In many marriages the matrimonial home is the most significant family asset owned by the spouses. The Family Law Act (“FLA”), in dealing with equalization of net family property on separation, provides special treatment of the matrimonial home.

Whereas generally  a spouse may deduct from his or her net family property the (net) value of the property he or she brings into the marriage, this deduction of property does not extend to the matrimonial home. Further statutory exclusions from family asset inclusions such as inheritances or gifts from third parties do not extend to the matrimonial home.

In situations  where parents purchase a home for a child or grandchild, and wish to protect the home from being included in the equalization of net family property in the event of marriage breakdown consideration should be given to using a trust to protect the home from a potential FLA claim.

In the recent case of Spencer v Riesberry a home was purchased and was settled on a trust for the purchaser and her four children. Three additional properties where subsequently also settled on the trust. One of the terms of the trust was that any trust property distributed from it was not to form part of the recipient’s net family property for purposes of the FLA.

When one of the daughters who occupied one of the homes settled on the trust separated the court was asked to determine whether the daughter had an interest in the property sufficient to warrant a finding that the property was a matrimonial home. The Court of Appeal held that, unless the terms of the trust expressly provided otherwise, a beneficiary has no property interest in any specific asset of the trust, prior to or absent an appropriation of such assets to the beneficiary by the trustee.

The court considered the daughter’s dual role as beneficiary and as co trustee of the trust and held that occupying those positions did not provide the daughter with an interest in the home for the purposes of the FLA.

A recent, highly publicized, spousal support decision sheds light on how the “other half” live (and how they end up paying their support).

Michael McCain, one of the children of Wallace McCain (a wealthy businessman in the food industry) and his wife of 30 years separated in 2011.  They had 5 children, only 2 of whom remained dependent at the time of separation.  Ms. McCain had not worked outside of the home for about 26 years.

About 16 years into the marriage, the husband’s father demanded that each of his children and their spouses sign marriage contracts that would protect the assets he would pass on during his lifetime or upon his death.  Essentially he wanted his estate to remain within his bloodline and not be available to any of his children’s spouses in the event that any of them separated.  The story was the husband’s father demanded these agreements on pain of the husband being ignored in his father’s Will.

In the agreement signed by Michael and Christine McCain in 1997, Christine agreed to release her entitlement to what is called  an Equalization Payment and in exchange she would receive a fixed amount of money which was to be a maximum of $7,000,000 (and a $300,000 payment one year after the agreement was signed) and she was to receive the matrimonial home.  The wife also waived what she might have been entitled to in spousal support.

The Court was asked to order the husband to pay the wife temporary spousal support even though the Marriage Contract released her entitlement to spousal support.

The Court undertook an analysis of the facts and the law on this issue.  The Court was of the view that the release of spousal support did not meet the criteria set out in the Divorce Act when considering an appropriate amount of spousal support – such as the means and circumstances of the parties, the length of the marriage, the roles assumed during the marriage, etc..  The Court was also aware that the wife’s property entitlement was far less than she would have otherwise been entitled to if she had not entered into the agreement.

If is worth noting that the wife had independent legal advice at the time that she was given the Marriage Contract to sign and she signed the Contract in light of the legal advice she received.  Even with legal advice, the Court was satisfied that the Ms. McCain was under sufficient duress to sign the Contract that it should be set aside.  The duress took the form of her father-in-law’s threat to “disinherit” his son if the Marriage Contract was not signed.  The Court stated that the “duress was subtle and psychological, in that she appeared to be the key to the husband remaining as one of his father’s heirs”.

The Court asked the question: “Was the bargain (Contract) acceptable?”  I am not sure this is the precise question that needs to be answered.  But the Court took into consideration that the marriage existed for another 15 years after it was signed; that there were no income projections done as to what the husband might be earning in the future and no projections as to lifestyle changes that took place as the years went by.

Once the Court was of the view that it would consider the agreement as only one factor in determining whether it would order support or not, then it became a decision on what was an appropriate amount of support to award.  The Court went on to state that each spouse should be able to live in a fashion that does not require the wife to sell the matrimonial home, to use up her capital, to support her expenses.

In the result, the Court ordered the Husband to pay temporary spousal support of $175,000 per month until the matters could be more fully examined and dealt with.

The takeaway point for me from this is – don’t be too greedy in what you ask for in your Marriage Contract.  If it is found to be too one-sided and does not come close to what the law might provide to your spouse without a Contract then there is an increased possibility that the Contract might be judged to be invalid at least to the extent that the unfairness is manifest and significant.

