The Unequal Division of Property under Ontario’s Family Law Act

Wednesday, December 23, 2015

These days, most people understand that the vast majority of property that is owned by a married couple is typically divided equally among the parties  if they were to divorce in Ontario. However, one of the most common reasons that marriages breakdown in the long-run are disputes relating to financial issues.

Although this point is outside of the scope of this article, the means by which a person spends their money is often a reflection of their value system.  In the context of jointly held bank accounts and jointly held lines of credit, which are common in most marriages, any difference in either spouse’s opinion about how to spend the fruits of the labour of the marriage can lead to prolonged conflict.

Once those conflicts about how to spend money become more common, it usually becomes very clear to one spouse that their value system is completely different than that of the other spouse. When children are involved, this alone can precipitate the social and economic constraints that will eventually lead to a separation.

It comes as no surprise, then, that one of the first questions that I am asked by a would-be family law litigant is, “Can I get more (or make my ex get less) money from the division of property if we were to divorce?” The correct response, as is typically the case in the legal system, is that “it depends.”  

As such, my goal in this article is to describe the circumstances under which a married spouse may be able to obtain an unequal division of matrimonial property after the separation.

First, I will describe the default equal division of property rules under the Family Law Act (“FLA”) in Ontario. Next, I will briefly summarize the legislative framework underlying Ontario’s FLA that permits a judge to order that matrimonial property be divided unequally among the spouses. Subsequently, I will undertake to provide a detailed overview of the most recent case law developments in relation to the issue of the unequal division of matrimonial property.

Finally, I will conclude this article by listing, as a point of comparison, five family law cases in which the equal division of property was ordered, and five cases in which it was held that the unequal division of property would be appropriate.

My hope is that this article will provide the reader with a greater understanding of the conceptual framework and policy rationales that underlie the Family Law Act in relation to how the property division scheme ought to function in Ontario for married spouses that had separated.

The Default Equal Division of Property Rules under Ontario’s Family Law Act

In Ontario, the Family Law Act governs the division of property among married spouses that had separated. Matrimonial property is divided under the FLA pursuant to the “Equalization of Net Family Property” scheme. On the other hand, common law spouses are not covered by the system of property division set out in the FLA (although those individuals may still have a claim in unjust enrichment as against their former common law spouse).  

In an attempt to make the division of matrimonial property a system that is based on more objective criteria, the Ontario legislator had designed a formula that accounts for the growth of each spouse’s net worth from the date of the marriage to the date of separation (usually considered the ‘Valuation Date’).

The formula then equalizes the difference between the two values through the payment of money, also known as the Equalization Payment. Transfer of property is also possible, but that is the topic of another article. Each spouse must calculate his or her net-worth on the date of the marriage and on the Valuation Date, in order to determine the payment owing by one spouse to another.

However, each spouse must first calculate their “Net Family Property” (or “NFP”) before knowing the value of the Equalization Payment that must be made, if any is appropriate at all. The Equalization Payment is made only if the difference between the two NFPs is a positive value.

Each spouse’s NFP is calculated by taking the total value of all of that spouse’s property on the Valuation Date, and then subtracting the value of all debts and liabilities on that date, along with the value of all assets owned on the date of the marriage by that spouse. This is contrary to a commonly held belief by many would-be family law litigants, as many individuals assume that the value of the property that they had brought into the marriage would be split with their soon-to-be former spouse (and this is often an ‘empty threat’ made by the other spouse to discourage the separation in the first place).

The value of any property that is owned by a spouse on the date of the marriage is usually deducted from that spouse’s NFP (meaning that the value of the property is not shared with the other spouse). The major exception to the above-noted rule, however, pertains to the value of a matrimonial home that is owned by one spouse on the date of the marriage.

The treatment of the matrimonial home’s value on the date of the marriage is unique under the Family Law Act, because a spouse will not receive a credit for bringing a matrimonial home into the marriage. However, this may be modified by way of a Marriage Agreement, also known as a prenuptial agreement, but that again is the topic of another article.

There are other exceptions to the default rule of the value of all property being shared among the spouses equally. For example, the value of property that was received as a gift (other than a matrimonial home), or an inheritance from a third person acquired after the date of the marriage and prior to the date of separation, will not be shared with the other spouse. This includes the value of any property into which the value of the gifted or inherited property can be traced.

Once the value of each spouse’s NFP has been determined, the Equalization Payment is effected via the spouse with the larger NFP usually paying the other spouse the value of one-half of the difference between the value of their NFPs (e.g. Equalization Payment = ((NFP 1 – NFP 2) / 2)). This is codified in s.5(1) of the Family Law Act, as follows:

“When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.” (Emphasis added)

Typically, the equalization payment is made through the unequal division of the sale proceeds of the matrimonial home, or the transfer of value from employer pension plans. The transfer of other assets, such as Registered Savings Plans, is also possible in order for the equalization payment to be effected among the spouses.

The “Equalization of Net Family Property” scheme seems great at first glance. Each spouse is guaranteed that their financial interest in the value of any property brought into the marriage or acquired during the marriage is protected.

