Are COVID-19 Financial Difficulties Relevant Post Separation?
Written on behalf of Shariff & Associates
Many families experienced an impact on their finances throughout the COVID-19 pandemic. As the value of some assets declined, some parties encountered difficulty finalizing equalization payments. Further, as incomes decreased, some parties struggled to comply with their support obligations. So, how did courts consider the economic consequences of the pandemic on families?
Wife Claims that Equalization Payment Would be Unconscionable
Courts can order an unequal division of net family property in limited circumstances if the equalization payment is unconscionable. The case of Jayawickrema v. Jayawickrema dealt with the division of property in the unpredictable aftermath of the COVID-19 pandemic. In this case, it was determined that the wife would be required to pay the husband an equalization payment of over $66,000. However, before the release of the judgement, the pandemic struck, and the judge sought further arguments on the issue of unconscionability.
Section 5(6) of the Family Law Act permits a court to deviate from the presumptive equalization of family property formula in exceptional circumstances, including having regard to:
(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.
Decline in Asset Value Does Not Sway Equalization
The wife alleged that she should not be required to pay an equalization payment as this would be unconscionable due to the impact of the pandemic on the value of her assets, in addition to her inability to fund the payment and support herself and the parties’ child. The wife claimed that she was forced to close her business, which was an educational facility, in accordance with public health restrictions, and was conducting online courses at a reduced rate to keep it afloat.
The Court looked to the case of Serra v. Serra in which the Ontario Court of Appeal found that a market-driven decline in the value of an asset held by a party could constitute unconscionability. In that case, the value of a business declined to a level such that the business was valued at less than the equalization payment that was owed.
Once unconscionability is found, a court must consider all of the parties’ circumstances. In Jayawickrema v. Jayawickrema, the judge accepted that the pandemic impacted the wife’s business, and would continue to affect its value for the foreseeable future. However, the Court was not convinced that she had met the high evidentiary threshold to establish unconscionability under section 5(6)(h) of the Family Law Act.
Husband Seeks to Sell Jointly Owned
Dhaliwal v. Dhaliwal was a case in which the respondent father sought to force the sale of two jointly owned properties, specifically an investment property and the matrimonial home where the applicant mother still resided with the parties’ two children. However, the mother did not want to sell either property.
The parties had an earlier temporary support agreement that was based on the father having an income of $132,000. However, the father was an optometrist and claimed that the pandemic drastically reduced his income. His two practices were shut down for lengthy periods, and patient care was restricted to urgent matters. With the reduced income, he claimed that he could not afford to pay the mortgage and support as set out in the agreement. According to the father, the parties’ finances were strained even before the pandemic, and the sale of the properties would allow them to address immediate financial needs.
Court Says Family Must Adapt to Pandemic Induced Financial Reality
The Court acknowledged that the pandemic had created a financial crisis for the family which “devastated the income capacity of the Respondent who is currently the only breadwinner for this family of four.” While the father had recently begun to reopen his business at the time of the hearing, public health restrictions continued to limit the number of patients he would be able to attend to. Therefore, the business’s future operations and the father’s income were uncertain.
Although the mother speculated that the father’s financial situation was not as bad as he claimed, she had no evidence to support this argument. Further, the Court accepted the immediate financial pressures required a resolution. The mother did not want to displace the children from their home, but she did not address the possibility of sourcing accommodations in a less expensive home. Ultimately, the father’s request to liquidate funds from the sale of the properties made more sense when viewed against their financial realities, and the mother could not provide a reason why the properties should not be sold.
The Court ordered that both properties be listed for sale, with the parties accepting any reasonable offer in relation to each property.
Contact the Family Lawyers at Shariff & Associates in Markham-Stouffville for Advice on Support Obligations and Post-Divorce Modifications
The skilled family lawyers at Shariff & Associates work with clients to determine fair and equitable resolutions that are tailored to their unique circumstances. If you have experienced financial hardship due to the pandemic, or have questions about enforcing an existing order, we can help. Our lawyers strongly advocate on behalf of clients and ensure that clients interests are preserved throughout the dispute resolution process. We proudly represent clients throughout Markham and across the Greater Toronto Area. Contact us online or call us at 905-591-4545 to schedule a confidential consultation with one of our lawyers.