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Squabbling Spouses in Business Together – What Can a Court Do Pending the Divorce?

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Squabbling Spouses in Business Together – What Can a Court Do Pending the Divorce?

When a relationship is good, being in business together can be a fulfilling and financially-rewarding team venture. When things go bad, however, having a joint business can be a liability in more ways than one. The business assets sometimes end up being yet more weapons in the arsenal that former spouses can use against each other until the divorce is final.

In a case called Hackett v. Hackett, the married couple were partners in a cleaning business when they decided to split up. They entered into an agreement to determine how to deal with the business and its assets – consisting mainly of eight company vehicles – until the divorce.

But notwithstanding that agreement, over time things went from bad to worse between them. The wife accused the husband of taking $19,000 from the business bank account, of cancelling credit cards used in the business, of removing equipment and inventory, and of taking the license plates off the business vehicles. She said he also cancelled the insurance policies on the business vehicles without her knowledge, in what the court said was an obvious bid “to frustrate the applicant’s ability to manage the business”. His truer motivation, according to the court, was to secure certain payments that he believed the wife owed him under the agreement.

To counter these allegations, the husband accused the wife of taking money from the business bank account for her personal use, and of refusing to pay the draw from the business to which he was entitled. He said that the wife had also terminated the employment of the husband’s son, due to allegations of theft. (And perhaps not surprisingly, the situation between them continued to go downhill after that).

Various short-term court orders had been made preventing the husband from attending at the business premises and interfering with its operations. He was also ordered to return the license plates.

The court was asked to finally settle the matter of the business pending the divorce proceedings, with the wife asking for an order transferring the ownership of certain company vehicles from the husband’s to the wife’s name, so that she could carry on running the business without the husband’s interference. In dispelling the husband’s objections, the court observed:

Despite his indignation at the course of events, the [husband] may be viewed as his own worst enemy; complicating matters, exacerbating the problems, compounding issues, all without perceptible benefit to him and taking the focus off what he says the [wife] should and shouldn’t be doing. …

The [husband] says that the successful continuation of the business is very important to him but his actions seem inconsistent with this assertion. There is circumstantial evidence that he has been competing with the existing business.

In light of all the circumstances, the court agreed that reasonable steps needed to be taken to protect the business until it could be appraised and its value made available to both parties as part of the divorce. And while an order was issued transferring the vehicle ownerships to wife, she was prohibited from selling them without either the husband’s agreement or a court order.

For the full text of the decision, see:

Hackett v. Hackett (2014), 2014 ONSC 4257

 

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