However, what if the marriage had only lasted a couple of years? Or a couple of months? What if all of the property that is “owned” on the date of the separation by one spouse was acquired via gifts made by the other spouse just prior to the separation?

What if one spouse takes out a large loan with a bank just prior to the separation, and then recklessly spends that money on his or her gambling habit or addiction to hard drugs? What if one spouse forced the other spouse to transfer property to him just prior to the separation, and then ran off with the mistress?

To many people, it would seem immoral or perhaps “unconscionable” to have the matrimonial property in question divided equally among the spouses in the circumstances described above.

To others, however, it would take extremely serious conduct by a spouse, especially in the context of all of the social and economic complexities of a human relationship, for that person’s conduct to be regarded as immoral or “unconscionable.”

The Unequal Division of Matrimonial Property

The Ontario legislator has attempted to address the issue of the circumstances in which the unequal division of matrimonial property would be appropriate. Section 5(7) of the Family Law Act codifies the purpose of the default division of matrimonial property scheme, as follows:

“The purpose of this section is to recognize that child care, household management and financial provision are the joint responsibilities of the spouses and that inherent in the marital relationship there is equal contribution, whether financial or otherwise, by the spouses to the assumption of these responsibilities, entitling each spouse to the equalization of the net family properties, subject only to the equitable considerations set out in subsection.” (Emphasis added)

The “equitable considerations” mentioned above are listed in section 5(6) of the Family Law Act, as follows:

“The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,

(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;
(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;
(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;
(d) a spouse’s intentional or reckless depletion of his or her net family property;
(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;
(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;
(g) a written agreement between the spouses that is not a domestic contract; or
(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.” (Emphasis added)

As indicated above, the court must first find that the default rule which calls for equalizing the difference between the parties' net family properties would be “unconscionable” in order for the court to award a spouse an amount that is more or less than the equalization payment.

Note that some of the grounds for an unequal division of property under s.5(6) of the FLA relates to spousal misconduct in relation to property and is therefore a “fault-driven” analysis, which is uncommon under current divorce laws. It seems somewhat self-defeating for the Province of Ontario to be considered a “no fault” divorce jurisdiction, but then for the legislator to enact laws that would essentially punish a spouse for misconduct via an economic reprisal. Luckily, the Courts have stepped in to provide guidance on this issue.

In Serra v. Serra, the leading case on the judicial test that is applied under s.5(6) of the FLA, the Ontario Court of Appeal had affirmed that the judicial remedies available for the unequal division of matrimonial property were only to be used in exceptional circumstances. The facts of the case in Serra will be discussed later in this article as this case relates to post-separation changes in the value of property.

On the issue of the analytical steps to be taken in order for s.5(6) of the FLA to be used, the court noted the following at paragraph 37 in Serra:      

“The steps to be taken when s. 5(6) is engaged are well-established. The court must first ascertain the net family property of each spouse, by determining and valuing the property each owned on the valuation date (subject to the deductions and exemptions set out in s. 4). Next, the court applies s. 5(1) and determines the equalization payment. Finally - and before making an order under s. 5(1) - the court must decide whether the equalization of net family properties would be unconscionable under s. 5(6), having regard to the factors listed in paragraphs 5(6)(a) through (h). See Rawluk v. Rawluk [1990] 1 S.C.R. 70 at pp. 93-94; Berdette v. Berdette (1991), 3 O.R. (3d) 51”

At paragraph 47 in Serra, the Ontario Court of Appeal noted that the unequal division of matrimonial property requires the high threshold of “shocking the conscious of the court” in order for s.5(6) of the FLA to be invoked, as follows:

“In this regard, the threshold of "unconscionability" under s. 5(6) is exceptionally high. The jurisprudence is clear that circumstances which are "unfair", "harsh" or "unjust" alone do not meet the test. To cross the threshold, an equal division of net family properties in the circumstances must "shock the conscience of the court": see Merklinger v. Merklinger (1992), 11 O.R. (3d) 233 (Ont. Page 13 Gen. Div.), aff'd (1996), 30 O.R. (3d) 575 (C.A.); Roseneck v. Gowling (2002), 62 O.R. (3d) 789(C.A.); McDonald v. McDonald (1988), 11 R.F.L. (3d) 321 (Ont. S.C.); and LeVan (S.C.J.).” (Emphasis added)

As indicated above, Ontario is a no-fault divorce jurisdiction, subject to the legislated exceptions to that rule such as s.5(6) of the FLA. However, in Serra and in other cases, litigants attempted to argue that such a rare and exceptional remedy under s.5(6) of the FLA could only be used when one spouse had engaged in misconduct. According to their argument, the overall result could not be considered unconscionable unless one spouse had engaged in misconduct. In rejecting that argument, the Court of Appeal noted the following at paragraph 58 in Serra:

“There is no principled reason that I can see, given the language of the Act and its purpose or objects, to confine the word "unconscionable" in s. 5(6) only to circumstances arising from fault-based conduct on the part of one of the spouses. Although unconscionable conduct is obviously an appropriate consideration in determining whether equalizing the net family properties would be unconscionable, in my opinion the true target of the limited exception to the general rule is a situation that leads to an unconscionable result, whether that result flows from fault-based conduct or not.” (Emphasis added)

Therefore, when an argument under s.5(6) of the FLA is made,  the overall circumstances of the case are assessed by the court, and any situation that leads to a result that is “unconscionable,” despite the lack of misconduct by one spouse, can be grounds for the unequal division of property. However, and this issue is later discussed in the Consentino case as found below, the wording of the FLA itself cannot be ignored, despite how “unconscionable” or “shocking” the resulting set of circumstances may be to the Court.

