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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, we 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.

The Factors That Influence Lump-Sum Spousal Support Awards

spousal-support

The Factors That Influence Lump-Sum Spousal Support Awards

Between divorced and separated couples, a spousal support order is usually structured so that one spouse will pay the other on an ongoing basis, often monthly and for a term of many years (at least until there is a material change that dictates that the order should be changed). In other words, spousal support is paid out over time, with periodic payments made in specified amounts on a regular basis. The majority of spousal support orders take this form.

However, courts have other payments structure options available to them. Somewhat less common is an award calling for a single, lump-sum payment, which is specifically authorized under section 33(9) of the Ontario Family Law Act.

In an Ontario Court of Appeal decision called Davis v. Crawford, the factors and principles that favour a court making (or not making) such an award were considered. As part of the overarching concern over whether the paying spouse can make a lump-sum payment without undermining his or her self-sufficiency, the court must consider (among other things):

• Both parties’ current assets and means;

• The assets and means they are likely to have in the future;

• The paying spouse’s capacity to provide support.

In Davis v. Crawford the Appeal Court emphasized that a court must weigh the perceived advantages of making the lump sum award being considered in the particular case against any presenting disadvantages of making such an order.

These can include:

• Whether, if the lump-sum award is ordered, the recipient spouse is unlikely to receive any equalization payment or child support payments to which she is entitled.

• Whether there will be any resulting disparity in the former spouses’ income, if the recipient spouse will not receive his or her share of the equalization payment (that otherwise represents the apportionment of the couples’ Net Family Property).

• Whether there will be a resulting inequity because the paying spouse will possibly be discharged from bankruptcy (and thus released from his or her equalization obligation, which was a topic I have written about previously [RA add link to prior article on bankruptcy])

For the full text of the decision, see:

Davis v. Crawford, 2011 ONCA 294 (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 us at RussellAlexander.com

Unpaid Equalization Could Come Out of Bankrupt Spouse’s Pension

Retirement Pension

Unpaid Equalization Could Come Out of Bankrupt Spouse’s Pension

We’ve talked recently in Can the Post-Bankruptcy Distinction Between Support and Equalization Payments be Circumvented? about an interesting distinction in Canadian law: a claim for unpaid equalization payment is “swept into” a paying spouse’s bankruptcy, whereas claims for unpaid child or spousal support can survive it.

In a case called Syrette v. Syrette, the wife took a position that is worth noting: in the face of her former husband’s newly-declared bankruptcy, she asked the court to allow her to pursue her unpaid equalization claim against his pension assets.

This is because pension assets can be subject to special provisions under the Ontario Pension Benefits Act, which keep them exempt from seizure by way of execution, which includes seizure by a bankruptcy trustee. So while the husband’s other assets were now in the trustee’s hands for distribution to his creditors (and were thus no longer available to satisfy the wife’s established equalization claim in the usual way), his pension assets remained untouched. This meant the wife could take steps to have those funds used in satisfaction of her equalization payment entitlement.

As a procedural aside, this required the bankruptcy court’s permission: Normally, the moment the husband declared bankruptcy, an automatic stay (i.e. suspension of legal proceedings) is triggered, which applies to all creditors – including the wife. However, in the circumstances the court was willing to grant the wife permission to proceed nonetheless:

Unfortunately for [the wife], not only are her equalization proceedings against [the husband] stayed as a result of his bankruptcy, any such equalization claim will be extinguished after the discharge … unless she obtains leave to proceed from the bankruptcy court …

The courts now routinely grant an order for leave to proceed in circumstances where a spouse wishes to proceed with an equalization remedy against the pension, presumably because the granting of such a stay does not prejudice the bankrupt estate in any way, and because it is consistent with desire of the courts to divide pension assets between spouses in circumstances where there are no other significant assets to be divided. The normal order is worded so as to permit the claimant to commence or continue proceedings in the matrimonial court for equalization against the pension, notwithstanding the bankruptcy or subsequent discharge.

