Toronto Family Law and Divorce Lawyer Pei-Shing B. Wang:
A recent high-profile divorce case gave us a glimpse into how portions of an otherwise valid marriage contract can be set aside because a unique set of facts renders them invalid.
Michael and Christine McCain were married for 30 years. As with many couples ending a long marriage, the McCains found that separating was not an easy task. At the time of separation, Michael had an approximate net worth of $500 million. Christine was left with $5 million in liquid assets and three mortgages, without spousal support. Christine decided it wasn’t fair and sued, among other things, for spousal support in the amount of $200,000 per month.*
Michael took the position that there was a valid marriage contract at the time of separation that lawfully restricted Christine’s entitlement to spousal support (albeit, one might add, to the extreme). Therefore, he said he didn’t owe her a penny more in spousal support than what she was entitled to under the contract.
Christine said that the contract was forced on her halfway through their 30-year marriage by Michael’s father, who threatened to cut Michael off if she didn’t sign the contract, essentially giving up her property rights and rights to spousal support as Michael’s wife. Therefore, the portion of the contract relating to spousal support was unenforceable, her lawyer argued, and should be set aside.
Justice Greer of the Ontario Superior Court of Justice, after hearing from the parties, sided with Christine and set aside the spousal support release in the contract.
Under the Family Law Act, a court may set aside a marriage contract (1) if either party failed to disclose significant assets or liabilities in existence when the contract was made, (2) if a party did not understand the nature of the contract at the time of signing, or (3) otherwise in accordance with the law of contracts.^
In Justice Greer’s opinion, the highly unusual set of facts in the McCain case rendered the portions of the contract relating to spousal support “grossly inadequate” and “unconscionable,” requiring that they be set aside.#
The extravagance of Michael and Christine’s lifestyle during their marriage was mind-boggling, observed Justice Greer in conducting her analysis:
“The parties own six (6) boats, with five (5) stored at the main cottage area and one sailboat with four (4) staterooms. That sailboat was built in Finland at a cost of $8,000,000 says the Wife and she was responsible for the interior design and outfitting of it. There was a crew of three (3) that operated the sailboat. She believes the maintenance cost of that boat alone was about $400,000 annually. The Husband has just recently commissioned the construction of a new 100 foot boat at an estimated cost of $18,000,000.”
“… between November 2010 and June 2011, … lavish vacations they went on [included] flying to The Grenadines, Jamaica, California, the British Virgin Islands, Halifax, Barcelona, Mustique, New York City, Tampa and Fredericton.”#
Justice Greer, however, wasn’t distracted by the parties’ lavish lifestyle. In her mind, the question at the heart of this high-profile dispute wasn’t how much Christine’s expenses are or how much Christine really needs. Justice Greer rightly pointed out that Michael has more than enough resources to meet Christine’s needs, while Christine’s assets would not afford her a lifestyle like the one she enjoyed before their separation.
Given that the husband’s ability to pay support wasn’t an issue, Justice Greer thought the case pivoted on whether the marriage contract was valid under contract law. Did Christine have a choice not to sign the marriage contract? Could Christine, 15 years into her marriage, have chosen to preserve her matrimonial rights, knowing that doing so would result in the disinheritance of her husband from the massive estate of her father-in-law?
Justice Greer ruled that the bargain wasn’t acceptable in a long-term marriage, especially when the marriage went on for another 15 years after the contract was signed. No projections were given to the wife at the time of the contract of the potentially drastic increase in her husband’s income-earning potential.
Further, the adequacy of the disclosure of the husband’s assets was also questionable. For example, the deed of the family trust as set out in the husband’s disclosure was never given to the wife. At examination, noted Justice Greer, even the husband conceded that the contract was unfair to the wife.
Although the husband claimed that the wife had signed the contract voluntarily and without duress, the duress, in Justice Greer’s view, was subtle and psychological, in that the wife appeared to be the key to the husband’s remaining as one of his father’s heirs. ”Of course the husband did not say ‘you must sign this contract or I will divorce you,’ but that was the underlying stake in it all,” remarked Justice Greer.@
After careful analysis, Justice Greer ruled that an agreement that appears to be fair when the contract is signed can through time become unconscionable and thus invalid. Given the circumstances surrounding its execution, the improvident result for the wife and the extent of the husband’s current wealth, in Justice Greer’s view, the contract in question as related to spousal support could not stand.
The paragraphs pertaining to spousal support in the marriage contract were set aside. Christine was awarded $175,000 in temporary spousal support.
As a family law lawyer, I must add that Christine’s victory is an exception rather than the rule. Courts are reluctant to set aside domestic contracts without compelling reasons. One of the major factors resulting in the setting aside of the contract, in my opinion, was that the contract was virtually imposed by the father of the husband as part of his estate planning, rather than being a reflection of the husband and wife’s mutual consent.
What’s more, in contrast to most Canadian families, for the McCains money wasn’t an issue. Had the McCains been individuals with modest means, i.e., a household income of less than $100,000, the wife’s claim for support would probably have attracted more scrutiny and the award been reduced after the judge had taken into account the increased costs of maintaining two households.
*McCain v. McCain, 2012 ONSC 7344 (CanLII) [McCain]
^ R.S.O. 1990 c. F3, ss. 56(4)
#supra, McCain, at paras 25, 27
@ibid., para. 74
This blog is provided for educational purposes and for your reference. It is not intended as legal advice and should not be regarded as such. The law may have changed since the publication of this article.
