Couple's move to Ontario puts millions in play in high-stakes divorce case

Special to Financial Post

Wealthy families are no strangers to marriage contracts. But sometimes a formal agreement isn’t enough to satisfy the family law courts. That was one of the lessons from a recent high-stakes divorce battle that highlighted the different family law regimes in Ontario and Quebec.

Following a 29-year marriage that started in Quebec and ended in Ontario, a wife sought a court order to set aside the marriage contracts into which she and her husband entered while residing in Quebec.

If the wife was successful, she would be entitled to approximately $8 million from the husband on account of division of property. Not surprisingly, the husband resisted the wife’s claim.

When the parties met in 1985, they were both pursuing MBAs at McGill University in Montreal. At the time, the wife was on a student Visa and did not have permanent resident status in Canada. Shortly after her graduation from McGill, the wife was offered a job and was given five weeks to accept the job offer. Unfortunately, her immigration status prevented her from working in Canada. The couple sought legal advice and were given two options: 1) pursue permanent residence status which will take time or 2) get married. Given the time sensitivity of the job offer, the couple married.

One year later, while still residing in Quebec, the husband’s family insisted the husband enter into a contract with his wife that would protect the husband’s family business. Despite the wife’s discontent with her in-laws’ interference, the couple signed a contract called “Modification of Matrimonial Property Regime.” The contract provided the couple was to be “separate as to property.” Owing to subsequent changes to the legislation in Quebec governing matrimonial property, the couple signed a further contract two years later confirming the changes would not apply to them. They remained separate as to property.

In 1993, the couple relocated from Quebec to Ontario, where they lived until their separation in 2015. At that time, the husband’s net worth was in the multi-millions, including shares in private corporations many of which were real estate holding companies with interests in, for example, shopping malls in Montreal. The wife’s net worth was just a fraction of the husband’s.

Shortly after separation, the wife commenced proceedings in the Ontario Superior Court of Justice. The principal issue in the case was whether the contracts, signed in Quebec, act as a bar to the wife’s claims to share in the husband’s net worth in accordance with the matrimonial property laws of Ontario. If so, the wife would be disentitled to an equalization payment she estimated to be more than $8 million.

Despite their disagreement, the couple agreed on one thing: if they had separated while still living in Quebec, the contracts would have entirely blocked the wife’s property claims against the husband. In other words, the law of Quebec would have upheld the contracts. The couple’s relocation to Ontario and the consequent application of the law of Ontario to the Quebec contracts makes the contracts susceptible to challenge.

After a two-day hearing in August 2022, Justice Adriana Doyle released her decision in December. Since the couple resided in Ontario at the time of their separation, Justice Doyle applied the laws of Ontario and quickly found the Quebec contracts met the formal requirements of a domestic contract under Ontario’s Family Law Act. Specifically, the Quebec contracts were “in writing, signed by the parties and witnessed and dealt with aspects of property division.”

But Justice Doyle took a deeper look at the contracts and found that, while they met the formal requirements, they did “not contain direct and cogent language” that would act as a bar to the wife’s claims under the laws of Ontario for equalization of property. According to Justice Doyle, in Ontario “there is a high threshold that must be met before finding that an out-of-jurisdiction marriage contract prevails over the equalization provisions.”

She found the contracts fell short and did not override Ontario’s laws, which would allow for an equalization payment on family property. The wife’s precise entitlement will be determined at a further hearing.

Having achieved success in the hearing before Justice Doyle, the wife sought an order that the husband pay her legal fees in the amount of $408,665.51. The husband resisted, claiming that the wife’s costs were excessive and that a two-day hearing did not warrant the wife’s lawyers billing her for 680.8 hours of work.

In her decision released on March 13, Justice Doyle said that while the stakes in the case were high, the cost amount was disproportionate, and reduced the cost award to $265,106.73

Given the increasingly mobile population, it is important for couples to consider the impact a move to a new jurisdiction may have on an existing marriage contract. Such a move should be a catalyst for taking the marriage contract out of the desk drawer and having it reviewed by a lawyer in the new jurisdiction.

This article was originally published in the Financial Post.