In the subsequent sections, I will discuss some of the specific grounds for which the unequal division of matrimonial property may be ordered under s.5(6) of the FLA:

s.5(6)(e): A Relationship that had Lasted Less than Five Years.

Although s.5(6) of the FLA may be used only when the “high threshold” of unconscionability is met on the facts of the case, there are certain circumstances in which the unequal division of matrimonial property is used quite commonly in practice, such as with marriages of a short duration.

In these cases, the “length of marriage formula” is usually applied, by taking the product of the number of months of the marriage multiplied by the proposed equalization payment, and then dividing that number by 60 months (the total amount of months in five years, or 5 years x 12 months / year = 60 months).

However, “cohabitation” for the purposes of this section of the FLA includes cohabitation prior to marriage (Pope v. Pope [1999] O.J. No. 242). Therefore, in cases where the parties had cohabitated for a long period of time before living together as a married couple, as is becoming more commonly observed these days, the “length of marriage formula” should be referred to as the “length of cohabitation formula.” 

In the recent case of Burden v. Burden [2014] O.J. No. 5192, the marriage had lasted for only about 18 months after the parties had wed. The husband was a widower, and he had owned a home from his previous marriage that he had transferred to be owned jointly with his new wife. After the separation, the husband argued that s.5(6)(e) of the FLA should be applied since his soon-to-be former spouse would receive a very large windfall for a marriage of such a short duration if the matrimonial home were considered to be part of the NFP calculations.

In holding that the aforesaid circumstances are unconscionable and that an unequal division of matrimonial property ought to be ordered, Justice Desotti of the Superior Court of Justice noted at paragraph 13 in Burden that there were different ways to calculate the quantum of the unequal division of property, as follows:

“There are various methodologies that I can utilize in order to come to a determination of what amount should be considered as a reasonable determination after accepting that the considerations under section 5 (6) of the Family Law Act are invoked. The Ontario Court of Appeal in Serra v. Serra indicated that the proper approach was to make an order that was "just and fair and equitable in the circumstances".” (Emphasis added)

At paragraph 15 in Burden, Justice Desotti reduced the equalization payment from the sum of $77,488.00 to the sum of $7,700.00 after applying the “length of marriage formula” under s.5(6)(e) and accounting for expenses that the husband paid for the wife, as such:

“Using a length of marriage formula, if I take the sum of $77,488.00 that would be the applicant's net family property after the equalization payment ($91,820.00 - $14,332.00 = $77,488.00) and multiply this by 17.5 months (duration of the marriage) and then divide this sum by 60 (the less than 5 year marriage duration under s. 5 (6) of the Family Law Act), this would leave a sum of $22,600.00 that would be payable to the applicant. From this sum, I would deduct the two expenses associated with the indebtedness previous referred to of $29,800.00 and the applicant's share of $14,900.00 leaving a balance of $7,700.00 ($22,600.00 - $14,900.00 = $7,700.00) as an amount that the applicant would be entitled to under this formula.”

Similarly, in Kucera v. Kucera [2005] O.J. No. 1514, the duration of the marriage was short and the husband had owned the matrimonial home before the parties had married. The court provides a succinct summary of the relevant factors in the case at paragraph 25, as follows:

“The relevant factors that I take into account in determining this issue are the following:
- the home was purchased by the Husband well before the marriage, with no contribution from the Wife;
- the home was not improved during the marriage in any way;
- the Husband paid all of the bills to maintain the home, as well as all other living expenses for both parties, during cohabitation;
- the bulk of the presumptive equalization payment has not been generated from any significant increase in the value of the Husband's assets during cohabitation, but rather from the value of the matrimonial home that he brought into the marriage;
- the Wife has improved her financial position even without receiving an equalization payment, since she paid off a debt of $4,260 during the marriage, and left with $9,400 cash in hand;
- there are no children of the marriage and therefore there has been no contribution to the marriage, within the meaning of s. 5(7), by either party in that regard”

Justice Heeney of the Superior Court of Justice provided his reasons for which the unequal division of matrimonial property was ordered given the above-noted facts of the case at paragraph 26 in Kucera, below:

“I have no hesitation in concluding that it would be unconscionable to award the Wife her presumptive entitlement of $86,217. An award of that size is disproportionately large having regard to the fact that the marriage lasted only 10 months. Furthermore, the bulk of that payment represents a share of the value of an asset that the Husband acquired well before the marriage, with no contribution from the Wife. To, in effect, divide that asset between the parties after such a short marriage represents an unjustifiable financial windfall to the Wife.” (Emphasis added)

The court later went on to reduce the wife’s entitlement to an equalization payment in Kucera from $86,217.00 to the figure of just $8,536.00 after taking into account the short duration of the marriage and the husband’s loans relating to the maintenance and upkeep of the matrimonial home.

s.5(6)(g): Written Agreement between the Spouses that is Not a Domestic Contract.

