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Posts from the ‘Disclosure & Financial Statements’ Category

Tick, Tock: What’s the Legal Deadline for Trying to Set Aside a Separation Agreement?

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Tick, Tock: What’s the Legal Deadline for Trying to Set Aside a Separation Agreement?

In a recent case called F.K. v. E.A. the court was asked to rule on a novel question: If a spouse wants a court order setting aside his or her signed separation agreement as invalid, what is the deadline for applying? And when does it begin to run?

The couple began their relationship in 2000, and the husband proposed in 2004. The wedding itself was hastily-planned over a period of less then 30 days, and took place in June of 2005. Against that background, the couple entered into what they called a “Prenuptial Agreement” based on a template that the wife found on the internet. It was witnessed by a mutual friend. In it, the couple agreed that each of them:

1) Waived the right to claim spousal support from each other, and

2) Would remain separate as to property, and not be subject to an equalization of Net Family Property.

The Agreement also purported to confirm in writing two events that did NOT actually happen, namely:

1) That the parties had provided fair and reasonable financial disclosure to each other before signing, and

2) That both of them retained their own lawyer and received independent legal advice.

The wife later explained that they did not bother “going through the motions” to fulfil these two duties because the Agreement was wholly uncontentious: Both before and after the wedding they had conducted themselves with financial independence; the Agreement merely confirmed and documented that agreed status.

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Unfortunately, the spouses split in October of 2012, after 7 years of marriage. The wife gave the husband $1,600 to help with first and last months’ rent, but made it clear he could expect nothing further from her.

He then went to a lawyer to discuss his legal options, and explained the lack of legal advice and financial disclosure in particular. Although his lawyer advised that the Agreement was “not worth the paper it was written on”, the husband took no concrete steps at that time.

A full five years later, in 2017, he applied to the court to have the Agreement set aside. In addition to its other shortcomings impacting validity, he claimed it was signed after the wife issued an ultimatum; this left him feeling rushed and in a state of duress, he said.

The wife countered by stating the husband was simply out of time to have the Agreement set aside. She said this type of claim was subject to a two-year limitation period set by provincial legislation, and that the husband had failed to take any steps with the court within that deadline. She asked the court to grant her summary judgment.

The court addressed the various legal arguments. First, it concluded that husband’s bid to set the Agreement aside was indeed tantamount to a legal “claim”, and was theoretically subject to the general two-year deadline. The more pressing question, however, was precisely when the clock on that two-year period began to run.

In law, this “discoverability” threshold was the point at which the husband knew or ought to have known that:

1) He had suffered some loss, and

2) A legal proceeding was the appropriate method for trying to redress it.

In this case, that point was back in 2012, when the husband first attended his lawyer’s office post-separation.

At that point, he knew there was some potential legal issue with the validity of the Agreement and the circumstances in which it was signed, based on the advice from his lawyer. He also knew he could expect “nothing further” from the wife after separation, beyond the $1,600 in rent money, and that all other financial issues were off-the-table. So he knew in 2012 that he was facing a potential loss, and he knew that a legal claim would be the only way to potentially recover it.

Since it was now 7 years past that discoverability point, the husband was too late to bring his claim to set the Agreement aside.

As a last-ditch argument, the husband had also asked for special forbearance in the circumstances: The law should not be applied to him, since his case was the first time in all the Ontario jurisprudence where a claim to set aside a marriage contract was being foreclosed by the two-year deadline.

But the court rejected this argument too. The husband’s error or ignorance about the limitation period did not stop it from running, it said. All citizens are presumed to know the “law of the land”, and it applied equally to his situation even if the husband’s thwarted claim was the “test case”.

Since the husband was out of time to bring his claim, there was no genuine issue for trial. The court granted the wife’s application for summary judgment.

For the full text of the decision, see:

F.K. v. E.A., 2019 ONSC 3707 (CanLII),

How To: Make a Valid Separation Agreement

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 Bezos fortune gets divided in a private divorce agreement and Amazon doesn’t miss a beat

The Bezos fortune gets divided in a private divorce agreement and Amazon doesn’t miss a beat

MacKenzie Bezos announced earlier today in a tweet that she and, now ex-husband, Jeff Bezos, have settled their financial affairs in a private divorce agreement. Though full details of the Agreement are not publicly available, MacKenzie declared she was “happy” to sign over 75% of the couple’s jointly owned stock in Amazon as well as voting control of her shares and her interests in The Washington Post and the Blue Origin aerospace company.

