How Ontario Courts Address Dissipation of Assets by One Spouse in Family Law Cases

In Ontario family law cases, the dissipation of assets by one spouse can significantly impact the equitable distribution of property and the financial well-being of the other spouse. Courts have developed specific legal principles and remedies to address this issue, ensuring that assets are protected and available to satisfy entitlements under the Family Law Act. This blog post explores how Ontario courts approach the dissipation of assets, the legal framework governing non-dissipation orders, and the consequences of breaching these orders.

Ontario courts have the authority to issue interim or final orders to prevent the depletion of a spouse’s property. This power is derived from sections 12 and 40 of the Family Law Act (FLA). These sections enable courts to make orders for the possession, safekeeping, and preservation of property, ensuring that assets remain available to satisfy the entitlements of the other spouse.

To grant a non-dissipation order, the court must balance several factors:

• Risk of Dissipation: Assessing whether there is a genuine risk that assets will be depleted before the trial.
• Strength of the Applicant’s Case: Evaluating the merits of the applicant’s claim.
• Serious Issues to Be Tried: Determining if there are significant issues that warrant a trial.
• Balance of Convenience: Weighing the convenience and potential harm to both parties.
• Irreparable Harm: Considering if the applicant would suffer harm that cannot be adequately remedied if the order is not granted.

Contempt for Breaching Non-Dissipation Orders

If a spouse violates a non-dissipation order, they may be found in contempt of court. The court applies a three-prong test to establish contempt:

1. Clarity of the Order: The order must clearly and unequivocally state what is required or prohibited.
2. Deliberate and Willful Breach: The breach must be intentional and willful.
3. Evidence of Contempt: The evidence must demonstrate contempt beyond a reasonable doubt.

Violating these orders can lead to serious legal consequences, including fines and imprisonment.

Dissipation vs. Reasonable Expenditures

It’s important to differentiate between dissipation and reasonable expenditures. Dissipation involves reducing one’s assets in a manner that impairs or defeats a claim for support. However, not all spending is considered dissipation. Courts recognize that reasonable expenditures for family maintenance or preserving existing matrimonial assets are not dissipation. The focus is on whether the spending significantly reduces the spending spouse’s net family property and whether it impairs or defeats a support claim.

Case Examples

Several case law examples illustrate how Ontario courts handle dissipation of assets:

• Habibi v. Aarabi (2021 ONSC 5574): The court emphasized the need to assess the risk of asset dissipation before trial and to determine if the depletion was intended to make the respondent “judgment proof” or for legitimate purposes.
• Weber v. Merritt (2018 ONSC 7590): This case demonstrated that courts could find parties in contempt for violating non-dissipation orders, even when the orders were broadly worded to prevent depletion of assets.
• Davydov v. Kondrasheva (2012 ONCA 488): The court set out a three-prong test for finding contempt, underscoring the need for clear orders and intentional breaches.
• Frick v. Frick (2016 ONSC 359): The court highlighted that dissipation under s. 5(6)(d) of the FLA requires a significant reduction in net family property, focusing on the consequences for equalization rather than the spending spouse’s conduct.

Ontario courts take the issue of dissipation of assets seriously to ensure that the financial interests of both spouses are protected. The legal framework provided by the Family Law Act allows courts to issue non-dissipation orders, balancing the risk of asset depletion and the need for equitable distribution. Breaching these orders can lead to contempt of court charges, reinforcing the importance of compliance. Ultimately, the courts aim to prevent the unfair reduction of assets, ensuring that entitlements under the Family Law Act are preserved.

Contact Galbraith Family Law today to schedule a consultation and take the first step towards resolving your family law matter in Ontario. To schedule a consultation, please call 1-888-880-2661 or contact us online. We serve clients in and around Barrie, Newmarket, St. Catharines, and Oakville.