Married spouses share in any increase in the value of family property between the date of marriage and the date of separation.  When the marriage ends, the spouse with the lower Net Family Property receives a payment for one-half the difference in the two.  That means an equalization payment.
The debt that a spouse brings into the marriage will impact on the spouse’s equalization entitlement.
What happens when the face amount of the debt is greater than its “real value”?  Should a court reduce the face amount of the debt to reflect the likelihood that it will remain unpaid?  The Ontario Court of Appeal was recently confronted with that issue for a debt owing on the date of marriage.
In the case of Zavarella v. Zavarella, the Court of Appeal discounted the wife’s date of marriage debt to zero.  The wife owed about $60,000.00 on the date of marriage.  She had made an assignment into bankruptcy a few weeks before the date of marriage.  Under the Bankruptcy and Insolvency Act, the debt remained owing until the wife’s discharge from bankruptcy.  Given the wife’s assignment into bankruptcy just before the marriage, there was no prospect of payment of the debt.  The Court discounted the debt to zero.
The Zavarella case is consistent with the Court’s approach of discounting of family debts based on likelihood of repayment.  In the past, the Court of Appeal has discounted debts owed to family members because they are not likely to enforce them.  The Court has also allowed parties to discount assets based on the contingent costs of realizing the asset.  The court has allowed parties’ to reduce the value of those assets by the anticipated legal fees on the date of separation.
In each case, the Court has used a prospective approach rather than hindsight in valuing the debt.

I was recently  involved in a case where the court awarded costs for “unbundled legal services” to a self-represented litigant.  The case is Jordan v. Stewart.  The decision on the issue of costs is set out in supplementary reasons.

After succeeding at trial, the court allowed the acting in person mother her costs of $90,000.00.  That sum included  accounts from lawyers who had provided ‘unbundled legal services” of about $65,000.00 at different parts of the proceeding.

In addition to allowing all of the mother’s lawyer’s fees,  the Court allowed costs for part of her preparation for trial.  Her claims for loss of income and a counsel fee for herself were not accepted by the Court.

The $90,000.00 was small compared to the father’s legal fees.  Those exceeded $400,000.00.

The  case took almost two weeks of trial followed by a full day costs hearing.  The trial was a David and Goliath battle, featuring a self-represented mother up against a team of 3 lawyers and a law clerk.

Both parties claimed to be the successful party.  After a full day of argument the Court delivered supplementary written reasons finding the mother was the successful party.  The presiding judge said he would have awarded the mother costs even if she had not been the successful party.  The Court found the father was motivated by a desire to do harm the mother and the child in spending vast sums of money well in excess of the economic benefit to him.

Justice Czutrin accepted the mother’s claim for the costs of obtaining legal services for part of the case, known as “unbundled legal services” and directed that she receive costs sufficient to pay her lawyers’ accounts.

Justice Czutrin noted my involvement as follows:

“Mr. MacLennan also prepared a Bill of Costs for work he did for the mother from September 7, 2012 to April 3, 2013 totaling $15,520.56. The description of his services includes trial preparation, discussion of issues that arose during the hearing before me, and discussions .. raised by father’s counsel.”

The decision is significant given recent changes to the Law Society’s by-laws allowing lawyers to provide legal services for part of proceedings.

I recently came across a study about the impact of the recession on family life, The State of our Unions, Marriage in America 2009: Money and Marriage. The study was released by the University of Virginia (click here for a PDF file).

The author of the stufy suggests that economic stress has made American marriages slightly more stable overall, as couples develop a “new appreciation for the economic and social support that marriage can provide in tough times”. Is this a nice way of saying that people are staying together for their creditors? How much fun can that be?

Having suggested that the recession might not be so devastating to American families, the study nonetheless expresses concern that the recession’s job losses have been heavily concentrated among working class men, who may not be equipped to make a smooth adjustment to playing stay-at-home dads while their wives support the family. So perhaps things aren’t so rosy for American families, after all.

Furthermore, although divorce rates in the U.S. are down slightly, the decrease can be explained by falling marriage rates. This is consistent with a trend we have seen in Canada over the past couple of decades away from marriage to cohabitation. Unfortunately, Canadian social studies suggest that families without the benefit of marriage and its commitment are at higher risk for separation.

The reality is that a financial stress like a recession places all families at risk.