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Family - Equalization Orders. 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.
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[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....
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[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.
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