As is typically the case, the courts will give a great deal of importance (or “weight”) to the existence of a written contract between the parties in relation to the issue of the unequal division of property.

By virtue of the principle of liberty of contract and due to reasons relating to the judicial protection of a party’s reasonable expectations, the presiding judge will usually be hesitant to disturb the terms of a contract that had been voluntarily contemplated, negotiated, and agreed upon by the parties.

For instance, in the admittedly older case of Crawford v. Crawford [1997] O.J. No. 5065, the parties had made an oral agreement, which was later drafted into a written contract. The wife was to receive an additional sum of money upon the sale of the matrimonial home in exchange for her agreeing to refinance the mortgage with a financial institution.

Despite there being evidence adduced on record that the wife had agreed to the terms of the contract orally, she later refused to sign the written contract at a meeting between the parties and their lawyers. However, the husband had signed the contract in the presence of the other parties, including his family law lawyer.  

The court held in Crawford that the aforesaid agreement that had been signed by the husband, but not the wife, was a valid “written” agreement for the purposes of s.5(6)(g) of the FLA. The court held that the effect of the wife not signing the written contract was irrelevant, since there was direct evidence of her prior agreement on the exact same terms in the oral agreement and that all of the elements of a proper and enforceable contract were satisfied.

s.5(6)(e): Acquisition, Disposition, Preservation, Maintenance or Improvement of Property

Post-Separation Decline in the Value of Assets

Sometimes, the family law system can work slowly. For example, it can take several months for a Case Conference to be convened. Many times, there are family law matters that take several years for a trial to be held.

Families evolve over time, and dramatic changes can occur that would completely change the landscape of the case from the date of the separation to the date of the trial. What if the value of the matrimonial property had decreased substantially by the time that the trial was actually held, for reasons outside of the control of either of the parties?

In Serra v. Serra 2009 ONCA 105, the parties had been married in 1976 and had built a very successful textile business together. They had lived a luxurious lifestyle due to the profit from their textile business, but they had eventually decided to separate in 2000.

By the date of the separation, the husband’s holdings in the business were valued in the range of $9.5 million dollars to $11.25 million dollars. However, by the time that the trial was to be held, the value of the textile business had decreased to the range of $1.875 million dollars to $2.6 million dollars. The reason for the downturn in their business was completely out of either party’s control, as shifting market forces had adversely affected the textile industry. In fact, the entire Canadian textile industry had suffered a downturn.

At trial, the husband argued that the required equalization payment of $4,129,832.00 would have exceeded his total net worth, and that the circumstances were unconscionable as contemplated by s.5(6) of the FLA. In rejecting the husband’s argument, the trial judge decided that market-driven post-separation date decline in the value of a spouse’s assets could not be taken into account under s.5(6) of the FLA. Unsurprisingly, the husband then appealed.

However, there had been previously established case law authority against the husband’s argument in the case of Levan v. Levan (2008), 51 R.F.L. (6th) 237 (C.A.). At paragraphs 44 to 46 in Serra, the Ontario Court of Appeal overruled that previous line of reasoning and held that post-separation changes in the value of property can be considered under s.5(6) of the FLA, as such:

“At trial in LeVan, Justice Backhouse had concluded that the factors in s. 5(6) did not include post-separation changes in value, expressing the opinion (at para. 267) that if "the Legislature [had] intended that post valuation date increases and decreases in value might form the basis of a s. 5(6) application, I think it likely, given the frequency of these events, that it would have included a provision to this effect." Here, the trial judge came to a similar conclusion. At paras. 135-136 she held:

‘Turning to the language of s. 5(6)(h) itself, a market-driven decline in value does not appear to come within the "acquisition, disposition, preservation, maintenance or improvement" of a property. This is to be contrasted to a situation in which the conduct of a spouse had an impact on the value of the property.

I conclude that the circumstances in which a court may order an unequal division of net family property under s. 5(6) do not include a market-driven decline in the value of the property.’

Respectfully, I disagree.

In my opinion, a court may take into account a post-separation date change in the value of a spouse's assets, and the circumstances surrounding such a change, for purposes of determining under s. 5(6) of the Family Law Act whether equalizing net family properties would be unconscionable. An order for an unequal division of net family properties is exceptional, however, and may only be made on such a basis (i) where the circumstances giving rise to the change in value relate (directly or indirectly) to the acquisition, disposition, preservation, maintenance or improvement of property (s. 5(6)(h)), and (ii) where equalizing the net family property would be unconscionable, having regard to those circumstances (taken alone or in conjunction with other factors mentioned in s. 5(6)).”

