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Posts from the ‘Finanicial Statements’ Category

Untangling Financial Information – By Guesswork and Extrapolation

Untangling Financial Information – By Guesswork and Extrapolation

Although it’s a relatively short little ruling, the decision in Yahya v. Omar gives a glimpse of the type of judicial guesswork that goes into determining a separated couple’s income and earning capacity for the purposes of determining their respective spousal and child support obligations to each other.

The parents lived together common-law for over 15 years, and had three children together.  The judge who ruled on an earlier motion for interim financial relief had held that the father’s income was about $56,000, even though this was a higher figure than he reported on Line 150 of his income tax return.  The judge made a temporary order for the father to pay child and spousal support accordingly.

The parents appeared in succession before four more judges who made orders dealing with various issues, including how the proceeds of the sale of their condominium were to be dealt with, how payment of child support was to be made out of those proceeds, and various other orders. In each case the financial disclosure provided by the parties was less than fulsome.

The father then brought a new motion for an order that the initial child support order was improperly made, because it should be based on his actual income, rather than what the original judge had declared. He claimed that at the time of separation he operated a taxi cab business, and for the past few years his income had been in the range of about $40,000 gross, and under $15,000 net per year.  The father said that although that information had been available to the initial motion judge – and the judge acknowledged that the support might change depending on further disclosure – the judge had improperly relied on the income on his financial statement, which showed about $51,500.

Moreover, the father stated that he had actually been unwell and unable to work for a few months, and that he had surrendered his taxi and was now driving for UBER.   Based on pro rata extrapolation, the father said his income would about $30,000 per year.  He asked that his child support be reduced accordingly.

In contrast, the mother claimed that the father’s income should be set at least $43,000, but ideally it should be set at $90,000 based on both the lifestyle he was apparently living.

In addition to refuting the mother’s figures, the father claimed that she should be looking for work in order to contribute to her own support. But the mother refuted this, claiming that she had a health condition that prevented her from working.  Her only backing for this diagnosis was a one-line letter from a doctor.

The court considered these submissions by both parties.  Starting with the father’s income, it found that the family’s lifestyle certainly showed they were living well beyond the amounts shown in his recent income tax returns, but this did not mean his income should be set at $90,000.  In fact, the court noted the father was “living with various family members and friends”, although he gave no additional financial details around those arrangements.

With no further clarity as to his income, the court concluded that the initial temporary order would have to stand until trial, unless the father could provide further disclosure that warranted a change to it.

As for the mother’s claim to be unable to work:  The court firstly returned the doctor’s letter to the mother, because it had not been properly tendered in evidence, then added that she needed to provide proper disclosure if she wanted to support her claim and settle the outstanding financial issues.  Respecting the level of proof needed for her ostensible medical diagnosis, the court diplomatically added:

If it consists of a single sentence from a family doctor, it will not suffice in which case she should consider investigating employment.

To the extent that it could with the information available, the court made several orders to resolve some of the issues relating to the treatment of the proceeds of sale, and certain arrangements respecting the payment of support.  It added that the next step “must be an informed and productive settlement conference,” which the court emphasized would require each party to file financial statements, as well as net family property statements.

For the full text of the decision, see:

Yahya v. Omar

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  RussellAlexander.com

Financial Disclosure: If One Spouse is Dishonest, Must the Other Actively Investigate?

 Financial Disclosure: If One Spouse is Dishonest, Must the Other Actively Investigate?

In a case I reported on last week, called Virc v. Blair, the husband had deliberately and materially misrepresented the value of the corporations that he brought into the marriage, which eventually came to light upon the couples’ separation.

Although the matter resulted in the court re-calculating the parties’ equalization entitlements in accord with the more accurate corporate valuation, the case raised an interesting corollary legal question:

If one party deliberately misleads the other, does it become the other’s obligation to actively investigate into that dishonesty?

In Virc v. Blair, the parties had gone before a motion judge on a procedural matter relating to what turned out to be the husband’s incomplete and misleading financial disclosure.   Once the motion judge had assumed that the husband had made certain material misrepresentations, the judge shifted the burden and placed it on the wife to inquire as to the truthfulness of the husband’s financial disclosure.

The Court of Appeal later held this was an error.  It said:

In the face of a deliberate material misrepresentation, the onus is not appropriately placed on the recipient spouse.  Rather, the burden is on the party disclosing to establish actual knowledge of the falsehood by the recipient. 

In other words, and contrary to what the husband claimed, there was no law to the effect that a spouse who receives financial disclosure in a matrimonial case is under an obligation investigate or test the veracity of the information provided by the other spouse.   Rather, the effect of the deliberate material non-disclosure remains the focal point (unless the dishonest spouse can prove that the other spouse conclusively knew of the dishonesty).

