NOTICE TO READER: The answer to each question below is a brief summary for informational purposes only and is only applicable in the Province of Ontario. It is not meant to be legal advice. If you require information or advice as it relates to your individual circumstances you are advised to consult with your own lawyer or retain the legal services of Steven Benmor.

Property Division
by Steven Benmor, B.Sc., LL.B.

• Is it unconstitutional to deny common law spouses the right to an equal division of property?

In the landmark decision of Nova Scotia (Attorney General) v. Walsh 2002 S.C.R. 83, the Supreme Court of Canada has ruled that excluding unmarried spouses from provincial matrimonial property laws is not discriminatory.

Susan Walsh and Wayne Bona cohabited for 10 years until 1995. Two children were born out of this relationship. Ms. Walsh applied for spousal support and child support. She also sought a declaration that the definition of “spouse” in Nova Scotia’s Matrimonial Property Act was unconstitutional because it failed to provide her with the right to an equal division of matrimonial property—a right that is available to married spouses.

In an 8-1 decision, the Supreme Court of Canada ruled that excluding unmarried spouses from provincial matrimonial property laws is not discriminatory because the distinction reflects the differences between married and unmarried relationships and respects the fundamental personal autonomy and dignity of the individual. The highest court stated that the decision to marry, or not to marry, is personal and that many common law couples have chosen to avoid marriage and its legal consequences. They are free to marry each other or take other steps if they want to enjoy the benefits available to married couples.

As an aside, this ruling is moot for Ms. Walsh and Mr. Bona. Before the appeal was concluded, Ms. Walsh and Mr. Bona settled their dispute and agreed to a 50-50 property split. In addition, Nova Scotia amended its laws in June 2001 to allow common law spouses, including same-sex couples, to register their relationships as domestic partnerships, thereby entitling them to many of the same rights and obligations as married couples, including division of assets upon separation or death.

• Does the law presume that common law spouses are entitled to the same equal division of their property after separation as married spouses?

The Ontario Court of Appeal in the May 21, 2003 decision of Wylie v. Leclair did not think so. In that case, the parties lived together from 1985 to 2000 and had two children. After they separated, they agreed to a shared custody arrangement, with the children living with each parent on alternate weeks. A trial was held on the issues of support and division of property. Regarding the division of property, the trial judge found that Mr. Wylie received the benefit of Ms. Leclair’s housekeeping and caregiving services during their relationship. The trial judge awarded Ms. Leclair $150,000, and calculated this amount based on an equalization of net family property—a calculation that is used when married spouses separate by calculating each spouse’s assets and liabilities at the date of marriage and the date of separation.

Mr. Wylie appealed the trial judge’s decision to the Ontario Court of Appeal. The appellate court felt that the trial judge was wrong in attempting to provide an equalization of net family property for a common law couple.

When married spouses separate, it is necessary to equalize the parties’ net family property. However, this is not the law in common law relationships. The appellate court felt that the trial judge was attempting to adjust the law to provide for an equalization of net family property for common law spouses while there is no legal authority or presumption to do so.

The appellate court did consider the fact that Mr. Wylie received the benefit of Ms. Leclair's housekeeping and caregiving services during their relationship, but also considered that Ms. Leclair lived rent-free for the duration of their 15-year relationship.

The appellate court reduced Ms. Leclair's award to $70,000.

• Do you have to share your lottery winnings with your wife?

This is the very dilemma that faced Ray Sobeski in April 2003 when he discovered that he won $30 million from Lotto Super 7.

Sobeski, a 47-year-old computer repairman, was married to Nynna Ionson. But he was not happy with his marriage, well before he became an instant millionaire. He was not sure how to handle the news. So he decided to not mention this to anyone-not even his wife. He even sought a divorce from her after learning of the winnings and before disclosing it to her. He ultimately claimed his prize 12 days before the ticket's expiry date in April 2004-nearly one year later.

After Sobeski claimed his winnings, Ionson served him with a lawsuit seeking half of the $30 million because, she claims, the lottery draw happened long before their divorce was finalized.

According to Ontario's Family Law Act, the increase of a married couple's assets (after deducting their debts) is equally shared based on the values at the date of marriage and the date of separation. In fact, there is a formula for dividing the value of assets and debts that were acquired during a marriage. The method is called equalization of net family properties. In the end, the spouses' net family properties are equalized.

In the ensuing court case, the couple's affidavits were laced with defamatory allegations against one another. Sobeski claims that Ionson was a table dancer that he met in 1994 at a strip club where she was appearing on stage. He alleges that Ionson was violent and abusive to him throughout their relationship and was even charged by the police for her violence towards him.

