How to Make a Valid Separation Agreement – The Supreme Court of Canada’s Miglin Decision

Before the Supreme Court of Canada decision in Miglin v. Miglin most Ontario Courts showed deference to a Separation Agreement containing full and final spousal support release unless the party wishing to change the Agreement experienced a radical change in circumstances that was causally connected to the marriage since the making of the Agreement. This test was set out in the Pelech case, a decision of the Supreme Court of Canada. Only in situations where this high threshold was met, or in circumstances where the contract was unsound or unconscionable, would the Court interfere with the Agreement and change its terms.

In Miglin, however, the trial Court granted spousal support to Linda Miglin, despite the comprehensive release contained in her Separation Agreement in which Linda gave up any right to support payments.

Eric and Linda Miglin were married in 1979 and had 4 children. They jointly owned and operated a Lodge. Linda did administrative and housekeeping jobs for the Lodge. In 1993, they separated and thereafter signed a Separation Agreement. The Agreement stipulated that Linda was to receive child support payments and was to share responsibility for raising the children, who primarily resided with Linda.

As well, the Agreement contained a comprehensive release following from which neither Linda nor Eric were ever to receive any payment on account of spousal support. However, the parties and the Lodge had agreed that the Lodge would pay an annual ‘consulting fee’ of $15,000 to Linda. This agreement and fee were renewable after five years.

After the divorce was finalized in 1997, Linda sold her primary residence in Toronto, moved to Thornhill and converted to another religion. These events changed the nature of the relationship between Eric and Linda. Eric refused to cause the Lodge to renew the ‘consulting fee’ after the five- year term was over.

Linda subsequently brought proceedings against Eric, which included a claim for spousal support. Eric argued, among other things, that Linda was not entitled to support. She had signed an Agreement in which she fully and finally released Eric from ever having to pay spousal support. Eric’s view was that Linda could not satisfy the high threshold set out in Pelech. She was therefore bound by the Agreement she had signed. This was not so, however according to the Ontario Court of Appeal.

Abella J.A. held that the 1985 Divorce Act was a “dramatic departure” from the statutory language of the earlier Divorce Act upon which Pelech was based. Therefore, according to Abella J.A. Pelech no longer applied. Rather, decisions following the 1985 Divorce Act, as opposed to the earlier language found in the previous Act, emphasized the objective of redressing any disadvantage sustained by one spouse in a marriage.

Abella J.A. then followed the Supreme Court of Canada’s decision in Willick: to override an Agreement containing spousal support release, Linda had to show that there had been a material change of circumstances, which if known at the time of the Agreement would have resulted in different terms.

Abella J.A. determined that Linda’s circumstances had materially changed. And according to Abella J.A., those changes, if known at the time, would have indeed resulted in different terms. The material change was determined to be the fact that Linda had been the primary caregiver of the children (which affected her range of employment options) rather than an equal caregiver which the Agreement contemplated.

As well, Abella J.A. relied upon the fact that the changes allowed the Court to override the spousal support release. According to Abella J.A., the Court was therefore at
liberty to re-assess the reasonable amount of spousal support based upon the statutory principles of the 1985 Divorce Act.

This threshold was a “radical” departure from the Pelech requirement. It was not necessary to demonstrate that the need for the change be causally connected to the marriage. An event which occurs after the marriage has broken down and the parties are divorced could cause the former spouse to pay support, notwithstanding a comprehensive spousal support release in an otherwise valid Separation Agreement.

At the Supreme Court of Canada, and like Abella J.A., the Supreme Court rejected the previous Pelech test. However, the Court did not reject the policy objectives that were behind the test, that is, autonomy, certainty and finality.

The Supreme Court rejected the “material change” test of Abella J.A. The Supreme Court concluded that a trial court should set aside the wishes of parties as expressed in a pre-existing agreement only where the agreement fails to be in substantial compliance with the overall objectives of the Divorce Act (the “Act”).

