Court Says Spouses’ Financial Statement “Reads Like a Fairy Tale”
In Family litigation, preparing financial statements is an often onerous task that few people could realistically enjoy. But once completed, the preparation and exchange of financial statements usually goes a long way toward helping resolve the financial dispute between former spouses.
In Ontario, under the Family Law Rules it is part of the mandatory disclosure process: Rule 13 provides that each spouse must provide the court and serve each other with a sworn financial statement, using one of several court-prescribed Forms (depending on the nature of the claim).
Each spouse must list his or her income from all sources, detail all living expenses, and provide the value of property. He or she must also declare the value of all debts and liabilities at various time-points, including details on bank accounts, registered savings plans, credit card debts, and pensions. For claims that relate specifically to support, the Rules include additional requirements: namely, the spouse filling out the financial statement must include proof of both his or her current income, and income for the past three previous taxation years (as established through notices of assessment, certain Canada Revenue Agency forms, or other proof of income).
As we have recounted in past Blogs, such “Financial Disclosure: A ‘Necessary Evil’ in Family Litigaiton” and “Family Law Disclosure and Confidentiality” where there is a legal obligation on spouses who engage in Family litigation to make full and frank disclosure. This means that the financial statements must be comprehensive, inclusive, and above all – accurate and reasonable.
On this last point, the older Manitoba case called Cadigan v. Cadigan illustrates how spouses can go completely overboard with the figures they include in their financial statements, and how courts are likely to respond to such embellishment.
The spouses, who were both dentists, had been married almost 27 years when they decided to separate and divorce. They had entered a separation agreement on matters such as spousal support, and had come before the court to have a final adjudication on their various issues.
In this context, the court received their respective financial statements, which included declarations as to their professional income arising from a dental partnership that they formerly shared and had now dissolved, as well as their alleged monthly expenses going-forward (and these figures were from 2004). In scrutinizing those documents, the court had this to say:
Each of these parties presented as part of his/her sworn financial statement a monthly expense sheet that reads like a fairy tale. The wife claimed expenses of $11,162.00 per month or $133,944.00 per year, more than two times her annual income. In this she claims $3,394.00 to service debt of $124,500.00 in total. Some of the monthly debt service has been double counted (Visa and house taxes). How one cannot organize one’s finances so as to service $124,500.00 of debt on a fraction of the amount claimed is not explained. Although her home is paid for her monthly housing and utility costs as presented total about $2,400.00 per month. She lives alone. How this is reasonable in her situation is not explained. Expenses of $500.00 per month for house maintenance, $150.00 per month for yard maintenance, $295.00 per month for other unspecified housing expense, $400.00 per month for charity, $400.00 per month for other insurance and $270.00 per month for gifts all call out for explanation but remain unexplained.
As for the husband, his sworn statement claims monthly expenses of $21,315.00 or $255,780.00 per year without mentioning a penny of spousal support. Adding in his existing spousal support obligation brings this to $26,315.00 per month or $315,780.00 per year. He has not earned income approaching this amount in any year since 1997 (or I suspect earlier) even when the wife’s part-time dental practice raised their partnership earnings somewhat. Were his actual expenses to resemble those presented his debts would far outweigh the substantial debts already reported. Within his budget he says he sets aside $3,000.00 per year for vacation, $1,200.00 per year for pet care, $3,600.00 per year for meals outside the home, $3,480.00 per year for entertainment and recreation and $1,800.00 per year for fitness. In his cross-examination he acknowledges membership in a squash club, seasons tickets to the Theatre Centre, and tickets for he and his present spouse to attend hockey, baseball and football games. It is clear that he is not without discretionary income. It is also clear that both of these parties can and do live on considerably less than each claims to require.
Faced with these inflated figures from both spouses, the court was prompted to add:
As a result of the parties’ unsatisfactory evidence as to their real needs and monthly expenses the quantum of the support order I now make is unavoidably somewhat arbitrary.
The court went on to do a best-guess at the various figures and the level of spousal support required, and how it should be allocated in the circumstances.
For those who are just embarking on their Family litigation, cases like this one should serve as reminders that “fairy tales” are to be avoided; the court might just come up with its own, less-appealing fiction in response.
For the full text of the decision, see:
Cadigan v. Cadigan, 2004 MBQB 283
Cadigan v. Cadigan, 2007 MBCA 28