Equalization and Foreign held Matrimonial Property

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BY: VALERIE DYE 

Part 1 of the Family Law Act deals with the division of assets between spouses after separation or divorce.

Section 5(1) states that: When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.

The process by which property is divided between spouses is referred to as the equalization process. Section 9 of the Act outlines the power of the court during the equalization process. Apart from the power to order one spouse to pay to the other spouse the amount determined under section 5, Section 9 (1 d) also gives the court power to order that property be sold or partitioned or transferred to another spouse. 

This situation changes when the net family property includes property outside of Ontario. Courts have generally decided that they have no jurisdiction to order a sale or partition or transfer of such property. In Marshall v Marshall the court said that it had no ability to give direction and hold the respondent to account in any way, or otherwise ensure the other spouse’s beneficial interest is protected in the foreign property. In Potter vs Boston, the court stated that an Ontario Court does not have the right to make orders affecting title to land or property in a foreign jurisdiction except in cases related to contracts, trusts or equity.  In other words. If the defendant resides in Ontario, if the parties owe a personal obligation to each other, if the court can supervise the execution of its order and if the order will be of effect in the place where the property is located then the court may make an order to enforce the personal rights of the other spouse.  These exceptions still do not allow the Ontario courts to make orders related to the title of the property or directing the sale, transfer or partitioning of the property. They can, however, make orders enforcing the personal rights and obligations arising from title or rights to the property. As such the Ontario courts can make orders that the defendant should make a payment to the plaintiff, which payment will take into account the value of the foreign held property. If, for instance, Spouse A owns property in New York valued at the equivalent of $500,000 Canadian dollars, the Ontario Court cannot order a sale of the property or order that the property be transferred from one spouse to the other.  The Ontario courts may however, order that the property be valued so that the courts can determine the net family property of Spouse A and thus determine the amount of equalization payment that should be made to the other spouse.

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