Divorce, Separation and Family Law – Victoria, BC

 

Disclosure of Documents

 

There are two ways a court can order an unequal division of family property pursuant to the Family Law Act. One is based on non-disclosure where a court can draw an adverse inference and impute income and assets, and the other is based on the fact that an equal division would be significantly unfair.

 

Both spouses are required to produce all documents which are relevant to any of the issues before the court. In a complex case this can mean that one spouse is required to provide a substantial number of documents if they are requested either by the other spouse or by a valuator.

 

The Family Law Act, section 5 states:

 

5          (1) A party to a family law dispute must provide to the other party full and true information for the purposes of resolving a family law dispute.

(2) A person must not use information obtained under this section except as necessary to resolve a family law dispute.

 

The Family Law Act, sections 213(1) and (2) state:

 

213     (1) This section applies if a person

(a) fails to comply with

(i)   an order for disclosure made under section 212 [orders respecting disclosure], or

(ii)   a requirement to disclose information in accordance with the Supreme Court Family Rules or the Provincial Court (Family) Rules,

within the time or in the manner required by the order or Rules, or

(b) provides information that is incomplete, false or misleading.

 

(2) In the circumstances set out in subsection (1), the court may do one or more of the following:

(a) make an order under section 212;

(b) draw an inference that is adverse to the person, including attributing income to that person in an amount that the court considers appropriate, and make an order based on the inference;

(c) require a party to give security in any form that the court directs;

(d) make an order requiring the person described in subsection (1) to pay

(i)   a party for all or part of the expenses reasonably and necessarily incurred as a result of the non-disclosure of information or the incomplete, false or misleading disclosure, including fees and expenses related to family dispute resolution,

(ii)   an amount not exceeding $5 000 to or for the benefit of a party, or a spouse or child whose interests were affected by the non-disclosure of information or the incomplete, false or misleading disclosure, or

(iii)   a fine not exceeding $5 000;

(e) make any other order the court considers appropriate.

 

Cunha v. Cunha (1994), 1994 CanLII 3195 (BC SC), 99 B.C.L.R. (2d) 93 (S.C.), Mr. Justice Fraser states:

 

I am satisfied and I find that he has not made adequate disclosure of his financial dealings, both before and after separation.  Much of the evidence before me is only before me because of a tireless struggle by Ms. Peters, counsel for Mrs. Cunha, to locate assets.  I agree with Ms. Peters that we can have no confidence that we now know everything there is to know.

 

Non‑disclosure of assets is the cancer of matrimonial property litigation.  It discourages settlement or promotes settlements which are inadequate.  It increases the time and expense of litigation.  The prolonged stress of unnecessary battle may lead weary and drained women simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of a reasonably‑based suspicion that justice was not done.  Non‑disclosure also has a tendency to deprive children of proper support.

 

It is not enough to respond to non‑disclosure by an award of costs.  Nor is it enough, in a case like this one, to deal only with what is known.  Either of these approaches, or both together, may still reward the non‑disclosing litigant for his conduct, depending whether his concealment has been successful.

 

I conclude that where there has been concealment of assets, it ordinarily should be held that the concealment is ongoing, that there are assets still undisclosed, and that the division of assets should be affected accordingly.  I am not sure whether it is of consequence whether this is characterized as an assumption, a rebuttable presumption or an inference of fact.  The result is the same.  Such a holding may be avoided if the trial judge is satisfied by the conclusion of the trial that full disclosure has by then been made.

 

Not only is it a matter of doing justice in any particular case, it is also a matter of general interest.  The system should not give offence to the honourable litigant by treating the dishonourable litigant the same.

 

Once non‑disclosure at any stage has been established, the onus of satisfying the Court that afterwards there has been full disclosure should be on the non‑disclosing party.  If by the end of trial the Court is satisfied that full disclosure finally has been made, an award of costs only might be the appropriate penalty.

 

My approach in this case has been based on the principles I have just articulated.  I am not satisfied that Mr. Cunha has disclosed his assets.  The origins of some of his assets which were uncovered is unknown.  Were they the descendents of family assets which were dissipated?  We do not know.  Certainly Mrs. Cunha does not know.  Mr. Cunha managed the family finances from the marriage in 1972 until the separation of 1991; she was not involved, except to sign whatever papers he told her to sign.

 

I conclude that I must infer that he has control and possession of family assets of which I have no knowledge.  The proper working inference, in my view, is that the value of undisclosed assets is at least equal to the value of disclosed assets.

 

(Emphasis Added)

 

J.D.G. v. J.J.V.I, 2013 BCSC 1274

 

[19]        Section 213 expands on s. 92(1). Firstly it makes it clear that the remedy for non-disclosure is now available under a wide range of circumstances including situations where a party has provided incomplete, false or misleading information. Secondly the range of remedies available is broader. Some were already available such as the ability to draw an adverse inference (Wu v. Sun2011 BCCA 239 (CanLII)). What is new is the ability to order a party to give security to the court, to pay a fine (although previously available if a contempt finding was made), to make any other appropriate orders and to award expenses beyond what would normally be considered costs. The circumstances under which the $5,000 can be paid for the benefit of another party also differs in that instead of being paid on behalf of whom it is requested it can be paid to any child, spouse or party “whose interests were affected”. It also expands the remedies available to the Provincial Court and provides some consistency in the remedies available in both the Provincial and Supreme Courts.

