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
How will our property be divided?
Ontario's Family Law Act provides a formula for dividing the value of assets and debts that were acquired during the marriage. The method is called equalization of net family properties. Each spouse must fill out and swear a financial statement. The financial statement lists all assets that each spouse owned on the date of separation, all debts that each spouse owned on the date of separation, all assets that each spouse owned on the date of marriage, all debts that each spouse owned on the date of marriage and any gifts or inheritances that each spouse received during marriage. The financial statement will be used to calculate each spouse's net family property. In the end, the spouses' net family properties will be equalized.
Will I have to share my pension?
A spouse's pension is treated the same as any other asset that a spouse accumulated during the marriage. That means the spouse with the pension gets credit for the value of the pension on the date of marriage, but will share with the other spouse the rise in the value of the pension during the marriage. The pension will need to be valuated by a professional to determine its value on the date of separation.
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
| ITEM | HUSBAND | WIFE |
| 1. Assets Car RRSP Wedding Rings Household Contents |
$5,000.00 $3,000.00 $500.00 $2,500.00 |
$0.00 $1,000.00 $500.00 $2,500.00 |
| TOTAL 1. | $11,000.00 | $4,000.00 |
| 2. Debts & Liabilities Student Loans Credit Cards Joint Line of Credit |
$8,000.00 $6,000.00 $5,000.00 |
$15,000.00 $4,000.00 $5,000.00 |
| TOTAL 2. | $19,000.00 | $24,000.00 |
| 3. Net Family Property (Total 1 minus Total 2) * Calculated value was negative. |
* $0.00 | * $0.00 |
| 4. Equalization Payment | Husband pays to Wife: |
$0.00 |
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
| ITEM | HUSBAND | WIFE |
| 1. Assets Matrimonial Home Household Contents Car |
$0.00 $10,000.00 $0.00 |
$200,000.00 $10,000.00 $20,000.00 |
| TOTAL 1. | $10,000.00 | $230,000.00 |
| 2. Debts & Liabilities Line of Credit Credit Cards |
$150,000.00 $30,000.00 |
$0.00 $0.00 |
| TOTAL 2. | $180,000.00 | $0.00 |
| 3. Net Family Property (Total 1 minus Total 2) * Calculated value was negative. |
* $0.00 | $230,000.00 |
| 4. Equalization Payment | Wife pays to Husband: |
$230,000.00 |
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?
Does a wife need to bear the consequences of her husband’s early retirement?
In the 2010 case of Dishman v. Dishman, the husband accepted an early retirement buyout from General Motors which had the effect of decreasing his income from approximately $85,000 to $38,000 per year.
The Dishmans were married for 20 years later. After they separated in 2000, a final order required Mr. Dishman to pay his wife $750 per month in spousal support.
Nine years later in 2009, when Mr. Dishman was 52 years, his employer General Motors announced that it was closing its plant where he worked for 28 years. He was offered an early retirement incentive. Mr. Dishman could have continued to work for a few more years. However, if General Motors went bankrupt before that date, then the offer would no longer be available. Mr. Dishman accepted the offer and retired on June 1, 2009.
To convince Madam Justice Nolan to terminate spousal support, Mr. Dishman explained that his pension with General Motors had already been equalized with his wife when they settled their affairs in 2001. Mrs. Dishman kept the matrimonial home. The amount owed by Mrs. Dishman to Mr. Dishman for his share of the matrimonial home was off-set by the value of Mr. Dishman’s pension at the time. In calculating the amount of Mr. Dishman’s pension at that time, the parties valued it based on a retirement age of 59 years, as opposed to the 52 years when he actually retired. Stated another way, Mrs. Dishman argued that a significant portion of her husband’s pension was not equalized at the time of the agreement or court order.
Madam Justice Nolan relied on a series of past decisions such as Moffatt v. Moffatt (2003) that established that where there is early retirement that will severely prejudice the recipient spouse, the court may assign income as though the person had not retired. The judge also considered Bullock v. Bullock (2007) which held that a support payor cannot choose to be voluntarily underemployed, whether by retirement or otherwise, and therefore avoid his or her spousal support payment obligations.