Following the news of the Bezos family settlement, Amazon’s stock price reportedly dropped by a mere 0.4%. The Bezos’ settlement out of court played a significant role in stabilizing the effect their separation would have on Amazon’s viability, and stock price. Consider the contrary, for a moment—had the Bezos’ litigated their family law dispute, personal financial details would have been made public record, and the very fate of Amazon may have been at the discretion of a family court judge—which could have resulted in an outcome felt around the world.

The success of the Bezos family settlement illustrates key benefits of resolving legal issues out of court: privacy, creativity and a controlled impact on the family business. These same benefits can be realized by family business owners who choose the collaborative process. Collaborative clients are empowered to privately resolve legal issues using creative solutions like share transfers, family trusts and delayed equalization, to name a few, to ensure an orderly transition, preserving the family business, and family legacy for generations.

We have published several other posts on the very topic of how the collaborative process can help family run businesses survive and thrive after divorce. To learn more, click here.

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.

GM Oshawa Assembly Plant Closing & Divorce

The Ghosts of GM: Past, Present and Future

On November 26, 2018, the General Motors Company (GM) announced that it will cease allocating new product to its Oshawa assembly plant beyond the end of 2019. This came as a shock to the 2,500 employees who work at the Oshawa plant and the many more who depend on their income. While the jury is still out on whether GM will be laying off or re-training its 2,500 employees, one thing is certain—a large cohort of GM’s employees stand to lose their livelihood.

Whether laid off or re-trained, employees who have a potential, current or settled family law matter will need to govern themselves wisely to weather the impact that closure will have on their day-to-day lives. Accordingly, this post explores the likely, and, not so likely, family law implications of GM’s closure of its once thriving Oshawa assembly plant.

The Ghost of GM Past: Settled Family Law Matters

If your family law matter was previously settled by way of a Separation Agreement or Final Order, the loss of employment income may trigger a review of child support or spousal support, or parenting.

Support obligations

It is likely that the loss of employment income will mean that you cannot afford to pay child support and/or spousal support as set out in a Separation Agreement or Final Order. In the case of a Separation Agreement, you may be able to rely on a built-in review clause to revisit the issue of support. Most Separation Agreements contain a dispute resolution clause which may be the first place to start in this endeavor. In the case of a Final Order, you will likely want to bring a Motion to Change a Final Order if you and your ex-spouse cannot agree on the appropriate adjustment out of court. A qualified lawyer can assist with making this process as seamless as possible.

Parenting

It is not likely that your loss of income will impact settled parenting arrangements. However, you may find yourself needing to reduce your parenting time with the children in order to focus on finding a new job. In this scenario, you may likely need to rely on the dispute resolution clause in your Separation Agreement or bring a Motion to Change a Final Order altering an access schedule in order to achieve the desired relief.

The Ghost of GM Present: Current Family Law Matters

If you are currently going through a legal separation from your spouse, the loss of employment income may affect a number of aspects in your separation, including but not limited to, support, assets and liabilities and alternative career planning.

Child support and spousal support

You may have credible grounds by which to vary a temporary Order for support in your legal proceeding. As an Order for support would have been based on your GM income at the time, the Order may be varied by the new circumstances. You may seek such relief at a pre-trial conference or by bringing a motion. It is not likely, however, that your loss of income resulting from being laid off will extinguish your entire obligation to pay support. Rather, you may still be required to pay support on the basis of employment insurance income or imputed income. However, the extent of any such continuing obligation depends on the particular facts of your case.

Assets and liabilities

The loss of employment income may result in a budgetary deficit, impacting your ability to keep the matrimonial home. If you are no longer able to maintain your share of the mortgage and bills associated with the matrimonial home, it may have to be listed for sale—which may be the most poignant of all of your post-closure concerns. Worry not. There may be options available to you for preventing this outcome such as, a buy-out, borrowing or disposition of investments, RRSPs, RRIFs or your GM pension. However, the viability of these options to save the matrimonial home will need to be assessed against the surrounding issues in your proceeding such as support, equalization and other issues relevant to your case.

