- May 13, 2020
- Posted by: Tricia Wong
- Categories: FDR Updates, FDRIO News
As the Supreme Court suggested in Leskun v. Leskun, at para. 34, nondisclosure is the cancer of family law. This is an apt metaphor. Nondisclosure metastasizes and impacts all participants in the family law process. Lawyers for recipients cannot adequately advise their clients, while lawyers for payors become unwitting participants in a fraud on the court. Judges cannot correctly guide the parties to a fair resolution at family law conferences and cannot make a proper decision at trial. Payees are forced to accept an arbitrary amount of support unilaterally determined by the payor. Children must make do with less. All this to avoid legal obligations, which have been calculated to be a fair quantification of the payor’s required financial contribution. In sum, nondisclosure is antithetical to the policy animating the family law regime and to the processes that have been carefully designed to achieve those policy goals.
– Leitch v. Novac, 2020 ONCA 257~44 (CanLII)
In all of these circumstances, the appellant has a poor platform from which to launch an attack against the trial judge’s conclusion regarding his assets and liabilities. As Fraser J. commented in Cunha v. Cunha at para. 9:
Non-disclosure of assets is the cancer of matrimonial property litigation. It discourages settlement or promotes settlements which are inadequate. It increases the time and expense of litigation. The prolonged stress of unnecessary battle may lead weary and drained women simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of a reasonably-based suspicion that justice was not done.
– Leskun v. Leskun,2006 SCC 25~34 (CanlII)
Non‑disclosure also has a tendency to deprive children of proper support.
– The balance of the quote from Cunha v. Cunha, 1994 CanLII 3195~9 (BC SC)
The term “cancer” evokes an immediate visceral, negative reaction. In Leitch, the court used the term as Simon and Garfunkel did: Silence like a cancer grows. In Cuhna, non-disclosure is not just devastating, it hijacks the system and eats it from within. There is good reason we have been using this metaphor for over 25 years now.
But with greatest respect, we need to expand away from it as a guiding principle. In Part (a) of this paper, I explain how the term is self-limiting and, without parsing it too much, self-fulfilling. In Part (b), I provide a completely different analogy. In Part (c), some suggested solutions.
- The problem of using Cancer as our guiding model
- The “cancer” metaphor looks only at the effects, not the causes
In Cuhna, the offending party literally folded his hands and said he was not disclosing his assets. In Leskun, the party had a spotty employment history but significant cash, which he moved into a business and claimed to have no “means” to pay support. In Leitch, the offending conduct was post-separation structuring of a corporate sale to redesignate income from personal income to a loan from another, related, co-owner.
In all of the three cases above, the conduct is post separation and deliberate. The worst-case of family law. But to the typical non-disclosing party, the non-disclosure starts well before ever coming to court, before filling out a financial statement, before the breakdown of a relationship or even the relationship itself. The typical problems, especially for income determination (which often impacts business valuation as well), start with the payor not reporting gross income or misreporting eligible expenses to CRA, and at the extreme, complex corporate or trust arrangements where income never reaches line 150(00) of the party’s tax return.
2. The “cancer” analogy is court system-centric, not user-centric
Both Cuhna and Leitch rightly note that non-disclosure impacts many people in the family law process, from judges to the (non-party) children for whom income determination determines support they receive. But why does a party “non-disclose”? I’d argue there are three reasons:
(1) They are maliciously motivated, whether in attempting to minimize their obligations, inflict harm on the other party, or are just purposefully obtuse to show who is in control.
(2) They don’t know how to disclose.
(3) The current family law system doesn’t ask them to discloseuntil after they provide their initial disclosure.
Look at any financial statement:
- Consider how much litigation has been created from the bottom of page 2 (income) where there is a place to put “Monthly amount before expenses” and then “Amount Received/Month”. What is anyone expected to do here? They copy what they told CRA.
- Consider the same from “Business Interests”, where all that is asked is the name and percentage interest. What is anyone expected to do here? They write what is asked.
From the lawyer’s perspective, telling a client to write any more than is asked is grounds for a Lawpro claim.
From the court’s perspective, there is no problem until the other party makes it a problem.
From the other party’s perspective, they now have to go through the trouble of pursuing “the truth”.
From the user’s perspective, on account of (3), they don’t understand why they are treated as (1).
Consider the unemployed on a motion to change. The form asks “unemployed – since” and, rightly, asks for any EI and record of employment (ROE) documentation. A close look at Box 16 of the ROE provides a partial glimpse into why the person’s employment ended, but the heart of litigation on such motions to change is on the story of the end of employment, the prospects of re-employment in context of the party’s life and attempts at re-employment. Where is that asked, at all, at first instance? All the while, we wonder why motions to change are worse than initial applications.
3. The “cancer” analogy implies there is no solution
I came upon an academic paper analyzing the use of cancer as a metaphor. The metaphor “emphasizes danger, damage, otherness, aberration and uncontrollability, and potentially elicits negative emotional reactions”. Importantly:
Where the metaphor is extended locally, the cancer is mainly described as growing, spreading, and eating away, while any metaphorical mentions of cancer treatment are limited to expressions such as excision, cutting, and removing. References to cure tend to be negated or otherwise nonfactual.
We have completely bought into this worldview. Non-disclosure is inevitable and our answer is, progressively: costs, imputation, striking pleadings and now the tort of conspiracy. In short, surgery and chemotherapy, at an unsolvable disease.