At paragraph 49 in Serra, the Court of Appeal noted that there were concerns by legal scholars and academics about the above-mentioned LeVan decision in that said decision had seemed to completely ignore the subtleties of how a post-separation decline in value may lead to an unconscionable result, as follows:

“However, it does not follow that because the threshold is exceptionally high the factors to be taken into account in assessing whether that threshold has been crossed should not include post-separation changes in the value of a spouse's assets and the circumstances surrounding that change. In an article published after the trial decision in LeVan, but before the argument on appeal, Professor Bala stated:

‘It is submitted that while the outcome in LeVan may well be correct, the courts should interpret the vague, general words of s. 5(6)(h) to include the factor of a post-separation decline in property values that renders an equalizing of net family properties as evaluated on separation date to be unconscionable. It seems inappropriate for there to be judicial recognition only of post separation increases in property values, with post-separation declines ignored, even in situations of "unconscionability." While in some circumstances it is appropriate to expect the titled spouse to dispose of the assets after separation or bear the full risk of not doing so, there are circumstances when such a disposition would be unreasonable.’

I agree. This is precisely one of those situations.” (Emphasis added)

The Court of Appeal also went on to conduct a statutory analysis of s.5(6) of the FLA and the Family Law Act in general, and noted that the wording of the FLA itself would allow for the post-separation decrease in the value of property to be taken into consideration by a judge. The Court of Appeal later decided that the trial judge had erred in failing to take the post-separation decrease in the value of property into account while setting the value of the equalization payment, and held that the circumstances would be unconscionable at paragraphs 67 to 68, as follows:

“This is not a situation where any of the other factors listed in clauses (a) through (g) of s. 5(6) come into play to be weighed in the analysis against the market-driven decrease in value. For example, there is no fault-based conduct on the part of Mr. Serra that could - if it existed – be evaluated in the s. 5(6) analysis against the market-driven factors affecting his assets, as there was in such cases as LeVan, von Czieslik and others.

As the trial judge noted, "[t]here is no suggestion that the decline in the value of the business is other than market-driven." Nor - for reasons mentioned above - is this a situation like LeVan where Mr. Serra could have disposed of the business (or of his shares in it) as a hedge against their downward trend in value, another factor that could otherwise be considered in the mix. It was necessary to keep Ajax Textiles afloat to enable him to continue to meet the interim support and capital obligations he had been ordered to pay.

In these circumstances, an equalization of net family property that requires Mr. Serra to pay more than his total net worth (and arguably as much as twice his net worth) because of a marked decline in the value of his major asset post-separation - over which he had absolutely no control and in spite of his best efforts to save the business in the face of Ms. Serra's trust claims, the preservation order and the need to comply with his support obligations - is, in my view, unconscionable. In so concluding, I have taken into account that Ms. Serra is not a woman without means. The trial judge found she left the marriage "with assets worth a considerable amount." She has net family property of about $1 million in addition to her interest in the Florida property. She has lived, and continues to live, a life of relative luxury, 6 months in Canada and 6 months in Florida. The trial judge found she had been "very well compensated" for her contributions to the business during the course of the marriage.” (Emphasis added)

The court later went on to reduce the net equalization payment to be made by the husband from $3.28 million to the value of $900,000.00, either by transferring the husband’s one-half interest in their Florida condominium, or receiving three installments of $300,000.00.

Could an Affair be “Unconscionable” for the Unequal Division of Property?

Most people are aware of the point of law that Ontario’s “no-fault” divorce scheme means that extramarital affairs by a spouse are usually not considered to be relevant except in very limited circumstances. However, what about when one spouse spends a large amount of money on the person with whom they are, or were, having an affair?

In the recent case of Cosentino v. Cosentino 2015 ONSC 271, the parties had been married for 29 years and had raised two children together. They had separated in 2007 but then had briefly reconciled. However, after finally separating in 2008, they have been in court about property and spousal support issues ever since. The wife in Cosentino claimed more than the usual equalization payment for various reasons under s.5(6) of the FLA, including the fact that her husband had an affair and had spent money on his mistress.

Justice Perkins of the Superior Court of Justice dismissed the wife’s aforesaid arguments at paragraphs 47 to 49 in Cosentino, as follows:

“The  wife  seemed  to  think  that  the  nature,  extent,  or  duration  of  the  extramarital  affairs engaged  in  by  the  husband,  his  having  left  evidence  of  the  affairs  where  the  wife  could  and  did find  it,  or  his  having  allowed  one  or  more  women  to  discover  where  he  was  living,  so  that  the wife  had  to  speak  to  or  otherwise  deal  with  one  or  more  of  these  women,  came  within  the enumerated  considerations  in  section  5(6).

A  somewhat  similar argument was raised  before me  in  Biant v Sagoo, [2001] OJ no 1685 (SCJ  Fam  Ct),  where  the  wife  sought  compensation  under  section  5(6)  for  a  sum  of  between $20,000  and  $50,000  spent  by  the  husband  over  a  number  of  years  on  jewellery  and  travel  for “the  mistress” .  In rejecting  the wife’s  claim,  I said (at para 126),

‘It would be a novel proposition that a philandering spouse is responsible under subsection  5(6) for paying to the other spouse a sum equal to the cost of an affair, either direct costs (jewellery and such) or indirect costs (diminished profits from business). … There was no evidence  that  the  husband's  expenditures  materially  affected  the  family in any way and certainly no evidence that the wife has been called on to shoulder any portion  of them.’

