Judge appoints receiver to disclose husband’s assets in divorce case

Judicial intolerance of spouses providing incomplete financial disclosures in divorce cases appears to be increasing

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Court intolerance of spouses who provide incomplete financial disclosures in divorce cases appears to be on the rise amid a mounting backlog of cases that is straining courts and judges across the country.

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Financial disclosure is a fundamental principle of family law: without it, a separated spouse is unable to determine his or her entitlement to division of property, child support and spousal support, and court proceedings may be unnecessarily prolonged while these issues are resolved.

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This happened recently in a case before Ontario Superior Court Judge Leonard Ricchetti, in which the judge eventually took the “extraordinary” step of appointing a receiver to ensure disclosure regarding the husband’s assets and income.

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In the case, a husband and wife, aged 77 and 72 respectively, separated after their 47-year marriage. The couple made considerable wealth through a land development business that the husband started shortly after the couple’s marriage. According to the man’s net worth, which he compiled seven months before the split, he was worth approximately $78 million. Despite his own description of the husband’s net worth, after the parties separated, he claimed that he had no net worth and was forced to live in his office because he could not afford to rent a house.

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Unfortunately, the hallmark of the couple’s split was the man’s adamant refusal to provide necessary and relevant financial information to his ex-wife. The wife initiated court proceedings just five days after the parties separated in November 2019. Since then, there have been about 15 court hearings, almost all of which have centered on the husband’s incomplete disclosure. Several orders were issued, forcing the husband to provide, for example, real estate appraisals, company information, documents on money advances to family members and information on a company reorganization.

The husband did not comply with many court orders. In May 2022, the wife asked Judge Ricchetti to find the husband in defiance of six court orders. In the contempt hearing, the husband admitted his non-compliance and finger-pointed at others to defend his transgression. He said he was “unable to comply with court orders due to a lack of funds, insufficient internal staff to make required financial disclosures, and lack of control over third parties who were required to submit reports.” create”.

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Judge Ricchetti dismissed the husband’s suggestion that he should not be held responsible for the incomplete disclosure, noting that “the difficulty with the pending disclosure is that everything is under the husband’s control — not as he suggests.” , under the control of third parties”.

Against this background, Judge Ricchetti examined whether the husband was despised. He began his analysis by stating that “the case demonstrates the unfortunate waste of considerable legal resources by parties Select NOT complying with their basic obligation of segregation – disclosing full and accurate financial information and records. The game of hide-and-seek for the party’s assets and income must be prevented by all means.”

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During a five-day hearing before the judge, the husband and wife presented evidence. The judge reviewed the husband’s evidence and dismissed it “in its entirety.” According to Judge Ricchetti, the husband’s evidence constituted “blatant denials, veiled and clear attempts to impeach his former attorney” and “was contradictory and contained unbelievable explanations.”

According to Judge Ricchetti, contempt should only be found “sparingly and as a last resort” in the “clearest cases and with the greatest caution”. For the judge, this was one of those cases. The judge found that the husband flouted the disclosure orders because he “acted deliberately to fail to comply with the disclosure orders to avoid disclosure of his personal and financial information.”

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On August 5, about three months later, a hearing was held to determine the penalty for contempt. At that hearing, Judge Ricchetti first examined whether the husband had made himself obey the court’s orders. In other words, had the husband shed his contempt? Despite the opportunity to put the ship back in order, the husband had not done so and, unsurprisingly, remained in contempt.

In designing the penalty, the judge considered the goals of a contempt judgment, namely 1) deterrence to prevent further contempts by recognizing that “willful and blatant disregard for court orders and failure to do so will result in serious consequences” and 2) denunciation , which aims to help “maintain the confidence of parties in family law proceedings and of the public using the justice system” by showing that “the administration of justice is seriously undermined when parties are able to ignore statutory obligations or court orders.”

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The judge ordered the husband to pay the wife a $50,000 fine. Judge Ricchetti found that the amount was “unacceptably low” but that he could not order a higher amount because the wife only asked for $50,000.

In a relatively rare step, the contempt penalty also included the appointment of a receiver. A bankruptcy trustee is a neutral and independent third party tasked with controlling all or part of the affairs of a person or company. In this case, the trustee is granted all the powers and rights that the husband had to “seek, request and take possession of all relevant financial records and information relating to the matters in the case.” Simply put, the husband’s refusal to grant disclosure is corrected by delegating disclosure authority to someone else.

Judge Ricchetti recognized that “the appointment of a trustee is an exceptional and intrusive remedy.” However, in the circumstances of the present case, the outcome is both proportionate and reasonable.

If the husband continues to frustrate the disclosure process and the work of the trustee, Judge Ricchetti’s decision leaves the door wide open for the appointment of a trustee who will take full possession of all of the husband’s property and business interests.

Adam N. Black is a partner in the family law group at Torkin Manes LLP in Toronto.

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