When a separation occurs and there is a Family Business, the separation can have a significant impact on the health and ultimate future of that business.  Often a non-owner spouse may have misconceptions about the value of a business, particularly where the business does not have significant hard assets such as a law practice, a consulting business, or a private medical practice.  Finding the value can be a difficult, controversial, and expensive issue.  On separation focus often shifts from day to day management of the business to determining value of the business, forensic analysis regarding the validity of expenses that the family has historically run through the business, and determining what actual income can be derived from the business.  This shift in focus can have a negative impact on business operations, and can cause additional economic stress on separation.  In order to avoid common problems that arise on separation, and to protect a business, the following are some precautions that may be taken:

1. Marriage Contracts:  are the single most effective tool to reduce or avoid the negative impact of a divorce on the business.  Having an agreement signed by the business owner and his or her non-owner spouse is the best protection against future problems should the couple separate.  The Marriage Contract should contain a waiver by the non-owner spouse of the owner spouse’s interest in the business, whether it is owned prior to marriage, or whether it is anticipated that one spouse will take over the family business in the future.  You want to ensure that the waiver also includes a specific waiver of any increase in value of the business in the future.  When negotiating the Marriage Contract the business owner must provide full financial disclosure to the non-owner spouse regarding the business’ present value and its future value if known and each party must also have independent legal advice.  Full financial disclosure and independent legal advice for both parties assists in protecting the agreement from attack if there is a separation. 
2. Succession Planning:  If you are looking at transferring a family business to a child or another family member, or if you are likely to receive a share in a family business during marriage, agreements should be in place between spouses before a transfer occurs.  It is wise to consider making a transfer of the ownership interest contingent on the signing of an acknowledge by the non-owner spouse stating that that the transfer of the ownership interest is a gift or inheritance which shall be excluded from the family’s net family property in the event of a separation.  Further, you will want a waiver by the non-owner spouse of any future claim for an increase in value on that interest over the course of the marriage.  The non-owner spouse must have independent legal advice when the acknowledgement and waiver are signed. 
3. Business Valuations:  If you do not have a Marriage Contract or a Waiver obtained on transfer of a business interest during marriage, be prepared to have your business valued on separation.  Engage someone early in the process to determine the business’ value.  If possible, agree on a jointly retained valuator to avoid conflicting expert reports on the value of business.  The expert retained should be a certified business valuator and should have experience in dealing with the valuation of businesses for the purpose of division of matrimonial property.  In order to assist in the valuation, you will be required to provide the valuator with detailed information regarding the company including financial records.  If you have a bookkeeper for the company, they would likely be the best person to assist the valuator and  provide necessary information and records. 
4. Management and Communication: Separation can be highly stressful; focusing on your business may be difficult.  Angry spouses can come into the business and cause significant disruption.  Upon separation, give your staff as much information as possible (and that you are comfortable sharing) regarding your separation.  It is best to take proactive steps rather than reactive steps in order to keep your business running.  Advise staff if there is significant conflict between yourself and your spouse and make a plan regarding how to deal with the non-owner spouse coming onto your premises.  If possible, abdicate some of your responsibilities to other owners or a manger while you weather the storm.  

First, in most cases, people have many issues to resolve:

1)    The children:

a)    What is the parenting plan going to look like? Is he or she entitled to see the children as often as they wish? Why?

b)    What about the fact that the children don’t want to see their mother/father?

c)    What about that new partner? How can the children be seeing him or her?

d)    What if things change over time?

e)    What happens if we don’t agree on the parenting plan and what it should look like?

2)    Child support:

a)    What is the income of the paying parent? 

b)    What is the income of the recipient parent?

c)    What are Section 7 expenses?

d)    What if we share the children 50% of the time? What how do I calculate 50% of the time?

3)    Property division:

a)    What do you mean I don’t get half?

b)    Equalization, how does that work?

c)    Why do I have to get assets like my pension or my small business valued?

d)    Do I need other experts to value by property?

4)    Spousal support:

a)    The Spousal Support Advisory Guidelines – how do they work?

b)    Income determination – same problem as in child support – what’s the income?

So even in relatively “simple cases”, figuring out what you are entitled to or are obligated to pay is not a simple task. Financial issues can take a lot of time to resolve.

Figuring out what to do with children is probably the toughest issue facing most people. In some cases, parents are able to come to a quick agreement. But if the emotions are running high due to the way in which the separation occurred, judgment is often clouded and it is very difficult for spouses to focus on the needs of their children, because their own needs are coming first.  Conflicts over the children are the most time intensive and therefore costly part of a lawyer’s job. Facts are always in conflict – each parent tries to paint the other as a “poor parent” who does not have the ability to address the needs of the children.  When facts are in conflict, it is always necessary to conduct lengthy interviews of third parties who are potentially neutral third party witnesses to historic events that need to be proven in court. It is also often necessary to retain an expert in child development to assist either by mediating or by assessing the family. Courts insist on neutral evidence like this in order to make a proper decision about the best interests of the children if a trial is necessary to resolve the parenting issues. Child custody cases typically cost well over $50,000 just in legal fees if they go to trial.  While this is perhaps more than the cost of your automobile (depending on the make), it is certainly a lot of money to spend which often the family coming out of  a separation simply does not have.