As the court said a little later in the judgment:

The law does not entitle a liar to succeed just because the recipient of the falsehoods has not ferreted them out.

For the full text of the decision, see:

Virc v. Blair

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 RussellAlexander.com

Wednesday’s Video Clip: How to Fill out a Financial Statement


Wednesday’s Video Clip: How to Fill out a Financial Statement

In this law video, Darla review the steps required to fill out a financial statement for the family court or negotiating the terms of your divorce settlement.

When entering into a Separation Agreement or bringing an Application before the Court, parties must provide full financial disclosure.

Complete financial disclosure is a prerequisite to the settlement of any family law case. The Family Law Act and its interpretation by our Courts, leaves no uncertainty in this respect. Any agreement can be set aside if a party has failed to truthfully and accurately disclose his or her financial position.

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 RussellAlexander.com

Ten Years Later, Court Overturns Agreement Due to Husband’s Non-Disclosure

Hiding Money

Ten Years Later, Court Overturns Agreement Due to Husband’s Non-Disclosure

Although the recent Ontario Court of Appeal decision in Tadayon v. Mohtashami is not all that exceptional, it serves as an excellent illustration about how even many years later, one spouse’s past misdeeds can still come back to haunt him or her, in the context of the obligation to provide full disclosure in family law litigation.

The parents of three children had separated in 1999. They entered into a separation agreement as part of their divorce in 2005.

At that time, the husband had reported that he anticipated earning $80,000 that year, and the agreement was reached with that figure in mind. Its terms required the husband to pay relatively modest amount for combined spousal and child support, and allocated him certain levels of financial responsibility for the purchase of a home for the wife and children. All of these commitments and obligations were made on the strength of the husband’s reported income of $80,000 for 2005.

In reality, his income for the prior year was already much higher than that (at $147,000), and it turned out that for 2005 he actually earned an income of $344,000, comprised of income from his own general contracting company, together with undisclosed amounts he also earned from a home building venture. All of this information was kept from the wife at the time, and none of it was taken into account when the 2005 agreement was reached between them.

Fast-forward 10 years, when the wife discovered that the husband had concealed these income amounts from her. She applied to the court to have the 2005 agreement set aside, and to have both child and spousal supports for several sequential years recalculated with the correct figures in mind.

That application was allowed by the lower court, and the husband’s subsequent appeal was dismissed. Even viewed a full decade later, both courts confirmed that the husband’s then-failure to disclose these significant income amounts undermined the validity of the 2005 agreement. Had the wife known the correct financial information, she would never have signed it.

(Moreover, the court pointed out that the husband could not claim that he would be prejudiced by the wife’s late-breaking objection to the non-disclosure; they had jointly retained an expert income valuator, so it could have come as no surprise to him that the accuracy of his figures would soon become an issue).

The bottom line was that the husband had an obligation to make full and proper financial disclosure in 2005 when the agreement with the wife was made in the first place; the agreement was accordingly unconscionable and even despite the passage of time the court was justified in overturning it now.

For the full text of the decision, see:

Tadayon v. Mohtashami, 2015 ONCA 777

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 RussellAlexander.com

Must a Spouse Confirm the Falsity of the Other Spouse’s Financial Information?

false document

Must a Spouse Confirm the Falsity of the Other Spouse’s Financial Information?

In a recent family law decision called Virc v. Blair, the Court of Appeal faced an interesting question: whether one party is duty-bound to make inquiries into or confirm that the other party has provided deliberately-false financial information.

The dispute arose in connection with the business valuation that formed the basis for a 2008 separation agreement between a wife and husband. Even though the wife happened to be a lawyer, she had no experience with business valuations; the husband on the other hand was an “experienced and sophisticated businessman” who considered himself an expert in that area.

The wife signed the agreement (which was prepared by the husband’s lawyers), even though prior to doing so she was not provided with a full independent business valuation of his assets at the date of marriage. About two years after signing, she then realized that he had likely over-valued his marriage-date holdings to the tune of $9 million, which made a big difference to her equalization and other entitlements.

She went to court to have the separation agreement set aside, but was unsuccessful on the first go-around before a motion judge. That judge had concluded that even if it appeared likely the husband had materially misrepresented the value of his marriage-date property, the wife had disqualified herself from attacking the resulting separation agreement’s validity because she failed to make inquiries to confirm one way or the other. In other words, the wife’s oversight in failing to confirm the husband’s likely-false information was fatal to her bid to set the agreement aside. The motion judge essentially dismissed the wife’s application.

