|
Family - Equalization Orders. Chapman v. Ing
In Chapman v. Ing (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, this from a trial judge's division of business assets where the parties had an "on-again, off-again" domestic relationship.
In the context of a restitution appeal argument, the appellant argued unsuccessfully [see para 23] that OBCA s.22(3)(b) ['Corporate Finance - Rights of shareholders'] constituted the juridical reason for enrichment:(2) Unjust Enrichment
[20] The first step in the unjust enrichment analysis asks whether the defendant has been enriched by the plaintiff. The second step asks whether the plaintiff has suffered a corresponding deprivation: Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303, at para. 41; Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at para. 36. Those steps are readily satisfied in this case.
[21] The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. This means that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case: Kerr, at para. 40.
[22] Kerr elaborates further on the meaning of a “juristic reason”, at para. 41:Juristic reasons to deny recovery may be the intention to make a gift (referred to as a “donative intent”), a contract, or a disposition of law. The latter category generally includes circumstances where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery. However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as “the legitimate expectation of the parties, the right of parties to order their affairs by contract”. [Internal citations omitted.] [23] In this case, s. 22(3)(b) of the OBCA does not offer a juristic reason for the appellant’s enrichment. By its terms s. 22(3)(b) addresses the relative rights of shareholders of the same class vis-à-vis the corporation. It does not purport to allocate the family law or equitable claims that one shareholder may have against the shares registered to another shareholder. There is therefore nothing in s. 22(3)(b) that can account for the enrichment of one shareholder to the detriment of another, even if linked to their corporate dealings. The provision is immaterial.
[24] This is not a situation in which the statute contemplates the very enrichment that is said to be unjust. Consider, for example, the operation of the Excise Tax Act, R.S.C. 1985, c. E-15, considered in Reference re Goods and Services Tax, 1992 CanLII 69 (SCC), [1992] 2 SCR 445 [“GST Reference”]. It required suppliers to collect and remit taxes and to incur expenses in the process. This requirement placed a burden on suppliers and conferred a benefit on the federal government. But since it was “precisely the burden contemplated by the statute”, the Act was a juristic reason that permitted the federal government to retain the benefit unless the statute itself was ultra vires: GST Reference, at pp. 476-77.
[25] This case is more like Moore. In that case, the deceased had named his wife the beneficiary of his life insurance policy. They agreed that the wife would pay the insurance premiums, and in exchange, the deceased would designate her as beneficiary of the policy. Unbeknownst to the wife, the deceased named his new common law spouse as the beneficiary before he died. The wife argued that the new spouse would be unjustly enriched if she retained the insurance proceeds. The common law spouse argued that the Insurance Act, R.S.O. 1990, c. I.8, entitled her to the proceeds and that this was a juristic reason for her enrichment.
[26] The Supreme Court disagreed, explaining at para. 70 that the Insurance Act would have to be much more explicit to deprive the wife of her common law entitlements:Nothing in the Insurance Act can be read as ousting the common law or equitable rights that persons other than the designated beneficiary may have in policy proceeds. As this Court explained in Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70, at p. 90, the “legislature is presumed not to depart from prevailing law ‘without expressing its intentions to do so with irresistible clearness’”. [27] And further, at para. 73:Accepting that contractual rights to claim policy proceeds can exist outside of the Insurance Act, can an irrevocable designation under the Insurance Act nonetheless constitute a juristic reason for Michelle’s deprivation? In my view, it cannot. This is because the applicable statutory provisions do not require, either expressly or implicitly, that a beneficiary keep the proceeds as against a plaintiff, in an unjust enrichment claim, who stands deprived of his or her prior contractual entitlement to claim such proceeds upon the insured’s death. [Emphasis in the original.] [28] The facts of this case are obviously distinguishable from Moore. The point to be made is that a statutory entitlement may have to yield to equitable considerations.
[29] This is particularly so when the context involves family law litigation. In Wildman v. Wildman (2006), 2006 CanLII 33540 (ON CA), 82 O.R. (3d) 401 (Ont. C.A.), MacPherson J.A. was willing to pierce the corporate veil in a family law dispute, commenting that: “[t]his is matrimonial litigation, not commercial litigation”, at para. 48. He went on to note that “although a business person is entitled to create corporate structures and relationships for valid business, tax and other reasons, the law must be vigilant to ensure that permissible corporate arrangements do not work an injustice in the realm of family law”: Wildman, at para. 49.
