• by David Frenkel
Originally published in the OFLM 2023-11 edition
Lippa v. Jawanshir (2023 ONSC 5852) answered the question what is a client to do when an ex-spouse deleteriously depletes a jointly held asset without consent. Justice Emery reviewed the relevant sections of the Family Law Act and summarized the factors to consider when determining this issue and balancing the competing interests.
In Lippa, the husband had depleted $116,000 from a joint line of credit that had a zero balance as of separation date. Originally, the wife brought an early case conference in Brampton Court in July 2023 when the husband had by that time withdrew $68,000. It appears that the earliest motion date that the wife was able to obtain was in October 2023. Leading up to the motion date, the husband had also listed for sale a condominium investment property in his name. The condo had $400,000 equity in it and the wife was concerned that the husband would deplete that money as well. Consequently, she added a further claim to her motion for a Certificate of Pending Litigation to be placed on the condo.
The Family Law Act
We are reminded in Lippa that s.12 of the Family Law Act permits a court to restrain the depletion of a spouse’s property in order to protect the other spouse’s interests.
As pointed out in Lasch v. Lasch (1988 CarswellOnt 235 (Ont. SC.)), the purpose of an order under s. 12 is to ensure that there are sufficient assets to make an equalization payment. Waiting until the trial may be too little too late.
In Radosavljevic v. Radosavljevic (1986 CarswellOnt 296 (Ont. SC) at para. 9), Labrosse J. held that the s.12 order in that case was necessary to protect the wife and to prevent her claim to equalization from being entirely defeated.
Therefore, the onus turns on the defendant to show that they have enough assets at trial to satisfy any potential payment owing.
S.40 of the FLA also provides jurisdiction for a court to make a non-depletion order if that depletion would impair or defeat a claim for child or spousal support.
Factors in granting a non-depletion order
There are also additional factors that the court will consider when deciding whether to grant the non-depletion order.
Those factors as pointed out in Bronfman v. Bronfman (2000 CarswellOnt 4622 (ON SC)) are as follows:
the legal threshold to meet before obtaining a s.12 preservation order is a “very low one” and is different than the requirements to meet for a Mareva injunction;
bare allegations are not enough since the court does not issue orders restraining people from dealing with property without some evidence;
the spouse seeking the non-depletion order has the onus to show prima facie that they are likely to receive an equalization payment equal to the value of the specific assets;
as with any interlocutory injunction, the exercise is one of balancing risks; namely, the risk of waiting to trial and the judgment not being able to be satisfied versus restraining a defendant’s assets that would ultimately be shown that they have a right to do; this balance is satisfied with the following checklist:
the relative strength of the plaintiff’s case;
- i.e. how likely is it that the plaintiff spouse will receive an equalization payment
the balance of convenience (or inconvenience);
- what effect will granting or not granting the non-depletion order will have on the parties
if a spouse that is asking for the non-depletion order will be entitled to an equalization payment, considerable weight will be given to this factor and perhaps less weight to the other factors;
In Lippa, Justice Emery ultimately ordered at the motion that the husband’s ability to draw down on the line of credit is frozen and effective immediately.
With respect to the amounts the husband already drew down, they would be subject to post separation adjustments he may be ordered at trial to repay to the wife.
It is interesting to see from this decision the length of time that it took for the wife to obtain relief, namely, three months. That is a long time when one is worrying how much their ex-spouse will deplete their joint asset by. He could have depleted all of it.
What made matters more complicated was that the husband was unemployed and claimed he needed the line of credit to pay for his expenses. However, at the motion, the court found that the husband had other income to meet his needs.
Therefore, one of the lessons from Lippa is that family law counsel should think about the big picture of their case early on in their retainer. If one solely focuses on exchanging disclosure and crunching the numbers without considering future events, their clients may be stuck holding the bag at the end of the day along with a large legal bill (or as mentioned in Bronfman, a Pyrrhic victory).
Instead, put your client’s case through a stress test of sorts by thinking about various scenarios that could occur at the end of the day. For example, what if the ex-spouse sells a property behind everyone’s noses? What would happen if the spouse claims bankruptcy?
Also, assess the actions of the ex-spouse and see whether there are reasons to be concerned even before your client raises a claim of non-depletion. For example, in M.B. v. D.B. (2023 PESC 39), Justice Clements granted the wife’s preservation order and took into account the following concerning behaviour by the husband:
he failed to pay spousal support and child support for a year after the separation date;
husband’s potential addiction issues;
his failure to make two significant loan payments; and,
significant sums being withdrawn from the accounts over a relatively short period of time.
Further, keep in mind that a non-depletion order can be obtained on consent and therefore, a wisely crafted offer to settle may go a long way to obtain the relief being sought and minimizing unnecessary litigation costs for possibly an urgent motion. For example, in Kuang v. Young, 2023 ONSC 2429, the parties consented to interlocutory orders for non-depletion of assets pending a motion.
With respect to the extent of the non-depletion order, one can also carve out exceptions to it if there are important payments that may need to be made from a certain account. This occurred in Meffe v. Meffe (2023 ONSC 3195) where Justice Sharma ordered the self-represented husband at the conclusion of trial not to deplete an investment account until the issue of costs was determined. However, the court did permit him to draw from that account for the purpose of paying any balance owing on a particular credit card.
Discussing these and similar issues early on with a client will likely result in productive conversations that will give them client confidence in the overall process. It will also increase counsel’s peace of mind knowing that they are looking at both the small and big picture of their family law case.