Saturday, March 25, 2006

Wills Variation Act: What is the Effect of a Pre-nuptial Agreement?

What is the effect of a pre-nuptial agreement on a spouses claim to vary a will to obtain a greater share of his or her deceased’s spouse’s estate? This question was considered in Ward v. Ward, 2006 BCSC 448, a judgment released a few days ago.

As I have previously written here, the Wills Variation Act, RSBC 1996, c. 490, gives the Supreme Court of British Columbia the power to vary a will in favor of a spouse or child where the maker of the will (the “testator”) has not made adequate provision for the spouse or child.

In Ward v. Ward, the Plaintiff, Shirley Ward, married David Forsyth Ward in 1986. Before the wedding, they signed a pre-nuptial agreement. The agreement provided that on the death of one of them, the survivor would be entitled to the deceased’s survivor pension benefits, but otherwise neither had an obligation to leave the other his or her estate. The agreement expressly provided that neither could make any claim under the Wills Variation Act for a share of the other’s estate.

Mr. Ward, died in September 2004. He left his pension benefits to Mrs. Ward, but left the rest of his estate to his two children. Mrs. Ward brought a claim to vary the will under the Wills Variation Act, as well as a claim against the estate on the basis of unjust enrichment.

Mr. Ward’s children brought a summary trial application (an application on the basis of affidavit evidence, rather than a full trial) to dismiss the Mrs. Ward’s claim under the Wills Variation Act. The children argued that the pre-nuptial agreement precluded the claim.

The children relied on the Supreme Court of Canada’s decision in Hartshorne v. Hartshorne, [2004] S.C.J. No. 20, which is a case in which a majority of that court prescribed what I would characterize as a deferential approach to pre-nuptial agreements in the context of a marriage breakdown. In Hartshorne, Mr. Justice Bastarche for the majority held that the court should look at the fairness of an agreement both at the time it was made and at the time of distribution. In assessing the fairness at the latter time, the court should consider the parties’ own notions of fairness as expressed in the agreement. If the agreement was fair when it was made, and the parties lives unfolded as they had contemplated, then the agreement should be upheld.

In Ward, Mr. Justice Macaulay considered Hartshorne, but held that it did not preclude the Mrs. Ward from pursuing her Wills Variation Act claim. He also considered the leading Supreme Court of Canada decision in, Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, in which the court held that the court must consider the legal obligations that the deceased had to his or her spouse, and any moral obligations.

Macaulay J. held that when considering the Mr. Ward’s moral obligations to Mrs. Ward, the pre-nuptial agreement is a relevant consideration, but is not determinative. Macaulay J. said at paragraph 25,
Unless death followed marriage within a very short time, it would be impossible, in my view, to consider the moral claim of a spouse solely on the basis of an agreement not to claim entered into before the marriage. The court must consider the circumstances of the relationship thereafter up to the time of the death of the testator. This reasoning is well reflected in the appellate decisions of this province dealing with the effect of separation and pre-nuptial agreements on the right to claim under the Wills Variation Act.

Mr. Justice Macauley, therefore, dismissed the children’s application, with the result that Mrs. Ward is entitled to a full trial of her Wills Variation Act claim.

I think it should be emphasized that if this case proceeds to trial, the trial judge could very well give effect to the pre-nuptial agreement, and find that in all of the circumstances, Mrs. Ward will not be entitled to a share of Mr. Ward’s estate. Mr. Justice Macauley’s holding simply says that the pre-nuptial agreement is not an absolute bar.

That said, my sense is that trial courts may have greater flexibility to order a distribution on the death of a spouse under the Wills Variation Act that differs from a distribution contemplated in a pre-nuptial agreement, than they may have in the context of a marriage breakdown. There are different policy issues where a marriage has broken down, and the court is asked to distribute assets in a manner that differs from the parties’ agreement, than where one spouse dies. In the latter case, the court is considering the competing claim of a surviving spouse as against beneficiaries who may not have as strong of a moral claim to the assets.

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