 

[20]        As noted by Mr. Justice Fraser in Cunha at para. 9:

Non-disclosure of assets is the cancer of matrimonial property litigation. It discourages settlement or promotes settlements which are inadequate. It increases the time and expense of litigation. The prolonged stress of unnecessary battle may lead weary and drained [parties] simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of a reasonably-based suspicion that justice was not done. Non-disclosure also has a tendency to deprive children of property support.

[21]        Section 213 recognizes that non-disclosure is a barrier to the speedy and inexpensive determination of cases. In many cases considerable resources, both private and public, are expended on pre-trial disclosure. This before any consideration of the real issues can be carried out. It is a barrier that should not be countenanced. Private and public resources are better spent on resolving the real issues between the parties rather than being depleted on such matters.

 

[22]        Section 213 and for that matter s. 212 should be read in the context of the FLA’s regime of encouraging earlier disclosure. Section 5 of the FLAprovides:

(1)        A party to a family law dispute must provide to the other party full and true information for the purposes of resolving a family law dispute.

(2)        A person must not use information obtained under this section except as necessary to resolve a family law dispute.

 

[23]        In Hansard, The Honourable Shirley Bond described s. 5 as requiring a:

… new level of disclosure. One of the major … goals of the act is to try to find ways for people to resolve their difficulties without ending up in courtrooms across the province. What we hope is that this will encourage full and truthful disclosure very early in the process so that it promotes settlement and ensures that people have all the information that they need, … (Official Report of Debates (Hansard) Vol. 28. No. 5 (21 November 2011) at 1505.

 

[24]        The authors of the Family Law Transition Guide state that s. 5 is a fundamental shift from the framework of the prior FRA. The latter was based on a process of demands, discoveries and court orders. The FLA imposes a statutory duty at the outset.

 

[25]        The goal of proper disclosure is to enable the parties to resolve their dispute. In my opinion s. 213 is to be used to secure proper disclosure in a timely and cost efficient way. It therefore requires a robust application to accomplish that end. That should increase the awareness of the importance of timely and complete disclosure and over time lead to fewer applications. In order words, punishment per se is not the end, but rather the means, as the information is required to resolve matters in a just manner. Section 213 provides a mixture of tools to be applied creatively in a manner sensitive to the issues of a particular case.

 

(Emphasis Added)

Nearing v. Sauer, 2015 BCSC 58

 

[126]     In Laxton v. Coglon2008 BCSC 42 (CanLII) [Laxton], Mr. Justice Kelleher clarified that the Cunha approach does not constitute reapportionment (at para. 29). Where the non-disclosing party has not satisfied the court that full disclosure has been made, the court may infer the value of the undisclosed assets is at least equal to the value of the disclosed assets. The inference simply operates to ensure equal division between the parties. The court in Laxtonalso observed that the principle in Cunha applies only where there is a strong evidentiary basis for the proposition that one of the parties to the litigation has hidden assets: Eng v. Eng, [1998] B.C.J. No. 2574 (S.C) [Eng]. In Eng, Justice Humphries’ expressed this concern as follows:

 

[45] Obviously a party cannot hide behind disorganization and sloppiness to rebut an allegation that assets are undisclosed, but neither can the other party establish concealment simply by pointing to poor business practices. There must be some basis upon which the court can reach the conclusion that the party is probably concealing assets. This will differ from case to case, depending on the available evidence and the court’s impression of the witnesses.

[127]     More recently in Wu v. Sun2011 BCCA 239 (CanLII) [Wu], the Court of Appeal made a similar point. It affirmed that strong measures are justified in discouraging non‑disclosure, but cautioned that there must be some evidence of the value of the undisclosed assets before the inference is appropriate: para. 41. The evidence may, however, be sparse: para. 45.

 

[128]     In a nutshell, the respondent’s testimony was that he did have $425,000 when the marriage began, that he could not explain what has happened to all of it, that he is not hiding anything, and that he has produced all of his financial records. Taken together, this evidence simply does not make sense.

 

[129]     I find that the respondent had $425,000 in financial assets at the time of the marriage and he has not accounted for approximately $225,000 of that amount.

 

[134]     Consistent with this goal, s. 213 of the FLA provides remedies for non-

disclosure in a wider range of circumstances than previously found in s. 92 of the FRA. Those circumstances include where a party has provided incomplete, false or misleading information. The range of available remedies is also wider. Pursuant to s. 213(2)(b), the Court may draw an adverse inference against a person, including attributing income to that person in an amount that the Court considers appropriate, and make an order based on that inference. Although s. 213(2)(b) does not prevent the Court from drawing other inferences, it is not my view that the legislature intended for this provision to replace the common law. I concur with Mr. Justice Punnett in J.D.G. v. J.J.V.2013 BCSC 1274 (CanLII), where he comments at para. 19 upon the court’s ability to draw an adverse inference as a remedy already available with reference to Wu in discussing and interpreting s. 213. I conclude, therefore, that while s. 213(2)(b) may be interpreted as allowing the Court to impute property as well as attribute income to a person, I may continue to consider the respondent’s concealed financial assets and draw a negative inference as provided for by Cunha and the subsequent authorities discussed above in determining an appropriate division of the claimant’s pension under the FLA.

 

(Emphasis Added)

 

 

Deborah A. Todd
Deborah A. Todd