Case Spotlight: Schrader v. Schrader and Setting Aside Separation Agreements

In Schrader v. Schrader, 2025 BCCA 50 (Schrader v. Schrader), Mr. Schrader argued that his ex-spouse was bound to a previously agreed separation agreement. The BC Court of Appeal rejected Mr. Schrader's argument and upheld the trial court's decision, finding that the agreement was significantly unfair.

This case illustrates the challenges that arise when ensuring a separation agreement remains enforceable following a shift in property value.

Background

Signing the Agreement and Its Aftermath

Mr. Schrader and Mrs. Schrader were married in 2003 and separated in 2014. Following their separation, Mrs. Schrader commenced a family proceeding seeking an order for retroactive spousal support. In 2019, the parties attended a Judicial Case Conference (JCC) and agreed to a consent order under which Mr. Schrader would pay Mrs. Schrader $750 a month for spousal support. In 2021, the parties signed a separation agreement before the presence of witnesses. Included within the terms of the separation agreement was a condition providing that Mr. Schrader would pay $200,000 in exchange for obtaining Mrs. Schrader's interest in the family home. Under the terms of the separation agreement, the parties also agreed to make a full release to any future claims to spousal support and property division.

Subsequent Events and the Trial Decision

Just four months after the separation agreement was signed, Mr. Schrader sold the family home for $1.18 million, a price far higher than the $750,000 valuation that had been used in the agreement. As a result of the high sale price, Mrs. Schrader responded by applying to set aside the separation agreement, arguing that it was significantly unfair under s. 93 of the Family Law Act (FLA).

Mrs. Schrader's basis for advancing the argument of significant unfairness rested on her alleging that Mr. Schrader had severely misrepresented the value of the family home, and that she had misunderstood that the prior spousal support arrangement from 2019 would be indefinite.

At trial, the judge heard evidence from both parties. The court found that Mrs. Schrader was economically disadvantaged and that she had been in a vulnerable position at the time the parties signed the agreement. Next, the court considered whether Mr. Shrader had taken improper advantage of Mrs. Schrader's vulnerability. Ultimately, the court found no evidence to suggest that Mr. Schrader knew that the family home was worth more than the parties had assumed. However, the court agreed with Mrs. Schrader, holding that the separation agreement should be set aside for being significantly unfair. The trial judge also awarded retroactive and ongoing spousal support to Mrs. Schrader, finding that the agreement did not reflect a true meeting of the minds regarding support obligations.

The Appeal Decision

Mr. Schrader appealed the trial decision on several grounds. Among these were that the trial judge had erred in setting aside the agreement and that he had erred in calculating the retroactive spousal support amount.

The Court of Appeal allowed the appeal in part. The Court agreed with Mr. Schrader in finding that the trial judge had miscalculated the retroactive spousal support amount owed to Mrs. Schrader. The Court therefore ordered a reduction of Mrs. Schrader's retroactive support award from $85,018 to $66,436.

Next, the Court was required to decide whether the separation agreement should be set aside for being significantly unfair. With this respect, the Court rejected Mr. Schrader's argument and sided with Mrs. Schrader, holding that the trial judge had been correct in choosing to set aside the separation agreement. The Court found that the trial judge had carried out the correct analysis by considering the three key factors required to set aside a separation agreement under s.93(3) of the FLA:

1. the length of time that has passed since the agreement was made;
2. the intention of the spouses, in making the agreement, to achieve certainty; and
3. the degree to which the spouses relied on the terms of the agreement.

The Court of Appeal noted that the trial judge had properly considered the factors set out in section 93(5) of the FLA and had exercised his discretion appropriately. With respect to these factors, the Court of Appeal found that the trial judge had observed that:

1. three years had passed since the separation agreement had been made;
2. that the parties had agreed to the agreement without the benefit of a current appraisal for the family home; and that
3. Mr. Schrader had relied on the terms of the agreement when he had invested in renovations to the family home.

Takeaways from Schrader v. Schrader

• Obtaining a professional and up-to-date property valuation can be essential for negotiating settlements.
• Even when an agreement is procedurally sound, courts retain the discretion to set it aside if its effects are significantly unfair. The FLA's significant unfairness standard is a high threshold, but not insurmountable, especially when new information comes to light shortly after an agreement is signed.
• Appellate courts will defer to trial judges unless there is a clear error in law or principle. This reinforces the importance of presenting a complete and accurate evidentiary record at trial.

This case serves as a reminder that negotiating a separation agreement requires great care and precision to ensure it is both legally sound and substantively fair. If you're considering drafting or reviewing a separation agreement, feel free to reach out for guidance tailored to your situation.