The wife was therefore allowed to proceed to enforce her equalization claim against the bankrupt husband’s pension.

For the full text of the decision, see:

Syrette v. Syrette, 2011 CarswellOnt 10640, 2011 ONSC 6108

Varied on other grounds:

Syrette v. Syrette, 2012 ONCA 693

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.

Wise Words from an Ontario Judge: A Custody Trial “Speaks Volumes About the Parents”

Custody Battle

Wise Words from an Ontario Judge: A Custody Trial “Speaks Volumes About the Parents”

In a decision from earlier this year called Jackson v. Mayerle, seasoned family court judge Mr. Justice Pazaratz began his judgment with these perceptive and disheartened-sounding comments:

1. Why would we need a 36-day custody trial where the basic facts are pretty straightforward?

a. One child. A delightful eight-year-old girl with minor academic issues but no special needs.

b. She loves both parents equally. She wants to spend as much time as possible with each of them.

c. Both parents are equally capable and dedicated to meeting all her needs.

d. But the parents can’t get along or communicate with one another. Not at all.

2. Not such a tough set of facts, really. Nothing we don’t see in family court every day.

3. So why did we need a 36 day trial?

4. Why did we need 20 witnesses, including teachers, a principal and vice-principal, CAS workers, a family doctor, and a custody/access assessor?

5. Why did parents of modest means choose to impoverish themselves – and their daughter’s future — for a needlessly destructive three-year court battle?

6. For the sake of the child?

7. Not a chance.

8. Custody trials are supposed to be about children. But 36 days – that speaks volumes about the parents.

(And the emphasized words are those of the justice himself).

Indeed, it’s common knowledge that there is no shortage of high-conflict family law disputes in our society, and not merely those that end up in court. Virtually everyone knows someone first-hand – be it a family member, friend or acquaintance – who is embroiled in seemingly-endless and costly divorce or custody litigation. It almost seems to be the rule, rather than the exception these days.

Is Justice Pazaratz right? Is acrimonious child custody litigation more about the parents, i.e. their own egos and latent agendas, rather than the best interests of the child? Is it just a thinly-veiled battle between the parents, in the guise of asserting their respective rights in relation to the care of child?

What are your thoughts?

For the full text of the decision, see:

Jackson v. Mayerle, 2016 ONSC 72 (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 us at RussellAlexander.com.

Can the Post-Bankruptcy Distinction Between Support and Equalization Payments be Circumvented?

Past Due

Can the Post-Bankruptcy Distinction Between Support and Equalization Payments be Circumvented?

Recently I wrote “How Does an Unpaid Equalization Payment Intersect with Bankruptcy?” about the impact that a paying spouse’s bankruptcy has on the recipient spouse’s entitlement to nonetheless receive either child/spousal support, or an equalization payment as part of a separation or divorce. I observed that – perhaps surprisingly – Canadian law treats these two categories quite differently in terms of the post-bankruptcy collectability by the recipient spouse.

Perhaps this distinction is why some courts might be tempted to try to re-cast a spouse’s entitlement, to maximize the possibility that his or her valid family law-related claim against the bankrupt spouse – essentially in creditor/ debtor roles – will be more likely to be preserved and enforced after the bankruptcy.

But as a case called Mwanri v. Mwanri illustrates, this re-characterization is not always appropriate or permissible in law.

After a trial, the husband and wife were granted a divorce, with the husband being ordered to pay the wife about $50,000 as an equalization payment. However, he filed an assignment in bankruptcy soon after, without ever having paid a dime in satisfaction of that obligation (his spousal and child support payments were current, however). It was unlikely that his assets would be sufficient to satisfy the amount he owed the wife in equalization.

In light of this and other developments, the wife applied to a motions judge for an order that his ongoing child and spousal support obligations be converted to a lump-sum amount in the same amount as the equalization payment would have been, i.e. $50,000. The motion judge agreed, ostensibly under a broad discretion to do so under the Ontario Family Law Act and the federal Divorce Act. The husband was discharged from his bankruptcy shortly after.

