Foreign Property and Equalization in Ontario: How Courts Handle Assets Held Outside Canada

When calculating an equalization payment in Ontario, the value of property located outside Canada is included in each spouse’s net family property. However, Ontario courts generally cannot make orders that change who owns that foreign property. In limited circumstances, a court may make an order against a spouse personally that affects land in another country.

When determining an equalization payment, Ontario’s Family Law Act requires that each party include the value of all the property owned on the valuation date, with certain exceptions. The definition of net family property includes any foreign property. But, as a general principle, Canadian courts do not have jurisdiction to make orders affecting foreign property. However, there are limited circumstances where a court can enforce rights affecting land in foreign countries. Also, the value of foreign assets can be considered, even if courts lack jurisdiction to deal with a legal interest in property located outside of Canada.

For separating spouses in Windsor and Essex County, this issue can arise more often than many people expect. Given the region’s proximity to the United States, and the many families with ties to other countries, it is common for one or both spouses to own a home, land, or other assets outside Canada. This article explains how Ontario courts approach those assets during property division.

Do Ontario Courts Have Jurisdiction Over Foreign Property?

The general rule is that Canadian courts lack jurisdiction to make an order concerning the right, title, or interest in foreign property. For instance, in Duke v. Andler, the Supreme Court of Canada recognized the long-standing principle which held that questions relating to title to property must be determined by the laws of the country where the property is located.

In Potter v. Boston, Justice Healey discussed the limitations of the courts’ powers over foreign property within the context of family law proceedings. The judge specifically considered that, while Ontario courts retain in personam jurisdiction over the parties (that is, authority over the person rather than the property) and may therefore be able to make orders affecting foreign property, such orders are difficult to enforce. The judge went on to add that Canadian courts have “jurisdiction to enforce rights affecting land in foreign countries if those rights are based on contract, trust or equity, and the defendant resides in Canada. In these instances, the court is enforcing a personal obligation between the parties, which is an exercise of in personam jurisdiction.”

When Can an Ontario Court Make Orders Affecting Foreign Land? The Catania Test

In Catania v. Giannattasio, the Ontario Court of Appeal identified four criteria that need to be met before an Ontario court may exercise its limited in personam jurisdiction.

1. The court must have in personam jurisdiction over the defendant. The plaintiff must accordingly be able to serve the defendant with originating process, or the defendant must submit to the jurisdiction of the court.
2. There must be some personal obligation running between the parties. The jurisdiction cannot be exercised against strangers to the obligation unless they have become personally affected by it… An equity between the parties may arise in various contexts. In all cases, however, the relationship between the parties must be such that the defendant’s conscience would be affected if he insisted on his strict legal rights.
3. The jurisdiction cannot be exercised if the local court cannot supervise the execution of the judgment.
4. The court will not exercise jurisdiction if the order would be of no effect in the situs…. The mere fact, however, that the lex situs would not recognize the personal obligation upon which jurisdiction is based will not be a bar to the granting of the order.

Can Courts Consider the Value of Foreign Assets in an Equalization Payment?

Yes. Even though courts are limited in what they can order about foreign property itself, the value of foreign assets can be considered. In Bennett v. Bennett, the judge accepted that in calculating net family property and the equalization payment, courts can take into account the value of any foreign-owned property, but that they do not have jurisdiction to order its sale.

Example: Equalization Paid From a Share of Property in Jamaica

In Knight v. Knight, the wife owed the husband an equalization payment of $87,171, but there was a question of how that should be paid, which involved considering the parties’ property in Jamaica. The wife argued that the court did not have jurisdiction to deal with the property. But, considering the four factors in Catania, the judge found that all four applied. The parties were spouses, both were Canadian, and there was no evidence that Jamaica, another common law jurisdiction, could not supervise the execution of the judgment concerning the property. Instead, the judge felt there was a good basis to expect Jamaica would act on the judgment if it was registered in compliance with the foreign judgment reciprocity laws. Overall, the judge ordered the equalization payment to be paid from the value of her share in the Jamaica property.

What if a Spouse Claims an Interest in Property Abroad? A Beach House in China

In Huang v. Mundulai, the judge had to decide how to deal with the respondent husband’s claim of an interest in a beach house located in China. The respondent claimed that the applicant’s parents had purchased a beach house in China around 2018 using funds from the sale of the respondent’s solely owned townhouse as well as other funds taken from their joint accounts. Now, the respondent claimed that the Court should impute a value of $100,000 to the beach house and grant each party a 50% interest. The applicant denied that the beach house even existed.

Yet, the respondent failed to file any admissible evidence that a beach house had been purchased in China or that it even existed. But the respondent also had a problem in alleging that the applicant’s parents held title to the property. He claimed that they held title in trust for the parties, but the parents were not parties to the proceeding and were not called as witnesses. Ultimately, they were not given any opportunity to respond to the allegation, which the judge felt was “based on speculation and hearsay”. And, based on the jurisdictional limits of Ontario courts to make orders concerning foreign property, the judge noted that the only possible order, if any, would be an in personam order against the applicant and her parents relating to the value and disposition of the foreign property.

Yet, because the parents were not parties to the proceeding, the court lacked jurisdiction to enter those orders against them. So, even if the court was to conclude that the parties were joint beneficial owners of the beach house, the orders could not be enforced against the parents as the court lacked jurisdiction. Justice Daurio also found that the respondent’s request to have the “imputed value” of the beach house included in the parties’ net family property would have no impact on the eventual equalization payment, since each would list half of the value of the house, resulting in no change. Ultimately, the judge was not convinced that the beach house existed, but even if it did, the Court lacked jurisdiction to enter the requested orders against either the foreign property or the parents, who were non-parties to the proceeding. And since the value of the property would not impact the equalization calculation, the judge felt the time spent litigating the issue of the beach house was a waste of time, the court’s resources, and only increased the cost of the action.

Key Takeaways: Foreign Property and Equalization in Ontario

Canadian courts generally lack jurisdiction to make orders affecting foreign property. But for equalization, each party’s assets will need to be identified, and judges can consider the value of any foreign property. In practice, that means:

• Foreign property is included when calculating each spouse’s net family property.
• Ontario courts generally cannot decide title to, or order the sale of, property in another country.
• A court may have in personam jurisdiction over the spouses instead of the property, but only where the Catania criteria are met.
• Claims involving property held by third parties, such as a spouse’s parents, face significant jurisdictional and evidentiary hurdles.

Speak With Our Experienced Windsor Family Lawyers About Foreign Property and Equalization

Foreign property issues frequently arise in family law, which can create additional challenges for families dealing with property division. The team at Johnson Miller Family Lawyers in Windsor can help you understand how your assets, including property outside Canada, may be treated in an equalization calculation and guide you through the process. To discuss your matter further or arrange a consultation, please contact Johnson Miller Family Lawyers by reaching out online or calling (519) 973-1500.