FAQ: Financial Disclosure

Find out the answers to frequently asked questions ("FAQs") with regard to family law and other legal issues.

Financial Disclosure and Striking Pleadings

It is crucial that a party to a matrimonial matter understand that there may well be significant consequences if he or she does not comply with his/her financial disclosure obligations.

In many cases, one of the parties withholds financial documents from the other in order to conceal the information contained in those documents or as a tactical delay in the proceedings.

As we were reminded in the case of Roberts v. Roberts, if parties do not comply with their financial disclosure obligations, they may have their pleadings struck by the Court, and as a consequence, may be susceptible to the opposing party proceeding with an undefended trial.

Justice Benotto of the Court of Appeal in Roberts v. Roberts discusses the importance that is placed on one’s obligation to disclose his/her finances as follows:

“The most basic obligation in family law is the duty to disclose financial information. This requirement is immediate and ongoing.

Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled.

Financial disclosure is automatic. It should not require court orders – let alone three – to obtain production.

The power to strike out the pleadings is to be used sparingly and only in exceptional cases. This is such a case. The appellant’s conduct in ignoring court orders and failing to follow the basic principles of family law litigation put him in the exceptional category of cases where the judge’s discretion to strike his pleadings was reasonably exercised…”

To learn more about the requirements with respect to financial disclosure, striking pleadings, as well as the services provided by Krol & Krol, call 905.707.3370 today.

Car Lease Payments and Financial Disclosure

In order for separating spouses to commence the negotiation process in Family Law, they must exchange financial statements and make full financial disclosure.

In cases such as Naidoo v. Naidoo and Sharman v. Sharman, the Court dealt with the issue of whether a party was justified in listing future car lease payments as a debt in their financial statement.

The Court in Naidoo, the leading case on the issue, ruled that because the car lease payments had not yet become due, rather they were merely a future debt, the party was not permitted to list the future car lease payment as a debt on his financial statement.

The Court in Sharman v. Sharman reiterated the ruling of Justice Howden in Naidoo, and stated as follows:

“At the time of separation, the wife still owed about $5000 on her car lease. The amounts were to be paid monthly. In fact, she paid the amounts, and returned the vehicle at the end of the lease, as she was entitled to do. I do not have the accounting evidence that Howden J. had in Naidoo v. Naidoo, [2004] O.J. No. 1458 (Ont. S.C.J.), but it seems to me that although the wife obliged herself before the separation to make these monthly payments, they were not due or collectable until after the separation. Accordingly I do not include them in the wife’s debts.”

To learn more about car lease payments and financial disclosure as well as the services provided by Krol & Krol, call 905.707.3370 today.

Financial Disclosure – Fishing Expeditions

When spouses decide to cut ties and sever their relationship, once each party has retained a lawyer to represent them on their behalf, the lawyers will exchange financial statements that their clients have prepared, and attempt to reach a settlement.

Often, one of the parties is reluctant to disclose how much they are currently spending and/or what they are purchasing with that money.

On a motion for disclosure, the applicant will usually succeed in terms of requesting information regarding the quantum of the expenses, as this is a relevant factor in determining issues such as spousal and child support. However, if the applicant attempts to get their hands on financial statements (i.e. credit card statements) so as to reveal what their former spouse has been spending his/her money on, the court will analyze whether the request is relevant to the fact-finding process or merely a fishing expedition.

In the case of Pilkington v. Barrack, Justice Stevenson explained:

” . . .  A party’s understandable aspiration for the outmost disclosure is not the standard. Fairness and some degree of genuine relevance, which is the ability of the evidence to contribute to the fact finding process are factors . . . ” The dollar amounts are sufficient. Nothing is to be gained by the disclosure of line by line details of the Respondent’s spending and I accept the Respondent’s argument that this request really amounts to a fishing expedition. The totals alone will afford the Applicant an opportunity to challenge the Respondent’s income and to ascertain whether he has been truthful regarding his income.

To learn more about financial disclosure as well as the services provided by Krol & Krol, call 905.707.3370 today.

