May 1, 2009

The Hartshonre Pre-Nup: Limited Impact in Quebec by Ian M. Solloway

It has now been over 5 years since the widely-reported decision of the Supreme Court of Canada in Hartshorne v. Hartshorne, in which our country’s highest Court upheld the enforceability of a British Columbia pre-nuptial agreement wherein the future wife waived her right to any equal division of the family assets under British Columbia law in the event of marriage dissolution.

The Parties, who were both lawyers, began to cohabit in 1985 and their first child was born in 1987. They married in 1989, a second marriage for both, and a second child was born later that year. Nine years later, they separated. From the time of the birth of their first child, the wife withdrew from the practice of law to remain at home to raise the children. The husband brought assets worth approximately $1.6 million into the marriage, including his law practice, while the wife entered the marriage with no assets and heavily in debt. The husband had made it clear to the wife before the marriage that given the partition of property that occurred after he and his first wife separated, he would never again allow a division of his property.

Prior to their wedding, the husband insisted that the wife sign a pre-nuptial agreement stipulating that they would be separate as to property, but with a provision that the wife would be entitled to a 3% interest in the matrimonial home for each year that the parties were married up to a maximum of 49%. The wife had obtained a legal opinion prior to signing the pre-nuptial agreement that the said agreement was grossly unfair. However, she nonetheless signed the agreement with a few amendments, including a clause confirming her right to spousal support.

Pursuant to the pre-nuptial agreement, Ms. Hartshorne was entitled to property valued at $280,000.00 upon separation while Mr. Hartshorne was entitled to property worth $1.2 million.

In their divorce proceedings, Mr. Hartshorne relied upon the pre-nuptial agreement to avoid the operation of the statutory partition of family assets under British Columbia law, while Ms. Hartshorne argued that the pre-nuptial agreement should be set aside because the agreement was “unfair” under the British Columbia Family Relations Act (“FRA”). The trial Court and the Court of Appeal both concluded that the Hartshorne pre-nuptial agreement was “unfair” and ordered the reapportionment of the family assets. The Supreme Court of Canada disagreed, concluding that the Hartshorne pre-marital agreement was substantively fair under the FRA and therefore valid and enforceable. In its “fairness analysis”, the Supreme Court concluded that private arrangements that spouses make for the division of their property on the breakdown of their marital relationship should be respected particularly where the agreement in question was negotiated with independent legal advice. In this case, the implications of the pre-nuptial agreement were understood by the Parties, Ms. Hartshorne having specifically reviewed its shortcomings with her lawyer. Moreover, the explicit preservation of a right to spousal support was an amendment made to the draft agreement at the insistence of Ms. Hartshorne, supporting an understanding on her part that her future needs could be met through alimony. Furthermore, by signing the pre-nuptial agreement, the Hartshorne’s entered into their marriage with certain expectations on which they were reasonably entitled to rely.

What is the impact of the Hartshorne decision in Quebec? Does Hartshorne mean that spouses marrying in Quebec are able to make similar types of pre-marital agreements?

Since July 1, 1970, under Quebec law, spouses who marry in the Province of Quebec without a Marriage Contract, are deemed to have adopted as their Matrimonial Regime (i.e. the law governing their property relations during the marriage) that of Partnership of Acquests. Simply stated, under the legal regime of Partnership of Acquests, the property owned by each spouse as at the date of marriage is his or her private property as the case may be and the property acquired by each spouse during the marriage is his or her acquest, save and except for gifts and legacies which remain private property. All interest and / or revenues generated from a spouse’s private property or acquests are his or her acquests. At the time of marital dissolution, each spouse has the right to accept or renounce the partition of the other spouse’s acquests.

The Parties can contract out of or alter the legal regime of Partnership of Acquests in Quebec by signing a Marriage Contract wherein they can adopt the matrimonial regime of Separation as to Property. Under a separation regime, any property acquired by either spouse prior to or during the marriage is his or her sole and exclusive property. It is to be noted, however, that in executing a Quebec Marriage Contract electing to be separate as to property, the spouses are not signing a divorce contract under Quebec law. Neither spouse can be considered as having contracted out of his or her rights to any claims, rights or entitlements that each may have against the other spouse as a matter of public order upon marital dissolution.

In 1989, the Quebec legislature introduced the concept of “family patrimony” into Quebec law. As of July 1, 1989, all marriages in Quebec entail the establishment of a family patrimony, which comprises six (6) categories of assets, namely:

  1. the principle and secondary family residence(s)

  2. household furniture used by the family

  3. vehicles used for family travel

  4. private pension plan contributions during the marriage

  5. retirement plan contributions during the marriage (RRSP’s / LIRA’s)

  6. registered earnings of each spouse during the marriage under the Quebec Pension Plan

Quebec law provides that regardless of where the spouses were married, whether in Quebec or elsewhere, irrespective of their matrimonial regime and regardless of which spouse owns the aforementioned assets comprising the family patrimony, spouses who are domiciled in Quebec at the time of the institution of their divorce proceedings are subject to the imperative rules of family patrimony and thus have the right to partition equally the net value of the family patrimony assets. Moreover, and most importantly, inasmuch as the rules relating to family patrimony are of public order in Quebec, the Parties cannot contract out of them prior to or during the marriage, whether by Marriage Contract or otherwise. Any such agreement outside the context of marital dissolution proceedings whereby the spouses express their wish to exclude the operation of the rules of family patrimony is illegal and would be unenforceable by the Courts in Quebec. It is only after separation or divorce proceedings have been taken can the Parties “contract” with regard to their respective family patrimony rights.

Therefore, a Quebec pre-nuptial agreement or marriage contract could not remove the spouse’s right to demand an equal partition of the net value of the family patrimony upon divorce. The Hartshorne decision would thus seem to have changed little if anything insofar as the Quebec marriage contract and the applicability of Quebec’s family patrimony rules are concerned.