From a legal standpoint, the motion judge’s ruling effectively circumvented the distinction in law between the types of award: Unpaid equalization payments got swept into the husband’s bankruptcy and evaporated once he was discharged, while spousal support obligations did not. So by asking for a $50,000 lump-sum spousal award – which was the same amount she would have received in equalization were it not for the husband’s bankruptcy – the wife could enforce the award even after the husband was discharged. In other words, the motions judge simply converted the mother’s now-unenforceable equalization claim into an enforceable entitlement to lump sum spousal support.

The husband objected, and brought an appeal to the Court of Appeal, claiming that the judge’s award was tantamount to re-distributing the husband’s assets in favour of the wife and in preference to his other creditors.

The Appeal Court agreed with the husband. It found that when it came time to make the support award, the motion judge had failed to consider: 1) the father’s status as an undischarged bankrupt; 2) the effect of a lump sum spousal support award on the father’s ongoing bankruptcy, and 3) the implications of the father’s eventual discharge from bankruptcy on the parties’ financial circumstances and assets.

The lump-sum award – not coincidentally in the same amount as the equalization payment would have been – had been made without regard to the father’s impending bankruptcy, and amounted to an end-run around the normal operation of the bankruptcy legislation. Since this was impermissible, the motion judge’s earlier ruling was overturned.

For the full text of the decision, see:

Mwanri v. Mwanri, 2015 ONCA 843 (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 us at RussellAlexander.com.

Is a Verbal Marriage Contract Only Worth the Paper It’s Written On?

Blank Paper

Is a Verbal Marriage Contract Only Worth the Paper It’s Written On?

In an interesting case from British Columbia, the court was asked to rule on whether a verbal marriage agreement, purporting to govern the division of a couple’s assets, was valid and enforceable.

The backstory featured a rather lavish courtship between a now 59-year-old doctor and a 49-year-old lawyer, who got married in Las Vegas in 2011. As part of their contentious divorce about three years later, the court heard that the husband had led the wife to believe that he was financially well-off; in the months prior to their wedding he had acted like a rich man, whisking her off to stay in 5-star hotels in destinations such as San Francisco, Palm Springs, Seattle, Europe, Los Angeles, Hawaii. In reality, he was overwhelmed with debt, owed money to Canada Revenue Agency, and had been repeatedly investigated and fined for improper billing in his medical practice.

Unaware of the true state of affairs, the wife proceeded with their wedding plans. At some point prior to the nuptials, she raised her concerns over a property she owned on Ross Street; she wanted it to be excluded from their family property, since it was her only asset and she wanted to have something for her children from a previous relationship.

They verbally agreed that the husband would not make a legal claim to it in the event they separated; the wife’s faith in his promise was fortified by her assumption that the husband was well-off in his own right. They had also discussed her understanding that under Canadian family law the Ross Street home would not become family property unless they lived in it together (which they did not intend to do, post-marriage, since it was rented to a tenant). They couple also agreed verbally to each pay their own credit card debts and their own car expenses, but share household expenses equally.

However, years of lavish and impulsive spending by the husband both before and during the marriage took its toll; after the inevitable financial collapse the wife was finally made privy to the true state of their precarious financial situation. The court described the next phase of their relationship this way:

She suggested to [the husband] that they move into Ross Street, but he would have to sign an agreement that recognized her sole right to that property and his sole obligation to pay his debts. [The husband] retorted that he would sign anything she wanted but she did not understand what it meant to be his wife. He suddenly asserted the marriage was over and he wanted a divorce. At the end of October 2014, [the wife] gave her Ross Street tenant notice and she moved into that home on January 1, 2015.

As part of the now-contentious divorce proceedings – and despite his verbal assurances to the contrary – the husband claimed against the wife’s Ross Street property nonetheless.

Ultimately the court issued a 132-paragraph ruling, which among other things considered in detail the provisions of the B.C. family legislation relating to division of property. The ruling culminated in a finding that the verbal agreement between the former couple to exclude the Ross Street home was valid and enforceable.

