• by David Frenkel, Ainsley Doell
Originally published in the OFLM 2023-9 edition
The following article summarizes the prevalence of financial abuse in family law matters. It also proposes introducing a tort of financial abuse so that courts have a way to adequately describe its occurrence on victims and properly compensate for its effects.
In recent years, there has been increasing attention on the prevalence of family violence and the need for our legal system to better account for its effects. Family violence can occur during relationships and after separation, and has a significant impact on the health and wellbeing of families.
Building on the discussion of family violence and torts from our August 2023 OFLM publication, we would like to call attention to the issue of financial abuse. Financial violence can be more difficult to identify than some other forms of abuse, but can be just as insidious.
Changes to the federally-enacted Divorce Act (RSC 1985, c 3) in 2022 introduced a definition of “family violence” which included “financial abuse”.
The definition was intentionally expansive, to provide the Canadian justice system with the flexibility to respond to the unique circumstances of families the different ways in which abuse can and does occur within them. And “family violence” is now a relevant factor that shall be considered when determining the best interests of the child.
This article will narrow the focus on financial abuse and provide an overview of factors which have been considered by Canadian courts to constitute such abuse. We also seek to answer the following questions:
- How has Canadian jurisprudence described financial abuse?
- If a party establishes that financial abuse has occurred, are costs awards sufficient to compensate for the losses arising from such abuse?
- Would a financial abuse tort be a positive addition as a tool in family law litigation?
Describing financial abuse
While there are significant barriers to proving any kind of abuse in court, it is clearer with some forms of abuse what it is that judges may find persuasive. For example, judges may consider evidence of injuries or medical reports in assessing allegations of physical abuse.
With financial violence, however, it is less clear what sort of conduct rises to the level of abuse that the Divorce Act seeks to address. This is complicated further by the fact that successful claims of family violence are not often made on the basis of financial abuse alone. The factors enumerated in the Divorce Act often exist in concert and reinforce each other: Spouses who experience physical abuse often also experience psychological abuse, for example. The fear or expectation of physical harm can lend weight to coercive behaviour and threats (see Marie Eriksson & Rickard Ulmestig, ““It’s Not All About Money”: Toward a More Comprehensive Understanding of Financial Abuse in the Context of VAW” (2021) 36:3-4 Journal of Interpersonal Violence NP1626).
As pointed out in sources quoted by Eriksson and Ulmestig in their paper, 75% of women who suffered from physical and/or psychological abuse from a male partner also experienced financial abuse. They also refer to research that shows how “…abusive men use courts to harass their victims, and how having an economic advantage makes their strategy even more effective.”
What follows is an overview of some descriptions that Canadian courts have used to identify financial abuse.
Controlling family finances
It is often the case that one person in a relationship takes responsibility for managing family finances. In some cases, this may be unproblematic and simply a practical decision in dividing household responsibilities.
However, it is important to be mindful of the fact that this division of responsibilities can lend itself to a situation where one partner’s access to money is controlled, in whole or in part, by the other. The case law suggests that whether control over family finances rises to the level of financial abuse is highly fact-specific.
In M.W. v. N.L.M.W. (2021 BCSC 1273), the wife alleged that her husband’s controlling behaviour amounted to financial abuse. The husband had placed family assets in his sole name, limited the claimant’s access to family money during their relationship, was occasionally late or short in his support payments, and interfered with the claimant’s business post-separation.
With respect to one of the wife’s claims, the court did find the husband’s call to his credit card company alleging that the wife’s ink purchases were unauthorized was financial abuse and constituted family violence. Given the timing, the court reasoned that it was clearly a reaction in anger to the wife leaving the family home with the child, and was intended to cause issues for her in her existing business relationships.
In Petrie v. Lindsay (2019 BCSC 371), the wife had no knowledge of or access to the family finances, and the husband made her sign financial documents that she did not understand. As a result, she was unaware of her financial obligations with respect to payments for the family home.
Prior to separation, the husband removed all of the funds from their joint bank account. Given the context of financial control, this draining of the account was found to be abusive. Justice Sharma stated that “it could not have been a surprise to [the husband] that without financial assistance from him, [the wife] would be in a dire situation” (at para. 157). It was also significant that the husband would occasionally leave without notice, leaving the wife without access to money (at para. 19).
