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Hidden or Disposed of Family Property Lawyers at MacLean Law help you stop and compensation for transferred, disposed of or Hidden Family Property. Hiring senior family lawyers with a track record of proving the existence and location of missing millions pays off in these difficult cases.

MacLean Law’s Hidden or Disposed of Family Property Lawyers have established a number of key precedents other lawyers and family client’s now rely upon for:

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What happens if your spouse hides some of his assets, or sells them, or closes a company and starts a new one, after separation?    We have dealt with these issues in many cases, including but not limited to family law cases where the parties are Asian.   In this article, senior lawyer Jonathan Wai of MacLean Law’s Vancouver office discusses a recent case that looks at Compensation for Transferred, Disposed of or Hidden Family Property.

Hidden Or Disposed Family Property Lawyers
Jonathan Wai, Hidden Or Disposed Of Family Property Lawyer

In the recent case of Stronks v. Stronks, 2022 BCSC 1966, the court was dealing with a property division case where the parties had been married for 19 years.  Generally, after a marriage of such length, there is a good chance of family property being divided equally, subject to exclusions.   

Further, in this case, there was a company created by the husband after separation.   Assets created after separation are not normally divided between the parties, unless it was created with assets that are family assets existing at the time of separation.

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In this case, the court noted the wife’s position was exactly that:

[8]          Ms. Warren [the wife] says that she and Mr. Stronks were joint shareholders in the Old Company. A few months after their separation in 2019, Mr. Stronks withdrew large amounts of cash from the Old Company account and redirected clients to pay receivables to the New Company. He took all the Old Company’s assets, inventory and its customer base to the New Company. Ms. Warren therefore seeks remedies for her losses, including tracing, accounting and trust, or (as argued in final submissions) unequal division of family assets.

[9]          Mr. Stronks similarly alleges that funds were, without his knowledge or consent, withdrawn by Ms. Warren from business and personal accounts. These withdrawals need to be assessed and accounted for in any division of assets.

[10]       A major issue in this matter is assessing appropriate compensation for Ms. Warren, who was excluded from the Old Company in which she was a joint shareholder and from which she reasonably expected to receive a portion of its profits for 2020 and 2021. Due to the actions of Mr. Stronks, the Old Company has essentially no value. Instead, Ms. Warren has been left with significant personal debt and receives no income from the Old Company whatsoever.

As such, the wife was asking the court for Compensation for Transferred, Disposed of or Hidden Family Property.

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In deciding whether that was justified, the court considered the options under the Family Law Act

Giving effect to property division

97   (1) For the purposes of giving effect to a division of property or family debt under this Part or Part 6 [Pension Division], the Supreme Court may

(a) determine any matter respecting the ownership, right of possession, or division of the property or family debt, and

(b) … make any order that is necessary, reasonable or ancillary to give effect to the division.

(2) Without limiting subsection (1), the Supreme Court may make an order to do one or more of the following:

(c) require a spouse to pay compensation to the other spouse if property has been disposed of, transferred, converted, or exchanged into another form, or for the purpose of dividing the property;

The court further noted prior cases:

[25]An order for compensation under s. 97 requires a finding of “significant unfairness” under s. 87 or s. 95: M.A.T. v. K.P.T., 2017 BCSC 1603 at para. 49; see also Newson at 18.

[26]Compensation under FLA, s. 97(2) is a suitable remedy where a spouse has improperly appropriated funds or assets from a business that is considered family property: Brody v. Brody, 2019 BCSC 1950 at paras. 34, 95. While the parties did not reference any cases where courts have actually granted this remedy with regards to a family business under the FLA, counsel for Ms. Warren provided the Court with several cases decided under the previous Act where spouses received compensation for companies dissipated by the other spouse.

[27]In Rohanni v. Rohanni, 2004 BCCA 605, the Court approved a compensation order and an order for the payment of dividends to address a situation where the appellant moved assets out of an incorporated company to deprive his former spouse of their benefit. The factual matrix was similar to that of the present case: like the parties in Rohanni,Ms. Warren is seeking division of property where a company represented a significant portion of the family property, and Mr. Stronks’s “prior history provide[s] ample reason … to conclude that [he] would frustrate payment by any available means. He ha[s] attempted to move assets out of [the Old Company] through fraudulent conveyances to avoid the wife’s claims”: Rohanni at para. 14.

