Written on behalf of Shariff & Associates

Identifying the correct valuation date when working through a divorce is critical as it is the first step in calculating the equalization of net family property. Sometimes parties may not agree on the correct date, especially if financial consequences arise from the difference in proposed dates. Identifying the correct date when parties separate can be challenging as there often is not a clear line demarcating when parties have separated. This may be particularly difficult to determine when parties continue to live together. In the event of a disagreement, documents such as separation agreements or tax returns may provide evidence of the parties’ intention, but even these are not always determinative.

Courts Can Draw Conclusions About Relationship

Section 4(1) of Ontario’s Family Law Act defines “valuation date” and provides a list of triggering events. One of the events includes “the date the spouses separated, and there is no reasonable prospect that they will resume cohabitation.”

Courts have been clear that deciding this date requires the determination of two separate issues:

1. Deciding when the parties separated; and
2. Deciding when there was no reasonable prospect that the parties would resume cohabitation.

Courts have also developed a set of factors that are relevant to deciding whether parties are cohabiting in a conjugal relationship or are living separate and apart. In Al-Sajee v. Tawfic, Justice Chappel noted that reasonableness is central to the analysis. The valuation date may be moved forward if there is a chance of reconciliation. Still, half-hearted discussions about reconciliation would not suffice in the absence of sincere efforts by the parties to resume their relationship. For this reason, the legislation references a “reasonable prospect.” Also, a sincere desire by one spouse to maintain hopes of reconciliation will not be enough if both parties have no mutual interest. In O’Brien v. O’Brien, the Court explained that simply “hoping” for reconciliation would not move the valuation date forward if the other spouse has been clear in their intention to end the relationship.

In Al-Sajee v. Tawfic, the judge explained that determining the date on which spouses begin to live “separate and apart” requires analyzing the “unique realities of their relationship, routines, social and other habits and practices and living arrangements over time.” A range of factors can be relevant to identify the point at which there is no longer a reasonable prospect the parties would resume cohabitation. The exercise in determining the valuation date is fact-driven, and cases such as Hogarth v. Hogarth have highlighted the fact that courts can weigh the intentions and actions of the parties to draw conclusions about their relationship.

Marriage Counselling May Extend Separation Date

In Cheng v. Sze, Justice Charney recognized that “separation is a process rather than an event,” and it can be difficult to define a single date as the date of separation. Yet, a single date is required to equalize net family property. In this case, the husband discovered the wife had an extramarital affair and testified that the wife was unsure whether she wanted to end their marriage. After the affair was discovered, the parties went to marriage counselling and continued to do activities together as a family. The husband also withdrew $80,000 from a joint line of credit and deposited the money into his own account. The wife argued the separation date was in September 2013. However, the husband proposed several different separation dates.

The husband claimed that the parties lived together in a spousal relationship until March 2017, when he became aware of the wife’s legal proceedings, which he proposed as the date of separation. The parties went on two trips to Walt Disney World in 2014 and 2016, although the wife stated that these trips were for the children’s sake. On the other hand, the husband argued that these trips were family vacations and confirmed the continuation of their spousal relationship. In January 2015, the parties had an altercation, which led to the husband being charged with assault. Following that, he did not return to the matrimonial home. This was the alternate date the respondent proposed as the date of separation.

The parties were in dispute over a number of facts about their relationship. The wife claimed that they did not share a bedroom after September 2013, but the husband claimed otherwise. The money that the husband withdrew from the parties’ joint line of credit was money that he had sole control over, which the judge accepted as an indication of an “intention to separate his financial future from the applicant.” The husband also repaid a pre-marriage loan by drawing funds from his investment account, all of which suggested preparation for separation in which the parties were no longer an “economic unit.” Yet, their marriage counsellor’s notes indicated a reasonable prospect of resuming cohabitation in the first half of 2014. The couple attended marriage counselling together and were willing to spend time together to work on their relationship.

The Court determined that by September 2013, neither party had given up on the marriage; however, when counselling came to an end in July 2014, there was no reasonable prospect of reconciliation, and they no longer interacted like a family. Although neither party proposed that date as the date of separation, the Court accepted it as the evidence supported it.

Date of Separation Recorded in Separation Agreement Not Valid

Courts can consider a range of factors to determine whether a spousal relationship exists. Parties may also change their marital status with organizations such as the Canada Revenue Agency. Documents that assert a date of separation by a party may be relevant for the analysis. However, they are not necessarily determinative. In Pennington v. Pennington, the Court began its analysis by noting that separation presumes that cohabitation by the parties no longer exists. Section 1(1) of the Family Law Act defines “cohabit” to mean living together in a conjugal relationship either within or outside of marriage, which requires more than simply sharing an address. Consequently, cases have described separation as the time when either party views the relationship as being at an end, and their conduct reflects this as their settled intention.

In this case, the wife alleged that the parties separated in August 2009 and relied on documentation to substantiate that date. She referenced a separation agreement that she claimed both parties signed in 2009, which was also witnessed. In contrast, the husband alleged the separation took place in February 2012, but by 2016 it was clear that the parties would not be getting back together. The preamble to the separation agreement stated that the parties have lived separate and apart since August 2009. However, in the wife’s application to the Court, she claimed that the parties had not entered into any agreement that dealt with any matter at issue. In cross-examination, the wife was asked why the parties entered into the separation agreement, to which she claimed that the husband intended to claim bankruptcy, and she was worried about the financial consequences for herself.

The husband confirmed that the wife was concerned that creditors would go after their house. On that basis, the judge found that the parties hoped the agreement would protect their home from any claims by creditors. The parties also filed forms that had been submitted to the Canada Revenue Agency. On one of these forms, the wife claimed a separation date in July 2009, while the husband claimed a separation date in August 2010. When it came to addressing the varying dates, the husband explained that the forms were completed so that the wife would be entitled to a higher child tax credit.

Weighing the evidence, the Court found that the separation agreement would not support a separation date of August 2009. The parties were clearly concerned about the bankruptcy and wanted to protect the family from losing assets, such as their house. The separation agreement even identified the house as an asset that would belong to the wife. The agreement was set up “for purposes other than organizing the parties’ affairs on separation.” In looking at the Canada Revenue Agency documents, Justice Scott pointed out that regardless of the date that may be acceptable for tax purposes, it is not determinative in setting a separation date under the Family Law Act. The Court acknowledged there could be a tax advantage in changing the marital status from married to separated with the Canada Revenue Agency. However, it was determined that the date of separation was February 2012.

Choice of Separation Date Must be Supported by Evidence

In any situation, parties should be aware of the significance of the valuation date. Courts understand that parties can try to advance a certain date to improve their financial position, but identifying the correct date is very fact specific, and a range of factors can be considered to determine a date that is supported by the evidence.

The Family Lawyers at Shariff & Associates in Markham-Stouffville Assist with Separation Agreements and Divorce Proceedings

The experienced family lawyers at Shariff & Associates work with clients to determine fair and equitable resolutions that are tailored to fit their unique needs. Whether you want to know more about your rights and obligations after separation or are seeking to prepare a separation agreement, our lawyers can help. We advocate on behalf of our clients and ensure that their rights and interests are protected throughout the separation process. We work with clients located in Markham and throughout the Greater Toronto Area. To schedule a confidential consultation with a member of our team, contact us at 905-591-4545 or reach out to us online.