Wednesday, November 15, 2006

Steernberg v. Steernberg

In reasons for judgment released last week in Steernberg v. Steernberg, 2006 BCSC 1672, the Supreme Court of British Columbia has again considered the effect of a pre-nuptial agreement on a Wills Variation Act claim.

Cheryl Steernberg and Peter Steernberg began living together in 1997. He was 68 years old, and she 47. He brought significant assets into the relationship; she did not have much financial wealth.

They married in 1998. On the date of their wedding they signed a pre-nuptial agreement. The agreement provided that each would retain the assets he or she brought into the marriage, and that they would share any property acquired during the marriage. If he died before her, she would be entitled to one percent of his estate for each year they lived together. The court found that he wished to make sure that most of his assets would pass to his four children, and to a younger brother-in-law from his first marriage.

When he died in 2004, Mr. Steernberg left an estate of $1.7 million dollars. In his will he left Mrs. Steernberg 1% for each year they lived together for a total of 10% of the estate. (I don't get how the 10% was arrived at, but that is what the case says.) He left the other 90% of his estate equally to his four children and his brother-in-law.

Mrs. Steernberg applied to court to vary the will pursuant to the Wills Variation Act, on the the basis that her husband did not make adequate provision for her. If successful, the court could award her a provision the court considered adequate, just and equitable in the circumstances.

Mr. Steernberg's children opposed the application. They argued that Mrs. Steernberg was bound by the pre-nuptial agreement. They cited the Supreme Court of Canada decision in Hartshorne v. Hartshorne, [2004] 1 S.C.R. 550, 2004 SCC 22, in which the court took a very deferential approach to pre-nuptial agreements in determining the rights of spouses when dividing family assets on the breakdown of a marriage. The Supreme Court of Canada said the court should not depart from a division of property mandated by a pre-nuptial agreement, if the agreement was fair when entered into, and if the spouses lives unfolded in a manner within the contemplation of the parties when the agreement was made.

Madam Justice Martinson considered Harshorne, but found it to be of limited assistance. Following Mr. Justice Macauley's decision in Ward v. Ward, 2006 BCSC 448 (which I wrote about here), she distinguished between the considerations that arise on the division of property on a marriage breakdown, and the considerations involved in the death of one spouse. She made the following distinctions at paragraphs 79 through 82:
[79] There are a number of reasons why I have concluded that the Court’s analysis in Hartshorne is of limited assistance in the wills variation context. First, the Court in Hartshorne was specifically focused on only one legal obligation owed after separation, that relating to the division of property under the FRA. Other legal obligations are found in the law of unjust enrichment and the Divorce Act.

[80] Second, the Court in Tataryn concluded that the second part of the two-part wills variation test, dealing with moral obligations, is distinct from and goes beyond legal obligations. As noted above, the Court said that most people would agree that although the law may not require a supporting spouse to make provisions for a dependent spouse after death, a strong moral obligation to do so exists if the size of the estate permits.

[81] Third, the FRA explicitly provides that a marriage agreement will prevail unless a spouse can prove that it is unfair. Hartshorne was decided in that context. There is no such provision in the WVA.

[82] Finally, while both the WVA and the FRA consider fairness, each does so in a different context. The FRA is concerned with the situation in which a relationship breaks down and each person continues with his or her separate life; the WVA is generally concerned with a relationship that would have sustained but for the death.
Madam Justice Martinson considered Mr. Steernberg's legal and moral obligations to Mrs. Steernberg as required by the Supreme Court of Canada's decision in Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807. She found that Mr. Steernberg's will met his legal obligations to the extent that Mrs. Steernberg received about what she would have received as her share of the family assets if the marriage had broken down, taking the pre-nuptial agreement into consideration. But the pre-nuptial agreement did not deal with support obligations. Madam Justice Martinson found that Mrs. Steernberg would have been entitled to some support on a marriage breakdown.

In addition to his legal obligations, Mr. Steernberg owed moral obligations to his wife. In this case, Mrs. Steernberg provided Mr. Steernberg with personal care during his illness the last couple of years of his life. He insisted that his wife provide the care, rather than hire a paid caregiver. This affected her ability to earn and income, and build her business.

Madam Justice Martinson increased Mrs. Steernberg's share of the estate from 10% to 15%.

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