Determining A Couple’s Net Family Property After Separation

After a separation, determining a couple’s net family property — based on what is and is not excluded property — can be complex.

One area where practitioners and the courts have struggled to find clarity is with regards to how personal injury settlements, for injuries that occurred during the marriage, should be considered.

Property & The Family Law Act

The Family Law Act provides that excluded property includes the value of:

“Damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represent those damages.”

At first glance, that would appear to make the issue simple, and that the entire value of the settlement should be excluded. However, courts have not taken this section at face value in later decisions.

Precedents

Originally, courts began interpreting this subsection to mean that all heads of damages were excluded. In de Champlain v. de Champlain the court found that the husband had unfairly depleted the wife’s excluded property by spending large chunks of her personal injury settlement and they restrained him from being able to further access the funds.

Mitler v. Mitler expanded upon the legislature’s rationale at the time by explaining that the parties could not be obligated to share damages for things that are completely personal to them that cannot be shared with another person, no matter how close their relationship is.

The line of reasoning from Mitler later led the courts to decline to follow de Champlain’s lead.

Looking to Shaver v. Shaver the court found that because the injured party suffered lost wages that would have been shared had the parties remained married, the wages could be shared on separation. In this instance, the loss of wages did not fall under the category of something that was so personal that it could not be shared with another person.

It is key to look at the different heads of damages awarded in a personal injury settlement when assessing which parts are excluded from net family property calculations.

Later decisions have stated that damages for loss of competitiveness and compensation for retraining and rehabilitation are not shareable.

Another key factor to consider is when the lost wages are the subject of compensation that would have been received. Vandra v. Vandra further broke down the ‘lost wages’ category and held that only compensation for lost wages before the date of separation were eligible property to be shared as part of the net family property. This has ruling has been followed in later decisions.

Loss of income can be a difficult matter to assess as most personal injury settlements do not set exact dates which the loss of income damages are supposed to address. This can require actuarial evidence of the breakdown in funds before a decision can be reached.

Conclusion

It is important to note that these decisions do not mean that the settlement is entirely excluded. The income replacement funds can be considered an income stream for spousal support purposes.

Although there appears to be a general move towards this approach there have been outlier decisions over the years that have fully excluded all damages, such as Prince v. Princeand Lukovnjak v. Weir.

Unfortunately, none of these decisions have reached the point of being tested at the Ontario Court of Appeal, so neither position has the weight of stare decisis behind it in Ontario. This leaves some ambiguity as to which method is correct until the Court of Appeal has an opportunity to rule on the issue.

If you are in need of further assistance pertaining to family law, contact us to speak to one of our family law lawyers.