[28]Similarly, in Valastiak v. Valastiak, 2010 BCCA 71, the Court ordered a compensation order where the defendant substantially depleted a business of its assets, and thereby diminished the value of his former spouse’s share equity in the company: para. 52.

The court considered the evidence, and decided that:

[65]       Mr. Stronks acted improperly when he transferred significant assets, receivables and the client base from the Old Company to the New Company. The Old Company was a successful venture owned by two equal shareholders, Ms. Warren and Mr. Stronks. Each was a director, and the company could only act according to their joint resolutions. A single director could not unilaterally dispose of or transfer assets, and none of the transfers of wealth from the Old Company were jointly authorized.

[66]       Among other remedies, Ms. Warren seeks a remedy of tracing pursuant to FLA, s. 84(1)(b), which defines family property as inclusive of property acquired by one spouse after separation that is derived from family property existing on the date of separation. There is no doubt that the Old Company was family property, nor is there any doubt that the New Company is largely derived from the Old Company’s assets, receivables and client base, which were transferred to it by Mr. Stronks.

[67]       The tracing remedy is thus applicable to the New Company for the year 2021, and the valuation date is the date of trial: FLA, s. 87(b)(ii). It is clear that Mr. Stronks’ misconduct has deprived Ms. Warren not only of the dividends on her shares for the year 2020 and 2021, but also the value of her shares in the company itself.

The court noted that it was possible to declare that the wife have a 50% interest in the new company.  However, in this case:

[68]       … I see little utility in doing so based on Mr. Stronks’ pattern of conduct concerning the Old Company in 2019, and his complete disregard of the requirements of operating an incorporated company.

[69]       I conclude rather, as argued by counsel for Ms. Warren, that pursuant to FLA, s. 97(2)(c), the Court should order Mr. Stronks to pay compensation to Ms. Warren for having dissipated or converted family property.

In terms of the amount of compensation, the court noted that it could look to what the value would have been, but for the actions of the husband, and compensate the wife accordingly:

[70]        In terms of valuing that compensation, Ms. Warren argues that, but for Mr. Stronks misconduct, the value of her shares in the Old Company today would be at least $230,000.00 …

The court then stated the amount of compensation, after equal division:

[73]       I conclude that an equal division of property is appropriate. To ensure an equal division of property occurs, I conclude Ms. Warren is entitled to the sole possession of the family home along with a number of other assets outlined below and Mr. Stronks must pay to Ms. Warren $230,685.46 to affect this division (line 18).

Given the above, the court further made provision for equal division of joint debts as they existed at separation (departing from the normal rule that they are divided as at the values at trial), and for further compensation to the wife for servicing family debt after separation and for improper transfers of funds from joint debts after separation.

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This case is a relatively clear example of a party creating a new company after separation, and draining the resources of a family company that was created prior to separation.   Such conduct can attract compensation orders as above, and we have sought and obtained such relief in many cases.

We note that this does not necessarily mean that new companies cannot be created after separation.  That is particularly where our client is the business owner/operator, and new business opportunities arise or there are other reasons for a new corporation.   Generally, we would advise clients on their obligation to disclose, seek consent, abide by any s.91 financial restraining Order, and moreover document what family assets were used (if any), knowing they will likely be “traced” and thus divided by agreement or court order.    

The point of the above case is that parties should not create such new companies and drain family assets, to avoid their legal obligations.

Call Us Early To Stop You From Losing Thousands

In any case, as you can see, dealing with Compensation for Transferred, Disposed of or Hidden Family Property can be complex and carry significant consequences.  We at MacLean Law, in all of our offices Greater Vancouver, Victoria, Kelowna, Calgary and Toronto remain open by telephone, video and email to advise you regarding your Compensation for Transferred, Disposed of or Hidden Family Property case.

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Hire lawyers like us who set the leading precedents in this tricky area.