Her Honour found that Mr. Dishman’s retirement was considerably earlier than anticipated, and Mrs. Dishman had good reason to rely upon support being provided for several more years. She stated that there is no reason why Mr. Dishman might not and cannot be expected to seek new employment opportunities and that Mrs. Dishman was in need and had a limited ability to earn more income.
In conclusion, the court found that this was a long marriage, that spousal support was payable because Mrs. Dishman was in need and should not be expected to bear all of the negative financial consequences of Mr. Dishman’s early retirement and, accordingly, the spousal support payments of $750 per month were to continue until 2016.
The “family joint venture”: the new law of property division for common law spouses
In a landmark decision released on February 18, 2011, the Supreme Court of Canada made it easier for unmarried (common law) spouses to claim a share in the wealth accumulated during their relationship.
The court heard two cases together - Kerr v. Baranow and Vanasse v. Seguin. Both cases dealt with the issue of ‘unjust enrichment’ in common law relationships.
In Vanasse, the couple cohabited for 12 years and had two children together. Michele Vanasse stayed at home with their children, while David Senguin focused on developing his business – which sold for $11 million. In Kerr, Margaret Kerr and Nelson Baranow cohabited for 25 years. They had no children. They both worked until Margaret suffered a stroke, which rendered her unable to work.
Parts 1 and 2 of Ontario’s Family Law Act contain statutory provisions governing the distribution of property on relationship breakdown. Unmarried spouses are expressly excluded from its matrimonial property sharing provisions. That is, only married spouses are entitled to apply for a division of property after separation.
Common law spouses were forced to resort to equitable remedies such as ‘unjust enrichment’ to recover any relief. These cases were challenging and very expensive to prosecute. This was until the Supreme Court of Canada lowered the threshold and made it easier for spouses to advance such claims.
The decisions in Kerr v. Baranow and Vanasse v. Seguin articulated a new analysis for property division. The court held that if a party can show that the common law relationship functioned as a marriage-like family, or as Mr. Justice Cromwell termed it - a “family joint venture” - there is no longer a need to show a specific link between that party’s contribution and the specific asset to be shared.
In order to determine whether the family functioned as a “family joint venture”, four factors must be considered including (1) mutual effort (2) economic integration (3) the intent of the parties and (4) the priority of the family. Any other relevant and case-specific factors may also be considered. Once established, it is up to the trial judge to award an appropriate percentage of the couple’s assets to the claimant spouse (not just a monetary award).
Ultimately, the Supreme Court of Canada refined its approach to the equitable remedy of ‘unjust enrichment’, making it easier for common law spouses to claim a share of the wealth accumulated during the relationship. It is hoped that the decision will help achieve a more equitable result for common law spouses when such relationships end.
What’s the matter with a “Maher” ?
A Maher is a sum of money that a groom agrees to pay his bride in a Muslim marriage contract. It is a compulsory gift from the husband to his wife. The idea is to provide some financial security for the wife. The amount is typically not paid at the time of marriage, but rather at the end of the marriage.
Courts across Canada have differed on whether traditional marriage contracts under Muslim law are enforceable. For example, the Ontario decision in Kaddoura v. Hammoud, [1998] O.J. No. 5054 held that a court should not determine the rights and obligations of the parties under a Maher, as it would lead the court into the “religious thicket”.
Then in the decision in Bruker v. Marcovitz, [2007] S.C.J. No. 54, the Supreme Court of Canada held that the fact that a dispute has a religious aspect does not make it non-judiciable. That is, persons can convert their moral obligations into legally binding obligations.
Recently, a Court of Appeal decision confirmed that the Maher is indeed enforceable in Ontario.
In Khanis v. Noormohamed [2009] O.J. No. 2245, the trial judge ordered the husband to pay the wife a $20,000 Maher by stating that it was a valid marriage contract under Ontario law that the parties had entered into at the time of marriage and was therefore enforceable. The husband appealed this decision to the Ontario Court of Appeal. On appeal, it was further held that the terms of the Maher were valid and binding under Ontario’s Family Law Act. The husband’s appeal was dismissed.
Like with all domestic contracts, the enforceability of the Maher should be considered in light of the specific facts of each case.
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