No Dower Act Consent? Is the Transaction Void or Voidable?

PDF version: No Dower Act Consent? Is the Transaction Void or Voidable?

Case considered: Charanek v. Khosla, 2010 ABQB 202

The question of whether failure to comply with the Dower Act’s requirements results in the transaction being void or voidable occurs with some frequency in Alberta (and not simply on our December Property Law examinations). This is odd because the relevant provisions of the Act have not changed since 1948 and the courts have addressed the consequences of the failure to comply with its requirements for consent quite often. Nevertheless, when Master in Chambers Jody L. Mason conducted a thorough review of the relevant legislation and case law in Charanek v. Khosla and concluded (at para. 61) that “the consequence of noncompliance with the consent requirements of the Dower Act remains an open question,” she was correct. She was also echoing a conclusion reached 50 years ago by Wilber Fee Bowker (former U of A Faculty of Law Dean and first Director of the Alberta Law Reform Institute), in “Reform of the Law of Dower in Alberta” (1960) 1 Alta. Law Rev. 501 at 502 where he observed:

From 1917 until today the courts and legislature and the legal profession too have wrestled with the question – what is the effect of the disposition of the homestead made without consent, properly given and executed?

Thirty-four years later, that very question continues to be with us. . . .

The crux of the problem is that the Supreme Court of Canada said in Meduk and Meduk v. Soja and Soja, [1958] S.C.R. 167 that the transaction was void and the Alberta Court of Appeal, in Schwormstede v. Green Drop Ltd. (1994), 22 Alta. L.R. (3d) 89, 116 D.L.R. (4th) 622, held that the transaction was voidable, but without mentioning the Supreme Court of Canada case.

 
The void versus voidable issue matters. As the Court of Appeal noted in Re Bridgeland Riverside Community Association and City of Calgary et al. (1982), 135 D.L.R. (3d) 724 (C.A.) at para. 28: “the debate over void or voidable, irregularity or nullity, mandatory or directory, preliminary or collateral” is a sterile debate without paying due regard to the real consequences. Those “real consequences” are succinctly described by Justice Jack Watson in Alberta Teachers’ Association v. Alberta (Information and Privacy Commissioner), 2010 ABCA 26 at para. 28:

Nonetheless, absent a clear indication by the legislators that the fatal consequence should be automatic and inexcusable in the case of mandatory provisions, it is reasonable to infer that the legislators intended that the court should be allowed to decide, in the specific context, whether the breach is so substantial that such a destructive consequence is appropriate and necessary.

Facts

In November 2008, the Charaneks agreed to buy the Khosla’s home in southwest Calgary. The home was registered at the Land Titles Office in the name of the husband alone. The transaction was to close February 2, 2009. On January 19, 2009, the Charaneks told the Khoslas that they no longer wished to buy their home. They had a number of excuses, but their legal arguments were two. First, they alleged that because a notice of waiver or satisfaction of buyers’ conditions was not given prior to a date initially specified, the agreement ended in accordance with its terms. That argument is a very fact-based one, depending on who said what when, and I will ignore it in this post. Second, the Charaneks alleged the agreement was not binding because Mrs. Khosla had not provided her dower consent as required by the Dower Act, R.S.A. 2000, c. D-15.

There was no question that the southwest Calgary property was Mr. Khosla’s “homestead” within the definition of that term in the Dower Act. Under subsection1(d) of the Dower Act, a “homestead” means a parcel of land “on which the dwelling house occupied by the owner of the parcel as the owner’s residence is situated…”. The Khosla’s home met this definition: Mr. Khosla was the sole owner and he lived in the house.

Subsection 1(c) of the Dower Act indicates that the person who has dower rights in a homestead is the spouse of the married person who owns the homestead. A spouse’s dower rights include the right to prevent disposition of the homestead by withholding consent: see section 2. Under section 1(b), a “disposition” includes a transfer of land. Mrs. Khosla’s consent was therefore needed for the sale of the house to the Charaneks.