In D.D.R. v. K.T.R. (2019 BCSC 1805), the mother similarly had no access to joint financial information or accounts. She had only a credit card with which to pay for things and required the consent of the father before doing so. When she tried to access financial records, the father responded to this ‘invasion of privacy’ by stealing her laptop, which led to a physical altercation. Upon learning of the mother’s infidelity, the father retaliated by cancelling the mother’s credit card and draining their joint funds.
Justice Francis found that there was financial abuse and that by controlling the mother’s finances, the father “enhanced [his] ability to control most elements of the mother’s life” (at para. 85).
Other elements of financial control include influencing a dependent spouse to transfer their personal savings and Canada Tax Benefit payments received for children (M.H.S.S. v. M.R., 2022 ONCJ 550). In M.H.S.S., the parties’ children were in the full-time care of the dependent spouse, and the government benefits were her only source of income (at para. 283). The court found that the father was financially abusive, noting several examples of the abuse:
- the mother did not know where the when the father was working or how much he earned;
- the father constantly pressured the mother to give him her Canada Tax Benefits she received for the children; and
- after separation, the father applied for and received the children’s tax benefits instead of the mother (despite the mother being the full-time caregiver of the children), which caused the mother and the children financial hardship.
Post separation: Refusal to pay support
A party refusing to pay support after separation until there is a court order has been found to be financial abuse in Ontario. This is especially so where it is clear that the party has the means to pay.
In F.S. v. M.B.T. (2023 ONCJ 102), the father refused to pay the mother child or spousal support, claiming that he wanted the court to decide whether it was appropriate, taking into account that he was not seeing the parties’ child.
The father claimed that he lacked the financial means to support the mother, which Justice Sherr found to be “outrageous” and simply not true, as he had received $400,000 from the sale of his home and had sent upwards of $80,000 to family members abroad (at para. 131).
Justice Sherr made a finding of financial abuse as the father’s conduct was coercive, controlling, and designed to “financially punish” the mother.
An alleged inability to pay support was also quickly dismissed in M.H.S.S. v. M.R. (2022 ONCJ 550): Justice Zisman found that while an award for retroactive support would create some financial hardship for the father, he “created this situation” by not making any payments between separation and the court order (from October 2019 until March 2022). He should have been aware of his obligation to support his children. Further, it was necessary to consider the hardship that would be created for the mother and children if a retroactive support award was not made.
A similar situation occurred between the parties in N.M. v. S.M. (2022 ONCJ 482), whether the father was found to have been intentionally paying very little support, despite the ability to pay “generously.” Justice Sherr, once again, found that this was abusive conduct intended to mother’s life difficult, as it meant that she had to work longer hours in order to support herself and their children.
Importantly, Justice Sherr notes that the father’s failure to provide proper financial disclosure, in contravention of many court orders, was itself manipulative and controlling. It made it difficult to calculate his income for support purposes, unduly complicating the legal proceedings.
Finally, a 2018 British Columbia decision provides an example of financial abuse at its finest. The case included text messages from the husband which starkly describe an malintent that is common in other such cases:
Wait til the end of the month o I can't wait
1200 bucks ur not getting a penny more
Bahahahaha I'm going to sit bk and laugh
I'm going to make ur life as hard as a [sic] possible can, a living hell….
Everything u do to me I'm going to punish u ... Keep acting like this I'm going to punish u a lot worse ... Financial u name it ... Ur not getting ur 2500 til June 1 and if u take me to court ur not getting it ever again
It should be noted that in all four of the cases discussed above, the allegations of family violence were not only for financial abuse and included elements of physical abuse.
It is widely acknowledged that litigation can be financially and emotionally draining for parties. But when litigation is conducted in a manner than appears to be motivated by the intention of financially harming a spouse, Dworakowski v. Dworakowski (2022 ONSC 1270) suggests that this may be found to constitute family violence. In Dworakowski, Justice Papageorgiou held that that the father's misleading evidence with respect to his income constituted bad faith and an attempt to mislead the court as to his actual income so as to reduce both his spousal and child support obligations. For example, the court found it unbelievable that that father claimed he only earned $24,000 from his business and that it had expenses of almost 90% of its gross income.
In Daher v. Khanafer (2023 ONSC 3877), the court found that the husband engaged in abusive litigation by not following court orders and that there was no justification for such conduct.