Determining income in this day and age is difficult. Many people are self employed “contractors” who earn their money through their own businesses. Income determines how much child and spousal support you need to pay or receive. Many people work over time or are entitled to bonuses. Figuring all of this out is never an easy cut and dried task, primarily because people are frightened  about their financial future and need to be careful about how much income they declare or how much money they can get from their spouse.  Often the trauma of the separation and the emotion make people behave in ways they would normally not – hiding their assets or understating their income. The lawyer's job is to figure out what the real numbers are and make recommendations on facts. Discovering the facts about income often takes a great deal of time. It also usually involves hiring another expert, like a chartered accountant who is skilled in family law issues. This necessarily adds to the cost of the case. But it is necessary in order to present the case properly and to arrive at a proper result.

Determining your property rights can also create a myriad of issues. Each side needs to establish their “net family property” (please see previous blogs for what that entails).  In general terms, married couples who separate are entitled to share all of the wealth that the couple generated themselves during the marriage.  Figuring out what that is takes time, and often involves valuation experts at additional cost.

Added to the complexity of the legal issues is the process itself. If you have ever been in Family Court, you know that there are The Family Law Rules which must be followed.  Just completing the paperwork is a time consuming and therefore expensive process. The financial statement which must be filed must be accurate and it must be supported by documents or valuation opinions. Properly completing this form so that it is satisfactory to the court and in compliance with the rules can all by itself cost several thousands of dollars, depending on the complexity of the property issues.

The rules require that procedure must be followed. For sound philosophical reasons, each case that is in court is supposed to be managed by one Judge. Nothing can happen in a case until you have had a case conference. You must also have a settlement conference and then a Trial Management Conference. The purpose of all these conferences is to encourage a settlement of the case without a trial. However, they all add to the cost of your case because the lawyer has to prepare paperwork for each and your financial statement has to be updated as well if it is more than 30 days old.  Nothing ‘substantive’ happens at these conferences unless the spouses come to an agreement. Often agreements are reached with the assistance of the presiding judge but these agreements are usually not a complete resolution of the entire case.  If the case has to go to a trial, it usually goes on a list with many other cases and you have to wait your turn as the case moves up the list.  You really can never be guaranteed a trial date in our court system.  But your lawyer has to be ready for trial just in case it does get reached when it’s on a list. Marshaling the evidence properly so it can be readily and easily presented to the trial Judge is a very time consuming and therefore expensive task. Most family law trials take at a minimum three days to try often taking much longer if there are many issues.  By the time all of the steps are taken to get through the family court system and by the time the trial is over, the cost is usually close to or exceeding $100,000 for the normal middle class family with children and the usual income and assets.  In other words, the ‘system’ adds to the cost but it is a ‘necessary system’.

If both parties can keep their emotions under control, retain a lawyer who is experienced in family law matters and then listen to their lawyer’s advice, use mediation or arbitration to resolve those difficult issues that can’t be agreed upon, or, in other words, if they can stay out of court, a much less expensive resolution can be obtained.  Both sides have to

a)    be honest with each other about their parenting roles and what’s best for their children,

b)    keep the focus on a resolution of the parenting issues, not a “win in court” at the expense of the children,

c)    fully disclose their financial information without having to be repeatedly asked,

d)    want to get their matter resolved in accordance with the law or accept financial responsibility for the breakdown of the relationship,

e)    be prepared to compromise, and

f)     be willing to do a lot of the work themselves.

There are no easy answers to the question of why legal fees are so high. There are many factors outlined above – the complexity of the law itself, the system in place to resolve the issues, the time it takes to organize and understand those issues and to prepare for a trial.

On the other hand, a lot has to do with the manner in which the parties themselves want to get their issues resolved. A lawyer has no choice but to follow their client’s proper instructions, and if the client wants to take a matter to trial that should be settled in some other manner, then the lawyer really has no choice but to take the matter to trial.  A good lawyer will make the client well aware of the potential outcome, the risks involved and the cost of taking that kind of approach to their case.  But even good lawyers have to take a case to trial when it is against their better judgment to do so.  The client has a lot to do with keeping his or her legal costs down.  A good lawyer will encourage this strategy and not encourage the client to take an adversarial approach.  A good lawyer only goes to trial when the other side presents no alternative.  Two good lawyers acting in the best interests of their clients only go to trial when there is some very honest difference of opinion on the potential outcome of the case. Most good family law lawyers settle their cases without a trial. 