[30] Relying on Wildman in Lynch v. Segal (2006), 2006 CanLII 42240 (ON CA), 82 O.R. (3d) 641 (Ont. C.A.), this court affirmed the need for a flexible approach to corporate issues raised in the family law context. Blair J.A. noted this approach to be particularly important o where “the corporations in question are completely controlled by one spouse, for that spouse's benefit and no third parties are involved”: at para. 36.
[31] This case does not turn on piercing the corporate veil in the traditional sense. It does, however, call for the same degree of flexibility. If the court can pierce the corporate veil to avoid injustice in the family law context, it must also be at liberty to reorder shareholders’ rights. The OBCA contemplates that a court can reorder the ownership of shares through the statutory remedies of oppression and winding-up: see, e.g. BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560. Shareholders’ rights under s. 22(3)(b) are “equal” only until a court orders otherwise.
[32] Nor did the trial judge err in her consideration of the reasonable expectations of the parties. It was not reasonable for the appellant to expect to share in the value of the Wyandotte property, given the disintegration of the parties’ relationship, the appellant’s failure to contribute to the betterment of the property, and his own deliberate efforts to undermine the commercial viability of T.A.C. Canada.
[33] For all of these reasons, I conclude that s.22(3)(b) of the OBCA is not a juristic reason for the appellant’s enrichment vis-à-vis the Wyandotte property. . Iredale v. Dougall
In Iredale v. Dougall (Ont CA, 2025) the Ontario Court of Appeal dismissed a family law appeal, this from a final order "regarding the equalization of the parties’ assets ... ":[1] At the core of this appeal is the relationship between the equalization provisions governed by the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”) and unjust enrichment arising out of a marriage’s joint family venture. This appeal raises issues similar to those addressed in Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, and McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401.
....
LAW AND ANALYSIS
[17] At the outset, it is important to emphasize that a finding made with respect to an unjust enrichment and remedial constructive trust claim is very fact specific and that the applicable standard of review is generally that an appellate court should only intervene where there is a palpable and overriding error: Tsai v. Dugal, 2022 ONCA 81, at paras. 8 and 10; Djekic v Zai, 2015 ONCA 25, 329 O.A.C. 133, at para. 16. Additionally, an appellate court should only intervene on a review of a spousal support order “when there is a material error, a serious misapprehension of the evidence, or an error in law”: Hickey v. Hickey, 1999 CanLII 691 (SCC), [1999] 2 S.C.R. 518, at para. 12.
....
[22] To begin with, it is important to remember that the express purpose of the equalization provisions of the FLA is to address the unjust enrichment that would otherwise arise upon marriage breakdown: s. 5(7) of the FLA. In McNamee, at para. 66, this court stated that, “in the vast majority of cases, any unjust enrichment that arises as the result of a marriage will be fully addressed through the operation of the equalization provisions under the Family Law Act”: see also Martin, at para. 64.
[23] In McNamee, at para. 66, Blair and Rouleau JJ.A. instructed that the court must first resolve questions of ownership, including beneficial ownership, before it determines each party’s net family property and calculates the equalization payment. It follows that, where a party is claiming a remedial constructive trust, as Kirk claims in the present case, the court is to determine the claim for unjust enrichment (and the appropriate remedy, if any) before determining the claim for equalization: Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, at para. 29. Additionally, pursuant to s. 10(1) of the FLA, a person may apply to the court to determine questions of ownership between married spouses, including consideration of any beneficial interests in property arising pursuant to the imposition of a remedial constructive trust.
....
[30] .... As discussed earlier in these reasons, it is well established that the determination of a party’s beneficial ownership through a constructive trust is a preliminary step which must be done before any determination of net family property and equalization: McNamee, at para. 66; Martin, at para. 47; Korman, at para. 29. That is why the assessment for unjust enrichment is conducted first.
[31] If a finding for unjust enrichment is made, a monetary remedy is the “default” remedy: Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303, at para. 89. The onus is on the plaintiff to establish that monetary damages would be insufficient: Kerr, at para. 52.