In K.M. v. J.R. (2022 ONSC 111), Justice Pazaratz referred to litigation abuse when describing one of the parties planning a motion within hours of consenting to a final order. This was a way of parents dealing with their “unfinished business” which they will try to rehash under the guise of motions to change.
In L.E.S. v. J.C.S. (2021 BCSC 2087), Master Muir found that the father had inflicted psychological and emotional abuse on the mother and child during the relationship that amounted to family violence. The father, however, did not stop with the start of litigation and continued with abuse. Specifically, the court found that the father refused to financially support the mother and child, delayed in producing financial disclosure, disobeyed a court order and forced the wife to bring an application in order to obtain any financial support.
Can spousal support or costs awards be used as compensation for financial abuse?
In most cases, financial abuse is canvassed in relation to parenting disputes, which makes sense given where the concept of “family violence” has been inserted into the Divorce Act. Accordingly, there has been no relief granted by Canadian courts specifically in relation to the findings of family violence, let alone financial abuse specifically.
This begs the question, now what? Legislature has introduced this concept of “family violence” and done so in an intentionally broad way, and yet courts do not appear to indicate that they have the latitude to compensate victims who successfully establish the presence of family violence.
Using spousal support awards as an indirect away to achieve compensation for financial abuse may not be sufficient.
On the one hand, courts can turn to the Divorce Act and consider whether family violence ought to be a relevant factor in determining spousal support. Section 15.2(6) does provide that one of the objectives of orders for spousal support is to recognize any economic advantages or disadvantages to the spouses arising from marriage or its breakdown.
However, there are a significant limitations in using this methodology.
Some individuals may not have entitlement to spousal support (for example a relationship of less than 3 years) but still incur financial abuse that requires compensation.
Other individuals may be entitled to spousal support but may be limited to the amount and duration based on various factors unrelated to financial abuse. These factors include the parties’ relative incomes, the duration of the relationship, s.7 expenses, etc.
Also, spousal support awards include clauses for material change of circumstances. This means that after a year or so if the payer “loses" their job, they can bring the recipient of the support back to court “legitimately" and claim that support needs to be reduced. This can start the cycle of financial abuse yet again with more than one iteration.
Therefore, spousal support may be useful to a degree in certain circumstances, however, it does not appear to offer a reliable source of compensation to address financial abuse in general.
The granting of costs awards is another way in which courts can acknowledge and compensate for incidents of financial abuse.
However, there are still several challenges for litigants to obtain costs for a finding of financial abuse.
A litigant would only be able to make financial abuse claims once the trial had completed. Therefore, the cost submissions would be the first time that a judge would have notice that a litigant is connecting certain facts of the case with a claim for monetary compensation. This then requires the defendant to counter the claims but in a backward-looking fashion at evidence already before the court. This method may limit the claimant’s ability to fully flesh out the facts and also limit the defendant’s ability to defend against the claims.
Also, cost submissions would likely not be the best venue in which to advance financial abuse claims, as a party’s ability to present their case would be limited. These limitations include a confined number of pages in cost submissions, an inability to cross-examine claims made after the end of trial, etc.
A further limitation is the nature of the cost award itself. The award in general relies on the successful party having spent money on lawyers first before being compensated for that expense. Therefore, if an unreasonable litigant that has financially abused the claimant before the start of litigation, that litigant’s cost obligation may not sufficiently cover the abuse itself.
At their best, cost awards can help replenish the financial resources that parties have expended due to abusive litigation practices. However, they do little to address the emotional toll that financially abusive litigation can take on parties or compensate parties for the abuse predating trial.
A proposal for the tort of financial abuse
In light of the limited ability of judges to address financial abuse as discussed above, there appears to be a need for a separate tort that can more reliably address the issue.
The following represents an attempt to codify the elements of the tort of financial abuse, describe the key features with examples and discuss possible damages to be awarded depending on the level of abuse.
Elements of the tort of financial abuse
Put simply, the required elements of a financial abuse tort could be as follows:
One who, directly or indirectly, intentionally inflicts financial harm or distress to a spouse or former spouse is subject to liability to the other, if the harm or distress would be highly offensive to a reasonable person.
The key features of this cause of action would be that
- the defendant's conduct must be intentional or reckless;
- the defendant must have negatively affected, without reasonable justification, the plaintiff's financial circumstances; and
- a reasonable person would regard the negative affect on the plaintiff’s financial circumstances as highly offensive causing distress or anguish.
