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Finding Hidden Assets

Dealing with undisclosed matrimonial property

Posted in Divorce By Nathanael (Nathan) L. Mills

True Disclosure of Income and Assets is Required

On separation, spouses are entitled to an equal division of family property and support obligations are determined according to the parties’ incomes. The courts therefore require full financial disclosure in family law matters in order to deal with family property and support obligations equitably. Sworn financial statements must be exchanged early in the process of separation to ensure an accurate assessment of both family property and spousal income. Yet parties often fail to meet their disclosure obligations. Incomplete or total non-disclosure can be part of a strategy to hide income and assets in order to avoid support obligations and an equitable division of family property.

Non-disclosure has been called the “cancer” of matrimonial property litigation. In Cunha v. Cunha (1994), 3195 (BCSC) the BC Supreme Court stated:

“[Non-disclosure] discourages settlement or promotes settlements which are inadequate. It increases the time and expense of litigation. The prolonged stress of unnecessary battle may lead … 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. Non disclosure also has a tendency to deprive children of proper support.”

Hiding Income and Assets

There are many ways to hide income, and especially where an individual is self-employed, simply looking at a tax return can fail to provide an accurate picture of a spouse’s finances. Income is often disguised as business expenses or deferred as retained corporate earnings.

Assets can be hidden as well, including cash, bonds, mutual funds, cash value in insurance policies and variable annuities, stocks, and even travelers’ checks. These assets can be transferred to third parties, or hidden behind false documents. Financial assets can be removed from Canada and hidden in non-reciprocating jurisdictions, or stashed in opaque ‘offshore’ tax havens.

Confronting Non-Disclosure

If your former spouse is not being honest about their income or assets, a family lawyer can employ a number of tools to tackle their nondisclosure. These tools include Examinations for Discovery, Interrogatories, and Notices to Admit. Once evidence of unreported income is found, courts can impute a higher income to that spouse. Where undisclosed family property can be identified, the courts have jurisdiction to order restraining orders which are intended to prevent the other spouse from disposing, transferring, converting or exchanging family property. The “draconian” Mareva injunction is available where there is a real risk that assets will be disposed of before trial and will prohibit your former spouse from disposing of assets – worldwide.

MAREVA

A Moreva injunction was recently ordered in Devathasan v Devathasan, 2017 BCSC 1010, where approximately $21-23.5 million in family real property was held in the United States and in Canada, along with $568,000 in vehicles. Further property of undisclosed value was held in Asia. The non-disclosing former spouse was prevented from selling or transferring any national and international assets prior to trial.

The Adverse Inference

The courts have been directed to take an ‘adverse inference’ from one party’s concealment of assets and income: Cunha in Laxton v. Coglon, *2008 BCSC 42*. In practice, this has often meant that the court has determined that the value of undisclosed assets is equal to at least the value those disclosed. In Rana v. Rana, *2014 BCSC 530*, the court found that the husband had hidden assets by removing them from Canada. An unequal division of family property was ordered and Ms. Rana received all assets remaining in Canada.

Conclusion

Mere suspicion that your former spouse is hiding income or assets is not enough to receive relief from the court. The BC Court of Appeal has cautioned against making findings as to undisclosed assets where there is no evidence to support such a finding: Wu v. Sun, 2011 BCCA 239. If you suspect that your former partner is hiding income or assets, our family law team has a wealth of expertise and experience to navigate the complexities of non-disclosure. Call to arrange a free, 15 minute consultation with an experienced family lawyer in Vancouver or Calgary.


Finding Hidden Assets - posted November 12, 2017

Read more articles about: Divorce

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