The form of such consent is prescribed by section 4 of the Dower Act. That section provides that the consent required for the disposition of the homestead must accompany the instrument by which the disposition is effected. Whenever that instrument is produced for registration under the Land Titles Act, R.S.A. 2000, c. L-4, the consent shall be produced and registered with it.

Although Mrs. Khosla signed the real estate purchase agreement and an amendment to that document, there was no consent in the form prescribed by the Dower Act on either the real estate purchase agreement or the amendment. Nevertheless, Mrs. Khosla did sign the prescribed consent form and provided it with the transfer of land her husband’s lawyer tendered to close the sale, a tender that was not accepted. She also deposed that she was aware of her dower rights in relation to the house and that she intended to waive them by her signature on the real estate purchase agreement and subsequent amendment.

There was some evidence that the Charaneks were looking for a way out of the purchase and the courts have frowned upon parties to a contract trying to use the Dower Act to escape liability: see e.g., Meduk and Meduk v. Soja and Soja, [1958] S.C.R. 167. Mr. Charanek gave evidence that he and his wife learned about a possible death in the house shortly before closing, although in fact Mr. Khosla’s grandmother had died at the Rockyview Hospital.

The Charaneks applied to the Master in Chambers for summary judgment under Rule 159 of the Alberta Rules of Court, Alta. Reg. 390/1968, seeking a declaration that the real estate purchase agreement was void and an order for return of the deposits they had paid. On a summary judgment application when the applicant argues that it can prove its case on the facts without a trial, it must be “beyond doubt” that no genuine issues for trial exist: Tottrup v. Clearwater, 2006 ABCA 380 at para. 10. The Khoslas argued that the Dower Act consent need not have accompanied the initial real estate purchase agreement, so long as it accompanied the later transfer of land. They also argued that summary determination of these issues was not appropriate.

Decision

After her review of the law on the void/voidable issue, the Master quite rightly concluded (at para. 50) that the automatic fatal consequence sought by the Charaneks was not a foregone conclusion. At the very least, there was the Schwormstede decision where the Court of Appeal had explicitly stated the consequence of non-compliance with the Act was that the transaction was merely voidable. There are also a number of cases – briefly canvassed by the Master – where courts have considered agreements signed by the spouse with dower rights, as was the case here with Mrs. Khosla’s signature on the real estate purchase agreement. True, those cases tended to say that the sales agreement was ineffective when there was no consent in the form required by the Dower Act: see McColm v. Belter (1974), 50 D.L.R. (3d) 133 (Alta. C.A.). Nevertheless, the Khoslas wanted to argue those cases were distinguishable because Mrs. Khosla was aware of her dower rights and never waivered in her intention to give them up in order to sell the house to the Charaneks.

The Master concluded she was not prepared to grant summary judgment on the basis the real estate purchase agreement was void for lack of the wife’s consent under the Dower Act. Given the state of the law on the void/voidable issue, it was not “beyond doubt” that no genuine issues for trial existed.

Void vs. Voidable Law

Before a new Dower Act came into force in 1948, the old Dower Act had explicitly provided that a transfer of a homestead made without a wife’s consent was “absolutely null and void for all purposes.” That provision was removed in 1948. After 1948 (and currently), a transfer of a homestead made without a wife’s consent was (and is) prohibited under penalty. Section 2(1) of the present Act provides:

2(1) No married person shall by act inter vivos make a disposition of the homestead of the married person whereby any interest of the married person will vest or may vest in any other person at any time
(a) during the life of the married person, or
(b) during the life of the spouse of the married person living at the date of the disposition,
unless the spouse consents to the disposition in writing, or unless the Court has made an order dispensing with the consent of the spouse as provided for in section 10.

Section 2(3) provides the penalty for violating the prohibition in section 2(1):

(3) A married person who makes a disposition of a homestead in contravention of this section is guilty of an offence and liable to a fine of not more than $1000 or to imprisonment for a term of not more than 2 years.

