While marriage and cohabitation agreements are great financial planning tools increasingly used by parties wishing to tailor their obligations and responsibilities following separation, the recent case of Bradley v. Callahan, 2024 BCSC 163, provides an important reminder of the meticulous care and attention that should be placed during the stages of negotiation and drafting.

In Bradley v. Callahan, the BC Court of Appeal was left to decide whether a marriage agreement should be upheld post-separation, or whether such a finding would lead to an unfair outcome for Ms. Bradley. Central to this dispute was whether the dramatic growth of Mr. Callahan’s business during the marriage could justify a court finding the entered agreement significantly unfair.

Ms. Bradley and Mr. Callahan’s Marriage Agreement

Ms. Bradley and Mr. Callahan had signed a comprehensive marriage agreement a few days prior to their marriage. The two spouses, who had started living together in 1992, had elected to sign a marriage agreement setting out their rights and responsibilities in the event of the occurrence of their marriage breakdown.

While the marriage agreement addressed various aspects of the parties’ responsibilities both during and after the marriage, the focus of the agreement was around shielding Mr. Callahan’s business interests in the event the parties’ marriage was to terminate.

At the time of the marriage, Mr. Callahan was a property developer with a considerable portfolio of assets that included various corporate and business interests.

The Trial Decision

While the trial judge deemed the marriage agreement to have been fair in the circumstances, Ms. Bradley challenged the decision by arguing that the trial judge had erred on the following two grounds:

1. the fairness of the marriage agreement
2. the denial of retroactive child and spousal support

The Decision on Appeal

By engaging in a fresh analysis of the “operational fairness” of the agreement, the Court of Appeal overturned the trial decision, finding that the agreement was significantly unfair as it ignored the indirect contributions Ms. Bradley had made throughout the marriage. A related concern addressed before the Court of Appeal, was whether the trial judge had erred in failing to order retroactive child and spousal support to Ms. Bradley.

Was the Marriage Agreement Operationally Unfair?

While the trial judge had found the agreement operated fairly, holding that the court should not “disregard the parties’ original intention” at the time the marriage agreement was made, the Court of Appeal disagreed.

By applying the Hartshorne analysis, the correct analysis to be applied when determining an agreement’s “operational fairness,” the Court of Appeal found that the determination of whether an agreement is operationally fair, is not one to be based on whether the circumstances had been fair at the time the agreement was signed, but rather whether the circumstances would be fair at the time of separation.

The court found that by the time the marriage had collapsed, the terms of the agreement no longer reflected the parties’ intentions at the time the agreement had been executed. In speaking to the growth in value of Mr. Callahan’s finances, the court found that Mr. Callahan’s business had experienced an “explosive growth” from the time the parties had contemplated the agreement, to the time of their eventual separation. Specifically, Mr. Callahan’s business interests, collectively held under the name “Argus Group” had gone from an estimated value of $3 million, to an estimated value of $239 million. The court found this 4,100% increase in growth could not have been reasonably contemplated by the parties at the time the agreement was negotiated. In striking a balance between the parties’ intentions at the time the agreement was contemplated, and the determination of a fair result, the Court of Appeal concluded that the marriage agreement had operated unfairly.

Should retroactive spousal and child support have been awarded?

Next, the court moved on to discuss the related issue of retroactive spousal and child support. The court applied the four following factors to determine whether it should exercise its discretion to award retroactive child support:

1. the reason for the recipient parent’s delay in seeking child support;
2. any misconduct of the payor parent;
3. the past and present circumstances of the child, including the child’s needs at the time the support should have been paid; and
4. whether the retroactive award might entail hardship.

The judge found there had been no misconduct and no unreasonable delay on the part of Ms. Bradley. Instead, the argument for whether Ms. Bradley should be awarded retroactive child support largely turned on the third factor.

The appeal court concluded that based on the fact the parties’ children had not experienced a diminished standard in living, and that considerable child support payments had been made by Mr. Callahan, the trial judge had been justified in concluding that Ms. Bradley’s request for child support should be denied. Additionally, the judge also concluded that as Ms. Bradley had received adequate assets and spousal support payments prior to May 2023, an award for further retroactive spousal support was also not justified.

In light of the appeal decision, people must consider whether their marriage agreement needs a fresh look — a deal is not always a deal. If you have questions about your marriage agreement, contact our Canadian Family Law Practice.