I have recently been involved with a number of cases dealing with “Excluded Property” in order to determine whether certain items of property can be excluded from the “net family property” calculation.  To determine this one first needs to look at the Family Law Act

Section 4(2) of the Family Law Act provides that:

Excluded property

(2)  The value of the following property that a spouse owns on the valuation date does not form part of the spouse’s net family property:

1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.
2. Income from property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property.
3. Damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represents those damages.
4. Proceeds or a right to proceeds of a policy of life insurance, as defined under the Insurance Act, that are payable on the death of the life insured.
5. Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced.
6. Property that the spouses have agreed by a domestic contract is not to be included in the spouse’s net family property.
7. Unadjusted pensionable earnings under the Canada Pension Plan. R.S.O. 1990, c.F.3, s.4 (2); 2004, c.31, Sched.38, s.2 (1); 2009, c.11, s.22 (5).”

The Act further states that onus to prove such a deduction or exclusion is on the person claiming it.

In order to exclude such property, you must first prove   that it was a gift from a third party (not your spouse), that it was received during the marriage and that it can be traced to an asset that you had on the date of separation.

If you received the asset by way of an inheritance, it will be necessary to review the Last Will and Testament  of the individual to determine whether the intention was to gift the asset to you and whether it is subject to the provisions of the Family Law Act or not.

Clearly there are many issues to be dealt with when considering whether or not you will be entitled to claim exclusion for certain property and how much you are entitled to claim. Your lawyer will best be able to explain to you the various issues and concerns relating to your specific assets that you are seeking to exclude.  Keeping complete records of any monies received and spent including bank statements, purchase receipts and investment statements, copy of correspondence from Estate lawyers, distribution statements, etc. will assist in tracing the assets to a valuation date asset.

Although you never anticipate that you are going to be divorcing and need such documentation it is simply a good financial step to take.

All of the information contained in this blog relates only to the law of the Province of Ontario. In Canada, each Province has its own property legislation which in some cases is similar to that of Ontario but not necessarily the same. So if you are our reading this plot from somewhere outside Ontario, you will need to check with the lawyer in your area to see if you have similar legislation.

Under the Canadian constitution, Provinces have the right to set out the rules for property division for married and common law couples when there is a relationship breakdown. Right now, there is no legislation in Ontario which deals with the property rights of common law couples. It would be nice if there was. Right now, the legislation deals only with the rules applying to married couples who separate. In other words, common law couples never acquire the same property rights as married couples no matter how long they live together. Couples who are unmarried but live together as if married are called "common law" couples primarily because it is the common law, and not Ontario legislation, which governs their property rights on relationship breakdown. I am not going to go into the property rights of common law couples in this blog. If you have lived in a common law relationship which has broken down and you have questions about your property rights, you should get legal advice.

For married couples, the philosophy of our legislation which is called The Family Law Act, is fairly simple conceptually at least. Essentially, Ontario law says that when a couple separate with no chance of a reconciliation, all of the wealth which the couple accumulated during their marriage should be divided equally between them. It also brings into this division the concept that only property which was acquired by the joint efforts of the parties should be shared. In other words, if property is acquired by one partner from someone outside the marriage by way of a gift or by way of inheritance for example, then the value of that particular property is not shared because it is not the product of the contributions made by the couple during the marriage.

So the law in Ontario is only interested in the value of property accumulated during marriage, that is the change in values of property owned by each partner from the date of the marriage to the date of the separation. If you win the lottery right after the day you separate, then you won’t be sharing that with your spouse (unless maybe because he helped you buy the ticket!) because our legislation says it’s only the value of property accumulated during the marriage that gets shared.

The legislation also lays out for us how to do this sharing of wealth. It tells us that we first must determine who owns what property. We then place that property on the side of whoever owns it. We then have to value the property which each party owns on the date of the separation so that we know how much wealth each party has as of the date of the marriage breakdown. We then have to figure out all of the debts and other liabilities of the parties at the date of separation so we can figure out each parties net worth as of that date. We then have to go back to the date of the marriage and do the same calculation so we know the net worth of each party at that date. The difference between the net worth at date of separation and the net worth at date of marriage constitutes the wealth that accumulated during marriage and it is called "net family property".

We then have to figure out if there are any items of property owned by either spouse at the date of separation which falls into that category of property called "excluded property" which is what we call the property that was not generated by the couple themselves such as those gifts or inheritances from parents. So if one party accumulated $100,000 of wealth from the date of marriage to the date of separation and the other party accumulated $200,000 of wealth, the party with the $200,000 of wealth would have to pay $50,000 to the other party in order to "equalize" the net family property. Each party would then have $150,000 worth of property. This right is exactly that – a right to a payment, not a right to property.  There is now a debt owed from one partner to the other and, like any other debt, if the party owing the debt goes bankrupt, then the party to whom the debt is owed loses out.