Among the evidence in favour of this conclusion was the fact that throughout their marriage they had acted in a manner that was consistent with the existence of such an agreement: the wife paid all the expenses related to the property and kept any income derived from it; the husband was never added on title, rarely attended at the property, and never made any financial or labour contributions to it (other than helping to power-wash the exterior on one occasion).

Although under Canadian law not all verbal agreements will necessarily be valid and enforceable, in this case the husband’s lack of credibility likely sealed the deal: In a preface to its ruling, the court underlined its finding that the husband “is not a trustworthy person”, that he had “little respect for the truth”, and that his evidence was “generally … unreliable and incredible”. This no doubt informed the court’s conclusion on the agreement’s existence, despite the husband’s unbelievable claims to the contrary.

For the full text of the decision, see:

Brown v. Brown, 2016 BCSC 1037 (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 us at RussellAlexander.com

We are pleased to announce that Laura will be returning to the team at Russell Alexander Collaborative Family Lawyers

Laura

We are pleased to announce that Laura will be returning to the team at Russell Alexander Collaborative Family Lawyers.

Laura’s enthusiasm and calm demeanour is an asset to the entire team, and her return has been much anticipated.

Welcome back, Laura!

Think You’re a Gift-Giver? Think Again

Gift Giver
Think You’re a Gift-Giver? Think Again

It seems like a straightforward scenario: Parents, perhaps now in their twilight years, decide to give a substantial gift to their married adult offspring, in the form of a large sum of money, land, a family cottage, or another asset (large or small). There is nothing in writing because – after all – it’s a gift between close family members.

But would it surprise you to know that absent a contract or other clear indication otherwise, the law actually presumes not that a gratuitous gift has been made from parent-to-adult child, but rather that the adult child holds the item/property on the parents’ behalf, unless there is evidence to the contrary?

The law on this perhaps confusing presumption was made clear in a recent Ontario decision called Barber v. Magee.

There, the couple had met in 2000, married in 2002, had a child together, and ultimately divorced in 2011. During the marriage, the husband had received $90,000 from his father toward the purchase of the matrimonial home, and another $67,000 later on. There was never a demand for repayment, nor any attempt to actually repay this $150,000 to the father. Nor were there any documents available: The husband claimed that his mother was the custodian of them, but had destroyed them in a “document purge”. He was thus unable to give the court evidence on the details of the purported loan, including the terms, interest rate, or repayment schedule.

Still, as part of settling their financial affairs during the divorce proceedings the husband claimed that this $150,000 was merely a loan from his father which he still had to repay; from a family law perspective this meant it would still form a liability and be deducted from his net family property.

As part of evaluating the husband’s position, the court revisited the current law on gifts-versus-loans in the context of these sorts of family law proceedings.

The court helpfully summarized the principles this way:

• In a scenario involving a gratuitous transfer of property from any one person to another (which for convenience we will still call a “gift”), the law of “resulting trust” applies. The law presumes that the actual intent of the gift-giver is to retain the gift but put in the hands of another person for “safekeeping” (so to speak), and not actually give it away.

• This also applies to gratuitous gifts between parents and adult children: The presumption is not that the parent intends a gift, but rather that the adult child is holding the property in trust for the aging parent. In other words, the assumption is that the gift-giving parents nonetheless hold an interest in the asset, even after placing it in the hands of the adult child.

• However, that presumption is rebuttable by putting forward evidence to the contrary. The burden is placed on the recipient adult child to show that an actual gift was intended, i.e. that he or she gets to keep the item.

• In the case of a dispute, the judge hearing the matter must begin with the presumption, and then weigh all the evidence in an attempt to determine the parents’ actual intent at the time of the transfer. The precise nature of the required evidence will depend on the facts of the case.

• There are various factors to consider:

o Whether there were any contemporaneous documents evidencing a loan;

o Whether the manner for repayment is specified;

o Whether there is security held for the loan;

o Whether there are advances to one child and not others, or advances on equal amounts to various children;

o Where there has been any demand for payment before the separation of the parties;

o Whether there has been any partial repayment; and,

o Whether there was an expectation or likelihood of repayment.

