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A critical new British Columbia Separation Agreement enforcement and BC separation agreement case was released recently in Rick v. Brandsema [2009] S.C.J. No. 10
If you are about to enter into a BC separation agreement or consider a British Columbia separation or separation agreement or marriage agreement you have signed to be unfair or unconscionable call us at 604-602-9000. The summary below was prepared by one of our very capable articled stdents, namely Jaqua Page who works out of our Vancouver and North Peace office.

This was an appeal to the Supreme Court of Canada from a decision of the British Columbia Court of Appeal, to set aside an award made to the wife by the trial judge, ordering the husband to pay damages in the amount of $649,680.00 on the grounds that the separation agreement signed by the parties was unconscionable and therefore unenforceable.

The parties married in 1973 and separated in February 2000 after a long and difficult marriage. There were five children to the marriage. During the course of the marriage the parties acquired assets and real property, including a dairy farm the value of which was the subject of the appeal.

The parties continued to live together for a number of months after the separation. They signed a separation agreement in December 2001, which was drafted with the intermittent assistance of two different lawyers, the services of two mediators, advice from tax accountants and other professionals. They were divorced in January 2002 and the wife brought an action a year later to set aside the separation agreement on the grounds the agreement was unconscionable or in the alternative that there should be a reapportionment under Section 65 of the B.C. Family Relations Act. The husband was found to have severely undervalued the property and concealed funds.

The SCC emphasized the importance of recognizing that the area of family law creates a uniquely difficult and vulnerable environment. To ensure fairness, the court found that there is “a duty to make full and honest disclosure of all relevant financial information in order to protect the integrity of the resulting agreement” when separating parties are in the process of settling an agreement. The case also represents the creation of the new term “psychological exploitation”, which is established when one party takes advantage of the other party’s mental state during negotiations of familial matters. In this case, there was evidence the husband was well aware of the wife’s mental fragility and that he had falsely exaggerated the dairy farm’s debts as well as claiming inappropriate tax deferment, decreasing the wife’s value of the company, when there was no evidence of a future sale.

The appeal court, applying Miglin, rejected the findings of fact of the trial judge that there was a power imbalance between the parties due to the wife’s mental vulnerability and regardless found that any disparities were cured by the wife’s access to professional assistance. The SCC respectively disagreed with the Court of Appeal’s interpretation of the test in Miglin in relation to the weight that should be given to professional assistance. The court held that the mere presence of professional advice does not extinguish the potential negotiating abuses that can occur in reaching an agreement, stating that a genuine bargain can only be reached when both parties are fully informed of the relevant information.

The SCC said that the “duty” flows from the judgment in Miglin with the acknowledgment that legal issues surrounding the breakdown of a marriage take place in highly emotive situations. As a result special care must be taken to ensure that negotiations between spouses are free from “informational and psychological exploitation”. The court stated that the degree of dishonesty will determine whether a separation agreement is open to judicial intervention.

The court was entirely supportive of the trial judge, affirming the principle that an Appellate Court should not reverse the findings of fact made by a trial judge unless there was a palpable and overriding error. In addition, a trial judge has discretion when considering tax deferment in relation to the division of assets, concluding that either damages or s66(2)(c) of the Family Relations Act that may include ordering a spouse to ‘pay compensation’ to the other spouse ‘for the purpose of adjusting the division.’ were suitable remedies when the terms of the separation agreement substantially deviated from the intent of the legislation.