While all of this may sound fairly simple, in practice, the issues arising from this legislation can be very complex and difficult to determine. One of the big issues for us lawyers is to determine exactly what is meant by the word " property". Rather than get into the legalities of the definition of property as contained in the legislation, I would like to first give you a few examples of what actually constitutes property that must be valued for purposes of this exercise.

The most commonly owned property item in this category is someone's interest in a pension plan. As far as our legislation is concerned, this is property which must be valued. Changes in Ontario legislation over the past 2 years have resulted in a method of valuing someone's interest in their pension by way of a formula. There have been many criticisms of the formula in the sense that there is the potential for it to improperly value the pension plan. However, if you have a pension, it will be counted as part of the wealth you accumulated during the marriage. Only that part of the pension which was accumulated during the marriage is shared and the formula figures that out for you.

So one would think that a pension of any kind would be property for purposes of dividing wealth accumulated during the marriage. Not so. A disability pension is not property under Ontario law. This type of pension is viewed by the courts as a replacement of income and therefore not property.

In a very recent case, the wife's right to the payment of future commissions was found to be property. During her employment as a commissioned insurance salesperson, she sold various policies to her clients which generated ongoing commissions for her. When her employment ended, under her employment agreement, she was entitled to her company’s "commission on release program" which meant that the capitalized value of the commissions which she was to receive was payable to her over a ten-year period by way of 120 equal installments. The capitalized value of these payments was found to be property even though,

the income tax department would probably consider these payments to be taxable income to her.

Similarly, stock options have been determined to be property. So too has the "book of business" of an investment adviser, that is his customer base from which his income is determined.

In other words, it does not matter if the money you receive will be taxed as income as that is not how property is defined in the legislation. The only question is whether or not the item fits the definition of property as contained in the legislation which reads "any interest, present or future, vested or contingent, in real or personal property and includes, a) property over which a spouse has a power of appointment exercisable in favor of himself or herself, b) property disposed of by a spouse but over which the spouse has a power to revoke the disposition or a power to consume or dispose of the property and c) [the right to a pension plan as noted above].”

In other words, in Family Law, nothing is as ever as simple as people think and unfortunately, because the law is complicated in this area, it is necessary to make sure that you understand your property rights a process which can often take some time to investigate and thoroughly establish.

It sure might have been easier (and cheaper) for all of us if the Family Law legislation simply did say that we should divide up the “property” itself on separation instead of dividing up “the wealth”. But I am sure that even  then the complications would be tremendous. 

Courts in Ontario, however, have historically granted common law spouses entitlement to compensation, monetary or property, against another common law spouse on the basis of the equitable principles of unjust enrichment, quantum meruit and resulting trust.

Unjust enrichment relief will be granted when a  claiming common law spouse ( claiming spouse) can prove:

1)    that the claiming spouse has provided enrichment or benefit to the other spouse;

2)    that the claiming spouse suffered a corresponding economic deprivation;

3)    that there was an absence of juristic reason (ie: no reason in law or justice) for the common law spouse claimed against to retain the benefit conferred by the claiming  spouse.

If the claiming spouse can show that his or her benefit provided to the other spouse was connected, in fact, to a specific property, the unjust enrichment remedy award could be secured by the court granting a constructive trust in favour of the contributing spouse against title to the property in question. In circumstances where monetary remedy was appropriate a lump sum monetary re-imbursement was paid to the claiming spouse on the basis of the doctrine of quantum meruit.

The courts have historically also used the legal remedy of resulting trust in common law situations to grant an interest in a claiming spouse to the acquisition of property where the court was satisfied that it was the intention of both parties that, even though legal title of a property was registered in the name of one spouse, the legally titled spouse was, in actuality, holding title in the property in trust for the benefit of the claiming spouse.

The doctrine of unjust enrichment frequently arises out of the following fact situation:

Common law spouse A (the contributing spouse) moves in with common law spouse B (the unjustly enriched spouse) into spouse B’s home, which spouse B solely owns.

Over the course of several years, while the spouses are co-habiting in spouse B’s home, spouse A contributes monies to pay down the mortgage and provides labour and service (ie: provision of meals, housekeeping, assisting in renovations and/or improvements to the property, maintaining the property), which over time increased the value of the property by increasing the equity in same and the fair market value of the property.

Following separation of the spouses, the court would examine and quantify the amount of increase in value for spouse B’s home and determine whether, on the basis of the three unjust enrichment principles enumerated above, spouse A is entitled to receive either a monetary award for the labour or services provided or a percentage interest in the increase in the value of the home owned by spouse B.

