Law Times

Law Times • November 23, 2015 Page 7 www.lawtimesnews.com COMMENT Time to amend the law to treat matrimonial homes as joint asset BY DAVID TOBIN For Law Times here there is a question of ownership of a matrimonial home, a non-titled spouse may be in a better position than the ti- tled spouse to recover the greatest value of the matrimonial home, an issue the government should address. The Ontario Court of Appeal's decision in Korman v. Korman makes it easier for a non-titled spouse to successfully claim a resulting trust in a matrimonial home when there is a post-separation increase in value of the home. However, the court was silent on the is- sue of resulting trusts when there is a decrease in value in the matrimonial home. The government should amend the Family Law Act to treat the matrimonial home as a joint asset to promote just results for sepa- rating spouses and mitigate against the advantageous position of the non-titled spouse. In the equalization process, the two dates that are important for determining a person's net family prop- erty are the date of marriage and the date of separation. If the spouses hold the assets jointly, they divide the value as of the date when they achieve an agreement or order regarding the division. The Ontario Court of Appeal's decision in Korman reinforces what many family law lawyers already know: The existence of a presumption of a resulting trust can allow a person who does not own the matrimonial home to benefit from the increase in its value between the date of separation and trial. The existence of this presump- tion gives the non-titled spouse a windfall with respect to the post-separation value of the matrimonial home. The windfall is a result of the act because where there is a post-separation increase, non-titled spouses will seek a resulting trust that entitles them to the increase. But where there is a post-separation decrease in value, they will not seek a resulting trust, thereby entitling them to the greater value as of the date of separation. In Korman, the wife held sole title to the matrimonial home. The couple originally bought the home with the proceeds from the sale of the parties' jointly owned home, joint savings, and monetary gifts from their parents. The parties jointly made the decision to register title solely in the wife's name. They made that decision to protect the home from the husband's potential credi- tors. At trial, the wife stated the parties placed title to the matrimonial home in her name alone to protect it from potential claims by creditors arising out of the husband's employment. She argued that since she was the sole registered owner of the matrimonial home, she alone was entitled to any post-separation increase in its value. The trial judge held that the husband did not have a resulting trust interest in the matrimonial home and thus was not entitled to the post-separation increase in its value. Therefore, the relevant date on which to determine the value of the matrimonial home was the date of separation. The Ontario Court of Appeal overturned the trial judge's decision largely due to the fact that s. 14 of the Family Law Act affirms the presumption of a resulting trust in determining questions of ownership between spouses in the context of gratuitous property transfers. In simple terms, it was up to the wife to prove the mat- rimonial home was a gift to her. Absent proof that the husband intended to provide the wife with a gift, the husband had a resulting trust interest equal to his fi- nancial contribution to the home. A resulting trust in a matrimonial home means the court recognizes a non-titled person's legal interest in the home as of the date of purchase. It is as though the non-titled person had a legal interest in the home from Day 1. The effect of the ruling is that where title to a home is in one party's name and there is no clear evidence of any intent to gift the home by the non-titled spouse, the non-owning party can assert a trust claim in the matri- monial home, thereby entitling him or her to the post- separation increase in the matrimonial home. Given the boom in the real estate market in Toronto, the six- year limitation period to make a claim for equalization, and the length of time it takes for family law matters to make it to trial, it is easy to foresee that parties could be fighting over hundreds of thousands of dollars. On its face, the legislation seems fair. Section 14 of the act presumes a resulting trust in determining ques- tions of ownership between spouses. The presumption of resulting trust is one that each party retains an in- terest proportionate to his or her contribution as pur- chaser. The presumption effectively directs the court to assume couples intend to share their assets unless one of them can prove a gift. The problem lies in the fact that relief from a declaration of a resulting trust is a personal right. The court cannot impose it on someone. It seems fair that a spouse who contributed to the ac- quisition of the home should benefit from the increase in the value after separation, but what happens if there is a decrease? Will the spouse have to share in the reduced value? The short answer as the law stands now is no. That puts the non-titled spouse in a windfall po- sition. If the value of the matrimonial home has in- creased, the non-titled spouse will assert a claim for a resulting trust in it. If it decreased, the spouse will not assert the claim and will be entitled to the value as of the valuation date. Although it is hard to imagine a scenario where there is a decrease in today's real estate market, it is not beyond the realm of possibility. I agree with lawyer Phil Epstein when he said re- cently that it "is time for the Family Law Act to be amended to treat the matrimonial home as a joint asset as it was in the previous statute and end this expensive legal wrangling." When the issue of entitlement to the increase in post- separation value of the matrimonial home arises, the parties have to retain