Ionson denies these allegations. She alleges that she is destitute and living below the poverty line.

The Sobeski-Ionson lawsuit may drag on for months and maybe even years. That is why Ionson recently asked the presiding judge for an immediate payment of $262,000 to help cover her legal costs and level the playing field. Ionson was also seeking temporary support in the sum of $9,000 per month.

The couple, with the help of their lawyers, reached a temporary confidential agreement in this regard.

But this does not mark the end of the dispute between the couple.

• How does Ontario law treat debts at separation ?

It is not unusual for marriages to suffer because of a family's financial difficulties, growing debt-loads, a spouse's loss of employment, the reduction or loss of the wife's employment income when children are born, and many other events that may occur within a family that place undue financial stress on the marriage.

In some cases, the financial stress may cause marital breakdown and separation. It is in these situations that a spouse who turns to counsel for legal advice discovers that Ontario property law does not provide that spouses are required to share their family debt.

Section 4(5) of the Family Law Act provides that:

"If a spouse's net family property as calculated under subsections (1), (2) and (4) is less than zero, it shall be deemed to be equal to zero."

In effect, spouses who are separating and who have an unequal distribution of debts amongst them, or a couple where the bulk of the family assets are held by one spouse, while the other spouse holds the family debt, are likely to suffer even greater hardship than they experienced prior to separation.

To illustrate this dilemma, the next two examples demonstrate cases of financial hardship under the present legislation.

Example A - Both Spouses End Marriage with a Significant Debt-Load

In this example, the husband in fact has a negative net family property of -$8,000.00 and the wife has a negative net family property of -$20,000.00.

Applying section 4(5) of the Family Law Act will result in each person being individually liable for the debts held in his or her name alone and be jointly responsible for the joint line of credit. In effect, this family's debt is not equalized and will result in tremendous hardship on the wife.

If section 4(5) of the Family Law Act was repealed, then the husband would assume $6,000.00 in debt from the wife so that each spouse would equally leave the marriage with $14,000.00 in debt.

The result of section 4(5) of the Family Law Act offends the preamble of the Family Law Act that provides:

"Whereas it is desirable to encourage and strengthen the role of the family; and whereas for that purpose it is necessary to recognize the equal position of spouses as individuals within marriage and to recognize marriage as a form of partnership; and whereas in support of such recognition it is necessary to provide in law for the orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership, and to provide for other mutual obligations in family relationships, including the equitable sharing by parents of responsibility for their children."

Specifically, the application of section 4(5) of the Family Law Act to the facts of this case accomplish the exact opposite effect than intended by the legislation.

The result is that the spouses are not provided with an equal position, the marriage is not treated as a form of partnership and the settlement of the family's debts is not equitable.

Example B - One Spouse Hold Assets - Other Spouse Holds Debt

In this example, the husband in fact has a negative net family property of -$170,000.00, but due to the application of section 4(5) of the Family Law Act, he is deemed to have a nil value for his net family property. This would result in the wife paying him $115,000.00 as an equalization payment - one half of her net family property of $230,000.00. After for accounting for the husband's negative net family property of -$170,000.00, he would leave the marriage with $55,000.00 in debt, while the wife would have assets of $115,000.00.

Equalizing this family's assets and debts - without regard to section 4(5) of the Family Law Act - would result in the wife paying the husband $200,000.00 as an equalization payment. Thus, repealing section 4(5) of the Family Law Act would result in each spouse leaving the marriage with $30,000.00 in assets.

The result of section 4(5) of the Family Law Act again offends the preamble of the Family Law Act as it applies to the facts of this case in that the spouses are not provided with an equal position, the marriage is not treated as a form of partnership and the settlement of the family's debts is not equitable.

Mr. Justice Galligan stated in the Ontario Court of Appeal ruling in Berdette v. Berdette (1) that "the intent of this legislation is to establish partnership and equal sharing of property accumulated during marriage." This can only be accomplished if family debt is not disregarded, but evenly shared by the spouses.

Repealing this provision will not prejudice either party, as wrongful conduct by one spouse may be addressed by section 5(6) of the Family Law Act which provides the court with the discretionary power to vary the sharing of the parties' net family properties in cases where there has been intentional or reckless depletion of family property, debts incurred recklessly or in bad faith or where one spouse has incurred a much larger amount of debt than the other spouse for the support of the family.

Is now the time to review this legislation and repeal section 4(5) of the Family Law Act ?