Preservation of economic rights during cohabitation

BY: VALERIE DYE 

For the most part, discussions about property division and equalization arise in relation to separation, divorce or death. Quite often, when parties separate, the court may find it necessary to grant a non-depletion order or preservation order against one spouse if the court is satisfied that the spouse is taking measures to deplete matrimonial assets to avoid an equalization payment. Section 12 of The Family Law Act outlines the steps the court may take in this regard.  Section 40 of the Family Law Act also provides for the granting of a restraining order to prevent depletion of assets which is done by one spouse in order to avoid making support payments.

While such orders are more common among couples who have separated, the Family Law Act also protects spouses who are still cohabiting. This situation is provided for under section 5(3) of the Family Law Act which states as follows:

When spouses are cohabiting, if there is a serious danger that one spouse may improvidently deplete his or her net family property, the other spouse may on an application under section 7 have the difference between the net family properties divided as if the spouses were separated and there was no reasonable prospect that they would resume cohabitation.

The intention of this provision is to protect one spouse where it becomes apparent that the other spouse intends to take measures to deplete his assets, which will, in turn, affect the rights of the other spouse. For instance, spouse A may have a greater value in assets than his wife, spouse B. However, spouse A may decide to transfer some of his assets to other family members or may simply squander his assets so that in the event of a subsequent divorce of death spouse B will not benefit significantly from an equalization of net family assets.

The Court of Appeal of Ontario ruled on this issue in the case of Stone vs Stone in 2001. In that case, the husband knew that he was going to die very soon and to prevent his wife from benefiting from his assets he transferred most of it to the children he had from his previous marriage. The court ruled that the wife could have brought an application for equalization and division of asset before the husband’s death even though they were not separated. However, since the transfers were done without the wife’s knowledge the court made an order revoking the transfers and allowed the wife to proceed with the process of equalization.

It is important to note that, firstly, this process of equalization can be started even though the parties are not separated and though they continue to be married to each other, once it can be proved that one party is depleting his or her assets. Secondly, once the equalization process takes place the parties can no longer go through any further equalization process in relation to their marriage.

The benefit of this provision is that no spouse has to sit idly by while the other spouse intentionally or otherwise, depletes his or her assets.