Suing your ex's family for conspiracy no longer out of bounds if they help in the evasion of child support

Special to Financial Post

After separation, it’s common for extended families to get involved in a couple’s divorce. Most of the time, the family of a separated spouse will provide emotional support or occasionally pay legal or accounting fees. Other times, the extended family can become “cheerleaders” who take sides and can increase conflict.

In extreme cases, the extended family is so invested in the outcome that they assist the separated spouse to reduce his or her financial obligations for support or property.

The Supreme Court also reasoned that as all provinces had established specific legislation to address the issues arising from family breakdown, there was no merit in bringing a claim such as conspiracy in a parenting case.

In the past, when a spouse has hidden assets or income, even when they may have been assisted in doing so by extended family, the court’s sanctions have largely been limited to penalizing the spouse by an order of costs (which often go unpaid) or by a contempt finding. While claims have sometimes been made against extended family members, these claims are uncommon and have been largely unsuccessful.

More recently, the Ontario Court of Appeal has changed the landscape for extended families when the separated couple is fighting over finances.

In Leitch v Novac, the wife sued the husband’s parents, a family corporation and several trusts and their trustees, alleging that the husband’s family and the various entities had conspired to defeat her family law claims and conceal the husband’s income and assets.

After the parties’ separation, the husband’s father incorporated a company to provide management services to a casino operation. The father and the husband had agreed orally that the husband would receive 40 per cent of the management fees otherwise payable to the father’s corporation over the life of the contract. Before the end of the contract, the casino owner bought out the contract for nearly $6,000,000, and the lump sum was paid to the father’s corporation. While the buyout occurred after separation, the husband’s 40 per cent share would have been income on which spousal and child support would be based. However, the husband’s father kept all of the income from the buyout.

In large part, the facts on which the alleged conspiracy was based were several draft memos from the father’s accountant, who structured the payment out to the father’s corporation. One draft memo described the buyout steps as follows:”(the father) takes his tax free proceeds and lends to (the husband) his portion as a loan that will be forgiven when the husband’s divorce is final.” Another draft memo adds that “this (will) keep income out of (the husband’s) hands.”

When claiming conspiracy against the extended family and the other entities, the wife had to prove whether or not the means used by the father and the husband were lawful or unlawful, whether the predominant purpose of their conduct was to cause her injury, or if the conduct was unlawful, whether the father and the husband should have known that injury to the wife was likely to result.

The father, the corporations and the trusts brought a motion for partial summary judgment, in an attempt to have the claims of conspiracy dismissed before trial. The motions judge granted summary judgment, finding that the basis for the claims had not been established. In part, her decision was based on her view that such a claim would open the floodgates of litigation in family law where the extended family was involved.

The Ontario Court of Appeal saw things much differently and set aside the motion judge’s finding. The court sent the matter to trial on all issues, including the claims for conspiracy.

Justice William Hourigan reiterated the oft-quote phrase that “non-disclosure is the cancer of family law” and then turned to the “related malady” of the “invisible litigants” who he described as being “willing to break both the spirit and letter of the family law legislation to achieve their desired result, including by facilitating the deliberate hiding of assets or income.”

Using the tort of conspiracy in family law, he found, can be necessary in certain circumstances to ensure fairness and achieve justice. Otherwise, co-conspirators could participate in hiding income or assets on a “no-risk basis.” To deter invisible litigants from participating in a party’s non-disclosure, they should be prepared to face a conspiracy claim.

Supportive extended families should know where to draw the line.

This article was originally published in the Financial Post