Unequal Division of Net Family Property

When a marriage breaks down in Ontario, one of the most important legal concerns is how property will be divided between spouses. The Family Law Act governs this process through a system called equalization of spouses’ net family properties. While the general rule is that spouses should equally share the wealth accumulated during marriage, there are specific circumstances where the court may order an unequal division of property. This departure from the standard 50-50 split is exceptional and requires meeting specific criteria under the law.

Definition of Net Family Property (“NFP”)

Before discussing unequal division, it’s important to understand what net family property means and how it’s calculated under Ontario law.

Family Law Act

The Family Law Act is the provincial legislation that governs property division in Ontario. 

The Act’s preamble states its purpose is “to recognize the equal position of spouses as individuals within marriage and to recognize marriage as a form of partnership.” This foundational principle shapes how property is treated when a marriage ends.

Section 5 of the Family Law Act establishes the framework for property division, with the default position being equal division of net family property between spouses. The subsequent subsections, especially 5(6), outline the specific circumstances where this equal division might be varied.

How is NFP Calculated?

Net family property (NFP) represents the financial growth experienced by each spouse during the marriage. To calculate it, you must follow these steps:

• Valuation Date Assets: First, determine the value of all property owned by each spouse on the “valuation date” (typically the separation date). This includes homes, vehicles, investments, businesses, pensions, bank accounts, and other assets.
• Subtract Debts and Liabilities: From this total, subtract all debts and liabilities that existed on the valuation date, such as mortgages, loans, credit card debt, and other financial obligations.
• Subtract Excluded Property: Certain property is excluded from NFP calculations, including:
• Gifts or inheritances received from third parties during the marriage
• Income derived from such gifts or inheritances where the donor specifically stated it should be excluded
• Life insurance proceeds received during the marriage
• Personal injury settlements or awards
• Property that spouses have agreed to exclude through a marriage contract
• Subtract Date of Marriage Property: Subtract the value of property owned on the date of marriage (less any debts at that time), except for the matrimonial home. This acknowledges that property brought into the marriage should remain with the original owner.
• Final Calculation: The resulting figure is that spouse’s net family property.

If the calculation results in a negative number (more debts than assets), the spouse’s NFP is deemed to be zero for equalization purposes.

Equalization Payments

Once both spouses have calculated their respective NFP, the spouse with the higher value must pay the other spouse half the difference between them. This payment is called an “equalization payment.”

For example:

• Spouse A’s NFP: $200,000
• Spouse B’s NFP: $100,000
• Difference: $100,000
• Equalization payment from Spouse A to Spouse B: $50,000

This payment ensures that both spouses share equally in the wealth accumulated during the marriage. The payment doesn’t necessarily have to be made in cash—it can be satisfied through the transfer of assets, such as giving up interest in the matrimonial home or other property.

It’s important to note that the equalization process doesn’t actually divide physical property. Instead, it divides the value of the property, leaving each spouse to keep their own assets while balancing the overall value through the equalization payment.

When can the courts award Unequal Division?

While the Family Law Act presumes an equal division of net family property, section 5(6) gives courts the discretion to award an amount that is more or less than half the difference between the spouses’ NFPs. However, this discretion is not exercised lightly—the law sets a high threshold.

The court may only vary from equal division if it finds that equalization would be “unconscionable.” This is a strong legal standard, meaning the result must be more than merely unfair—it must shock the conscience of the court.

Section 5(6) of the Family Law Act lists specific circumstances where unequal division may be considered:

• Failure to Disclose Debts: A spouse failed to disclose debts or liabilities that existed at the date of marriage. For example, if one spouse concealed significant student loans or credit card debt when entering the marriage, the court might adjust the equalization payment.
• Reckless Debt Incurrence: The debts or liabilities claimed to reduce a spouse’s NFP were incurred recklessly or in bad faith. This could include gambling losses, frivolous spending, or debts incurred with the intent to reduce equalization obligations.
• Gifts from Spouse: A disproportionate portion of one spouse’s NFP consists of gifts made by the other spouse. For instance, if Spouse A gave Spouse B expensive jewelry throughout the marriage, and these gifts form a significant part of Spouse B’s assets, the court might consider this when calculating the equalization payment.
• Intentional or Reckless Depletion: A spouse intentionally or recklessly depleted their NFP. This covers situations where a spouse deliberately wastes assets, perhaps by giving them away, selling them below market value, or spending excessively in anticipation of separation.
• Short Marriage: The amount a spouse would receive through equalization is disproportionately large in relation to a period of cohabitation less than five years. The courts recognize that in very brief marriages, a strict application of equalization principles might result in a windfall for one spouse that doesn’t reflect the reality of their short partnership.
• Disproportionate Family Debt: One spouse incurred significantly larger debts than the other for family support. If one spouse took on substantial debt to maintain the family—perhaps by supporting the family during the other spouse’s education or career advancement—the court might adjust the equalization payment.
• Written Non-Domestic Agreement: The spouses have a written agreement that isn’t a formal domestic contract but addresses property division.
• Other Property-Related Circumstances: Any other circumstance relating to the acquisition, disposition, preservation, maintenance, or improvement of property. This is a catch-all provision that allows courts to consider unique situations not specifically listed.

The case of Booth v. Bilek (2021 ONCA 128) provides an instructive example of when courts might award an unequal division. In this case, the Ontario Court of Appeal upheld a trial judge’s decision to reduce the equalization payment to just 10% of what would normally be required. The court considered three factors: the marriage was relatively short (about four years), one spouse had received significant gifts from the other that formed part of their NFP, and the difference in NFP came primarily from investments made by one spouse independently of the marriage.

