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Unequal Division of Net Family Property

Unequal Division of Net Family Property

When married spouses separate, s.5(1) of the Family Law Act (“FLA”) provides that there will be an equalization payment made from the spouse with the greater net family property to the spouse with the lesser net family property (see our blog post here for an introduction to how net family property and equalization work).

To briefly recap, the value of this equalization payment under s. 5(1) of the FLA is described as “one-half [the] difference between [the spouses]”.  Meaning the spouse with the greater net family property pays 50% of the difference to the spouse with the lesser net family property.

However, this equalization payment can be varied should the court find that the payment would be unconscionableS. 5(6) of the FLA provides us with the following criteria that could result in a varied equalization payment amount:

 

Variation of share

(6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable (emphasis ours), having regard to,

(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;

(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;

(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;

(d) a spouse’s intentional or reckless depletion of his or her net family property;

(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;

(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;

(g) a written agreement between the spouses that is not a domestic contract; or

(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.  R.S.O. 1990, c. F.3, s. 5 (6).

 

The purpose for why this is allowed is described in s. 5(7) of the FLA:

Purpose

(7) The purpose of this section is to recognize that child care, household management and financial provision are the joint responsibilities of the spouses and that inherent in the marital relationship there is equal contribution, whether financial or otherwise, by the spouses to the assumption of these responsibilities, entitling each spouse to the equalization of the net family properties, subject only to the equitable considerations set out in subsection (6).  R.S.O. 1990, c. F.3, s. 5 (7).

What we can see in the language in s. 5(7) is that an unequal equalization payment is not something to be granted easily.  This will really only apply rarely and then only after carefully assessing the specific circumstances of each party to see if an unequal equalization payment would be appropriate.

Unconscionable

So what does unconscionable actually mean here? The court in Serra v Serra evaluated this term and provides us with the following guidance:

[T]he threshold of “unconscionability” under s. 5(6) is exceptionally high (emphasis ours). The jurisprudence is clear that circumstances which are “unfair”, “harsh” or “unjust” alone do not meet the test. To cross the threshold, an equal division of net family properties in the circumstances must “shock the conscience of the court[1] (emphasis ours).

Further caselaw helps to clarify the point by stating the following:

  1. “It is the financial result, the result of the usual NFP equalization, that must be unconscionable, after taking into account only the eight enumerated considerations, nothing else”[2]
  2. “The term “shocking” indicates a situation or circumstances such as to shock the conscience where the party seeking relief has been put in a position so unfair as to cry out for redress. Accordingly, the word “unconscionable” must mean more than a mere consideration of “fairness” or “reasonableness”[3]
  3. “The conduct must relate to the accumulation of the net family property in some way. Even if the evidence established that the husband sexually assaulted the wife on the day before they separated, as alleged, the court could not impose a financial punishment on him by varying his share of the net family property, as that conduct was not related in any way to the property that the parties had on the date of separation”[4]

This helps us to understand the extreme level the financial circumstances of a spouse must reach before the unequal equalization payment will be considered by courts.  As stated in the third bullet point above, if the conduct of a spouse does not affect the financial situation of a spouse, that alone cannot affect a variation of an equalization payment.

If you are going through a separation right now, or are looking for information regarding separation, contact the professionals at Rabideau Law to see how we may be able to assist you.

This information was provided for information purposes only and is not to be construed as legal advice.

 

 

[1] Serra v. Serra, 2009 ONCA 105, 61 R.F.L.(6th) 1, var’g. 2007 CanLII 2809, 36 R.F.L.(6th) 66 (S.C.J.), Blair J.A. stated (at para. 47):

[2] Cosentino v. Cosentino, 2015 ONSC 271 (at para. 46)

[3] Heal v. Heal, 1998 CanLII 14896, 43 R.F.L.(4th) 88 (Ont.Gen.Div.).

[4] N.R.I.H. v. M.G.S.H. sub nom. Hamdy v. Hamdy, 2015 ONSC 3277 (at para. 291).