I am often told by my BC Family Law clients that they suspect family assets or family money have been hidden or gone missing near the end of a marriage. To avoid this problem I recommend you keep a close eye on assets, bank accounts, company financial statements and credit cards amongst other assets and liabilities. Make copies of financial documents and keep them is a safe place and act immediately if you suspect fraud against you.
In the event assets have been disposed of, a court must balance the need to fairly divide ALL of the assets at the end of a marriage against allowing days of trial time to be occupied by a roving investigation into each spouse’s spending habits throughout what may be many years of marriage. On the one hand we have a line of cases that say once hidden assets have been proven the court might punish the guilty party by awarding all the remaining assets to the innocent spouse as non-disclosure is the cancer of matrimonial law litigation. On the other hand the BC Court of Appeal has recently released the decision of Kuo v. Chu, 2009 BCCA 405 which applies a potential time and fairness limit on the investigation of past dispositions:
17] I turn to the issue of Mr. Justice Ehrcke’s refusal to make a compensation order in respect of monies allegedly dissipated by Ms. Chu before and after separation.
[18] The judge in his reasons adverted to the cross examination of Ms. Chu relating to withdrawals from her bank accounts and her inability to account for the transactions. The judge noted (at para. 99) that many of those transactions were from the years 2004 or 2005. Mr. Justice Ehrcke then noted this Court’s decision in Newson v. Newson (1986), 3 B.C.L.R. (2d) 1, 27 D.L.R. (4th) 738, where guidelines for the making of compensation orders in the face of a spouse’s dissipation of assets shortly before the end of the marriage or after separation‚Äù are discussed.
[19] Mr. Justice Ehrcke reached this conclusion (at paras. 100–102):
[100] Counsel for Mr. Kuo relies on Newson v. Newson (1986), 3 B.C.L.R. (2d) 1 (C.A.), where the court said at p. 15:
From the provisions of the Act and the above cases the following guidelines may be drawn:
(1) Where a spouse has disposed of spent potential” family assets shortly before the end of a marriage or after separation, a compensation order may be made in respect of such disposal or expenditure.
(2) Compensation orders are not made in respect of every disposal or expenditure. There must be proof of unfairness” having regard to the factors enumerated in s. 51 of the Act. For example, a disposal or expenditure that deprived the other spouse of a reasonable expectation that on the happening of the triggering event the potential family asset would be available for division, might well be unfair.
(3) Depreciation or appreciation in value of potential’ family assets, resulting from market forces between the date of separation and the triggering event, is unlikely to give rise to unfairness’.
(4) The Wagner case and the Gourlay case are cases where potential’ family assets have been disposed of or spent at or near the end of an uneasy’ marriage (but before separation). But it is only in those or similar unusual circumstances that the court ought to make compensation orders in respect of disposals or expenditures made during the marriage.
[101] I would not accede to Mr. Kuo’s argument. Pursuant to s. 56 of the Family Relations Act, a spouse’s interest in family assets vests on the occurrence of a triggering event, in this case, the s. 57 declaration made on June 22, 2007. An order for compensation should not be used improperly to defeat the effect of s. 56 with respect to the time when the interest vests. That is why in Newson, the court qualified its comments on compensation orders by saying that they could be made in respect of assets disposed of shortly before the end of a marriage‚Äù or at or near the end of an uneasy‚Äô marriage‚Äù. In the present case, transactions that occurred months or years before the separation cannot be said to have occurred at or near the end of the marriage even if, as Mr. Kuo alleges, the marriage had been rocky‚Äù for some time prior to their separation, with Ms. Chu sometimes mentioning of the possibility of a divorce.
[102] I am mindful of the caveat expressed in Newson at p. 16, that the court should not engage in a roving inquiry into the spending habits of the spouses during the marriage:
Sections 51 and 52 do not provide a trial judge with a roving commission to inquire into the spending habits of the spouses during the marriage. Moreover, sections 51 and 52 do not provide a basis for re-apportionment based on reckless, wasteful or improvident expenditures made by either of the spouses during the marriage. If the Legislature had so intended it would have made provision for such re¬apportionment in clear and explicit language. Accordingly, I hold that the argument of counsel for the appellant under this head must fail.
[20] Mr. Kuo’s central submission here is that the trial judge too narrowly focused on the fact that many of the transactions complained of predated the triggering event by many months, indeed, for some, by years. Mr. Kuo submits that the trial judge thereby effectively truncated the Newson analysis by only considering the first factor. I do not agree. While the judge certainly stressed the timing of many of the impugned transactions, that was to be expected because it was an important factor in this case. The judge expressly instructed himself on all of the Newson guidelines and I would not take his reasons as an indication that he ignored three of them by mistakenly halting his analysis after a consideration of the first factor. In concluding that he would not accede to Mr. Kuo’s argument‚Äù, the trial judge was clearly indicating that he did not find the unfairness‚Äù which lies at the heart of the considerations supporting a compensation order under the FRA.