In Shopsky v. Danyliuk (1960), 30 W.W.R. 647 (Alta. S.C.T.D.), the plaintiff’s husband, without her consent, transferred their homestead to the defendant, having sworn in the dower affidavit that he had no wife. The defendant registered the transfer. Justice Milvain held the transfer was null and void because of non-compliance with the Act, noting (at 649) that:

Sec. 3 [now s. 2] of The Dower Act provides a positive prohibition to any disposition of a homestead during the lifetime of the spouse unless such spouse consents in writing to the disposition ….

Justice Milvain acknowledged that the provision providing that a disposition without consent was “absolutely null and void for all purposes” had been deleted by the legislature from the 1948 Act, to be replaced by the prohibition under penalty. Yet he still found that the transaction was null and void because it was a prohibited contract. He stated that “null and void” had been removed from the Act because it was unnecessary:

It is clear law that every contract made about a matter or thing which is prohibited by statute is a void contract: . . .

The general principle, above expressed, has been applied to contracts made in contravention of sec. 3 [now s. 2] of The Dower Act, and such contracts held to be void: Pinsky v. Waas [1953] 1 SCR 399, which reversed (1951) 2 WWR (NS) 49; Meduk v. Soja [1958] 1 SCR 167.

When it is realized such a legal principle exists, it becomes obvious why the legislature dropped from the Act, as surplusage, any reference to such a transaction being void. The contract being prohibited, it is void in law, unless the legislature expressly provides to the contrary.

In Meduk and Meduk v. Soja and Soja, [1958] S.C.R. 167, the wife was the sole registered owner of homestead property and accepted a written offer to purchase it. Her husband did not sign the agreement; nor did he sign the Dower Act consent at any time. There was no indication that the husband opposed the sale; it appeared he merely thought he had no role to play in the sale because the property was his wife’s. The Court held that the wife’s acceptance of the purchaser’s offer was “ineffective to form a contract” because it was made without the written consent of her husband and “expressly forbidden” by what is now section 2(1) of the Dower Act.

The Supreme Court of Canada confirmed these principles in Senstad v. Makus, [1977] 5 W.W.R. 731. That case dealt with the failure of a spouse to acknowledge consent, but the need to give consent in writing was confirmed by Mr. Justice Martland who detailed the history of Alberta’s dower provisions and their underlying philosophy.

In McColm v. Belter and Belter (1974) 50 D.L.R. (3d) 133 (Alta.S.C.A.D.), the farm land was registered in the name of the husband alone but both husband and wife signed an acceptance of an offer to purchase. The husband and wife refused to carry out the agreement and were sued. Mr. Justice McDermid held (at para. 5) that because there was non-compliance with the Dower Act, the agreement was unenforceable. For this, Justice McDermid relied upon the Supreme Court of Canada decision in Meduk and Meduk v. Soja and Soja. As for the fact the wife signed the offer to purchase, Justice McDermid held (at para. 10) that “when Cartwright, J. [in Meduk] refers to a consent in writing he is referring to the consent required by the Act and not a mere signature of the spouse to the memorandum.” There was, he noted, no consent contained in or annexed to the agreement in Form A or a similar form, as required by the Dower Act. The Act, he held (at para. 13) “defines what is needed to constitute a consent, and a mere signature by a spouse to an agreement, which complies with neither s. 5 or s. 6, cannot, in my opinion, be a consent as envisaged and as ordered by s. 3 in order to make valid a disposition inter vivos by the other spouse.”

The Alberta Court of Appeal in Schwormstede acknowledged that a number of decisions held a transaction without a spouse’s consent was void, but stated (at para. 39) that “the better view is that the transaction is voidable.” It noted various provisions of the Act that supported its finding that a transaction that did not comply with the Act had some legal effect until it was attacked and voided. Shopsky, a decision of a lower court, was the only case mentioned by name for the proposition that a number of decisions had held a transaction without a spouse’s consent was void. Schwormstede did not mention the Supreme Court of Canada decision in Meduk and Meduk v. Soja and Soja.

