But what if my spouse hides our assets before trial?”
A common question and very often legitimate fear of the non-asset
holding spouse; a question of deep concern to your client and
one that should cause you to thoroughly explore with your client
their concern to order to assess its validity and to determine
how to best deal with it.
Section 12: Orders for Preservation
Section 12 of the Family Law Act (the Act) allows a party
to obtain a preservation order, and an order restraining the
depletion of a spouse’s property in an application for an equalization
of net family property brought under Section 7 of the Act. The
“in an application under Section 7 or 10, if the
court considers it necessary for the protection of the other
spouse’s interest under part, the court may make an interim
or final order,
restraining the depletion of a spouse’s property;
for the possession, delivering-up, safekeeping
and preservation of the property.”
The court has the power not only to make
preservation orders under Part I of the Act (family property)
but also under Part III of the Act (support obligations). The
authority is set out in section 40 of the Act which states:
“The courts may, on application,
make an interim of final order restraining the depletion of
a spouses or same sex partners property that would impair or
defeat a claim under this part.”.
It is useful to remember that even though
common law spouses or same sex partners do not have property
rights under the Act, they can tie up their spouse’s or partner’s
property by making use of Section 40 if the circumstances are
Once an application under Section 5,
7 or 10 of the Act has been made, a court may make an interim
or final preservation order if the court considers it necessary
for the protection of the other spouse’s interest under Part
I of the Act. An order under Section 12 will only be made where
a claimant’s Part I rights are at stake with clear evidence
that these rights are at risk, that is demonstrating that the
property holding spouse will do something to the assets that
affect the equalization payment.
There must more than an unsupported concern.
In Pollak v Pollak, Justice Lane stated that
“the court does issue orders restraining people from dealing
with property without some evidence as opposed to bare allegations”.
A Section 12 order does not create property
interests in, or rights over the other spouse’s property, but
rather functions to ensure that there are sufficient assets
available to satisfy an equalization payment.
There are two types of preservation orders
contemplated by Section 12:
Those that restrict ones spouse’s ability to dispose/encumber
or deal with the asset (negative orders) and;
Those that require steps to be taken to preserve
the value of the asset itself and to account for the those assets
at the date of trial (positive orders)
In Lasch v. Lasch, the court held that
a restraining order under Section 12 should be confined to specific
assets and that there should be an onus on the applicant to
prima facie demonstrate that he or she is likely to receive
an equalization payment to the value of specific assets. Justice
Granger refused to make an all encompassing preservation order
as he was of the view that it would prevent a spouse from dealing
with his or her assets. He found that a restraining order, under
S.12 which is injunctive in nature should deal with the specific
Justice Granger had the opportunity to
deal with section 12 again in Gray v. Gray. In that case, the
wife sought an order that the husband’s share of the sale proceeds
from the matrimonial home be hold trust pending trial to secure
her equalization payment. Justice Granger allowed that relief
in her husband’s share of the net proceeds from the sale of
the property, but rather was seeking an order to ensure that
the funds were available to satisfy the equalization payment.
The court concluded that was the essence of Section 12 and made
the order requested.
Justice Granger also commented that a court should not unnecessarily
tie up a spouse’s liquid capital in this fashion unless there
was a reason to believe that the person will attempt to avoid
the future payment or if there was no other source to fund the
In Bronfman v. Bronfman the
court outlined the appropriate test for determining whether
or not to make a preservation order.
In making a
determination, the court will consider how likely it is that
the Plaintiff of Petitioner will receive an equalization payment,
and the effect of granting or not granting a preservation order
on the parties: ie., the balance of convenience
This requires an assessment of the risk
of dissipation of the assets in existence prior to trial. Where
it is very clear that a spouse will be entitled to an equalization
payment in a particular amount, the court will give considerable
weight to this factor and perhaps less weight to other factors.
Where the facts and the law are disputed on the issue of entitlement,
the court will give more serious consideration to the balance
of convenience and risk of dissipation prior to trial.
In Bronfman, there was evidence
that he husband was prepared to manipulate and deplete assets
that existed on the valuation to his own advantage and to his
wife’s disadvantage. Prior to being served with and ex-parte
preservation order, the husband had already taken steps to transfer
his share from the proceeds of a litigation settlement into
an offshore trust. The husband’s position was that the wife
had no claim for an equalization payment, however, the court
hold that the wife had raised a prima facie case and that she
was entitled to a substantial equalization payment. The court
believed that there was a real risk that if preservation order
was not made, the husband would dissipate his assets before
the wife’s claim was adjudicated. The court according, made
the preservation order after the considering the effect that
the granting of not granting of the order would have on the
Section 9: Powers of the Court
Section 9 of the Act sets out the powers
of the court once an application for an equalization payment
has been made. In order to facilitate an equalization payment,
security by way of a charge on property may be ordered, and
specific property may be ordered to be transformed or vested
in a spouse. In addition, the remedies of the partition and
sale are available.
Although property transfers are contemplated
under Section 9 (1)(d), those orders appear fairly difficult
to obtain. In Verboom v. Verboom the court refused
to grant an order transferring the matrimonial home to the wife
in satisfaction of an equalization payment. While the court
held that the Family Law Act established a debtor creditor scheme,
it did not create new property rights. Instead, a charge was
placed on the home to ensure that the equalization payment was
made. This was the case even though a prima facie case of entitlement
to an equalization payment was made out.