Disclosure from non-parties

In child and/or spousal support cases, the issue of requiring non-parties to provide financial disclosure relating to one of the parties to the litigation, is often brought to light.

The relevant legislation with respect to non-party disclosure is found in the Family Law Rules of Ontario. Rule 19(11) of the Rules states as follows:

(11)  If a document is in a non-party’s control, or is available only to the non-party, and is not protected by a legal privilege, and it would be unfair to a party to go on with the case without the document, the court may, on motion with notice served on every party and served on the non-party by special service,

(a) order the non-party to let the party examine the document and to supply the party with a copy at the legal aid rate; and

(b) order that a copy be prepared and used for all purposes of the case instead of the original. O. Reg. 114/99, r. 19 (11).

The case of Bailey v. Bailey explains rule 19(11), as the Court set out six criteria that must be met for the court to exercise its discretion and rule in favor of the party requesting disclosure from a non-party to the litigation. The six criteria are:

  • The documents requested are in a non-party’s control;
  • The documents requested are exclusively available to the non-party;
  • The documents requested are not shielded by legal privilege;
  • An order refusing to compel the disclosure of said documents would prove unfair to the party requesting its disclosure;
  • The documents requested are relevant and necessary; and,
  • Notice must be provided to the nonparty in possession the documents requested.

To learn more about disclosure from non-parties as well as the services provided by Krol & Krol, call 905.707.3370 today.

Financial disclosure: Are options to acquire shares considered money in the bank?

In the case of Reid v. Reid, the issue of whether options to acquire further shares should be calculated in a party’s assets, was the turning point of a case that saw the court rule in favor of the husband.

The Reid case featured a wife attempting to set aside a separation agreement due to the fact that it was contrary to objectives as set out in the Family Law Act and the Family Relations Act; specifically, that the husband’s financial disclosure was intentionally inadequate. The wife claimed that the husband’s major asset, his company, was undervalued based on the sale of the company, some years later, for a price higher than what was disclosed at the time of the separation.

The wife asserted that, despite a Pryce Waterhouse Cooper report disclosing the worth of the company at the time of the separation, the husband did not disclose the fact that he had an option to acquire more shares in the company at that time, and therefore financial disclosure was inadequate and misleading.

The Trial Judge disagreed with the wife and would not set aside the separation agreement. He ruled that an option to acquire more shares in a company is not “in the money”, and thus have no value.

Essentially, the Judge ruled that the agreement was not contrary to section 65 of the Family Relations Act, which states:

(1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to

(a) the duration of the marriage,

(b) the duration of the period during which the spouses have lived separate and apart,

(c) the date when property was acquired or disposed of,

(d) the extent to which property was acquired by one spouse through inheritance or gift,

(e) the needs of each spouse to become or remain economically independent and self sufficient, or

(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse, the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

(2) Additionally or alternatively, the court may order that other property not covered by section 56, Part 6 or the marriage agreement, as the case may be, of one spouse be vested in the other spouse.

(3) If the division of a pension under Part 6 would be unfair having regard to the exclusion from division of the portion of a pension earned before the marriage and it is inconvenient to adjust the division by reapportioning entitlement to another asset, the Supreme Court, on application, may divide the excluded portion between the spouse and member into shares fixed by the court.

To learn more about financial disclosure as well as the services provided by Krol & Krol, call 905.707.3370 today.

Costs in Family Law

In order to encourage and promote a just expeditious outcome between the parties in a matrimonial matter, the Family Law Rules penalize a party for being uncooperative during the course of the litigation and for being the unsuccessful party in court.

As Rule 24(1) of the Family Law Rules states:

“There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal. O. Reg. 114/99, r. 24 (1).”

However, Rule 24(4) lends some relief to an unsuccessful party that has dealt with an unreasonable party:

“Despite subrule (1), a successful party who has behaved unreasonably during a case may be deprived of all or part of the party’s own costs or ordered to pay all or part of the unsuccessful party’s costs. O. Reg. 114/99, r. 24 (4).”

The Court will look at specific factors when ruling on costs. As the Family Law Rules state in Rule 24(5):

“In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,

(a) the party’s behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;

(b) the reasonableness of any offer the party made; and

(c) any offer the party withdrew or failed to accept. O. Reg. 114/99, r. 24 (5).”