Alternative career planning

You may wish to delay your re-entry into the workforce to obtain credentials in a more stable industry. While this will yield economic benefits in the long run, your current financial obligations of support and solvency will be deciding factors. Delayed income generation caused by alternative career training may likely be manageable provided that the financial obligations of your ongoing separation are minimal. However, your freedom and ability to pursue such an undertaking may require a corresponding compromise and will depend on the unique facts of your case.

The Ghost of GM Future: Potential Family Law Matters

If you have been planning to separate from your spouse, the loss of employment income can have significant family law implications on a number of obligations arising in separation, including but not limited to, support, parenting and family property.

Child support and spousal support

It is not likely that being laid off will defer support obligations. You may be obligated to pay support if you receive employment insurance income sufficient enough to meet legislative minimums. If you do not qualify for employment insurance, your spouse may still seek support by imputing an income on you commensurate with your work experience, whereby you will be required to pay support. In either scenario, the obligation to pay child support and spousal support may survive the loss of income depending on the facts of your particular situation.

Parenting

It is likely that being laid off will mean expanded parenting time. While increased parenting time may yield social benefits, it may also impinge on your economic rehabilitation. Your spouse may expect you to dedicate your new found time to caring for young children who are not in school. These, and other significant changes to parenting time after initiating your separation, may likely hinder your re-entry into the workforce. A properly drafted parenting agreement can help by moderating unrealistic expectations.

Family property

You will have a legal duty upon separating from your spouse to avoid the reckless depletion of family property. While you may wish to list personal or real property for sale to help make ends meet, it is not likely that you will be able to freely dispose of family property after your date of separation without your spouse’s prior consent or proper accounting. You will have to be mindful of how you manage family property as mismanagement may prejudice the equalization of net family property and may result in a Court order.

Bottom line

The closure of GM’s Oshawa assembly plant in 2019 will disrupt the lives of many families, the impact of which might be felt most by those dealing with a potential, current or settled family law matter. Contacting a lawyer for legal advice tailored to the particular facts of your case is a proven way to mitigate the effects of an imminent disruption to income. While it may seem impossible to afford a lawyer at this time, there may be options available to finance the cost of much-needed legal representation.

At Russell Alexander Collaborative 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.

Saving the Golden Goose: Part I – How Family Run Businesses can Survive and Thrive after Divorce

Saving the Golden Goose: Part I – How Family Run Businesses can Survive and Thrive after Divorce

One of the common fears of clients who own family run businesses is how a divorce will affect the business they have spent their life building. While business owners have control over the work they put into their business and the legacy they are building for their family, they may have little influence over a relationship breakdown. The worry in regards to the effects of this breakdown on a business can cause additional stress above and beyond the heartache associated with restructuring a family.

In many family law matters involving children, the spouses are able to agree to cooperate in order to address the best interests of the children. In many ways, a family business can be used as a similar incentive: spouses can agree to cooperate in order to address the best interests of the family business. While fueling conflict is an almost unavoidable side effect of the court system, a collaborative approach is a very effective method in reducing the impact of separation and divorce on family run businesses. This process seeks to ensure that the business remains viable for both spouses, as well as future generations.

What is Collaborative Practice?

Collaborative Practice Family Law offers an effective alternative to the inherently adversarial court process. Both parties must enter into the process voluntarily, and agree to resolve their issues respectfully. While the court process is oriented based on the legal rights and obligations of both parties, the collaborative process allows both parties to generate options that best suit their family. This allows the family much more self determination in creating an outcome based on their specific needs. Specially training collaborative lawyers work with both parties to guide them through the process, and are available to offer legal advice and support to their clients when appropriate.

Both parties’ lawyers also commit themselves to coming to a mutually agreeable resolution. The parties must agree in advance that should the collaborative process fail, neither party may use their collaborative lawyer to advance their position in court. This creates an environment conducive to negotiation and settlement, outside of court.

The underlying philosophy of the collaborative divorce process is that the parties mutually agree to completely avoid the court process, with the result being a faster, cheaper and more amicable divorce or separation.

