Should Wife Get $500K Advance on Equalization Payment?
In Ontario (as elsewhere) getting a divorce often takes a long time; part of that process is the equalization of family assets, which by definition drags on too. Meanwhile the funds that the former couple shared are tied up in assets like the matrimonial home or other investments. But because equalization generally involves the transfer of a fairly predictable sum from one spouse to the other (which the court will confirm through a series of calculations, after reviewing the facts), sometimes the recipient spouse finds it necessary to ask for an “advance” on the transfer, in cases where he or she has legitimate financial need, and where there is little or no real dispute as to the amount.
This is precisely what happened in the recent case of Kates v. Kates. The couple had been married for 25 years when they decided to divorce. They had worked together in a family furniture business for 33 years, and owned four properties together that were in the wife’s name.
The wife went before the court asking for a $500,000 advance on what she estimated would be the $1.9 million equalization payment to which she would be eventually entitled in the divorce order. (She also had a claim based in the law of trusts, which she said would eventually entitled her to another $2.7 million). However the 69-year-old husband, who conceded that he would owe the 60-year-old wife something in the future, said she should get only $210,000 up-front, which was to be added to an earlier $75,000 he had paid.
The court reviewed the facts, as well as the figures. In this case, and while there was some dispute between the couple as to the exact amount (which would be settled at their later trial), it was clear that the wife would be owed more than $500,000 in equalization when all was said and done. More importantly it was clear that – given that the matter was not yet close to trial – she had a reasonable and legitimate need for the funds up-front, because she needed financial support throughout the divorce process, and needed funds to continue the litigation and have the necessary valuations completed.
In fact, since separation the wife had been renting an apartment with her only income being the payments she received under the Canada Pension Plan and Old Age Security; meanwhile the husband was still living in the matrimonial home, and had locked the wife out without giving her access to her personal belongings.
Also, it was relevant to note that the husband could come up with the $500,000 from the various liquid assets that were at his disposal, so that he would not be prejudiced if the order requested by the wife was made. Indeed, since separation (as in the marriage) the husband had retained and controlled virtually all of the former couple’s assets. In scrutinizing the facts, the court also pointed out several inconsistencies in the husband’s disclosed financial information, which included omissions from his Net Family Property, dubious claims that certain large sums were received from or transferred to family as “gifts” or an “inheritance”; overvaluations, and certain calculation errors – all in the husband’s favour.
In the end, the court made the order for a transfer for $500,000 as sought by the wife, which was to be in addition to the $75,000 advance already paid. The court also ordered the husband to pay the wife $2,500 per month in temporary spousal support. In doing so it rejected the husband’s claim that he earned only about $40,000 in income the previous year; the court inferred that his annual income must be much higher, in light of the almost $100,000 in legal fees and $145,000 in credit card expenses he paid in that same period.
For the full text of the decision, see:
Kates v. Kates (2014), 2014 CarswellOnt 15794, 246 A.C.W.S. (3d) 143,(October 1, 2014, Backhouse J. (Ont. S.C.J.).