The Family Law Rules do take into account a scenario whereby the actions resulting in a high costs bill were on account of the party’s lawyer. In such a case, “the court may, on motion or on its own initiative, after giving the lawyer or agent an opportunity to be heard,

(a) order that the lawyer or agent shall not charge the client fees or disbursements for work specified in the order, and order the lawyer or agent to repay money that the client has already paid toward costs;

(b) order the lawyer or agent to repay the client any costs that the client has been ordered to pay another party;

(c) order the lawyer or agent personally to pay the costs of any party; and

(d) order that a copy of an order under this subrule be given to the client. O. Reg. 114/99, r. 24(9).

To learn more about costs in family law as well as the services provided by Krol & Krol, call 905.707.3370 today.

 

Financial disclosure and the Family Law Rules

Section 56(4)(a) of the Family Law Act depicts the importance of having full financial disclosure in family law matters.

It states that if one of the parties fail to provide full financial disclosure to the other, any agreement made between the parties may be set aside. Failing to adhere to section 56(4)(a) of the Family Law Act squanders any opportunity at achieving fair, cost-effective and final results in any family law proceeding.

Rule 13 of the Family Law Rules is intended to ensure that parties provide full and adequate financial disclosure to each other. For instance, rule 13(1) of the Family Law Rules requires that a party making any sort of claim grounded in support, property or exclusive possession, must serve a financial statement along with the claim. However, an exception to 13(1) is when the applicant only makes a claim for child support and does not include any claim with respect to property or exclusive possession.

Rule 13(10) is another rule intended on forcing the parties to make full financial disclosure as it states that the court clerk is prohibited from accepting an application, answer, reply, notice of motion, or affidavit in response to filing if the Rules require that a financial statement accompany the document stating the claim, and no financial statement has been provided.

Rule 13(11) furthers the obligation to provide adequate financial disclosure by permitting the court to order that if a party has not responded to a request for further information with 7 days, that the party give the requested information or serve a fresh financial statement.

To learn more about financial disclosure as well as the services provided by Krol & Krol, call 905.707.3370 today.

What is financial disclosure? What happens if I do not disclose all of my assets?

Financial disclosure requires that both parties disclose their full financial circumstances to one another.

There are three different areas of one’s finances that each party needs to provide documentation for, relating to support and property. These three areas include employment-related documents, documentation on assets and documentations on debts and liabilities.

When it comes to employment-related documentation, the documents that are commonly used in order to prove an individual’s salary includes, but is not limited to copies of the individual’s employment contracts, income tax returns (including all attachments and schedules), any notices of assessment or reassessment, recent pay stubs, financial statements, and so forth.

When it comes to the documentation for the individual’s assets, documentation that may be requested includes bank statements for all bank accounts, brokerage accounts, RRSPs, as well as any other investments, pension plan documentation, life insurance plan documentations, Canada Savings Bonds, trust documents, trust financial statements, title documents for all property both spouses own and documentation that proves the origin of any gifts, inheritances or personal injury awards and so on. When the parties are married, this documentation is to be provided as of the date of marriage, the date of separation and currently.

When it comes to the area of debts and liabilities, one must submit statements for all credit cards and lines of credit, mortgage statements.  When the parties are married, this documentation is to be provided as of the date of marriage, the date of separation and currently.

In the event that one party does not provide the other party with full financial disclosure and a contract or settlement is reached, the Family Law Act permits a Court to set aside such a contract or settlement based on a lack of financial disclosure.

If an individual believes that his or her spouse is concealing information or assets, or simply not providing complete disclosure, then s/he may apply to the Court to compel the spouse to disclose the missing information.

Due to the fact that full disclosure is obligatory, many ask what documents each party is obligated to provide in order to have completed the process of financial disclosure.

Finally, a lawyer can assist you in determining the issues relevant to your case as well as the financial disclosure requirements.

For more information on financial disclosure, and information on the specific documentation that is required when providing financial disclosure, contact Krol & Krol at 905.707.3370.