However  morally  objectionable  or  emotionally  harmful  the  husband’s  conduct  may  have been   in  this  case,  it  is  only  open  to  the  court  to  respond  to  it  under  section  5(6)  if  it  falls  within one  of  the  eight  clauses  of  that  provisionThere  was  no  evidence  in  this  case  that  the  husband’s affairs  had  any  significant  effect  on  the  parties’  debts,  liabilities,  or  property.  There  is accordingly  no  remedy  under  section  5(6)  for  the  matrimonial  misconduct  of  the  husband. Indeed,  section  5(6)  was  very  tightly  drawn  specifically  so  as  to  exclude  consideration  of  matrimonial  misconduct  such as this.” (Emphasis added)

While many people would regard the conduct described in Cosentino as ‘unconscionable’ in the sense that it is immoral, it would seem disingenuous, in my opinion, to say that this type of spousal misconduct would satisfy the high threshold of “shocking the conscious of the court.” Speaking about the matter objectively, affairs are common in modern cases, and many times the underlying reasons for the affair are completely different from one case to another.

Unless the argument being made is directly related to the wording of s.5(6) of the FLA, then allowing a judge to decide which categories of misconduct and which underlying reasons for having an affair are “unconscionable” or not, would essentially call for the presiding justice to make a moral value judgement in relation to the litigant’s relationship choices, without a clear legal basis for same.

This not only would fly in the face of Ontario's “no-fault” divorce scheme, but ascribing a “worth” or “value” to an affair is extremely difficult to do in terms of quantifying the appropriate sum of money for same, even if that money was spent on the other person. Further, the Legislative Assembly of Ontario had already drafted s.5(6) of the FLA to exclude moral and ethical considerations which are unrelated to property. Therefore, it would also violate the division of powers for the Court to “read-in” exceptions to the default rule that are not codified in s.5(6) of the FLA .

Example Cases:

            Below, I will list a brief summary of five family law cases in which the equal division of property was ordered, and five other cases in which the unequal division of property was ordered:

I.                 Equal Division

  1. Medeiros v. Medeiros [2009] O.J. No. 4309 – The wife had received a $200,000.00 settlement during the marriage, and parties had attempted to shelter money from the husband but the contract was not enforceable. Wife had legal advice and could have asked husband to sign domestic contract, but she did not do so. Equal division ordered.
  2. Mahony v. Laderoute [2007] O.J. No. 3478 – Husband put $31,000.00 worth of his inheritance into the purchase of the family home, and the title to the home was taken out in both of the spouse’s names jointly. Also, the mortgage was jointly held and there was no evidence adduced of any intention other than that the parties would be joint owners of the home. Equal division ordered.
  3. Conway v. Conway [2005] O.J. No. 1698 – During the marriage, the wife received an inheritance and put all of the value of same into the purchase of a family home. The husband was the primary income earner throughout their 28-year marriage. The parties had conducted their financial and family affairs as an economic partnership. Equal division ordered.
  4. DeBora v. DeBora [2004] O.J. No. 4826 – The husband was clearly hiding assets from the wife, and full disclosure would have resulted in a larger equalization payment. However, the court had already imputed amounts to husband and had ordered that the wife would retain large sums of money and would have other assets returned to her. Equal division ordered.
  5. MacDonald v. MacDonald [1997] O.J. No. 4250 – During their 17-year marriage, the wife was employed throughout the marriage while the husband, with the wife’s encouragement, had operated an unprofitable business. He cared for their children and contributed significantly through his labour relating to improvements to the matrimonial home. Equal division ordered.

II.               Unequal Division

  1. Ward v. Ward [2012] O.J. No. 3033 – While their marriage was crumbling, the husband insisted that a $9,000.00 gift from the wife’s father to the wife was to be used to pay down the line of credit, the debt from which was mainly for the husband's personal expenses. Soon after paying the line of credit with her father's gift, the husband had exited the marriage and had found another woman. The husband had significant earning power, while the wife had given up her career in order to raise the children of the marriage. Unequal division ordered.
  2. Naidoo v. Naidoo [2004] O.J. No. 1458 – Husband had lost $20,000.00 a year on gambling. Combined family income was over $200,000.00 per annum. Wife assisted husband by supporting him financially through medical school. Unequal division ordered. Wife entitled to an additional $12,000.00.
  3. Reid v. Reid [2003] O.J. No. 5174 – During their 34-month cohabitation, the wife liquidated all of her stock options and she had made a significant profit due to same. She owned the stock options at the time of the marriage but had sold them prior to the date of separation. Wife also made major contributions toward the various renovations to the matrimonial home and earned more income. Unequal division ordered.
  4. Rivers-Eshkibok v. Rivers-Eshkibok [2003] O.J. No. 2412 – The marriage had lasted 3 years, and the wife had made no contribution towards the acquisition, preservation, maintenance, or improvement of the matrimonial home which had been brought into the marriage by the husband. Unequal division ordered. Wife was awarded only half of the increase in the value of the matrimonial home during the time that they were wed.
  5. Kuzmanovic v. Kuzmanovic [2001] O.J. No. 1450 – The parties had jointly owned and operated a family business. Due to conflict, the husband had fired the wife from the family business, and then after the separation, he had fraudulently transferred funds from the business, resulting in a loss to the wife in the amount of $300,000.00. Unequal division ordered. The aforesaid amount was added to the wife’s equalization payment.