The Supreme Court of Canada, in recent judgments of two cases has taken a fresh look at the concept of unjust enrichment. The court ruled that the resulting trust remedy has been all but eliminated as a remedy in a family law proceeding. The three principle elements of unjust enrichment were affirmed by the court, which held that in pursing the unjust enrichment the claiming spouse must show that the enrichment does not fall within an established juristic reason (ie: contract disposition of law). If the enrichment does not fall within the established categories, then the claiming spouse has established a prima face case of unjust enrichment arising from a disproportionate sharing of assets accumulated during the period of common law cohabitation.

The court labeled common law relationships wherein unjust enrichment entitlement arises as “joint family ventures”. The court held that the claiming spouse must show that there is a joint family venture and that there was a link between his or her contribution to the venture and the accumulation of wealth.

Some of the factors listed in establishing that a common law relationship was a joint family venture are as follows:

1)    the pooling of efforts;

2)    the decision to have and raise children together;

3)    the length of the relationship;

4)    the joint contribution to a common financial pool;

5)    the use of parties funds entirely for family purposes;

6)    the extent of economic integration of the family such as the sharing of expenses and amassing common savings.

7)    The priority of family (ie: contributing spouse leaving the workforce to raise children   or relocating to benefit the other spouses’ career.

Although the Supreme Court, by establishing the concept of the joint family venture, has more clearly identified a legal mechanism for establishing an unjust entitlement, the nature and extent of the relief (the amount of monetary damages or percentage interest in the other spouse’s property) has not been addressed and will still continue to be determined at the discretion of a trial court judge.

Myth 1

Myth – The matrimonial home is deemed to be jointly owned even if only one spouse owns the property.

True or False? – False

The Family Law Act is a provincial statute that governs property division in Ontario.  In 1986 this current statute replaced the previous Family Law Reform Act (FLRA).  In the FLRA , all assets were deemed to be “family assets” regardless of ownership and, subject to certain restrictions, equally divided between spouses, regardless as to which spouse had title.  In 1986, a fundamental philosophical  change in the division of property occurred with the institution of the current Family Law Act (FLA). As a result, legal title was recognized for property division purposes.  However, in order to avoid mischief the legislators included certain provisions regarding the matrimonial home to protect the rights of a non titled owner/spouse.  The matrimonial home is defined as “ 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 spouse as their family residence is their matrimonial home”  While legal title remains with the titled party , Part 11 of the Statute provides the non-titled party with certain rights including:

*the right to possession of the home;

*disallowing the titled spouse to encumber (for example, borrow against or mortgage or dispose) of the matrimonial home.  If the titled spouse attempts to do so the transaction can be set aside by the court, and

*the right to “exclusive” possession of the matrimonial home, even if the requesting party is not a titled spouse.

So, how does this affect the myth?  The ownership of the matrimonial home is relevant to the division of property.  For example, if it is owned by one party the then it is valued at the date of separation and accounted for by the owner in his or her “column” of the value of his or her net family property. but the non-titled spouse still has the right to live in the home by agreement (possession) or court order (exclusive possession).

The answer to the myth is therefore, no.  The matrimonial home is not deemed to be jointly owned.  An owner accounts for the full value of the home for property division purposes, but each party has an equal right to reside in the home.

Myth Two

In dividing property on separation there are certain “deductions” from the value of your property such as debts and property owned on the date of marriage.

Myth – One can never deduct the value of a matrimonial home from their net family property

True or False?  False

If one owns the same home at the time of separation as he or she did on the date of marriage, the Family Law Act does not allow the deduction.  But a matrimonial home as defined by the statute speaks to the occupation of the home at the time of separation.  If another home was owned on the date of marriage, and was subsequently sold, the value of the date of marriage property may be deducted as it is not the same property as the home ordinarily occupied on the date of separation.  Of course if the home on marriage was owned jointly at the date of marriage (and is different from the one occupied at separation) then each party will be able to each deduct the same value and there will no benefit to either of them (unless the deduction places one party in a negative net family property value, but that is another issue).

The answer to this myth is no – there are times when a party can benefit from a home owned on marriage.

Myth Three

There can only be one matrimonial home.

True or False?  False

The matrimonial home definition states that “every” property owned on the valuation date is a matrimonial home.  The very definition clearly indicates that, yes, there can be more than one matrimonial home, such as a cottage, chalet or condo.  This issue is especially  relevant when the second home (for example a historic family cottage) has been gifted or inherited by one party.  If the property is a matrimonial home and ordinarily occupied by the parties at the time of separation then the gifted and inherited property owned by a spouse cannot be excluded.  Usually inheritances and certain proven gifts can be excluded or “taken out” of the property division calculation, but if the property is a matrimonial home it cannot be excluded.  Imagine the surprise of  a separated party has when he has been given the family cottage and now has to include the value in the property division process!  As a result it is proper to ensure that when such decisions are made within the family, legal advice is obtained for the giving party, the receiving party and the non-titled spouse.

