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When facing separation or divorce, the right to equalization or support payment can feel like a crucial lifeline. However, that right becomes meaningless if the assets needed to fulfill it vanish. Unfortunately, some spouses may attempt to shield their wealth by transferring property before a final court decision. This is where a preservation order steps in as a powerful tool, ensuring that sufficient assets remain available to satisfy legitimate claims. By preventing a spouse or former spouse from selling or disposing of assets, a preservation order offers vital protection.
Preservation Order Can be Obtained Before Receiving a Judgment at Trial
In Dormon v. Dormon, the parties had been married for 54 years. The applicant claimed that the respondent’s husband had discussed for years leaving Canada for a country with lower taxes. She claimed that in the last year before separation, it became clear that the respondent was moving funds out of Canada. At the time of the trial, he resided in Panama. After separation, he agreed to maintain $10,000,000 in two Canadian bank accounts to secure the applicant’s equalization and support claims. Nevertheless, he transferred funds out of Canada, leaving only $3,700,000 in the accounts. The applicant brought an urgent motion, and an order was granted restraining the respondent from transferring certain funds without the applicant’s consent. The motion judge also found the respondent acted in bad faith and depleted funds he had agreed to preserve. The applicant now sought an order requiring the respondent to preserve his property in Ontario and restraining him from depleting it.
Section 12(a) of the Family Law Act provides courts with the authority to make an order restraining the depletion of a party’s property if it is considered necessary to protect the other spouse’s equalization claim. Likewise, section 40 of the Act provides authority to restrain the depletion of property that would impair or defeat a claim for spousal or child support. Granting such an order is at a judge’s discretion, and an order can be made after balancing several factors. Bronfman v. Bronfman set out three factors that need to be considered:
- The relative strength of the case made out by the moving party.
- The balance of convenience (or inconvenience).
- Irreparable harm.
Checklist of Factors Considered Before Granting Order
The judge determined that an order restraining the respondent from depleting all of his assets in Ontario, as well as an order requiring him to preserve those assets, should be granted. The judge reached this conclusion, having considered whether there would be assets available to satisfy the applicant’s claims by the end of the trial if the preservation and restraining orders were not granted. Justice Presser looked to the Bronfman factors and first considered whether there was a serious issue to be tried. As outlined in Bandyopadhyay v. Chakraborty, courts need to weigh whether it is likely that an applicant will be entitled to an equalization payment. In that case, the judge stated that,
“there is an onus on the party seeking the restraining order to prima facie show that he or she is likely to receive an equalization payment equal to the value of the specific assets”.
Here, the judge was satisfied that there was a serious issue to be tried. The applicant had met the onus of establishing that she was likely to receive an equalization payment, and consequently, there was a basis for an order preserving assets as security for her support and property claims. And looking more closely at equalization, it became clear that the existing preservation and restraining orders on the respondent’s bank accounts would not be sufficient to ensure there would be enough funds to satisfy her claims if she were successful at trial. A rough calculation of the equalization payment suggested the funds that were already frozen by an earlier order were $1,000,000 short of what the equalization payment could be, before considering further spousal support claims. Additionally, the respondent had not completed making his financial disclosure, which meant the equalization payment could be greater still.
Judge Finds Significant Harm if the Order Was Not Granted
The second factor requires examining the inconvenience to both parties. As the judge in Qureshi v. Qureshi explained, this part of the test requires the court to look at the inconvenience that would be caused and balance it against the risk to the applicant if the assets were disposed of before trial. For Justice Presser in Dormon, the applicant successfully established that the harm to her if the preservation and restraining orders were not granted exceeded the inconvenience to the respondent if they were. The respondent resided in Panama, and a bank statement from his Panamanian bank showed his account held a balance of more than $4,700,000 USD. The judge concluded that any order preserving his assets in Ontario would not cause him undue inconvenience, since he still had substantial assets available to him in Panama, where he resided. Although there was some indication these funds might not be available and were locked-in investments, it was not established that the funds were inaccessible or that the respondent did not have access to funds in Panama.
In this case, there was a possibility of significant harm to the applicant if the orders were not granted. The respondent had already transferred missions of dollars out of Ontario and disposed of assets and sole personal property. And the bank accounts that were already preserved held insufficient assets to cover the applicant’s equalization and support claims. If the order that the applicant sought to restrain the respondent from disposing of Ontario assets was not made, there was a possibility that she would never be able to collect the full amount that she could be owed. The “minimal to non-existent inconvenience to the respondent if the orders are made is outweighed by the significant harm to the applicant if they are not”.
Orders Were Necessary to Ensure the Applicant Could Collect on Her Claims
The third factor involves assessing the potential for irreparable harm if the order is not granted. In Qureshi, the judge explained that courts must examine any negative effects that a preservation order will have on the parties, and whether any party would suffer significant harm if the order were not made. At this stage Justice Presser looked to Hekmati v. Oliver and examined whether there was a “real risk” that the respondent “is removing or about to remove assets from the jurisdiction to avoid the possibility of a judgment, or is otherwise dissipating or disposing of assets in a manner clearly distinct from the usual course of business or living”. The judge acknowledged that the respondent had already transferred funds out of Ontario and disposed of significant assets. Importantly, there was a real risk that he would continue to do so if the preservation and restraining orders were not made. Overall, the applicant met the onus of establishing that there was a real risk of significant harm that would impact her ability to collect on her claims, and the requested orders were granted.
Windsor Family Lawyers Helping You Secure Your Equalization Payment
If you have concerns that your spouse may transfer or dissipate assets that could impact your equalization or support claims, a preservation order can be an important means of protecting your financial interests. The court will balance several factors and may grant an order to ensure that assets are protected and are available to satisfy a family law judgment.
At Johnson Miller Family Lawyers, our team understands these urgent situations and can provide the guidance you need. Take the first step towards securing your interests – complete our online questionnaire or call us today at 519.973.1500 for a confidential consultation.