experts to appraise it on valuation day and as of the trial. Their lawyers will have to lead evidence as to the admissibility of the expert evidence and the reliability of it. Their lawyers will have to cross- examine the other party's experts. They will have to lead evidence related to the parties' financial contribution to the acquisition of the home and convince the court of the percentage interest it should award them. That exer- cise uses up lawyers' and judicial time and ends up cost- ing the parties a significant amount of money. Treating the matrimonial home as a joint asset will allow for an easy determination of each party's interest in it. If circumstances arise whereby it would be uncon- scionable to split the value of the home evenly, a person could seek an unequal division of net family property pursuant to s. 5(6) of the act. For now, it would appear wise for lawyers who are representing non-titled spouses in matrimonial mat- ters to advance a trust claim in the matrimonial home in anticipation of ever-increasing real estate prices. LT uDavid Tobin is a Toronto lawyer who practises family law. Employers' aggressive defence tactics come with hefty price tags BY DANIEL LUBLIN AND JONQUILLE PAK For Law Times hen companies terminate someone for misconduct, the employee is not entitled to compensation. This is nothing new as just cause for termination is usually a complete defence to any allegation of wrongful dismissal. But what about employers that advance misconduct allegations with little or nothing to back them up, often in an effort to dissuade people from proceeding with po- tential cases? In the context of wrongful dismissal law- suits, that is an all-too-familiar defence tactic specifically designed to frustrate a former employee's ability to seek recourse through the courts. But sometimes, it can back- fire. When employers assert bogus misconduct allegations, there is a practical effect of turning what could otherwise be a relatively simple and efficient litigation process into a very expensive, drawn-out, and more complicated case that will possibly necessitate a trial. It is an access to jus- tice issue. Many individuals are simply not in a position to pay for the trench-warfare type of litigation associated with just-cause allegations and often, from a cost-benefit perspective, the quantum of damages on the line may not justify financing that type of case. The practical effect is that individuals shy away from seeking their severance entitlements through the courts and often take less than they should receive. The defence strategy of exaggerating misconduct al- legations also f lies in the face of the decision in Hryniak v. Mauldin in which the Supreme Court strongly endorsed the summary judgment process as an expeditious and less expensive means to achieve a just result. The complexities and cost of a trial are usually unnecessary in most wrongful dismissal cases. If an em- ployer attempts to frustrate access to the summary judg- ment process by artificially making it a more complex case, it should come as no surprise that the courts will impose harsh penalties to discourage that tactic. Now, there are at least two recent precedents where judges have come down hard on employers that have failed to prove their defences. In Tetra Consulting v. Continental Bank, Justice Ed- ward Morgan sanctioned an employer for advancing baseless just-cause allegations by awarding substantial indemnity costs. The plaintiff, Lewis Cassar, sued the Continental Bank of Canada for wrongful dismissal damages after it terminated him when the financing for his project fell through. Although it initially offered him severance, once he sued, the bank alleged there was cause for his dismissal due to a performance concern. The problem was that the bank could not back this de- fence up with any facts. In fact, just prior to termination, the bank was in the process of drafting up an offer for the plaintiff 's continued employment. It was not until the start of the hearing that the bank abandoned its just- cause allegation. Morgan found the bank had abandoned its just-cause defence because there was "not a stitch of evidence to support it." He also found the just-cause allegation was "nothing more than a cynical tactic deployed by the Bank to discourage this legal action." In Morgan's view, the bank raised the cause allegation for no other purpose than to make the plaintiff 's case more difficult than it should have been and increase his cost burden. In the end, the plaintiff 's claim was success- ful and the court ordered the bank to pay elevated legal costs. The Tetra decision comes on the heels of the ruling in Gordon v. Altus, in which the court ordered an employer to pay $100,000 in punitive damages on account of un- founded allegations of just cause that it could not prove at the trial. The court found some of the allegations were a "red herring" and the defendant had put together a process to justify its actions after the fact. The judge admonished the employer's tactics as "cheap," "mean," and "harsh" and ordered it to pay punitive damages. Both cases represent very costly lessons for employ- ers. At the early stage of the litigation process and even prior to it, management counsel should look closely at any misconduct allegations to determine whether there is any merit in pursuing that angle as a defensive strategy at all, particularly in light of the generally high standard of proving that cause for dismissal actually existed. In the absence of credible evidence substantiating the de- fence, employers should proceed cautiously when raising tactical allegations in dismissal lawsuits or risk seeing el- evated cost awards or other sanctions. LT uDaniel Lublin and Jonquille Pak are senior employment lawyers at Whitten & Lublin in Toronto who represent both employees and employers in workplace disputes. Lub- lin was counsel to the plaintiff in Tetra Consulting v. Continental Bank. W W u SPEAKER'S CORNER

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