April 24, 2014 By: Marta Siemiarczuk
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Thinking of using a gift to pay for the line of credit on your home?  You may want to think carefully about your decision, but there is reason to hope that you might get at least some of your gift back in the event of a separation. Here’s why.

In 2012, the scope of equalization litigation was expanded with the Court of Appeal for Ontario’s (ONCA) decision in Ward v. Ward. The parties involved had been married for about 11 years. They had children together, and although Carolyn Ward had earned a high income before having kids, they decided she would stay home with them.

The marriage had been tumultuous for about four years before their separation. Three months before they separated, Carolyn received a $200,000 cash gift from her father. She wanted to save the money for retirement, but her husband Murray wanted her to use the money to pay down the line of credit registered against their family home. She agreed, and put $180,000 down on the line of credit. Three short months later, Murray told Carolyn he had bought a condo and was leaving.

Carolyn sought an unequal division of net family property under s. 5(6) of the Family Law Act (FLA), which states: "the court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable having regard to" a list of enumerated factors.

The majority of the Court agreed with Carolyn’s position and ordered an equalization payment be made to her, plus another $90,000 amounting to half of the money she used to pay down the line of credit. The decision was based on the concept of “unconscionability”. In other words, was the fact that Murray profited by $90,000 three months before the separation unconscionable? In this case, there was a short time-span between Carolyn’s payment on the line of credit and the separation, and she may have been duped into a financially detrimental decision.

One of the Appeal Judges however, wrote a compelling and careful dissent that, in my view, correctly applies Ontario's legislated division of property scheme. All other things being equal, the situation may not have been fair to Carolyn, but the risk was hers to take. It will be interesting to see how this decision affects future jurisprudence under s. 5(6) and claims related to unequal division of property. If you are thinking about using a gift to make a payment on your matrimonial home, you would be wise to consult your family lawyer first to weigh the pros and cons of your decision.

Read more about this case in my full article, Wife uses Gift to pay off Line of Credit on Home before Separation – Unconscionable? which first appeared in the October 2012 issue of The Law Times.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Family Law