I would hope that this article has left you with a clearer understanding of the policy rationales and the conceptual framework behind Ontario’s Family Law Act in relation to when the default rule calling for the equal division of property ought to be set aside.   

If you require assistance with a case involving the unequal division of property in the Windsor region then please send me an e-mail at lutfallah@flbarrister.com or call me at 519-915-8779 in order to set-up a free initial 30-minute consultation. After hearing your story, I hope that I could provide you with legal representation at an affordable rate.

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Exclusive Possession of the Home during Separations

Monday, October 20, 2014

Living together as a couple, whether you’re married or unmarried, can become effectively impossible during periods of prolonged conflict. The atmosphere tends to be extremely tense in the home. It’s quite common during these times to see individuals engage in trivial arguments. However, there could also be controlling/obsessive behaviour, regular invasions of privacy, or financial coercion. The worst circumstances involve intimidation, abuse, and domestic violence.

Any of these situations are already problematic enough during a separation, but it could be especially difficult if you own ‘real’ property with the other person, such as a home or a condominium. 

When the decision to separate is finally made, who has to move out, and who gets to stay in the residence becomes extremely important. To many people, the only other issue that is more important is custody/access of the children. 

During the circumstances mentioned above, people often ask questions such as “What can I do to kick him/her out?” or “How can I get the police to make him/her leave?” The answer is somewhat complicated, and it depends on whether you were married or not.

i.     'Common-Law' Couples

If you have cohabitated as a ‘common law’ couple, then whomever has their name on title to the home has the presumptive right to possess the property. That means whichever common-law spouse has their name on the deed, has the right to exclude others from the property. For example, if both common-law spouses are joint tenants, then they both have the equal and undivided right to possess the property.

If, on the other hand, one common-law spouse does not have their name on title, then they may be excluded from the property by the owner. In some situations, as long as one common-law spouse can show the police that their name is solely on the deed to the property, and they prove their identity to the police using a government-issued photo-I.D. card, they could have the police forcefully exclude their common-law spouse from the property.

This rule can lead to some harsh applications in certain cases. There has been call for legal reform. However, even if a common-law spouse is excluded from the home, they may have a claim for unjust enrichment against their former spouse for their share of the ‘joint family venture,’ but that is a topic for another article. On the other hand, if children are involved, and/or if the circumstances involve abuse or violence, then the situation may not be so clear cut for common-law spouses. For example, the police may refuse to enforce the owner’s request if young children are involved, but that is a matter of discretion.

Nevertheless, a common-law spouse may seek a restraining order against the other spouse. However, under s.46 of the FLA, this would be limited to situations where the common-law spouse has reasonable grounds to fear for his or her own safety, or for the safety of any child in his or her custody. Common-law spouses can apply for a restraining order because section 29 of the FLA defines “spouse” for all of Part III, and the definition includes couples that have cohabited for a period of 3 years or more, or that were in a “relationship of some permanence,” if they were the natural or adoptive parents of a child.

Under s.46 of the FLA, which is in Part III and therefore applies to common-law “spouses” defined in s.29, a restraining order may restrain a spouse away from ‘a specified distance of one or more locations,’ or may contain ‘any other provision that the court considers appropriate.’

Therefore, under s.46 of the FLA, the non-owner common-law spouse would be able to apply for a restraining order against the other spouse which prevents that spouse from going to the home, even if the restrained spouse owns the home and the applicant does not. This would essentially allow the common-law spouse applying for a restraining order to have ‘exclusive’ possession of the home, even if their name is not on title.

There’s another avenue that a common-law spouse could use in order to stay in the home exclusively, even if their name is not on title. Common-law couples have the right to seek child support and spousal support under the FLA. Interestingly, under s.34 of the FLA, which pertains to the powers of the court while making support orders, the court may order anything authorized under the s.24(1) of the FLA, which includes “exclusive possession of the matrimonial home.” (Discussed in detail below)

Normally, this section would only apply to married couples, but because s.29 of the FLA includes common-law couples in its definition of “spouse,” then a common-law spouse whom is seeking spousal support or child support may also apply for exclusive possession of the home previously used for cohabitation. The argument would be that such relief is incidental to the support order. However, as discussed below, orders for exclusive possession are reserved only for the most extreme cases.

ii.     Married Couples 

Married couples have a completely different set of rules governing the right to possess the property under the Family Law Act. The home is called the ‘matrimonial home’ in this context under s. 18 of the FLA, which provides the following:

“Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.” (Emphasis added)

If you are married, you have an equal right to possess the matrimonial home, which is entirely different from the issue of who actually owns the property. Section 19 of the FLA provides that both spouses have an equal right to possession of a matrimonial home. It doesn’t matter if one spouse doesn’t have their name on title. For married couples, each spouse has the right to stay in the matrimonial home, despite the fact that they’ve separated.