The Answer to this myth is yes – there can be more than one matrimonial home.

In subsequent blogs I will continue to discuss myths including common misunderstandings of the division of property, child support and forms of custody

For years family law lawyers in Ontario (and their clients) having been waiting for (and lobbying for) changes to the legislation governing pensions upon separation.  The reason for the desire for change was to be able to treat a spouse’s (or both spouses’) pension(s) more equitably and hopefully in a more straightforward manner .  The end goal was to treat the pension as a separate entity and share the growth in the pension during the marriage equally between the parties at the time of separation with each spouse getting their own pension.

Up until now, the process has generally been for the parties and their lawyers to obtain a statement from the pension plan administrator for the pensioned spouse and then forward that statement (usually for “defined benefit” pension plans) to an independent pension valuator.  The valuator would also need the marriage details (date of marriage, date of separation, ages of the parties, earnings of the pension member, etc.) and then the pension valuator would perform calculations and provide an estimate of the value of the pension.  There has not been a legislated formula establishing precisely how the pension is to be valued.  The valuators have relied upon calculations derived from their own industry and been guided on which principles to use by case law decisions determining the preferred methods to be used in a particular type of situation. 

Usually the pension valuator will give alternative values for the pension based on the date on which the pension member can retire with an unreduced pension and the date of retirement that is traditionally used  (usually 65 years of age).  The parties are then left to determine which of the 2 or 3 values provided most accurately reflect the reality of the parties.  By that I mean, did the parties always plan for the pension member to retire at the earliest possible age with an unreduced pension or was it going to be necessary for the pension member to work longer?

Once the parties have determined the appropriate value to be used (or a court has decided the value for them) and if the parties wish to divide some portion of the pension so that the non-pensioned spouse receives their own form of pension, then the pension plan administrator must be consulted to make sure that what the parties want to achieve can be achieved under Ontario law.  Ontario law restricts the parties to accessing a maximum of 50% of the pension growth from the date of marriage (or cohabitation) to the date of separation to go to the non-pensioned spouse.  So if the valuation indicates that the growth in the pension from the date of marriage to the date of separation is $50,000 then the parties can agree to carve off up to $25,000 of the pension to the non-pensioned spouse into their own retirement vehicle.

This process could mean that the pension plan administrator would have to hire their own actuary to make sure that what the parties want done can be done.  Also, the benefit which the non-pensioned spouse might receive from the pension may be more or less than the amount estimated in a pension valuation performed as at the date of separation because of a number of factors.  These factors include unforeseen investment losses or gains; changes to the benefits provided under the pension plan or restrictions imposed on the plan due to the operation of the 50% rule.

Starting in January 2012 a new process has been legislated to begin.  The pension value process will change in 2 important ways.  First, the formula used to determine the value of the pension is regulated and the formula will be applied by the pension plan administrator.  This means that separating spouses will no longer be required to hire independent pension valuators for pensions governed by provincial legislation.  Second, for a pension member who has not yet begun to receive a pension, the amount going to the non-pensioned spouse must be made in the form of an immediate lump-sum transfer from the plan.  There will be a single value determined; there will no longer be 2 or more values depending on the particular facts of the case.  For members already in receipt of their pension payments at the time of separation then the payment to the non-pensioned spouse must be made by dividing the pension payments between the pension member and the former spouse.

In the typical case this will general mean four steps:

1. The pension plan member or their spouse or former spouse makes an Application to the pension plan administrator for a determination of the “family law value” of the pension.
2. If the application has been completed correctly then the pension plan administrator will perform the calculations to determine the “family law value” of the pension and provide a statement to this effect to the requesting party.
3. The pension member and their spouse (or former spouse) will determine how the “family law value” of the pension is to be treated and obtain a court order or separation agreement reflecting this.
4. The spouse or former spouse of the pension member informs the pension plan administrator of their decision to either divide or not divide the family law value of the pension.  If the decision is not to divide the value of the pension then the parties have presumably found another way to satisfy the non-pensioned spouse’s share of the pension and thus the pensioned spouse will keep their pension intact.

As you can imagine there are specific government forms that need to be used at each step of the process and the forms vary depending on the type of pension and whether the pension is already “in pay” at the time of separation.

For more handy and easy to understand information about the changes that will take place starting in January 2012 I suggest you visit the government website at: 

http://www.fsco.gov.on.ca/en/pensions/Family-Law/Pages/familylawforms.aspx.

