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Courts may award an unequal division of net family property if an equal division would be unconscionable. This may arise in various circumstances, such as where one spouse has recklessly incurred debts or depleted family property, since debts must be apportioned between the spouses, which can affect the eventual equalization calculation. However, there must be some evidence to support this type of claim. And some debts may be jointly assumed as a family, and cannot be assigned to only one spouse.
Applicant Sought an Unequal Division of Net Family Property
In Werbeski v. Werbeski, the parties disagreed about property division, child support and spousal support. Before their separation, the matrimonial home was destroyed by a fire. While the home was being rebuilt, their insurance company made payments directly to the contractors, and the parties also received $260,974 from the insurance company. These funds were deposited in an account in the respondent husband’s name. After the fire, the husband stopped working and was not employed again until after the separation. Also, before the COVID-19 pandemic, the parties began their own business, but due to pandemic restrictions, the business received a $60,000 government loan. However, the business had closed, and the loan had not been repaid.
The applicant sought an unequal division of net family property. Equalization of net family property is set out in section 5 of the Family Law Act. Additionally, section 5(6) of the Act states that a court may award “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”.
In Serra v. Serra, the Ontario Court of Appeal emphasized that judicial discretion regarding equalization is restricted, and that judges should only depart from the presumption of an equal division if equalization would be “unconscionable”.
No Evidence Funds Were Recklessly Depleted or Hidden
The applicant pointed to Dillon v. Dillon. In that case, the applicant looked for an unequal division, claiming that the respondent had recklessly depleted family assets and incurred debts due to his alcohol misuse. However, the judge found the case distinguishable. In Dillon, the evidence clearly established that the respondent struggled with alcohol abuse and had control over the family finances and ended up accumulating debts that the applicant had to pay with her own savings. But here, there was no indication that the respondent recklessly incurred family debts due to alcohol misuse. The applicant even denied having any concerns. She also admitted that she did not think the respondent had a gambling addiction. While she suggested that the respondent did smoke cannabis, that would only account for some of the money that she believed had been spent.
The judge looked to Stetco v. Stetco for guidance in determining when the threshold for unequal division based on reckless depletion of assets or incurring of debts is reached. In that case, the applicant alleged that less than a year before their separation, she was threatened, subjected to physical abuse, and forced to sign documents so that the parties could obtain a line of credit, against her own wishes. The evidence showed that the respondent was the only party who withdrew funds from the line of credit without explanation. And the respondent used some of the funds to purchase a car and a new home for himself. In those circumstances, the judge felt that an equal division would be unconscionable.
However, in Werbeski, the applicant testified that she believed money was hidden somewhere because she could not understand how all the insurance money the parties received could have been spent. Yet she could not point to any evidence supporting her belief that money had been hidden somewhere. Consequently, Justice Hilliard did not believe that the respondent had improperly or recklessly depleted the parties’ assets. Instead, it was likely that the insurance money was merely spent over time. Indeed, the bank statements showed the funds being used for daily expenses. Ultimately, there was no evidence that the respondent used large sums of money for his sole benefit to an extent that an equal division of property would be unconscionable.
Loan Was Incurred to Support the Family Business
Although the judge determined that an unequal division of net family property was not justified, the parties still disagreed on the appropriate amount to be equalized. The value of the matrimonial home was in dispute, resulting in a significant difference between their respective equalization calculations. The home was held by both parties as joint tenants, and both were equally responsible for the mortgage. Justice Hilliard agreed with the respondent that the amount owing on the mortgage was the proper amount that should be used to calculate the value of the matrimonial home. And any post-separation adjustments related to the applicant solely paying some of the mortgage costs were to be dealt with separately.
The parties also differed on the issue of debts that each owed on the date of separation. One of the debts was related to financing the respondent’s truck, purchased months before separation. But the judge determined that the truck’s value, equalized as of the date of separation, was negligible.
Another debt was a government CERB loan that the parties had not paid back. They had obtained the loan during the COVID-19 pandemic to support their business. Although the applicant was primarily responsible for running the business, the judge concluded that the loan was a family debt. The applicant was the only spouse working at the time, and both parties hoped the business would succeed and financially support the family. The respondent suggested that the loan was recklessly incurred and that he did not receive any benefit from the funds. But the judge disagreed, concluding that the money was spent on family expenses that benefited the respondent, particularly as he was not employed at the time.
Judge Can’t Force Spouse to Agree to Buyout of Their Interest in Matrimonial Home
The matrimonial home was the major asset that had to be equalized. The judge determined that the matrimonial home needed to be listed for sale, as there was no legal mechanism for the applicant to compel the respondent to agree to a payout. In addition, it was unclear whether the applicant had the financial means to purchase the respondent’s interest in the home. The judge felt that the applicant’s resistance to the matrimonial home being sold was based on the argument for an unequal division of property. However, the judge had already dismissed that claim.
Consequently, the home was ordered sold, with the proceeds equally divided between the parties after their joint debts were paid. Justice Hilliard found that there was no basis for any other equalization order. There was insufficient evidence regarding the value of the parties’ assets. So any remaining jointly held assets would be listed for sale with the proceeds equally divided equally, subject to any other written agreement they might make.
Johnson Miller Family Lawyers: Windsor-Essex Family Lawyers Advising on Unequal Division of Property
If you are navigating property division after separation, understanding your rights under Ontario’s equalization regime is critical. Whether you believe your spouse has improperly depleted assets, incurred unfair debts, or you are facing a claim for unequal division, experienced legal guidance can make a significant difference in the outcome.
The family and divorce lawyers at Johnson Miller Family Lawyers advise clients on complex property division issues, including equalization calculations, matrimonial home disputes, and claims involving alleged financial misconduct. We provide practical, strategic advice grounded in the Family Law Act and current case law to help you protect your financial interests. Contact us online or call 519-973-1500 to discuss your situation and get clear, actionable guidance on your property rights and obligations.