I could go on. There are numerous decisions dealing with the consequences of non-compliance with the Dower Act. Suffice to say, in commenting on a summary judgment application, that those consequences remain uncertain in Alberta. The trial of the issue in this case will not resolve the void vs. voidable issue either – at least not unless the matter makes its way to the Supreme Court of Canada. And the idea that the highest court in the land would grant leave to appeal in a Dower Act case, in these days of Charter issues and security concerns, seems a very dim prospect. Neither does the legislature seem likely to address the issue with amendments to the Dower Act; repeal of the entire statute in favour of the Matrimonial Property Act or a statute dealing even more broadly with the distribution of property between all types of “spouses” seems more likely. Until then, we are left to hope that someday the Alberta Court of Appeal might take it upon itself to consider all of the conflicting authority, starting with its own decision in Schwormstede, and come to a reasoned conclusion on the void vs. voidable issue.

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About Jonnette Watson Hamilton

B.A. (Alta.), LL.B. (Dal.), LL.M. (Col.). Professor. Member of the Alberta Bar. Please click here for more information.
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6 Responses to No Dower Act Consent? Is the Transaction Void or Voidable?

  1. Noel says:

    What I find interesting about this issue is the fact that the standard residential purchase contract used by Alberta Realtors does not include dower consent and Realtors who bother obtaining consent are few and far between.

    The contracts are signed and delivered to the lawyers without such consent almost always, and as a result it seems to be standard that transactions of this type are concluded exactly as in the Charanak case where the dower consent is included with the transfer and NOT with the contract.

    Does this mean that a significant number of transactions in Alberta involving dower issues would be ineffective? Also, why would the Alberta Real Estate Association not insist that Dower consent be included and add a consent form page to their existing standard contract?

  2. Jonnette Watson Hamilton says:

    Good questions, Noel. If the acceptance of an offer to purchase by a married person is a “disposition” as defined by section 1(b) of the Dower Act, then the consent of the spouse is required. Section 2 of the Dower Act prohibits a married person from disposing of a homestead without the consent of their spouse and makes it an offence for them to do so.

    “Disposition” is defined to specifically include an “agreement for sale” in section 1(b)(ii)(A). “Agreement for sale” would have to be read much more narrowly than usual to exclude a contract for the sale and purchase of land. Before the Supreme Court of Canada’s 1996 decision in Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, there was no question that a contract for the sale and purchase of land was an agreement for sale. Post-Semelhago, it may be that an argument could be made that the category “agreement for sale” should be narrowed to include only those agreements for the sale of land which take the place of a mortgage. But that argument has not been made, as far as I am aware, and I would be very surprised if that was the reasoning behind the omission of the Dower Act consent from the standard form contract for the sale and purchase of land.

    Standard real estate purchase and sale agreements should include Dower Act consent and acknowledgment forms. Why don’t they? It may be that section 6 of the Dower Act suggests there is a choice: provide the Dower Act consent and acknowledgment on the agreement for sale or on the transfer. Section 6(1) provides that when a spouse has consented to the sale of the homestead under an agreement for sale and acknowledged that consent, then no further signature or acknowledgment is required on the transfer. Or it may be that the Dower Act requirement for an acknowledgment before a commissioner or notary public is an obstacle, making the acquisition of a proper consent seem like too much trouble, especially if there are conditions precedent in the contract. Or it may be that Dower Act consent and acknowledgment on the listing agreement is wrongly thought to be enough.

    Whatever the reason for the omission, the omission of Dower Act consents and acknowledgments is risky. In the Charanek v. Khosla case, it was not the spouse of the married person who challenged the lack of consent. But a condition precedent-free contract for the sale and purchase of land that requires and does not have a Dower Act consent and acknowledgment could easily be successfully challenged by the spouse whose consent was required.