(A court will also take into account the fact that what started off as more of a “gift” to one spouse in a newly-separated couple may prompt the parents to suddenly collude in the claim it was a loan, to help out their son or daughter in the face of threatened litigation. This may be particularly so if the alleged debt is old, the parents do not need the money, and there has been no demand for repayment until after separation).

All of these principles stem from the law of equity, which focuses itself on what is fair. Those principles presume the existence of bargains, not gifts.

Returning to the Barber v. Magee facts, the court found that the $150,000 advanced from the husband’s father were gifts, with no clear intention or expectation that it be returned. Among other things, the court considered the fact that the wife had no idea during the marriage that the money was supposedly a loan; it was never discussed. She never saw or had knowledge of any documentation, and learned of the alleged loan only after she and the husband separated.

For the full text of the decision, see:

Barber v. Magee, 2015 ONSC 8054, 2015 CarswellOnt 19620, [2015] O.J. No. 6818

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.

Amelia Receives Client Service Award

1P0A2238 (1)

Amelia Receives Client Service Award

We are pleased to announce that Amelia recently received our Client Service Award for her excellent commitment to helping our clients.

Amelia’s attention to client service and her friendly prompt attention to detail makes her a valued member or our team. Congratulation Amelia. (pictured: Russell Alexander and Amelia Rodin)

How Does an Unpaid Equalization Payment Intersect with Bankruptcy?

bankruptcy

How Does an Unpaid Equalization Payment Intersect with Bankruptcy?

If one separated or divorced spouse is obliged, by agreement or court order, to pay the other spouse an equalization payment, there are various enforcement mechanisms that can be brought into play if he or she does not do so.

But what happens if the payor spouse goes bankrupt in the interim?

This question was addressed squarely by the Supreme Court of Canada in a case called Schreyer v. Schreyer. In particular, the Court considered the interplay between provincial Family Law statutory schemes on one hand, and the federal bankruptcy laws on the other.

Perhaps surprisingly, the Supreme Court concluded that any unpaid equalization payment is “swept into the bankruptcy” of the now-bankrupt spouse that has the payment obligation.

Effectively, this means the equalization claim by the recipient spouse is just like any other debt owed by the bankrupt spouse: In keeping with the regime established under the federal Bankruptcy and Insolvency Act, it becomes a claim that has to be proven just like any other claim put forth by a creditor (hopefully) for payment out of the bankrupt’s assets.

More to the point, in the context of the bankrupt spouse’s bankruptcy proceedings it cannot be put forward as a “preferred” claim, ranking ahead of other existing creditors. Rather, it may be one of many simultaneous debts owed by the bankrupt spouse, and will rank behind any secured creditors in priority.

(This certainly does not mean that a recipient spouse will not receive his or her equalization payment, or that the bankrupt spouse can try to avoid having to pay it under the guise of a bankruptcy. It just means that equalization claims don’t attracted any preferential status in the paying spouse’s bankruptcy proceedings).

And – no doubt to the chagrin of a spouse who is owed and expecting an equalization payment – the bankrupt spouse is released from that claim once his or her bankruptcy has been discharged in the usual manner.

Note that this outcome pertains to unpaid equalization payments only, which readers will know is the amount that spouses must pay to each other in order to equalize their respective Net Family Property as part of their division of assets.

However, in what may be a puzzling distinction, under Canadian family law the situation is entirely different for unpaid support claims and unpaid arrears in support: the bankrupt spouse is not released on discharge; rather, the payment obligation persists beyond the bankruptcy and is not erased.

I will touch upon the ramifications of this second scenario in a future blog.

For the full text of the cited decision, see:

Schreyer v. Schreyer, 2011 SCC 35, [2011] 2 S.C.R. 605 (S.C.C.)

Thibodeau v. Thibodeau, 2011 ONCA 110, 104 O.R. (3d) 161 (Ont. C.A.)

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.