But, continuing the stretched analogy, the treatment can have consequences as negative as the disease. In the courtroom, consider the stream of post-imputation motion to change cases arising from Trang v.Trang, or the lengthy list of Court of Appeals decisions on striking pleadings.
Outside the courtroom is the real elephant in the room. Now, in almost every contested case, especially motions to change, the issue of disclosure has become its own issue to fight over. That is because we have learned to appreciate the power of a negative inference and the ability of “disclosure” to change focus away from the actual substantive issues. The energy put into cross-disclosure disputes, most obvious in court but more insidious in out-of-court negotiations and mediations is, to attach another metaphor, real gum in the machinery.
b. A completely different analogy
In 2007, the mayor of a fictional city we’ll call “Toronto” instituted a new waste disposal program. You would now separate garbage (black bins) from recycling (blue bins) and compostable food items (green bins). To subsidize and encourage the use of recycling and composting, city council instituted a levy based on the size of your garbage bin: the larger the bin, the higher the cost. At the same time, a household or building was allowed to have unlimited blue and green bins. (To sell the new program, city council also instituted a rebate system).
Around town there are six people who are very displeased by these new developments. They considered how to avoid (and perhaps profit from) from the new levy. Each, on their own accord, arrived at the conclusion that they should have the smallest/cheapest black bin allowed, and figure out a way to hide the difference of their actual garbage output.
Alice decided that she would use her barbeque pit in the backyard to burn her garbage. Dirty, but effective. Over time, she has had to hide the ashes and built extension after extension on her house to cover them.
Benjamin was a bit more tricky. He ordered 10 super large blue recycling bins. Expertly, he mixed his garbage with recycling so that no one was the wiser. He is very proud that despite the few close calls with the city bylaw enforcement officer, he has never had a fine.
Cheryl has a retail business on the other side of town. She loads her garbage every morning and throws the garbage in the business dumpster behind her office where it is privately picked up. She also has a separate recycling dumpster and mixes her garbage in there too.
Daniel’s parents have been providing him with garbage tags, which ordinarily cost extra, for those bags that don’t fit into the bin. When asked (and depending who asks), he says the tags are a gift from his parents or that they are borrowed from them and his parents are expecting repayment.
Eunice simply brings over her garbage to her parents’ bins every night. Her parents, who are in their 90s, only create between themselves one bag every two weeks, but apparently have a need for the largest bin available. Eunice pays them the difference by having her company lawn crew mow their lawn and clear their snow at no cost, all of which well outstrips the additional cost of the bin.
Frank lives with Cheryl and claims he doesn’t have any garbage at all.
On account of all the people paying only for small garbage bins, the mayor complains that there’s not enough revenue. Worse, the head of waste disposal has publicly declared that the garbage found within recycling is a crisis that is a “cancer on the system”. City council has decided to pay for more bylaw officers, impose higher fines for hiding garbage in recycling, and threaten extra fines to family or neighbours who share bag tags or garbage bin space. Oddly, these draconian laws have not helped solve the growing problem.
The analogy imperfectly reflects the most typical financial disclosure issues that arise daily in family law. Those who have disclosure issues are those studiously avoiding taxes for sometime prior, and without regard to any contemplation of separation. Alice is not disclosing her cash income. Benjamin is running personal expenses through his sole proprietorship. Cheryl is keeping money in her corporation and running personal expenses through it as well. Daniel has an arrangement with family whereby, through creative accounting – usually involving corporations – what income is generated is claimed as gifts or loans (not unlike the memos in Leitch). Eunice is even more nefarious where, again through creative accounting, her closely related family is used to ‘wash’ income. Frank is the party who sets up their business in their new (romantic) partner’s name and claims not to be earning any income.
In the meantime, all the family law parties are under suspicion.
c. What can be done?
Simple answers? No. I have two ideas.
In real life, the city of Toronto puts together an extensive calendar with information on how to fill your respective bins. Their website includes a wizardthat directs residents based on what they have. List on your fingers the resources your typical family law party has to complete the financial statement? At the least, we could create a resource for the “low lying fruit” of those people who intend on providing the disclosure required but just don’t know how to.
Secondly, it would be interesting yet naive to believe that we could have “amnesty” disclosure where parties can liberally disclose their finances without worry of retribution from CRA (consider corporate non-disclosure agreements). But if we can’t provide a forum for people to be honest, we should give them the opportunity to, or at least, “box their story in”.
Seeing how the SSAG calculator printout – which is not a sanctioned court form – has been accepted industry-wide, leads me to believe that voluntary disclosure schedules to the existing financial statements can be successfully created and implemented. We should be asking Alice how exactly she bills and collects from clients, including a space to self-declare cash collections. Benjamin and Cheryl ought to be able to explain what expenses are included in their line items. Cheryl should have a space to disclose every account associated with her corporation(s). Daniel could complete a schedule of gifts and loans over $300 received from non-arm’s length parties (human or corporate) over the past 36 months. Eunice needs the opportunity to disclose if she or her company pay expenses for or to any closely related people/businesses. Frank should have a space to explain why he is unable to work and what evidence he would be relying on that justifies his situation.
In conclusion, failure to provide financial disclosure is a significant problem in family law, but using cancer as its metaphor has led us down a path where the issue is considered terminal. But it need not be, and we should consider fresh paradigms to address this issue positively rather than reactively.
Shmuel Stern is in the process of completing his LLM in family law and is practicing remotely through www.disclosureclinic.ca.