Practically speaking, there are only two circumstances under which a married spouse vacates a matrimonial home after separation:

  1. He or she leaves the matrimonial home voluntarily; or
  2. He or she is ordered to leave the matrimonial home by the court.

Section 24(1)(b) of the FLA provides that, regardless of which spouse owns the matrimonial home and its contents, and despite each spouse’s equal right to possess the home under s.19, the court may make an order directing that one spouse be given exclusive possession of the matrimonial home for a period of time that the court directs.

When the court orders a married spouse to leave the matrimonial home, the court is essentially depriving that spouse of their equal right to possess the home under s.19 of the FLA, so judges tend to be extremely cautious before making such an order. There must be very good reasons, and proper evidence adduced on record, in order to deprive a married spouse of their possessory rights.

As stated above, orders for exclusive possession of the matrimonial home are usually granted only in the most extreme cases. Here are some situations that will likely attract an order for exclusive possession of the matrimonial home:

1. Physical abuse/violence.
2. Throwing objects.
3. Intentional destruction of property.
4. Forcible confinement.
5. Stalking and bullying.
6. Extreme verbal abuse that is substantiated by independent witnesses.
7. Behaviour causing fear for your safety, and/or the safety of the child/children.

Again, a judge will not grant an order for exclusive possession of the matrimonial home unless there are very good reasons to do so. After canvassing case law from the Superior Court of Justice on the issue, here are some examples of circumstances that will not result in an order for exclusive possession:

a) General unfriendliness / hostility.
b) Staring.
c) Being involved with another person.
d) Occasional arguing.
e) Speaking loudly.
f) Hogging the TV/computer/video game system.
g) Being out at all hours and never being home.
h) Reading the e-mails of the other spouse.
i) Having non-disruptive friends over.
j) Making a mess and never cleaning up.
k) Refusing to speak with the other spouse.

However, the court cannot make these types of orders without first considering certain factors. When making an order for the exclusive possession of the matrimonial home, section 24(3) of the FLA provides the following:

“In determining whether to make an order for exclusive possession, the court shall consider,
(a) the best interests of the children affected;
(b) any existing orders under Part I (Family Property) and any existing support orders;
(c) the financial position of both spouses;
(d) any written agreement between the parties;
(e) the availability of other suitable and affordable accommodation; and
(f) any violence committed by a spouse against the other spouse or the children.” (Emphasis added)

As seen above, if the married couple had children, the court must take the best interest of the children into consideration when making an order for the exclusive possession of the matrimonial home. Section 24(4) of the FLA provides the following:

“In determining the best interests of a child, the court shall consider,

(a) the possible disruptive effects on the child of a move to other accommodation; and
(b) the child’s views and preferences, if they can reasonably be ascertained.” (Emphasis added)

From a strategic point of view, the combined effects of the above-mentioned s.24(3) and s.24(4) of the FLA are that the spouse who is the primary caregiver to the children in the matrimonial home has a much stronger argument for obtaining an order for exclusive possession, assuming that the facts warrant such an order.

This is because the court must consider the possible disruptive effects of a move, or other accommodations, on the children. If the children have been staying at the home, or if they’ve lived there for their entire lives, then it is easy to see why judges are careful not to perturb the status quo. This is especially true if the children are mature and articulate, and they have clearly expressed a preference for staying in the home. However, every case is different, and as seen above in s.24(3) of the FLA, other factors are considered such as the financial position of both spouses.

Section 24(5) of the FLA makes it a criminal offense for a person to contravene an order for exclusive possession of a matrimonial home. A person that is convicted of the offense would face the following range of penalties on sentencing:

“(a) in the case of a first offence, to a fine of not more than $5,000 or to imprisonment for a term of not more than three months, or to both; and

(b) in the case of a second or subsequent offence, to a fine of not more than $10,000 or to imprisonment for a term of not more than two years, or to both.”

Additionally, since orders for exclusive possession of the matrimonial home tend to be reserved for the most extreme cases, including those involving harassment and stalking, section 25.1 of the FLA  provides the following:

“In making any order under this Part, the court may also make an interim order prohibiting, in whole or in part, a party from directly or indirectly contacting or communicating with another party, if the court determines that the order is necessary to ensure that an application under this Part is dealt with justly.” (Emphasis added)

Again reflecting the serious nature of these cases, section 24(6) of the FLA allows a police offer to arrest a person, without a warrant, that the police officer believes, on reasonable and probable grounds, to have contravened an order for the exclusive possession of a matrimonial home.

If you require assistance with a case involving a home in the Windsor region that you’ve cohabitated in as a “common-law” couple, or a case regarding a matrimonial home that you’ve lived in while you were married, then please send me an e-mail at lutfallah@flbarrister.com in order to set-up a free initial 30-minute consultation. After hearing your story, I hope that I could provide you with legal representation at an affordable rate.

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