How to Choose a Better Jurisdiction for a Prenuptial Agreement
By Marcus Sixta, Calgary Family Lawyer, Vancouver Family Lawyer, Mediator
When people move from one province to another, or even from one country to another, it can create issues for the enforcement of a prenuptial agreement or cohabitation agreement. These issues, if they can be anticipated, should be addressed in advance when the prenuptial agreement is negotiated. However, sometimes a move to another jurisdiction is not foreseeable and that is why all marriage agreements should include standard terms on jurisdictional issues.
When you have an opportunity to change provinces for employment, or if there are retirement plans to move to a different country, you must consider the jurisdictional impacts when drafting your prenuptial or cohabitation agreement. Some jurisdictions are better for the enforcement of prenuptial or cohabitation agreements than others. For example, in British Columbia, there is a broad fairness test built right into the Family Law Act which allows a judge to overturn a prenuptial agreement if they do not think it is fair. Alberta has no such provision in their legislation and generally prenuptial and cohabitation agreements are more likely to be upheld in Alberta. There are also US states with legislation that is very good for upholding prenuptial agreements.
As a family lawyer who regularly deals with files involving multiple jurisdictions, like Alberta, B.C. the U.S.A., Australia, Iran, Spain, India, the U.A.E. and Russia, one of my first questions is where is the agreement more likely to be upheld. If the parties plan to move to a jurisdiction with more favourable laws regarding the enforcement of prenuptial agreements, I may advise that they wait to draft the agreement in that other jurisdiction. However, if they currently live in a good jurisdiction for prenuptial agreements and plan to one day move to a less favourable jurisdiction, like British Columbia, the situation becomes more complex.
Choice of law is a section that is standard in most prenuptial and cohabitation agreements. In this section you get to decide which local law you will use if the agreement is ever interpreted by a family law court. It has generally been held in family law cases in British Columbia and Alberta that a contract made in one jurisdiction will usually be accepted in another.
The issue of interjurisdictional enforcement of prenuptial agreements was before the British Columbia Supreme Court in 2016 in the case of S.L.D. v. W.A.D. 2016 BCSC 616. In that case, the prenuptial agreement that was drafted in Alberta included a clause that stated:
Each of the parties acknowledges and agrees that the laws of the Province of Alberta, and particularly sections 37 and 38 of the Matrimonial Property Act of Alberta shall govern the interpretation and enforcement of this agreement, notwithstanding the parties may from time to time reside outside the Province of Alberta, and that one or both of them may now or hereafter own property outside the Province of Alberta, or in the event that one or both of the parties change permanent residence or domicile to a place outside the province of Alberta.
In that case, the court found that the Matrimonial Property Act of Alberta contained no provision permitting a prenuptial or cohabitation agreement to be varied upon the basis of unfairness. Furthermore, the court stated:
[208] In Humble v. MacKay, 2012 BCSC 1285, at para. 11, Koenigsberg J. stated that, where parties to a contract have expressly indicated that a particular law governs the contract, the general rule is that the courts will respect the parties’ choice, provided that the choice is: (1) bona fide, (2) legal, and (3) there are no public policy grounds for which the chosen law should not be applied.
[…]
[211] Porter-Conrad is directly on point. It involved an application respecting the enforcement of an agreement prepared and executed in Alberta. The agreement contained a clause adopting the law of Alberta, and the provisions of the Matrimonial Property Act were said to govern the parties’ respective holdings and assets. The central issue was whether Alberta or British Columbia law applied and the consequences of that decision upon the division of assets.
[212] In holding the agreement governed the distribution of assets without regard to British Columbia legislation, Vickers, J. stated the following:
[…]
[24] There is no doubt about the existence of a marriage contract in this case. Is it a valid marriage contract? It is signed by the parties and under seal. The plaintiff was advised by her lawyer and he drafted the document. This was the second or third agreement, the latter agreements being drafted at the plaintiff’s request. There is no evidence of duress or undue influence. An agreement confirming the existing family law of the Canadian province in which the agreement is executed by the parties cannot be characterized as unconscionable.
The B.C. family law court ultimately decided that it had no jurisdiction to vary the agreement under British Columbia law as the parties fully understood the nature and effect of the prenuptial agreement and that it was not contrary to public policy to uphold the agreement. Furthermore, the agreement was supported by the fact that it clearly contemplated a change in residence when it was drafted. The court stated:
[223] The Agreement contemplated a change in residence of the parties beyond Alberta’s borders. In 2009, the parties agreed to move knowing that the terms of the Agreement were portable and were to follow them to whatever jurisdiction they chose to reside.
Therefore, the agreement to choose the law of a particular jurisdiction, which will be used to interpret a prenuptial agreement if ever challenged at court, can be upheld if the parties understood the nature and effect of the agreement, if they complied with the local laws when in drafting the prenuptial agreement, and if upholding the agreement would not be unconscionable or against public policy in general. Therefore, if a prenuptial agreement is seen to be properly done in accordance with the laws of another jurisdiction, and if it does not contain anything totally offside, then it should be upheld, even in British Columbia.