Yamamoto v. Best is an
interesting case where the wife moved for an order requiring
the husband execute and delivery a general security agreement
over his existing and future personal property in order to secure
his indebtedness with respect to an equalization payment owing
to her. Justice Greer ordered that the husband execute a general
security agreement in favour of the wife over his RRSPs and
a portion of his business. The court focused on the fact that
the husband had informally told the wife that a bankruptcy of
his business was possible. The court found that “the security
agreement will protect the wife’s equalization payment in the
event a trustee in bankruptcy is appointed after the wife’s
security has been perfected.”
The court utilized Section 9(1)(b) of
the Act as authority for the decision. The only assets that
the husband had which could have been used to settle this equalization
payment were his RRSPs, a vehicle and his share in a private
As one might imagine, the husband’s company’s
bank also had a general security agreement in place in its favour.
Her Honour dealt with that by ordering that the wife cooperate
with the husband while such security was in effect, in the event
that the security required that she consent or sign documents
which affected the business and the company.
For a good review of the case law under
Section 9 of the Act, see Zagdanski v. Zagdanski
Some Practical Tips for Obtaining
Effective Preservation Orders
Your client will be the most instrumental
in giving you the ammunition for obtaining a preservation order.
While you can be the on to put together the material demonstrating
your client’s entitlement to an equalization payment, it is
your client who will be the most helpful in doing their homework
the conduct which should give rise to the order;
the specific assets which are to be preserved.
Try and get as many possible from your
client as to what the asset holding spouse has said or threatened
which will impact on the assets. Your will likely find that
if you dig deep enough, your client will have a number of statements
that they can recall which a Judge can interpret as putting
asset at risk. By way of example, one of my asset holding clients
recently made a comment (which according to him was made in
jest) that came back to haunt him. In this particular case,
the court found the statement “I would rather burn my money
that give it to you” to be enough to grant an exparte order
restraining him from dealing with substantial assets. I guess
it wasn’t such a funny joke.
In order to obtain the order, you will
need to demonstrate that the order is essential to protect the
assets from being disposed of. Have your client tell you all
they can about:
- threatening statements, even if allegedly
- details about the liquidity of assets.
- the asset holding spouse’s experience
in being able to move assets around.
- any other detains about why they have
a “feeling” that the assets will be gone by the time of trial.
Particulars Required in the Order
I hope that the days of blanket statements
in orders such as “neither party will dispose of their assets”,
are gone. Those types of orders are, in my view, both ineffective
and unenforceable. Determining whether there has been a breach
of such an order in an impossible task. This was demonstrated
in the case of Greer v. Greer in which the read:
further orders that there be a mutual mon-depletion order, including
the proceeds of the accident claim to the extend of the wage
loss and interest of the Defendant”.
Justice Fleury in commenting on the clause
“It is obvious
that no care went into the drafting of this clause. It mimics
the frequent endorsements of motion court Judges which obviously
contemplate the formulation of the Order in the “usual terms”
by the party taking out the order. The words “mutual non-depletion
orders” are a form of short hand adopted by Judges to allow
them to expeditiously complete endorsements and have never been
intended to be incorporated as such in the final wording of
orders eventually issued and entered. If these were proceedings
in the nature of contempt for failure to abide by the terms
of this “non-depletion” order, I have some considerable doubt
as to whether I would be able to ever reach the conclusion that
this kind of vague wording was capable of enforcement”.
When drafting your order try and envision
everything that the asset holding spouse may try and do. Consider
putting words into the order that restrain the asset holding
spouse from: (for example). Withdrawing, depleting, transferring,
encumbering, pledging as security, and anything else that you
can contemplate could be done with the particular assets.
Remember also to not simply name the
asset holding spouse in your order, but also any companies that
the spouse may an interest in.
Identify where the assets are, who is
the owner and the approximate value of each asset. Specify account
numbers if you can.
Preservation Orders are not the norm
in every case, nor should they be. Their use however to preclude
assets from going AWOL and as tools for subsequent settlement
negotiations should be considered in the appropriate case.
a PDF sample notice of motion and draft order can be viewed
 Family Law
Act, R.S.O., 1990, c.F3; S. 7 and 10
 Family Law,
R.S.O.,1990 c.F3, S.40
 Pollak v.
Pollak (1993), 48 R.F.L.,(3d) 56 (Ont. Gen. Div.)
 McLeod and
Mamo, Matrimonial Property Law in Canada, 0-148, Volume 1
 Lasch v.
Lasch (1988), 13 R.F.L. (3) 434 (Ont. HCJ)
 Gray v.
Gray (1990) 31 R.F.L. 3d (97)(Ont. Gen. Div)
v. Bronfman (2000), 51 O.R. (3d) 226 (S.C.J.)
and Steinberg. Ontario Family Law Practice (Canada): Lexis Nexis
2004 Page 578
v. Verboom (1991), 34 R.F.L,(3d) 312
v. Best (1998),39 O.R.(3d) 412 (Ont. Gen. Div)
v. Zagdanski (2001), 55 O.R.(32) 6 (SCJ)
 Greer v.
Greer (1995) OJ No.4022 (Ont. Gen. Div.)