The general proposition in family law is that the value of any kind of property that was acquired by a spouse during the marriage and still exists at separation must be divided equally between the spouses. Despite this, the courts have the power to order an unequal division of net family property where it would be inordinately inequitable to do otherwise. This was the circumstance in Ward v. Ward (2012 ONCA 462).
In Ward, the parties are spouses who were married for 11 years, then separated in March 2007. They had two young children. The matrimonial home was jointly owned by both parties and was subject to a line of credit secured by a mortgage. In December 2006, shortly before the separation, the wife received a gift of $200,000 from her father. By that time, the marriage had been troubled for a number of years. The husband wanted to use the money to pay down the line of credit on the jointly owned matrimonial home. The wife wanted to save the money for retirement. Hoping to save the troubled marriage, the wife agreed to give the husband $180,000 of the gift to pay down the line of credit on the home, which she did in January 2007. The wife expected that the husband would pay her back because the money represented her inheritance from her father. Then just a couple months later, in March 2007, the husband announced that he had purchased a condominium and was leaving the marriage and the home. The wife remained in the matrimonial home with the children.
In the family law proceedings that followed, the parties were eventually able to resolve all issues except two: (1) whether the wife was obliged to pay the husband occupation rent for the time she occupied the home with the children after he moved out; and (2) whether she was entitled to an unequal division of the net family property by the amount of $90,000, which was the amount by which the husband benefitted by paying off the line of credit on the matrimonial home using the gift money from the wife’s father.
The trial judge denied the husband’s claim for occupation rent and ordered the unequal division of net family property. In reaching that conclusion, the trial judge took into account the following:
(a) allowing the husband to reap a $90,000 benefit from the gift to the wife would give him a windfall benefit because of the timing of the gift. By the date of separation, the husband’s net family property, represented by his interest in the matrimonial home, had increased by $90,000 because of the wife’s gift from her father;
(b) the wife acceded to the husband’s pressure to save a crumbling marriage, and the husband left soon afterward;
(c) the wife had given up her career to raise the children while the husband had significant earning power as an executive;
(d) the gift came from the wife’s father’s savings and would not be repeated; and
(e) The gift from the wife’s father was to her only and not to both spouses. In fact, the wife testified that her father told her not to give the money to her husband. If the wife had not given into the husband’s insistence that the gift be used to pay down the line of credit, she would have retained the full proceeds as the gift was excluded property under s. 4(2) of the Act (before it was used to pay down the line of credit on the home), not property accumulated during the marriage that is intended under the Act to be shared.
The trial judge concluded that it was a reasonable assumption that the wife would not have advanced the money to pay down the mortgage in January had she known that her husband was going to leave the marriage a mere two months later, namely, in March. Ultimately, the trial judge found that an equal division of the net family property would shock the conscience of the court. The husband appealed. The husband’s appeal was dismissed.
The Ontario Court of Appeal commented: not every case where a spouse receives a gift that is comingled with matrimonial property will warrant a subsequent unequal division of property. That said, the Court of Appeal agreed with the trial judge’s findings that it would be unconscionable, or in other words, “shockingly unfair”, “patently unfair” or “inordinately inequitable” to allow the husband to reap a $90,000 benefit from the gift to the wife. Ultimately, the Court of Appeal agreed with the trial judge’s finding that an order for unequal distribution of net family property was required to avoid an unconscionable result.
– Summary prepared by Carolyn Warner