The case of Booth v Bilek, 2021 ONCA addresses the court’s propensity to award an unequal division of property during the equalization of net family property. Presumptively, the value of each spouse’s net family property is calculated and subsequently equalized through an equalization payment from one spouse to the other. In certain circumstances, however, the court may find it is in the interests of justice to award an unequal equalization of property.
The parties, who were married, separated after four years and four months of cohabitation. There were no children of the marriage. The Court of Appeal was solely concerned with the issue of equalization of net family property.
The trial judge had declined to equalize the parties’ net family properties under section 5(1) of the Family Law Act (hereafter ‘the Act’) for three reasons: (1) the extent that the appellant’s net family property derived from gifts from the respondent; (2) that a full equalization payment would be disproportionately large considering the relatively short period of cohabitation, and (3) the parties’ different financial contributions to the property during the marriage.
The trial judge ultimately awarded 10% of the full amount that would equalize the parties net family properties, awarding $10,627.45 from the original $106,274.49. It should be noted that the appellant had already received approximately $200,000 from the sale of the matrimonial home.
Under section 5(6) of the Act, the court can award an unequal division of net family property when an award of full equalization would be considered ‘unconscionable’ or ‘shocking to the court’ (Kara v Erkurt, 2019 ONSC 31). A number of factors can be considered in making this determination of unconscionability, namely:
- a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;
- the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;
- the part of a spouse’s net family property that consists of gifts made by the other spouse;
- a spouse’s intentional or reckless depletion of his or her net family property;
- 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;
- 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;
- a written agreement between the spouses that is not a domestic contract; or
- any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.
The trial judge held the appellant had benefitted substantially from the relatively short marriage, receiving significant funds from the sale of the matrimonial home and gifts from the respondent. The appellant had made no direct financial contribution to the purchase of the matrimonial home, and instead used benefits arising from the marriage to pay off her personal debts. The main difference in net family property derived from the respondent’s own investments during the marriage, which were not financed from any funds originating from the marriage.
The threshold for a court to find unconscionability is a high one (Serra v Serra, 2009 ONCA 105). The equal division of property must, in the circumstances, be enough to ‘shock the conscious of the court’. This is consistent with the presumption of equal division of property. Only in very rare cases should this presumption be rebutted. Only when, to do so, would be ‘unconscionable’.
Section 5(6)(e) identifies a period of cohabitation less than five years is a relevant factor in considering unconscionability. A significant windfall from equalization, despite there being a short marriage, would raise doubts to the fairness of an equalization payment.
The Court of Appeal agreed with the trial judge’s conclusion of unconscionability in the circumstances. The significant funds received by the appellant through the sale of the matrimonial home, minimal contribution to the acquisition and maintenance of the home, and the relatively short period of cohabitation had satisfied the high threshold of section 5(6). The court further upheld the trial judge’s reduction of the equalization payment to 10%, stating that a pro rata approach based on the exact length of the marriage was not required.
This case highlights the court’s discretion regarding unequal equalization payments to counter the potential unfair distribution of property upon marriage breakdown. Should the court find that one spouse would unjustly benefit from an equal division of net family property, to the point where an equal division would be unconscionable, an unequal equalization can then be ordered.
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