Unequal Division of Net Family Property & the Threshold Question of Unconscionability

In Ontario, married spouses are subject to the equalization of net family property legislation set forth in Section 5 of the Family Law Act.  In effect, married spouses share in the other spouses net family property to help ameliorate any economic disadvantage resulting from the breakdown in the marriage.  The spouse with the greater net family property owes the spouse with the lesser net family property 50 per cent of the difference in their respective net family property resulting in each spouse having a similar asset base upon a breakdown in the marriage.  However, in specific circumstances, the family law may provide for an unequal division of net family property. 

Section 5(6) of the Family Law Act sets out the factors that must be examined in assessing whether an unequal division of net family property is appropriate.  An unequal division of net family property will only be appropriate if the Court finds that an equalization payment would be “unconscionable” in the circumstances after examining the factors provided in Section 5(6) of the Family Law Act.  An unequal division of net family property is the exception rather than the rule.

In Booth v. Bilek, [2021], 2021CarswellOnt2607 (Ont. C.A.), the Ontario Court of Appeal provided some clarity on the legal threshold question as to what constitutes “unconscionable” in deciding whether to Order an unequal division of property between two married spouses.  In Booth, the parties were married for 4.5 years.  They did not have any children of their marriage.  The Trial Judge ruled in favour of unequal division of net family property.  The Trial Judge’s decision was based on the following factors:

• The degree to which the wife’s net family property originated from gifts made by the husband;

• That a standard equalization payment would be disproportionate given that the parties cohabited for less than the five year threshold;

• The contributions of the husband and the wife during their relationship. It was found by the lower Court that the majority of the parties’ respective net family property resulted from the husband’s contributions.

In analyzing the S. 5(6) factors, the Trial Judge found that the wife had disproportionately benefitted from the short marriage.  The wife had received nearly $200,000 from the sale of the matrimonial home, an asset to which the wife made no direct financial contributions.  The Trial Judge further found that that the difference in each party’s net family property was almost solely attributed to the growth in the husband’s investments.  There was an age difference between the parties of 23 years with the husband solely living from the investment income, while the wife was found to be self supporting.

At Trial, the husband was Ordered to pay an unequal payment to his wife in the amount of $10,627 which represented only 10 per cent of the full equalization payment of approximately $106,000.  The wife appealed the decision of the Trial Judge and argued that a full equalization payment would not be unconscionable and, in the alternative, that she should be awarded 87 per cent of the full equalization payment because they cohabited for 52 months out of the 60 month (5 year threshold).

In deciding whether to overturn the Trial Judge’s decision, the Court of Appeal noted that the threshold of unconscionability is a high one and that more than mere unfairness is required: Serra v. Serra, [2009], 61 RFL (6^th) 1, (Ont. C.A.).

Section 5.6 (e) of the FLA specifies that an equalization payment may be found to be unconscionable if the payment is disproportionately large relative to a cohabitation of the spouses of less than five years.

In the Booth decision, the Court of Appeal agreed with the Trial Judge that a standard equalization payment would be “unconscionable”.  The Court of Appeal rejected the argument that the unequal payment should be proportionate to the length of cohabitation.

The correct approach in unequal division cases is to first calculate the full equalization payment.  The legal question then then becomes:  is the full equalization payment unconscionable having regard to the factors set out in S. 5(6) (a) through (h)?  While cases of unequal division are the exception rather than the rule, the Booth decision serves as a reminder that the high threshold of unconscionability may be met in certain circumstances.