A Flexible Alternative to Court

As mentioned above, the collaborative process allows spouses to shape the outcome of their separation and divorce. In contrast, judges in the court system have limited statutory options available them when presented with these disputes. Their analysis is built upon a determination of the legal rights and obligations of the parties under the Family Law Act. Furthermore, family law judges may struggle to understand the time and effort that goes into building and running a business, and the concept that income is not necessarily guaranteed or consistent. Issues such as liquidity of assets, the risks associated with owning a business, and ensuring that funding remains stable are complex, and family judges are not necessarily trained to analyze these concepts. Due to these restrictions, often a court process will result in the sale of business at a significant discount, which ultimately results in a significant loss of family wealth.

Collaborative family law is an option that operates outside of the court system. It allows the spouses much more privacy than a court process does, which a huge additional benefit to those owning family businesses. Issues such as tax planning or corporate share transfers can be done with reduced publicity. Both spouses are able to sit down with one another, and their lawyers, to discuss a solution that is beneficial to both the business and the family unit. Spouses can determine whether or not it is a realistic option to continue to operate the business jointly, or if one should step down. In the latter situation, flexible payment structures can be created to ensure that the business is not destroyed in the wake of one spouse leaving. This fosters the health of the family business, and promotes growth and stability for future income and the building of capital which ultimately supports the family.

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

Part II

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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, 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

Appeal Court Confirms Unique “Philosophy” of the Ontario Family Law Rules

Appeal Court Confirms Unique “Philosophy” of the Ontario Family Law Rules

The Ontario Court of Appeal, in a recent case called Frick v. Frick, confirmed that the Ontario Family Law Rules are philosophically different from their civil counterpart, and reflect the unique nature of litigation involving families.

The initial facts in Frick v. Frick were unremarkable: The couple married in 1993 and had two children. They separated 20 year later, and the wife started divorce proceedings. In addition to custody and spousal/child support, she also asked for the usual equalization of Net Family Property (NFP).

But after filing her pleadings, the wife learned that the husband had spent money on extra-marital activities during the marriage, namely those incurred during what she claimed was a “10-year affair”, as well as the cost of male and female escort services and an adult fetish website membership.

In light of that spending, the wife claimed the husband had recklessly depleted his share of family funds during the marriage. Because of it, she asked for an unequal division of NFP in her favour, now that their relationship was over. She asked the court for permission to amend her claim accordingly.

But the court declined, and went one step further by expressly preventing the wife from asking for an unequal NFP division at trial. The wife appealed.

The Appeal Court ruled in her favour, finding that the motion judge had made several procedural errors. For one thing, he had innovated certain evidentiary requirements for the wife to meet, that were simply not contained anywhere in the Family Law Rules (FLR). He took issue with the wife’s failure to specify in her pleadings the precise FLR provisions on which she relied for unequal division, even though these were implicit. He took procedural liberties by essentially bringing his own motion to strike out the wife’s unequal division claim, and baring her from pursuing it at trial, even though the husband had not requested these remedies himself.

The motion judge had also applied an unjustly-high threshold for establishing the wife’s unequal division claim, and had deprived her of notice that it might be struck out permanently. As the Appeal Court put it:

Here, the wife knew that the motion was to strike portions of her document. She could not have known that her claim for an unequal division would be judged according to the summary judgment rules. Nor could she have known that her claim would be barred forever since she was denied leave to amend.

The key error, however, was the motion judge’s assessment that the FLR governed certain procedural aspects inadequately, and that he should look to the civil procedure rules for guidance instead. (Although Ontario judges are permitted to do this where warranted, the motion judge in this case showed over-reliance on the civil rules, and misunderstood when they could be invoked.).

In this context, the Court of Appeal made some important comments about the fundamental nature of the FLR:

The Family Law Rules were enacted to reflect the fact that litigation in family law matters is different from civil litigation. The family rules provide for active judicial case management, early, complete and ongoing financial disclosure, and an emphasis on resolution, mediation and ways to save time and expense in proportion to the complexity of the issues. They embody a philosophy peculiar to a lawsuit that involves a family.

The Appeal Court allowed the wife’s appeal, in part.

For the full text of the decision, see:

Frick v. Frick, 2016 ONCA 799 (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

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.

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

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