....
[37] Contrary to the appellant’s submission, the mere fact that the parties’ business relates to farming the land does not create a strict rule that both partners should receive a beneficial interest in the land. A constructive trust “should only be awarded if there is reason to grant to the plaintiff the additional rights that flow from recognition of a right of property”: Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, at p. 678. In the context of a joint family venture, “the court may take into account the probability of recovery, as well as whether there is a reason to grant the plaintiff the additional rights that flow from recognition of property rights”: Kerr, at para. 52; Martin, at para. 59. This may be the case, for example, if there would otherwise be insufficient funds to pay the claimant the amount calculated as an equalization payment, or where the claimant’s efforts resulted in an unquantifiable or indeterminable increase in value for which the claimant should receive the benefit.
[38] It is also important to note that the existence of a causal connection between the benefit received and the detriment suffered does not lead inexorably to a 50:50 share. Such an assumption risks confusing equalization with unjust enrichment. This is not an exact science. The claimant party should be granted the percentage equal to the value of their contribution to the venture. That could be more or less than fifty percent: Lesko v. Lesko, 2021 ONCA 369, 57 R.F.L. (8th) 305, at para. 34, leave to appeal refused, [2021] S.C.C.A. No. 39804.
....
[41] Further, the argument fails to follow the “order of operations” laid out in the case law for this analysis: McNamee, at para. 56; Martin, at para. 47, Green v. Green, 2015 ONCA 541, 387 D.L.R. (4th) 512, at para. 44; Townshend v. Townshend, 2012 ONCA 868, 113 O.R. (3d) 321, at para. 29.
....
[44] Lastly, it should be noted that it is trite law that the FLA provides enhanced protection to spouses’ interests in a matrimonial home. In the case of farm properties, it may be difficult to draw distinctions between a matrimonial home and farm property in the broader sense. Section 18(3) addresses this:Residence on farmland, etc.
(3) If property that includes a matrimonial home is normally used for a purpose other than residential, the matrimonial home is only the part of the property that may reasonably be regarded as necessary to the use and enjoyment of the residence. [45] As Tellier J. wrote in White v. White, 2021 ONSC 6018, at para. 23, “[t]he separation of one piece of property based on use and purpose in section 18(3) supports the continuing functionality of a farm or other activity, without derogating from either spouse’s separate rights in relation to the matrimonial home.” The price of buying a farm is generally very high. Asking a party to pay for half of not just the home but large farm property would often result in selling the entire property. It is important to preserve farms in one piece and keep them in the hands of people who are more likely to farm the land. . Brohman v. Brohman
In Brohman v. Brohman (Ont Divisional Ct, 2025) the Divisional Court dismissed a family law appeal where the issue was the Partitition Act sale of the matrimonial home, here before an equalization payment had been decided:[16] Under s. 2 of the Partition Act, a joint owner of a matrimonial home has a prima facie right to partition and sale. The onus is on the party opposing the sale to establish why the sale should not be ordered, which may include a real prejudice to the other party's rights under the Family Law Act, R.S.O. 1990, c. F.3, or if the application for the sale was brought with malicious, vexatious or oppressive intent: for example, see Latcham v. Latcham, 2002 CanLII 44960 (Ont. C.A.). The motions judge correctly identified the law in this area during the motion.
[17] The Appellant refers to Martin v. Martin (1992), 1992 CanLII 7402 (ON CA), 8 O.R. (3d) 41 (C.A.), for the proposition that an order for the sale of a matrimonial home made before resolution of the Family Law Act issues should not be made as a matter of course. Martin was about whether the court can make an order for the right of first refusal on the sale of a property and whether an order for the sale of the home can be made under s. 10 of the Family Law Act, instead of the Partition Act. The comment that the Appellant relies on was made in obiter. The Court of Appeal confirms that the court should not make an order for the right of first refusal. The Appellant can bid for the house in the open market. The sale of the home does not prejudice this right.
