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MARITAL PROPERTY - Equalization or division - Insolvency of party

Thursday, April 22, 2021 @ 6:07 AM  


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Appeal by the trustee in bankruptcy from the dismissal of its application for a declaration that the right to commence an equalization claim under the Family Law Act vested in it as the husband’s trustee in bankruptcy. During the couple’s marriage, the matrimonial home was purchased and placed in the respondent wife’s name alone. The couple separated in 2015 but did not commence an application for the equalization of net family property. Later in 2015, the husband made an assignment in bankruptcy. The respondent continued to reside in the matrimonial home with the couple’s two children. The husband remained an undischarged bankrupt. His declared unsecured liabilities totalled $282,700.

HELD: Appeal dismissed. The entitlement to an equalization payment provided in s. 5 of the Family Law Act fell within the broad definition of property as found in s. 2 of the Bankruptcy and Insolvency Act, without regard to whether an application was initiated. The limitation placed on the entitlement in s. 7(2) of the Family Law Act to the effect that it was personal as between spouses operated to prevent anyone other than a spouse from starting an application for the equalization of net family properties. While an unexercised equalization payment constituted property under the Bankruptcy and Insolvency Act for vesting purposes, the trustee in bankruptcy could not initiate a claim for recovery of that equalization entitlement because the required triggering event, the initiation of the application by a spouse, did not occur. There was no operational conflict between s. 7(2) of the Family Law Act and the scheme and purpose of the Bankruptcy and Insolvency Act. The doctrine of federal paramountcy was not applicable.

Arachchilage (Licensed Insolvency Trustee for) v. Arachchilage, [2021] O.J. No. 849, Ontario Court of Appeal, G.R. Strathy C.J.O., P.S. Rouleau and S.A. Coroza JJ.A., February 23, 2021. Digest No. TLD-April192021009