It’s important to note that when a marriage is 5 years or longer, the Family Law Act is clear that an unequal distribution of the parties’ NFP only occurs when it would be “unconscionable” to divide it equally. The courts set a very high bar for finding unconscionability. In Serra v. Serra (2009 ONCA 105), the Ontario Court of Appeal emphasized that the threshold for unconscionability is not merely unfairness, but a result that “shocks the conscience of the court.” This underscores the strong presumption in favor of equal division.

Special Considerations in Unequal Division Cases

When courts evaluate claims for unequal division of property, several special considerations come into play that can significantly impact the outcome.

Burden of Proof

The spouse seeking an unequal division bears the burden of proving that equal division would be unconscionable. This is not a light burden—courts require substantial evidence that one of the circumstances listed in section 5(6) exists and that the unconscionability threshold is met.

Evidence might include financial records, witness testimony, expert valuations, or documentation of financial misconduct. The stronger and more detailed the evidence, the more likely a court will consider deviating from the equal division presumption.

Judicial Discretion and Proportionality

If a court determines that unequal division is warranted, it still must decide how much to deviate from the standard 50-50 split. The Act doesn’t provide a formula for this—it’s left to judicial discretion.

Courts generally take a proportional approach, considering:

• The severity of the conduct or circumstances justifying unequal division
• The financial impact of that conduct or circumstance
• The overall fairness of the adjusted division

In some cases, like Booth v. Bilek, courts have reduced equalization payments to a small percentage of the original amount. In others, they might make more modest adjustments. Each case is decided on its unique facts.

Short Marriages and the Five-Year Rule

Section 5(6)(e) of the Family Law Act specifically identifies marriages lasting less than five years as potentially warranting unequal division. This provision recognizes that brief marriages may not establish the kind of economic partnership that the equalization regime assumes.

When evaluating short marriages, courts consider:

• The exact length of the marriage
• Contributions made by each spouse during that time
• Assets brought into the marriage versus those acquired during marriage
• Whether there was any significant financial integration

Courts don’t automatically reduce equalization payments for short marriages—they must still find that equal division would be unconscionable. However, when combined with other factors, a short marriage can strengthen the case for unequal division.

Frequently Asked Questions

Can I get an unequal division if my spouse cheated on me?

No. Ontario’s family law system is “no-fault,” meaning that moral conduct during the marriage, including infidelity, is generally not relevant to property division. Unequal division is only considered based on the economic factors listed in section 5(6) of the Family Law Act, not because of marital misconduct unrelated to finances.

How do I prove my spouse intentionally depleted assets?

To establish intentional depletion, you typically need evidence showing:

• Unusual financial transactions shortly before or after separation
• Transfers of assets to third parties without receiving fair value
• Creation of debts without corresponding benefits to the family
• Attempts to hide assets or financial information

Financial records, bank statements, property transfer documents, and testimony from financial professionals can all help establish a pattern of deliberate depletion. It’s advisable to work with a lawyer experienced in family law and divorce to gather and present this evidence effectively.

Can a marriage contract override the unequal division provisions?

Yes. The Family Law Act generally allows spouses to make their own arrangements through domestic contracts, including marriage contracts and separation agreements. If you and your spouse have a valid marriage contract that specifies how property will be divided in case of separation, those terms will usually prevail over the statutory provisions about equal or unequal division.

However, a court can set aside provisions in a domestic contract in certain circumstances, such as if one spouse failed to disclose significant assets or debts, if there was duress in signing the agreement, or if the terms are unconscionable.

 

Does unequal division apply to the matrimonial home?

Although the special status of the matrimonial home  under the Family Law Act continues to apply in cases of unequal division, there are certain circumstances where the court may order the unequal division of the matrimonial home as well. 

If the equal division of the matrimonial home would be unconscionable, the court may order an unequal division of the matrimonial home but this is extremely rare.

It must be noted however, that the unequal division of the matrimonial home is uncommon and holds a high threshold. In consideration of the special status of the matrimonial home, the court will look at the circumstances of each case, the evidence each party provides, and may only grant unequal division of the matrimonial home if doing so aligns with the law.

 

How do inheritance and gifts affect unequal division?

While inheritances and gifts received during marriage are generally excluded from NFP calculations, they can become relevant to unequal division claims in several ways:

• If one spouse gave substantial gifts to the other during the marriage, a court might consider this when deciding if equal division would be unconscionable.
• If an inheritance or gift was improperly included in NFP calculations (perhaps because it was commingled with family assets), a court might address this through unequal division rather than re-categorizing the asset.
• If excluded property was depleted intentionally by one spouse to prevent the other from benefiting from it indirectly, a court might consider this under section 5(6)(d) of the Family Law Act.

Navigating Unequal Division Claims

While Ontario family law presumes equal division of property after divorce, the courts can order unequal division when circumstances make a 50-50 split unconscionable. This exception applies in specific situations outlined in section 5(6) of the Family Law Act, such as financial misconduct, short marriages with disproportionate outcomes, or other property-related circumstances that would make equal division unjust.

Successfully arguing for unequal division requires meeting a high legal threshold and providing compelling evidence. If you believe your situation warrants deviation from the standard equalization process, consulting with an experienced family law professional at Alves Law can help you understand your options and effectively present your case.

Property division decisions can have long-lasting financial consequences. Seeking proper legal guidance ensures that your rights are protected as you navigate this complex aspect of family law.