[18] The Appellant also relies on the Court of Appeal decision in Silva v. Silva (1990), 1990 CanLII 6718 (ON CA), 1 O.R. (3d) 436 (C.A.), for the proposition that an application under the Partition Act should be deferred where it would prejudice the substantial rights of either spouse. In Silva, the Court of Appeal upheld the lower court's decision to order the partition and sale of the home. The husband opposed the sale of the jointly owned matrimonial home because he wanted to bid on the home once it was up for sale and could not do so if the equalization of net family property had not been resolved, as in this case. The court stated, “I can think of no reason why the husband should hold the house hostage until his claim has been adjudicated”. The husband's concern about collecting any equalization payment owing to him or his claim for an unequal division did not amount to prejudice within the meaning of the case law: Silva, at pp. 445-446.
[19] The facts in Silva closely resemble the facts of this case. The Appellant failed to show that any prejudice would occur if the home was sold. A sale prior to trial would not prejudice his claims regarding the equalization of or unequal division of net family property. He has not claimed that there is any hidden agenda or purpose connected to the request for the sale of the property and certainly none that would amount to malicious, vexatious, or oppressive conduct by the Respondent. . Frenkel v. Frenkel
In Frenkel v. Frenkel (Ont CA, 2024) the Court of Appeal illustrates a court's 'net family property' equalization, here where the assets were in cash and precious metals and the appeal court found errors made by the trial court:[1] The issues on appeal arise from the equalization of net family properties following marriage breakdown. The appellant appeals the trial judge’s order that she pay the respondent $210,665.48 comprised of an adjusted equalization payment of $233,363.02, less certain amounts for arrears of child support and s. 7 expenses.
[2] The equalization payment issue, and others, were litigated over the course of an eight-day trial. The main property issue at trial was which party took from their apartment $314,945.25 in precious metals and $60,000 in cash. The respondent stored these items in a large safe in his bedroom and in two other, smaller safes. Each party claimed that the other was responsible for removing these items from the apartment.
[3] After reviewing the conflicting evidence on this issue, the trial judge found on a balance of probabilities that the appellant “retained the balance of the precious metals and the cash that was in the apartment.”
[4] The trial judge found that, after revising the appellant’s net family property financial statement to accurately reflect the amount of the cash she had retained, as well as money in an undisclosed BMO account, the appellant would owe the respondent an equalization payment of $23,918.79. She then considered other post-separation adjustments at para. 127 of her reasons, the most significant of which was an adjustment for the precious metals, in respect of which she said: “[The appellant] [is] to reimburse [the respondent] for the precious metals I find her to have kept after V-date. The parties agree the total value of the precious metals on V-date was $314,945. [The appellant’s] sworn [financial statement] sets out that she retained $82,867.78, leaving a balance of $232,077.47.”
[5] The trial judge then added $232,077.47 to the amount that the appellant was to pay the respondent. After other post-separation adjustments for matters unrelated to the precious metals, she arrived at an adjusted equalization payment owing by the appellant of $233,363.02. She ordered that amount paid by the appellant to the respondent, less amounts for child support and arrears of s. 7 expenses that the respondent owed to the appellant, which reduced the total payment to $210,665.48.
....
[8] ... Although the factual background of this case may have been somewhat unique, the trial judge was engaged in a routine task of family law judges – tracing the assets of the parties in the determination of net family property....
....
[10] Turning to the third ground of appeal, we agree with the appellant that the trial judge made an error in the calculation of the amount of the post-separation adjustment arising from her finding that the appellant had retained the precious metals.
[11] The trial judge found that the parties jointly owned precious metals in the amount of $314,945.25 as of the valuation date. Accordingly, each was entitled to one-half the value of that property. The trial judge noted that the appellant had claimed in her own statement of post separation adjustments that she had retained only a portion of the precious metals worth $82,867.78, and she coupled that with her claim that the respondent had taken the balance (which, if accurate, would have given rise to a post-separation adjustment in the appellant’s favour). But the trial judge found the appellant in fact retained all the precious metals. The trial judge correctly held that this required a post-separation adjustment in favour of the respondent. The calculation of the appropriate amount of this adjustment, however, was incorrect.
[12] In her net family property statement, the appellant attributed half of the value of the precious metals, namely $157,472.50, to each party. The trial judge used the appellant’s net family property statement as the basis for correctly calculating a revised equalization payment of $23,918.79,[1] before adjustment for the fact that the parties had not retained equal amounts of the precious metals.[2] The required adjustment was the amount necessary to ensure each actually received one half the value of the precious metals—that is $157,472.50.