Multi-Million-Dollar Marriage Contract without Spousal Support “Unconscionable,” Must Be Set Aside: Court
Toronto Family Law and Divorce Lawyer Pei-Shing B. Wang:
A recent high-profile divorce case gave us a glimpse into how portions of an otherwise valid marriage contract can be set aside because a unique set of facts renders them invalid.
Michael and Christine McCain were married for 30 years. As with many couples ending a long marriage, the McCains found that separating was not an easy task. At the time of separation, Michael had an approximate net worth of $500 million. Christine was left with $5 million in liquid assets and three mortgages, without spousal support. Christine decided it wasn’t fair and sued, among other things, for spousal support in the amount of $200,000 per month.*
Michael took the position that there was a valid marriage contract at the time of separation that lawfully restricted Christine’s entitlement to spousal support (albeit, one might add, to the extreme). Therefore, he said he didn’t owe her a penny more in spousal support than what she was entitled to under the contract.
Christine said that the contract was forced on her halfway through their 30-year marriage by Michael’s father, who threatened to cut Michael off if she didn’t sign the contract, essentially giving up her property rights and rights to spousal support as Michael’s wife. Therefore, the portion of the contract relating to spousal support was unenforceable, her lawyer argued, and should be set aside.
Justice Greer of the Ontario Superior Court of Justice, after hearing from the parties, sided with Christine and set aside the spousal support release in the contract.
Under the Family Law Act, a court may set aside a marriage contract (1) if either party failed to disclose significant assets or liabilities in existence when the contract was made, (2) if a party did not understand the nature of the contract at the time of signing, or (3) otherwise in accordance with the law of contracts.^
In Justice Greer’s opinion, the highly unusual set of facts in the McCain case rendered the portions of the contract relating to spousal support “grossly inadequate” and “unconscionable,” requiring that they be set aside.#
The extravagance of Michael and Christine’s lifestyle during their marriage was mind-boggling, observed Justice Greer in conducting her analysis:
“The parties own six (6) boats, with five (5) stored at the main cottage area and one sailboat with four (4) staterooms. That sailboat was built in Finland at a cost of $8,000,000 says the Wife and she was responsible for the interior design and outfitting of it. There was a crew of three (3) that operated the sailboat. She believes the maintenance cost of that boat alone was about $400,000 annually. The Husband has just recently commissioned the construction of a new 100 foot boat at an estimated cost of $18,000,000.”
“… between November 2010 and June 2011, … lavish vacations they went on [included] flying to The Grenadines, Jamaica, California, the British Virgin Islands, Halifax, Barcelona, Mustique, New York City, Tampa and Fredericton.”#
Justice Greer, however, wasn’t distracted by the parties’ lavish lifestyle. In her mind, the question at the heart of this high-profile dispute wasn’t how much Christine’s expenses are or how much Christine really needs. Justice Greer rightly pointed out that Michael has more than enough resources to meet Christine’s needs, while Christine’s assets would not afford her a lifestyle like the one she enjoyed before their separation.
Given that the husband’s ability to pay support wasn’t an issue, Justice Greer thought the case pivoted on whether the marriage contract was valid under contract law. Did Christine have a choice not to sign the marriage contract? Could Christine, 15 years into her marriage, have chosen to preserve her matrimonial rights, knowing that doing so would result in the disinheritance of her husband from the massive estate of her father-in-law?
Justice Greer ruled that the bargain wasn’t acceptable in a long-term marriage, especially when the marriage went on for another 15 years after the contract was signed. No projections were given to the wife at the time of the contract of the potentially drastic increase in her husband’s income-earning potential.
Further, the adequacy of the disclosure of the husband’s assets was also questionable. For example, the deed of the family trust as set out in the husband’s disclosure was never given to the wife. At examination, noted Justice Greer, even the husband conceded that the contract was unfair to the wife.
Although the husband claimed that the wife had signed the contract voluntarily and without duress, the duress, in Justice Greer’s view, was subtle and psychological, in that the wife appeared to be the key to the husband’s remaining as one of his father’s heirs. ”Of course the husband did not say ‘you must sign this contract or I will divorce you,’ but that was the underlying stake in it all,” remarked Justice Greer.@
After careful analysis, Justice Greer ruled that an agreement that appears to be fair when the contract is signed can through time become unconscionable and thus invalid. Given the circumstances surrounding its execution, the improvident result for the wife and the extent of the husband’s current wealth, in Justice Greer’s view, the contract in question as related to spousal support could not stand.
The paragraphs pertaining to spousal support in the marriage contract were set aside. Christine was awarded $175,000 in temporary spousal support.
As a family law lawyer, I must add that Christine’s victory is an exception rather than the rule. Courts are reluctant to set aside domestic contracts without compelling reasons. One of the major factors resulting in the setting aside of the contract, in my opinion, was that the contract was virtually imposed by the father of the husband as part of his estate planning, rather than being a reflection of the husband and wife’s mutual consent.
What’s more, in contrast to most Canadian families, for the McCains money wasn’t an issue. Had the McCains been individuals with modest means, i.e., a household income of less than $100,000, the wife’s claim for support would probably have attracted more scrutiny and the award been reduced after the judge had taken into account the increased costs of maintaining two households.
*McCain v. McCain, 2012 ONSC 7344 (CanLII) [McCain]
^ R.S.O. 1990 c. F3, ss. 56(4)
#supra, McCain, at paras 25, 27
@ibid., para. 74
This blog is provided for educational purposes and for your reference. It is not intended as legal advice and should not be regarded as such. The law may have changed since the publication of this article.