According to the Act, the objectives of a spousal support order, in section 15.2(6), are:
(a) to recognize any economic advantages or disadvantages to the spouse arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

The Supreme Court set out a new two stage analysis. At one stage, (a) the circumstances under which the Agreement was negotiated is to be reviewed for any indicia of exploitation, unfairness and then (b) the substance of the Agreement is to be reviewed to determine whether it is in substantial compliance with the objectives of the Act. We presume the objectives of the Act include those above and the Supreme Court specifically stated that the objectives include certainty, finality and autonomy.

The Supreme Court noted that emotional stress does not give rise to a presumption that parties are incapable of assenting to a binding contract. As well, a trial court should not presume a power imbalance, vulnerability or that any advantage was taken by one party, according to the Supreme Court. There must be a fundamental flaw in the negotiation process at this stage.

As well, the Supreme Court stated that an Agreement need not mirror the above-noted objectives set out in 15.2(b). The support provisions are to be viewed in the context of the entire contract. Further, the parties should have a large discretion to establish priorities and goals for themselves.

Therefore, if the negotiation process is not fundamentally flawed and the Agreement was in substantial compliance with the general objectives of the Act at the time of execution, a trial Court should defer to the wishes of the parties and afford the Agreement great weight.

At stage two, the new circumstances that exist at the time the Agreement is challenged are to be reviewed to determine if the Agreement still reflects the parties’ intentions at the time of execution and the overall objectives of the Act.

At this stage, there must be a significant change in the parties’ circumstances from what could reasonably be anticipated at the time of negotiation. The change need not be radically unforeseen nor causally connected to the marriage. However, the applicant must demonstrate that the circumstances were not reasonably anticipated, the circumstances no longer reflected the parties’ intentions at the time of execution and the objectives of the Act and the new circumstances have led to a situation that cannot be condoned.

As far as the Miglin’s were concerned, the Court stated that foreseeable changes include changes to the job market, parenting responsibilities, health and the value of one’s property. In the face of the support releases, Ms. Miglin’s circumstances did not justify overriding the Agreement.

The Supreme Court did not state that stage one must be passed before proceeding to stage two of the analysis. Therefore, the Supreme Court left room for discretion in the trial court. However, and in our view, the Supreme Court lowered the bar from the older Pelech test. Perhaps the Supreme Court recognized that the focus on self-sufficiency in the late 1980′s and early 1990′s was inappropriate. At that time, many traditional housewives released their spouse from support obligations immediately or after a few years.

Yet, the Supreme Court did not open the door for just any change to justify the setting aside or overriding of a clear Agreement. Rather, the Supreme Court left a test which affords some discretion to trial court, but in our view, sends a clear message that it is only where current circumstances represent a significant departure from the parties’ anticipated outcomes, in a manner that puts the parties and the circumstances at odds with the objectives of the Act, the trial court may be persuaded to give the agreement little weight and dictate a new support arrangement.

Apart from the conclusion that an “Agreement is very likely an Agreement,” there are a number of important underlying policy objectives that flow from the Miglin decision. Those objectives ought to be considered by anyone going through a breakdown of a relationship who wants a final and binding Agreement.

Among others, they are as follows:

  1. Make a reasonable agreement (i.e. don’t make too good of a deal that fall outside of the objectives of the Act);
  2. Ensure your partner has professional assistance from a lawyer conversant in matrimonial law and perhaps even insist upon it;
  3. Ensure full and honest financial disclosure takes place;
  4. Allow your partner to fully consider his or her options in an environment without any added stress and alleviate any additional emotional or financial stress (i.e. don’t even bother your partner through the process and provide your partner with enough finances throughout the negotiation process so that financial pressures are absent).
    If the underlying objectives are not met, one may find that the “Agreement” is not really an Agreement. Odds are, however, that if the process was fair and the terms of the Agreement on a whole are reasonable, a full and final Agreement can really be considered to be a full and final Agreement, considering the Miglin decision.

If the underlying objectives are not met, one may find that the “Agreement” is not really an Agreement. Odds are, however, that if the process was fair and the terms of the Agreement on a whole are reasonable, a full and final Agreement can really be considered to be a full and final Agreement, considering the Miglin decision.

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