Setting aside domestic contracts post-mortem

Law360 Canada (May 16, 2024, 12:40 PM EDT) --

Jason Moore

Can domestic contracts protect a deceased spouse’s estate from the surviving spouse’s application for support?

The Family Law Act, R.S.O. 1990, c. F.3 (FLA) specifically permits domestic contracts to opt out of many of the provisions concerning post-separation spousal or dependent support provided in the FLA. Interestingly, there can still be litigation over the surviving spouse’s estate notwithstanding the existence of a domestic contract that purports to opt out of the FLA and the Succession Law Reform Act (SLRA). This litigation is rooted in certain provisions under the FLA, the SLRA and common law.

The FLA provides two ways for the court, on an application, to set aside part or all of a domestic contract: s. 33(4) and s. 56(4). Section 33(4) primarily concerns dependent support issues. Section 56(4) concerns general principles of contract law. Unlike most of the FLA, these sections cannot be contracted out of by the parties (Barris v. Barris, 2024 ONSC 2546, at paragraph 52).

Notwithstanding the existence of a domestic contract, s. 33(4) of the FLA allows a court to set aside the agreement on the grounds of unconscionability; if a provision affects the rights of a dependent who qualifies for an allowance from public money; or if a party is in default on their dependent support payments at the time of the application. In this provision, the FLA has essentially codified the common law rationale for invalidating a contract. If the domestic contract is set aside, the court may determine support in an application under the FLA’s own framework.

Under s. 56(4) of the FLA, the court may set aside a domestic contract or a provision in it (e.g., property division) if a party fails to disclose to the other significant assets or significant debts or other liabilities existing when the domestic contract was made; if a party did not understand the nature or consequences of the domestic contract; or “otherwise in accordance with the law of contract.” Fulfillment of one of these conditions does not automatically set aside the domestic contract, however, and the court must exercise its discretion to determine whether it is appropriate, in the circumstances, to set it aside (LeVan v. LeVan, 2008 ONCA 388, at paragraph 33).

An application under s. 56(4) triggers certain evidentiary considerations for the application in the context of estate law. Per s. 13 of the Evidence Act, R.S.O. 1990, c. E.23, an applicant cannot obtain judgment concerning any matter that occurred before the deceased respondent’s death, “unless such evidence is corporated by some other material evidence.” This consideration is borne out of fairness to the deceased, as they are no longer available to provide their own evidence (Sourges v. Sourges, 2022 ONSC 3939 at paragraphs 12-13).

This principle was recently applied in the 2022 decision of Sourges v. Sourges. The applicant brought a motion seeking to summarily set aside the domestic contract she entered into with her late husband. The applicant claimed that the husband had not made full disclosure of his business assets and had made various misrepresentations to induce her to enter into the domestic contract. The motion judge dismissed the motion on the grounds that the determination of the domestic contract’s validity required a full trial and cited the applicant’s uncorroborated evidence as the sole living witness as a factor in his decision to dismiss the motion (Sourges, at paragraphs 46-48).

Based on this elevated evidentiary consideration, it is crucial that an applicant seeking to set aside a domestic contract post-mortem should make extra efforts to ensure their evidence is corroborated. While this rule has been explicitly applied to s. 56(4) of the FLA on several occasions, it is likely that it would apply to s. 33(4) in a similar fashion.

A lunch and learn seminar on the topic of setting aside domestic contracts post-mortem will feature David Wagner of Wagner Sidlofsky LLP and Aaron Franks of Epstein Cole LLP on May 21, 2024, starting at 12:00 p.m. This seminar is an opportunity for new and experienced estate and family lawyers to learn about this rapidly evolving area of family law and estate litigation. For more information and to register, please click here.

Jason Moore is a lawyer at Wagner Sidlofsky LLP, practicing in the estate and commercial litigation groups.

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