  3. David Laidlaw says:

    Hi Jonnette,

    I believe that there are a number of reasonable explanations for not including Dower Act Releases in a Standard form Purchase and Sale Agreement, including:

    1. Not all lands are homesteads.
    2. Many realtors are reluctant to have “more paperwork” than absolutely necessary when finalizing a Purchase and Sale Agreement.
    3. Issues as to coercion, independent advice, agency obligations etc. could arise. For example the Dower Act requires that someone meet with the spouse separately, with a witness who should then execute an Affidavit of Execution. The issue would arise for example whether the Realtor was providing legal advice (although lawyers can act as Realtors).
    4. Purchase And Sale Agreements are often not considered absolute dispositions, there may be preconditions such as the Vendor obtaining consent from a divorced spouse, satisfactory proof of financial capacity (for Vendor-take-back mortgages) or any one of a number of other Vendor inspired conditions.
    5. The Dower Act specifies in s. 4(2) a specific form – which could be accomplished by the Realtor, but errors and mistakes can happen – better to have the lawyer responsible in the process of preparing the documents.
    6. A Standard Form Purchase and Sale Agreement cannot usually be considered for registration without some further, usually Court based relief. While s. 64 of the Land Titles Act says that an owner “may” execute a Transfer of Land in FORM 8 – the policy of the Registrar is to examine all documents to ensure that all of the requirements are met, the name matches the Certificate of Title, the legal description is correct, the interest transferred is correct, Dower Act as been complied with, Foreign Ownership of Land is required etc.
    7. Standard Form Purchase and Sale Agreements contain signature lines for “Vendor” and “Co-Vendor/Spouse”.

    In short – Realtors generally want to get the land sold and receive their commission, leaving lawyers with the details.

  4. Jonnette Watson Hamilton says:

    Good points all, David. I still think my original “too much trouble” idea is most likely the best explanation and it accords with your points 2, 3 and 5 and your concluding remark. However, no matter what the cause, Standard Form Purchase and Sale agreements, whether absolute or conditional, are still “dispositions.” If the land being sold is owned by a married person alone and that married person has occupied that land as his or her residence, then a Dower Act consent is not a mere “detail” and it is risky practice to leave its completion to the much later transfer stage. As you note, and as my experience would confirm, issues of coercion are not uncommon in the context of Dower Act consents. The intensity of the coercion only increases if dower is not dealt with immediately.

  5. Noel says:

    I’m coming back to this quite late so I have no idea if anyone will read it but….

    The idea that consent is not required with the transfer if it is given with the contract doesn’t really fit because land titles requires dower consent, leaving us with the “too much trouble” theory. You’d think for the commissions being earned they would be willing to arrange for commissioners. They are not difficult to find.

    “Realtors generally want to get the land sold and receive their commission, leaving lawyers with the details.”

    This is precisely the problem, and it fits nicely among the other issues that often lead me to wonder what many realtors do to earn their significant commissions. (Not all since there are obviously good and thorough realtors out there)

    I wonder if this might change if realtors were made aware that without Dower consent their commissions remain vulnerable.

  6. David Laidlaw says:

    I am coming back even later, but Noel in answer to your comment, I would go further and suggest that on the authority of

    “Chand et al. v. Sabo Bros. Realty Ltd. et al., [1979] 2 W.W.R. 248 at 258 (Alta. C.A.), the Court held that a realtor was liable for failing to appreciate the importance of completing the purchase agreement correctly. In particular, the realtor had failed to get a dower consent.”

    cited in: Johnston v. Re/max Real Estate (Edmonton) Ltd., 2004 ABQB 212.

    In Chand, the vendors Realtors were held liable in negligence to the PURCHASERS when the putative Purchase and Sale Agreement fell through.

    Basically the facts in Chand were that a property, shown only in the husband’s name in Land Titles, was subject to a listing agreement. That listing agreement was signed by both the husband and wife and the realtors assumed that the property was held in joint names. When problems arose with the wife in the course of the transaction, the plaintiffs settled their claim against the vendors and then claimed against the realtors. The plaintiffs claimed the Realtors had professed a professional expertise and that founded a duty to the Plaintiff/Purchasers.

    Judgment was given against the realtors for the damages incurred, ie. legal fees, value of land and a loss of a favourable mortgage interest rate at the time.

    The better practice, for realtors is to always check the Vendors title – something that has become more affordable and available under SPIN.

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