The test for unconscionable transactions was discussed in Blunt v . Lee 2019 BC SC 351 , where at paragraph 42 the trial judge cited Hamilton v. Hamilton 2005 BCSC 1713, where the court quoted from an earlier decision in N (W.P.) v N (B.J.) 2002 BCSC 53 at paragraphs 55-56:
55. The test is stringent:
a) Was there an inequality in the position of the parties due to the ignorance, need, or distress of the weaker, which would leave him or her in the power of the stronger;
b) Is there proof of substantial unfairness in the bargain (see Klassen v Klassen 2001 BC CA 445)
c) The burden is on the party applying to set aside the agreement with respect to both parts of the test. If that burden is met, it falls to the other party to demonstrate that the bargain was fair, just and reasonable, or that no advantage was taken.
56. The policy of the law is to enforce agreements made by adult persons. Cases which separation agreements have been set aside for unconscionability have involved substantial inequality of bargaining positions with the relative unsophistication or vulnerability of one party being exploited by the other party. Usually there are factors such as asymmetrical access to financial information or undervaluation of family assets.
A number of considerations arise from the case law, including:
1. Emotional Vulnerability:
Circumstances falling short of unconscionability in the commercial law context may be relevant to accessing the parties vulnerability and the family law context – Miglin v Miglin 2003 SCC 24 at paragraph 82
However, the emotional stress of separating from one spouse does not give rise to a presumption that the parties or incapable of making a valid agreement. There must be evidence to ground a finding that one parties vulnerability was exploited in the bargaining process.
2. Duty of Disclosure
There is a duty to make full and honest disclosure of all relevant financial information when negotiating a family separation agreement. Such disclosure protects the integrity of the bargaining process.
Depending on the circumstances of each case, deliberate failure to make full disclosure may result in judicial intervention. The extent of the defective disclosure, the degree to which it was deliberate, and whether the agreement complies with statutory objectives are all relevant circumstances;
3. Professional Assistance
Vulnerabilities can be compensated for by professional assistance. However, depending on the circumstances, the court cannot always assume that the presence of professional assistance was sufficient to cure vulnerabilities
4. Independent Legal Advice
The absence of independent legal advice is an important factor, but is not, on its own, the ground for setting aside the agreement . Graham v McCartney 2013 BC SC 130