A claim for financial abuse will arise only for deliberate and significant harm or distress. Claims from individuals who are sensitive to certain financial family dynamics or typical expenses of family law litigation are excluded.
Highly offensive harm or distress, as viewed objectively on the reasonable person standard, will include but not be limited to:
- oppressive financial control during the parties’ relationship;
- non-payment of child or spousal support while having the means to do so;
- delaying production of financial disclosure that is readily available; and,
- behaving in bad faith during litigation.
If an element is made out as listed above, the defendant may rebut the claim if they can show that there was a reasonable explanation for the event in question. For example, a defendant may show that their spouse was recklessly depleting family finances through spending on drugs, alcohol or gambling and thus they required some financial control during the relationship for the financial security of the family. Or, there may be legitimate reasons for not paying child support, as in the case of having to pay for necessary family home expenses instead.
Specific examples of financial abuse
The following is a non-exhaustive list of actions that may be considered as financial abuse:
- controlling family finances;
- demanding to withdraw money from a personal account;
- sabotaging employment or educational opportunities;
- depleting family resources;
- refusing or delaying paying child or spousal support;
- sabotaging possibilities to receive social assistance;
- intimidating or financially draining the other party;
- dissipating and/or not disclosing assets;
- failing to disclose or delaying in disclosing documents; and,
- not following court rules or orders.
When assessing damages in financial abuse cases, a court would be looking for pecuniary and non-pecuniary losses to the claimant.
The claimant can incur emotional harm or distress as a result of the financial abuse of the defendant. The case of Jones v. Tsige (2012 ONCA 32) provides a list of cases where varying levels of non-pecuniary damages were awarded, with $500 being the lowest and $20,000 being the highest.
In Jones, the Court of Appeal listed a number of considerations when awarding damages, which could represent such considerations in the financial abuse context:
- the nature, incidence and occasion of the act or conduct constituting the harm or distress of that spouse;
- the effect of the financial abuse on the health, welfare, social, business or financial position of that spouse or their family;
- factors of the relationship between the spouses to the action;
- any harm, distress or humiliation suffered by that spouse or their family arising from the financial abuse; and
- the conduct of that spouse and the defendant, both before and after the commission of the financial abuse, including any apology or offer of amends made by the defendant.
As noted in Jones, the court should also have a wide discretion in awarding damages which would include the possibility of aggravating and punitive factors depending on the degree and extent of the behaviour in question. For example, there should be a difference between damages awarded as a result of one or two isolated incidents of financial abuse versus those awarded for years of abuse being inflicted. As in general family violence cases, financial control can also occur coercively and repeatedly.
Financial abuse has been around in matrimonial cases since the beginning of family law.
Spouses with a financial advantage have abused that advantage when they are able to and, for the most part, with impunity.
Judges have attempted to curtail this behaviour through increased spousal support awards or cost rulings; however, the full effect of the financial abuse rarely gets compensated.
Financially abusive tactics before and after separation vary and are not clearly defined. This lack of uniformity of description makes it hard for judges to consolidate let alone categorize behaviours when attempting to punish the appropriate individual.
Therefore, the proposed tort of financial abuse is a rudimentary attempt to start the conversation about what such a tort could look like in the context of family law cases.
The tort proposed above has a definition, a list of elements, examples and also factors to assess damages.
Providing this framework would provide litigants with notice of the implications of such behaviour and the consequences that would arise if the required elements of the tort are met.
The financial abuse tort claim would be part of the list of claims that form court applications, and therefore litigants would not have to wait until they are arguing costs to raise their abuse. This way, the significance of the abuse would be at the forefront of family law matters and not be relegated to the ‘back of the line’
The more that financial abuse and family violence topics are discussed in the normal course of family law litigation, the more pause individuals may take before behaving in such manner. The elements would be clear and the financial consequences even clearer.
Just like increasing the cost of a grocery bag from 10¢ to 35¢ changed the behaviour of many shoppers, incentivizing them to bring their own bag; increasing the financial consequences of deleterious behaviour in litigation may hopefully have similar effects.
A simple proposal of a financial abuse tort will not be sufficient: Just like any shift in the law, change will require further discussion and iterations to the initial proposal before a final version can be implemented.
But without an initial proposal, the status quo will likely remain and financial abuses in family law will continue without sufficient means to stop them or compensate for their harm.