I suggested she needed to speak with the corporate counsel who could better explain that in fact the family was likely worried about the state of the corporation on a long term basis – they could not be faced with having to buy her out or her forcing a sale of the corporation in the event of divorce.  It was important to safeguard the corporation and in fact the sister’s spouse most likely was being required to sign a similar document.

In Family Law married parties are entitled to a division of property based on their net family property.  In order to determine a value for the husband’s interest i.e. the value of his shares in the corporation, he would be required to provide, as part of his full and fair financial disclosure, a valuation of his shareholdings in the family corporation.  This should be prepared by a certified business valuator or other method agreeable to both parties.  Once the Wife received the valuation, if she was not satisfied with the value, it is open to her to proceed to obtain her own critique of the valuation and arrive at her own values.  Once the value has been agreed upon this would be inputted into the net family property calculations under the husband’s property.  So in fact, by valuing the husband’s shares in the corporation and putting that on his side of the ledger, the Wife is receiving her one-half of the value of that asset.

It is important in these situations to obtain advice from a lawyer who specialize in the area of corporate law and one that specializes in family law prior to signing any documents provided to you by your spouse or his/her family relating to the family business to ensure that you receive all that you are entitled to.  Any agreement signed by you should require that you obtain independent legal advice.

Although you may believe that you will never divorce and this issue is a non-issue, it is better to safe guard your interests just as the family is safe guarding the interests of the corporation.

Over the past twenty five years, the most misunderstood definition in law is the “common law” relationship.  The area with the least knowledge is each party’s rights in a “common law” or unmarried relationship.

In Ontario, the Family Law Act does not define a “common law” relationship.  It simply provides rights to support to parties who have cohabited together for three years, or less time if there is a child of the union.

Technically, the only right that a party has in an unmarried relationship is to support – not to property.  The support applies to child and spousal support, if there are facts supporting such an entitlement.  Support may sometimes apply for non-biological children (step children) in certain circumstances. 

Provincial law defines property rights in Canada.

In Ontario,  there are no statutory rights to property division from one party to the other, in an unmarried relationship, regardless as to how long the relationship has lasted.  Many people in this kind of relationship believe that after “x” years they are entitled to a property division – part of the home or the other person’s pension, just like married people – and the term I often hear on initial consultations is three or five years.  Not true.

However, this does not mean that at the end of a long unmarried cohabitation, there are no property rights or obligations.

First, joint property is divided as all joint property – so if the home is jointly owned, each party is entitled to his or her share and has the rights in law to deal with that property the same as a married couple (with some exceptions, such as exclusive possession orders) or commercial partners.

Secondly, the law has created a “fiction” to protect parties in regard to such claims.  This fiction is known as the “constructive trust”.  Essentially, the argument is that the person who owns the property holds a portion of the property in trust for the non-titled party/partner. The history of the development of the constructive trust is monumental and was a huge  shift in the law of Canada.  Originally a woman in the Prairies named Mrs. Murdoch separated from her husband after a lengthy relationship (in this case they were married, but this was before the law reform statutes of the nineteen seventies), and she was not “on title” to the family farm.  In dissent, Justice B. Laskin espoused that it was unfair for Mr. Murdoch to have sole title to the property so he imposed an old equitable remedy from the English law to impose a trust on Mr. Murdoch so that he held fifty percent of the property for Mrs. Murdoch.  It was fair process and provided relief to Mrs. Murdoch for the years she spent on the farm, working, caring for animals, fixing fences, raising the children, etc. Mr. Murdoch received an economic benefit from Mrs. Murdoch – and she did not get paid for it (in this case it was defined as a “deprivation”).  There was no real or legal reason for the deprivation.  So Mrs. Murdoch would have received half the farm, had Justice Laskin had his way!

Over the years the constructive trust remedy has evolved and had influence and a lack of influence.  Most recently, the Supreme Court of Canada released the most substantial case influencing non-married parties in years. The case decided has clarified and guided lawyers in regard to unmarried couples and their families.  In making property decisions for unmarried partners, (both heterosexual and same sex parties), the court introduced the term, “Joint Family Venture” or “JFV”  to the legal lexicon.  In deciding whether property division is a fair remedy for an unmarried couple, the test is defined by four leading facts to consider: mutual intent, economic integration, actual intent and the priority of the family.

So, how does this affect you?  The short answer is that if you are in a relationship outside of marriage for whatever reason you decide to do so, you have support rights.  You might also have a right to the other party’s property by having legal title or a right that party’s property over the years as a result of your “joint family venture”.   A party in a cohabitation may not have the same rights to property as one in a marriage, but the law has established fictions, goalposts and pillars to provide relief when and if it is right to do so.