In most jurisdictions duress or cohesion in drafting a prenuptial agreement, mental incapacity, or severe lack of disclosure will be among some of the issues which can result in an agreement that is considered contrary to public policy. Both parties having independent legal advice from a family lawyer can go a long way to preventing these issues.
Furthermore, if a prenuptial agreement contains recitals that clearly indicate that the parties believe that they could move to another jurisdiction in the future, and notwithstanding, want to choose the law from the original jurisdiction to apply to the agreement even if they move, this will also encourage the court to uphold choice of law if challenged.
If spouses are considering choosing another jurisdiction to apply to the agreement, consideration must also be given to the problems of proving foreign law. That means a lawyer in the foreign law may be required to attend trail if the choice of law in the prenuptial agreement is challenged. If not proved, the court will make the presumption that the law to be applied is that of the court hearing the trial, Van Erp v. Van Erp 2015 BCSC 203. This is another reason why independent legal advice from a qualified family lawyer or divorce lawyer is highly recommended for prenuptial agreements involving jurisdictional issues.
Also, prenuptial and cohabitation agreements often also include a term which indicates where the agreement will be interpreted if it is ever challenged. Usually, the jurisdiction in which the agreement was drafted is included as the jurisdiction where the parties must attend court, but this is not always the case. Moreover, family law courts have declined to take jurisdiction even if they are given jurisdiction by the parties in the agreement, if another jurisdiction is more appropriate. This is an important consideration when reviewing location of assets, ties to certain states or provinces.
In the matter of Monterio v. Monterio 2015 BCSC 1543, the divorce court considered a division of assets where property was located in British Columbia, and a Separation Agreement stated the contractual laws of British Columbia applied. The parties habitually resided in Portugal, and court proceedings were commenced in Portugal. The issue of jurisdiction was raised, and even though there was property located in British Columbia, and the Agreement stated that British Columbia law would apply, the Court refused jurisdiction as proceedings were already commenced in Portugal.
Also, if there are several issues in dispute, the court can take jurisdiction over some, and not other family law issues S.R.L. v. K.J.T., 2014 BCSC 1562. Moreover, if the court decides to take jurisdiction to hear the case, it does not mean that the law of that jurisdiction will be automatically applied, and the court hearing the family law case can apply the law of another jurisdiction if the parties have entered into a prenuptial agreement with a choice of law clause that states that the law of another jurisdiction will be applied.
In British Columbia, if a marriage agreement is silent on the issue of jurisdiction, section106 of the Family Law Act sets out rules for determining jurisdiction. It should be noted that section 106 applies even when jurisdiction is stated in an agreement.
S. 106 of the B.C. Family Law Act states:
(1)This section applies if an order respecting property division, respecting the same spouses, may be made in more than one jurisdiction.
(2)Despite any other provision of this Part, the Supreme Court has authority to make an order under this Part only if one of the following conditions is met:
(a)a spouse has started another proceeding in the Supreme Court, to which a proceeding under this Part is a counterclaim;
(b)both spouses submit, either in an agreement or during the proceeding, to the Supreme Court's jurisdiction under this Part;
(c)either spouse is habitually resident in British Columbia at the time a proceeding under this Part is started;
(d)there is a real and substantial connection between British Columbia and the facts on which the proceeding under this Part is based.
(3)For the purposes of subsection (2) (d), a real and substantial connection is presumed to exist if one or more of the following apply:
(a)property that is the subject of the proceeding is located in British Columbia;
(b)the most recent common habitual residence of the spouses was in British Columbia;
(c)a notice of family claim with respect to the spouses has been issued under the Divorce Act (Canada) in British Columbia.
(4)Despite subsection (2), a court may decline to make an order under this Part if the court, having regard to the interests of the spouses and the ends of justice, considers that it is more appropriate for jurisdiction to be exercised outside British Columbia.
(5)In determining whether to decline jurisdiction under subsection (4), the court must consider all of the following:
(a)[Repealed 2014-9-15.]
(b)the relative convenience and expense for the spouses and their witnesses;
(c)if section 108 [choice of law rules] applies, the law to be applied to issues in the proceeding;
(d)the desirability of avoiding multiple proceedings or conflicting decisions in different courts or tribunals;
(e)the extent to which an order respecting property or debt
(i)made in another jurisdiction would be enforceable in British Columbia, and
(ii)made in British Columbia would be enforceable in another jurisdiction;
(f)the fair and efficient working of the Canadian legal system as a whole;
(g)any other circumstances the court considers relevant.
(6)A determination of authority under subsection (2) or of whether to decline jurisdiction under subsection (4) is to be made solely by reference to this section.
Therefore, the choice of law and the choice of jurisdiction when drafting a prenuptial agreement, cohabitation agreement, or post nuptial agreement can be a complex issue. However, there are significant benefits in the enforceability of these agreements by selecting the most beneficial laws and jurisdiction. In choosing laws or jurisdictions, there must also be some real connection to the parties, their assets or their future plans, otherwise these choices will not be upheld.
If you are contemplating a prenuptial agreement, cohabitation agreement, or post nuptial agreement the Alberta family lawyers and British Columbia family lawyers at Crossroads Law can be of assistance. We have extensive experience in drafting complex agreements involving multiple jurisdictions for high net worth individuals. We have represented professional athletes, business owners and media personalities.
