside, invalid or unenforceable.