Unequal Division of Family Property

Equal vs. Unequal Division

Married spouses who separate are generally entitled to an equalization of family property if they separate. An “equalization payment” represents a payment of one-half of the difference by the spouse with the larger Net Family Property (“NFP”) to the spouse with the lesser NFP. Upon separation, married spouses are presumed to be entitled to an equal sharing of all property accumulated from the date of marriage to the date of separation.

In limited circumstances, a court may diverge from ordering an equal sharing of marital property where to do would “shock” the conscience of the court. Where circumstances exist that would make an equal division of property unconscionable, a court will consider whether unequal division is appropriate. Section 5(6) of the Family Law Act provides that a court may order more or less than half of the difference between each spouse's net family property where an unconscionable outcome would result from the following circumstances:

1. A spouse’s failure to disclose to the other spouse debts or liabilities existing at the date of marriage;
2. The fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;
3. The part of a spouse’s net family property that consists of gifts made by the other spouse;
4. A spouse’s intentional or reckless depletion of his or her net family property;
5. 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;
6. 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;
7. A written agreement between the spouses that is not a domestic contract; or
8. Any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.

The Threshold for Unconscionability

The test for establishing unconscionability is an exceptionally high one. Before determining the question of unconscionability, courts will first assess each party’s net family property and the appropriate equalization payment owing. If it would be unconscionable to divide the difference between each spouses’ respective net family property, a court may consider the factors noted in section 5(6) of the Family Law Act. While courts may exercise their discretion where equal division would lead to an unconscionable outcome, such orders are rarely made. The onus is on the party claiming an unequal division to establish unconscionability.

The equalization provisions in the Family Law Act are meant to provide predictable, fair, and final outcomes for separating spouses. “Unfairness”, “harsh”, or “unfair” circumstances arising from an equal division are not enough to warrant the exercise of judicial discretion ordering unequal division. Judges are loathe to stray from the intended purpose of the Act except in the circumstances where an equal division would “shock the conscience of the court”, an extremely high threshold. In Serra v. Serra, 2012 ONCA 747, the Ontario Court of Appeal confirmed the high threshold of unconscionability, providing that unequal division claims are an exception to the general rule of equal division.If a court finds that unconscionable circumstances would arise from an equal division, they may award more or less than one-half of the equalization payment owing.

Common Circumstances Where a Court May Order Unequal Division

Where one spouse incurs debts or liabilities recklessly or in bad faith:

Gambling

In Naidoo v. Naidoo, [2004] O.J. No. 1458, the wife successfully argued that unequal division should be ordered where the husband dissipated approximately $20,000 of family assets per year on his gambling habit. While gambling itself does not equate to unconscionability, it may be considered in determining the amount of family means that were put at risk, the parties resources, and the conduct of the parties, including whether it was condoned by their spouse. In ordering an unequal division of property in favour of the wife, Justice Knightingale found that the husband’s cumulative dissipation of monies was reckless and could have substantially benefited the family.

Hiding Assets

In Jukowsky v. Jokowsky, [2004] O.J. No. 1458,  the court ordered an unequal division where a husband failed to fully disclose his assets. Justice MacDonald found that the husband’s failure to disclose assets raised a reasonable inference that he had either disposed of them or was hiding them. His failure to disclose assets, coupled with gambling debts and shirking his obligation to seek employment and provide for the family would have led to an unconscionable outcome if family property were equally divided. 

Recklessly Incurring Debts

In Scott v. Scott, 6 R.F.L. (3d) 422, the court ordered an unequal division of property where the husband, who looked after the families finances throughout the marriage, recklessly incurred a number of debts, including re-mortgaging the family home to install a pool while failing to keep his wife adequately informed of the joint debts that he was incurring throughout the marriage.

Where one spouse intentionally or recklessly depletes their net family property:

• In Kuzmanovic v. Kuzmanovic, [2001] O.J. No. 1450, the court found that a husband intentionally depleted the value of his company following separation by fraudulently siphoning funds from his business and falsifying corporate records to devalue the business for family law purposes. The wife worked in the family business and was an officer and equal shareholder, until the day before separation when the husband accused her of theft, fired her, and ejected her from the premises. Ultimately, the court found that the husband’s fraud “dripped with unconscionability” and ordered the husband to pay an amount equal to the husband’s depletion of the wife’s shares in the Company, $305,961, an amount that exceeded the difference between each party’s net family property.  

