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Valuation and separation dates - how are these decided?

Introduction Often, I have clients who differ on the valuation / separation date with their ex-spouse. So, the question is – how are these dates decided? Also, why are these dates important? How does the Court decide on the valuation / separation date?

Importance of valuation / separation date: The importance of the valuation date is that it is typically the first step in determining whether a spouse owes an equalization payment to the other spouse and, if so, its amount. Sections 4(1) and 5(1) of the Family Law Act[7] (“the Act”) set out, respectively, what “valuation date” means and its operative impact once the spouses’ net family properties have been calculated.

4(1) “valuation date” means the earliest of the following dates: 1. The date the spouses separate and there is no reasonable prospect that they will resume cohabitation. 2. The date a divorce is granted. 3. The date the marriage is declared a nullity. 4. The date one of the spouses commences an application based on subsection 5 (3) (improvident depletion) that is subsequently granted. 5. The date before the date on which one of the spouses dies leaving the other spouse surviving.

Equalization of net family properties Divorce, etc. 5(1) When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.  R.S.O. 1990, c. F.3, s. 5 (1). [21] Sections 4(1) of the Act also defines “net family property”: section 4(2) of the Act identifies what is excluded from that calculation. 4(1) “net family property” means the value of all the property, except property described in subsection (2), that a spouse owns on the valuation date, after deducting, (a) the spouse’s debts and other liabilities, and (b) the value of property, other than a matrimonial home, that the spouse owned on the date of the marriage, after deducting the spouse’s debts and other liabilities, other than debts or liabilities related directly to the acquisition or significant improvement of a matrimonial home, calculated as of the date of the marriage;

Excluded property (2) The value of the following property that a spouse owns on the valuation date does not form part of the spouse’s net family property: 1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage. 2. Income from property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property. 3. 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 represents those damages. 4. Proceeds or a right to proceeds of a policy of life insurance, as defined under the Insurance Act, that are payable on the death of the life insured. 5. Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced. 6. Property that the spouses have agreed by a domestic contract is not to be included in the spouse’s net family property. 7. Unadjusted pensionable earnings under the Canada Pension Plan.  R.S.O. 1990, c. F.3, s. 4 (2); 2004, c. 31, Sched. 38, s. 2 (1); 2009, c. 11, s. 22 (5). In a recent case, Jayawickrema v. Jayawickrema, 2020 ONSC 2492, Justice Jarvis, at paragraph 22, succinctly identified the two issues around the valuation date as including the following: the date when the parties separated and the point in time when, as noted in s. 5(1) of the legislation, “there is no reasonable prospect that [the spouses] will resume cohabitation”.  Most often these two events are the same but where a dispute about the choice of a valuation date arises it is invariably financially driven due to the consequences of the date selected. In cases where, as in this case, the parties continued to reside under the same roof after an alleged separation event and there are, also as in this case, differences (even though modest) to their respective net family properties depending on the valuation date, caution must be exercised by the court before concluding that the marriage cannot be salvaged. In Newton v. Newton[8] Czutrin J. observed: … extreme caution should be exercised in fixing a valuation date. Parties may attempt to manipulate valuation dates to attempt to improve their financial position vis a vis a possible settlement or trial. (bolding added) [23] Separation and valuation dates are not necessarily synonymous terms. This was made clear by the Ontario Court of Appeal in Oswell v. Oswell.[9] In that case, the only issue in the appeal was the valuation date fixed by the trial judge: the husband claimed that the valuation date should be August 1984 when he said that the parties separated even though they continued to live under the same roof afterwards whereas the wife contended that the date should be March 1988 when she was served with a petition for divorce. The choice of date materially impacted the amount of the equalization payment that the husband presumptively owed. After a careful review of the evidence, the trial judge selected an earlier January 1988 date as being the valuation date, a selection that the Court of Appeal observed was “somewhat arbitrary, but the Act contemplates arbitrary decisions”.[10] Those decisions must, however, be supported by the evidence.[11]

[24] A thoughtful and comprehensive review of the general principles and indicia of “living separate and apart” and determining a valuation date was made by Chappel J. in Al-Sajee v. Tawfic.[12] In that case the parties disputed their date of separation: this impacted the determination of their net family properties. The husband claimed a date about three and a half years earlier than the wife’s date. Chappel J. thoroughly reviewed the parties’ evidence, assessed their credibility and selected the husband’s date, concluding that despite evidence that the parties, among other things, had travelled together with their children internationally and occasionally spent overnights at the other’s residence there was no resumption of cohabitation having reconciliation as its primary purpose. Relevant to the analysis in the case before this court are the following observations:

… Determining the point at which there was no reasonable prospect of resumed cohabitation requires the court to carefully consider and weigh all of the relevant factors objectively.  In this regard, Scott J. commented as follows in Hogarth v. Hogarth, 2018 ONSC 3580 (S.C.J.), at para. 9:

The court must look at the specific facts related to each situation, as the determination of the valuation date is fact driven.  The court must draw conclusions concerning the intentions of the parties with respect to their relationship. Intentions by necessity will be decided by a review of both the statements and actions of the parties and an analysis of the consistency of one with the other.[13]

What does the above mean to your case? Emotions run high during a litigation. As one of the most experienced family court Judges, Justice Czutrin notes above, the reason for varied dates is that “Parties may attempt to manipulate valuation dates to attempt to improve their financial position vis a vis a possible settlement or trial.” It is to avoid such manipulation and deceit that it is critical to have solid family law advice, to maintain thorough evidence from the start of your case to put your best foot forward at trial. The evidence needs to show that the parties were either separate or together and this evidence needs to be collected systematically. Evidence can include documents (to be authenticated); emails; text messages; social media messages and other forms of documentary or communication evidence to back up your case. Importantly, you need a good lawyer to advice you! At Shankar Law, we will do our best to assist and guide you through your legal travails in your spousal life. We work primarily in three counties: Huron, Bruce, and Grey and span several cities (Southampton, Kincardine, Goderich, Wiarton, Hanover, Dundalk, Walkerton, Meaford, Markdale, Chatsworth), through our two locations in Port Elgin and in Owen Sound. We look forward to hearing from you.

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