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Sketchy Debt Repaid By Husband’s Transfer to Off-Shore Account; Court Finds Contempt

Sketchy Debt Repaid By Husband’s Transfer to Off-Shore Account; Court Finds Contempt

Kondrasheva v. Davydov is a recent decision involving contempt of court. The husband and wife had been married in Russia in 2005; the husband was a Canadian citizen and had sponsored the wife’s immigration to Canada in 2006.  This was a second marriage for both, and they each brought two children into the relationship.

The marriage broke down in 2011, and the parties commenced litigation to divide their assets and work towards a divorce.  As part of that process, and to the knowledge of the husband, the wife had obtained a number of court orders, including one that “neither party is to dissipate assets until further order or written agreement.”  
Notwithstanding that non-dissipation order, the husband took almost $725,000 held in his Canadian bank account, and transferred it to an offshore account in Cyprus.  The back-story to this transfer read like parts of a spy novel:   Ostensibly, the transfer was made to repay an alleged debt to a woman named Irena Kulakova, who was owed closer to $860,000 as part of a longstanding investment scheme.  She had apparently placed these funds with the husband, so that he could invest them for her; over the years the husband delivered Irena’s investment profits by way of $30,000 payments made periodically to a man named “Sergey”, whose last name he did not know.  (And these payments had been deliberately structured to avoid breaches of Canadian money-laundering legislation).   Irena had demanded repayment of the money – and uttered threats against the husband and his children – after she became anxious over the husband’s divorce proceedings and recent investment losses. The husband had acquiesced to Irena’s demand and threats because, as he put it, “Russians deal with disputes differently than do Canadians.”

From the wife’s standpoint, the husband’s transfer of funds out of his account essentially depleted all of his liquid assets, with the result that the only source of money for equalization or spousal support was the mortgaged matrimonial home that the couple had shared.   In addition, the husband was also currently in breach of a temporary order requiring him to pay the wife $6,000 per month in spousal support pending trial.  

The wife therefore went to court to have the husband’s funds transfer addressed, and to have him declared in contempt.  The court began by noting that the legal test for a contempt finding involves three elements:  

• The non-dissipation order must be clear and not subject to different interpretations;

• The husband’s acts must have been wilful rather than accidental; and;

• The husband’s contemptuous acts must be proven beyond a reasonable doubt.

Here, the non-dissipation order was clear, and the husband was aware of it. (Although initially, he claimed he did not understand it, despite being represented by counsel throughout all court proceedings.  He also asserted that his own lawyer was incompetent, but never set out evidence that he actually consulted with his lawyer prior to the transfer, and in fact the court concluded that he had every opportunity to do so but did not avail himself of the opportunity).

As for the second and third elements:  the husband’s acts were also obviously wilful, and the court had no trouble finding beyond a reasonable doubt that the transfers were made in defiance of the earlier order.  Also, the court noted that the husband’s evidence as to the existence of the alleged debt to Irena was filled with inconsistencies and did “not have the ring of truth”; moreover the husband had not put his best foot forward with the court, since he had not complied with an earlier undertaking to provide additional proof.

Ultimately, the court pointed out that the husband could not pick-and-choose the creditor that he or she wished to pay; this offshore transfer to Irena had been made in preference to his potential upcoming spousal support and equalization obligations to his wife.  More importantly, the transfer was made in direct defiance of the non-dissipation order of which the husband was aware.  The husband was therefore found to be in contempt, although the court gave him 60 days to purge that contempt by paying the $725,000 into court.

For the full text of the decision, see:

Kondrasheva v. Davydov, 2012 ONSC 690  http://canlii.ca/t/fpsbz

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at  www.RussellAlexander.com.

 

 

2 Comments
  1. It’s onerous to search out educated individuals on this topic, however you sound like you already know what you’re speaking about! Thanks

    March 17, 2013
    • Thank you for the kind comments.

      March 20, 2013

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