• In von Czieslik v. Ayuso, [2004] O.J. No. 2521, the Justice Stewart ordered unequal division where the husband caused a mortgage of approximately $250,000 to be registered against a property owned by the husband. The husband’s decision to register the mortgage came at a time when his relationship with his wife was deteriorating. The wife was unaware of the mortgage. After selling the property to which the mortgage was registered prior to separation, the husband claimed that he did not receive any proceeds from the sale. The Court found that the husband’s actions were intentionally designed to siphon property that otherwise would have formed part of his net family property. In light of the husband’s “reprehensible” conduct, the court ordered the husband to pay 100% of the difference between the parties’ net family properties to the wife. On appeal, the Ontario Court of Appealordered that the husband pay the entire value of his net family property to the wife to compensate for his unconscionable conduct. This seminal decision by the Court of Appeal established that courts in Ontario can order an amount greater than the difference between each party’s net family property.

• In Venton v. Venton, 2015 ONSC 4705, the court ordered unequal division where the husband’s financial irresponsibility in abandoning the matrimonial home triggered a power of sale that diminished the parties’ equity, equity that would otherwise have been available to pay down the parties’ joint debt. The court found that it would be unfair for the wife to be responsible for the husband’s financial irresponsibility, which diminished the value of their equity in the home.

Where one spouse incurs a disproportionately larger amount of debts or other liabilities for the support of the family:

• In Jackson v. Jackson, 2015 ONSC 4424, the court ordered unequal division in favour of a mother after finding that she incurred a disproportionately larger amount of debts and liabilities for the family. Justice Gordon found that the father did not contribute to the acquisition, maintenance, or improvement of their home, failed to provide financially for the family, and refused to be productive during the marriage by not pursuing employment or retraining. On the other hand, the mother contributed all of her financial resources towards family expenses and their properties. The mother was forced to incur significant debt to take care of the children’s needs during the marriage, while the father remained unemployed and unproductive throughout. The court found that an unequal division was appropriate and ordered that no equalization payment be made to the father.

• In Morrison v. Barclay-Morrison, [2008] O.J. No. 4663, the court ordered an unequal division of property where the court found it would have been “outrageous” to order an equal division of property after the husband contributed minimally towards the upkeep of the matrimonial home for 13 years and where the wife maintained the upkeep of the home, and paid the parties joint debts with respect to the home. Justice Czutrin found that the parties benefited from the increase in the value of the home as a result of the wife’s contributions and sacrifices, and ordered an unequal division in her favour.

Any other circumstances relating to the acquisition, disposition, preservation, maintenance, or improvement of property.

• In Serra v. Serra, 2009 O.J. No. 432, 2012 ONCA 747, the value of the husband’s 75% interest in a textile business experienced a precipitous decline following globalization, increased competition, and a decline in textile prices following separation. At trial, the court found that unequal division was not warranted given that the decline in value occurred after separation. The court ordered the husband to pay an equalization payment of $3,283,272.57, nearly twice his net worth at the time of trial. On appeal, the Ontario Court of Appeal overturned the trial judge’s decision and ordered unequal division, reducing the husband’s equalization payment to $900,000. In doing so, the court recognized that market conditions and a dramatic post-separation decline in the value of a business as a result of market-driven decline could result in an unconscionable outcome for the payor of an equalization payment where their net family property is substantially reduced post-separation by no fault of their own.

• In Gamvidana v. Gamvidana, 2017 ONSC 6312, the court ordered an unequal division where the wife paid $192,859.05 towards the mortgage and property tax of their home without contribution from the husband. The court found that the wife contributed a disproportionate amount towards the maintenance and preservation of the matrimonial home. Pursuant to section 5(6)(h), the court ordered an unequal division in favour of the wife.

The above scenarios illustrate some, but not all, of the circumstances where a court may order unequal division (please also see our blog titled “Unequal Division of Family Property For Short-Term Marriages”). Determining whether equal division would create an unconscionable outcome requires an assessment of the facts in each case, to ensure that such circumstances trigger one of the factors outlined in section 5(6) of the Family Law Act and meets the high threshold required to establish a claim for unequal division.

Speak With a Lawyer About Property Division and Equalization

If you have separated from your spouse, contact us to schedule a consultation with one of our lawyers to:

1. Understand what property claims are relevant to you;
2. Whether you are entitled to an equalization payment; and
3. Whether you or your former spouse can seek the unequal division of net family properties.