The matter went to appeal, and the wife was successful. The Appeal Court found that the motion judge, in purporting to apply the Ontario Family Law Act’s two-stage test for setting aside a domestic contract, had effectively (and incorrectly) shifted legal responsibility for confirming the false financial information to the wife.

However, this was not the law in Ontario.

Rather, once the motion judge was in a position to assume the husband had made a material misrepresentation as to his finances, the law placed the onus on the husband, being the party disclosing the financial information, to establish that the wife actually knew that his information had been false. It was incorrect to shift the responsibility to the wife to make the inquiries, and incorrect to conclude that her application to set the agreement aside had no real chance of success at trial.

The wife’s application should not have been dismissed; the proper course was to send the matter on for a full trial. The Court of Appeal made an order accordingly.

For the full text of the decision, see:

Virc v. Blair, 2014 ONCA 392 (CanLII)

 

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 our main site.

74-Year Old Mine Worker Hides Almost $175K in Salary – Should He Pay Retroactively?

mine6

 

74-Year Old Mine Worker Hides Almost $175K in Salary – Should He Pay Retroactively?

In a recent Ontario case, the court had to grapple with deciding whether an elderly husband who had made an unusually high income in one year – but who was now living on very limited means in a basement apartment – should have to pay retroactive support to his unemployable wife.

The couple was married for almost 20 years. At the time of their separation, the wife was 51 and the husband was 74. Since that time, the wife had developed various medical issues including possible Parkinson’s disease, which likely rendered her unemployable. She was currently living with and taking care of her elderly father, doing the cooking, laundry, cleaning. She had no pension and no savings to speak of, and lived very frugally.
The parties reached a simple negotiated separation agreement requiring the husband to pay about $800 per month to the wife. It was based on his declared income of about $36,000 per year.

However, about a week after signing the separation agreement, the husband received a job offer to temporarily work the “tool crib” at the local Mine. However, the position lasted longer than initially expected and for the year 2012 he earned almost $173,000 including his pension.

The wife learned of the husband’s job indirectly, because (as the court put it), they had “the same circle of friends. Her lawyer’s request to the husband for financial disclosure went unanswered, and the wife was forced to apply to the court for retroactive spousal support as part of their divorce.

The court considered the various factors that allowed it to order retroactive spousal support – including (among other factors) the wife’s past need and the husband’s ability to pay, as well as the underlying basis for support, any delay in claiming it, any undue hardship to the support-paying husband, and also any blameworthy conduct on his part.

In this case, the husband had an obligation under the separation agreement to disclose any change in his financial circumstances within five days. The wife had asked the husband for such disclosure but he had ignored her lawyer’s requests. She was accordingly left with no alternative but to go to court.

There was also evidence that the husband had reckless spending habits. The court described it this way:

It became clear during the course of the evidence that the [husband] has never met a dollar that he did not care to spend. Even after being unemployed for a considerable period of time and earning a substantial income in 2012, the [husband] did not see fit to put aside any money for himself let alone for his estranged spouse. In his words, he worked in a “high paid trade and they spent a lot of money on trips and other things”. …

Finally, the husband also claimed to be heavily in debt, but had no proof. The court added that the husband “went on to say that the balance of the money was spent on lifestyle expenditures for meals and restaurants, buying rounds in the union hall and some gambling in Sault Ste. Marie.” His lack of financial disclosure was also “worthy of criticism”, it found.

Nonetheless, after evaluating these circumstances, the court added that the now-76-year old husband was living in his sister’s basement apartment, and would never again be employed in any meaningful way. His assets consisted of an old truck worth about $2,000, and about $37,500 per year in pension.

This being the case, he could not now and would never be able to afford to pay the retroactive spousal support that was being claimed by the wife. The court accordingly declined to make the order. (However, in light of other circumstances, including the terms of the separation agreement, it did order the husband to pay the wife about $1,000 per month, going-forward).

Should the husband have been ordered to pay up retroactively, in this case? What are your thoughts?

For the full text of the decision, see:

Dufour v. Dufour, 2014 ONSC 166 (CanLII) http://canlii.ca/t/g2nh8

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.

How to fill out a financial statement — Video


Wednesday’s Video Clip: How to fill out a financial statement

In this law video, we review the steps required to fill out a financial statement for the family court or negotiating the terms of your divorce settlement.

Complete financial disclosure is a prerequisite to the settlement of any family law case.  The Family Law Act and its interpretation by our Courts, leaves no uncertainty in this respect.  Any agreement can be set aside if a party has failed to truthfully and accurately disclose his or her financial position.