The Tort Of Conspiracy In Family Law Cases

• Published date: 12 May 2022
• Subject Matter: Litigation, Mediation & Arbitration, Family and Matrimonial, Family Law, Trials & Appeals & Compensation
• Law Firm: Lindsay Kenney LLP
• Author: Ms Fanda Wu

The phrase "non-disclosure of assets is the cancer of matrimonial property litigation" is an oft-quoted phrase, arising from the seminal case of Cunha v. Cunha, 1994 CanLII 3195. In Cunha, the Honourable Mr. Justice Fraser of the Supreme Court of British Columbia found that where a family law litigant actively engages in the concealment of assets, the consequences of the concealment should be visited upon the party that sought to conceal their assets, and not the innocent party. "Not only is it a matter of doing justice in any particular case, it is also a matter of general interest. The system should not give offence to the honourable litigant by treating the dishonourable litigant the same."

As a result of Cunha, family law cases across BC and in fact across Canada have judicially denounced the concealment of assets. Where the Court has found that a party has concealed assets, the Court will often draw an adverse inference that "the value of undisclosed assets is at least equal to the value of disclosed assets". This often results in the known family assets being unequally divided in favour of the innocent party.

The other issue that often arises in non-disclosure cases is where those undisclosed assets have gone. Were the assets dissipated? Frittered away on lavish living expenses or depreciating assets? Transferred to third parties, so that the non-disclosing party could effectively become "judgment proof"? What if the third parties had actively assisted in the deception, helping the concealing party by allowing for a fraudulent transfer of assets for little or no consideration?

Until recently, the only relief that an innocent party could obtain in such a case was an unequal division of the existing assets and an award of special or solicitor/client costs. The assets that had already been squandered or transferred to third parties would typically be impossible to recover. The innocent party could attempt to seek relief from the third parties directly by suing the third parties under the Fraudulent Conveyance Act, however, that was often an uphill battle, with little likelihood of success.

However, a recent Ontario Court of Appeal case has laid new ground on this issue. In Leitch v. Novac, 2020 ONCA 257, the wife sought damages against the husband and his family members, for conspiracy to divert the husband's business income in order to reduce the husband's child support payments. After the parties separated, the husband's father incorporated a...