[13] The trial judge calculated the adjustment in favour of the respondent to be $232,077.47 (the difference between what the appellant said she had retained and the value of all the precious metals), but this gave the respondent more than one-half of their value. The appropriate post-separation adjustment in relation to the precious metals was a payment by the appellant to the respondent of 50% of the total value of the precious metals the appellant was found to have retained, in the amount of $157,472.50.
[14] Partially offsetting this error which the trial judge inadvertently made in favour of the respondent, are two additional smaller errors in the calculation. These, the respondent correctly points out, were errors in favour of the appellant. The trial judge mistakenly deducted the amounts for their joint BMO accounts and the Effective Technologies bank account, $1,689.13 and $3,073.04 respectively, from the amount the appellant owed the respondent when in fact she had identified them as additional amounts owing from the appellant to the respondent. They should have increased the amount payable by the appellant.
[15] Correcting each of these errors, the amount of the equalization payment to be paid by the appellant to the respondent after giving effect to post separation adjustments is not $233,363.02 as the trial judge found at para. 128 of her reasons, but rather $168,282.39. . Cohen v. Cohen
In Cohen v. Cohen (Ont CA, 2023) the Court of Appeal considered (and allowed an appeal from) a family law equalization order, here where there was an uncontested trial, and the respondent (for whom equalization was initially ordered) "made no financial disclosure at any stage of the proceedings":[21] ... we agree with the appellant that the trial judge erred in finding that the respondent was entitled to an equalization payment. On the record before the trial judge, that finding was a palpable and overriding error. There was a wholly inadequate factual basis to assess the net family property of the respondent. Absent that information, there was no basis on which to order an equalization payment.
[22] None of the information about the respondent’s assets and liabilities that would have been necessary to calculate his net family property was disclosed by the respondent or in the trial record: Hamilton v. Hamilton (1996), 1996 CanLII 599 (ON CA), 92 O.A.C. 103 (C.A.), at paras. 23-26. There was no evidence of the respondent’s assets or debts and liabilities at the date of the marriage or on the valuation date, and no evidence of any of the other financial information required to be disclosed under s. 8 of the FLA.
[23] The respondent made no financial disclosure at any stage of the proceedings. This court has repeatedly stressed that the duty to disclose financial information is the most basic obligation in family law proceedings: Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, at paras. 11-12; FLA, s. 8; Family Law Rules, O. Reg. 114/99, r. 13 (“FLRs”).
[24] In the absence of any disclosure from the respondent, the trial judge did not have a record before her on which equalization could be assessed. Depending on the record, in the absence of disclosure, it may be open to the court to make an adverse inference. However, in this case, the trial judge accepted that the respondent was in debt (i.e., he had a net family property of zero, pursuant to s.4(5) of the FLA), which was a finding in his favour.
[25] Further, ordering an equalization payment in favour of the respondent in the face of such non-disclosure creates incentives that are contrary to the objectives of both the FLA and the FLRs. It gives the non-disclosing spouse the benefit of a finding in their favour while denying the other spouse and the court any evidence to assess the assets of the non-disclosing spouse.
[26] In our view, it was also unfair to the appellant to order her to make an equalization payment to the respondent in circumstances where he failed to make disclosure and where the evidence from the appellant was that she was in the dark about his financial situation during the marriage. The appellant explained in her affidavit in the uncontested trial that she knew very little about the true nature of the respondent’s finances. He had a gambling problem throughout the marriage. He recklessly ran up debts during the marriage due to his gambling, compulsive shopping, and perhaps, given what the appellant learned after the date of separation, other illicit activities of which she was unaware. In early 2020, the appellant found out that the respondent had forged her signature to secure more debt against the matrimonial home.
[27] As noted above, the appellant does not seek an equalization payment in her favour. In the circumstances of this appeal, given the total failure of financial disclosure by the respondent and the evidence that, because of the respondent’s secrecy about his finances during the marriage, the appellant was not in a position to know anything about his finances, we find it appropriate to make an order that no equalization payment is owing.
|
