Family Trusts and the Tort of Conspiracy in Family Law Matters

April 21, 2020 Doreen So Continuing Legal Education, Estate & Trust, Executors and Trustees, Litigation, Trustees Tags: , , , , , , 0 Comments

Further to my blog on Monday, the Court of Appeal also released another interesting decision last week with respect to the tort of conspiracy in the context of a family law proceeding.  Leitch v. Novack, 2020 ONCA 257, is an appeal from a summary judgement motion that was brought by the husband’s father, a family trust, and a family company.  Summary judgment was brought because the wife sought damages against the moving parties for an alleged conspiracy that they were intentionally withholding payments to the husband in order to reduce his family law obligations.

The motion judge, in 2019 ONSC 794, held that the conspiracy claim was appropriate for partial summary judgment.  The conspiracy claims were dismissed even though the wife could still pursue a claim to impute additional income to the husband for the purposes of determining his income at trial.  Over a million dollars in costs were later awarded to the husband and the moving parties and there was a subsequent order for security for costs that effectively froze all of the wife’s assets.

The appeal was allowed.  The Court found that there was a material risk of inconsistent results because the wife was allowed pursue her claims that additional income ought to be imputed to the husband despite the motion judge’s finding that there was no unlawful conspiracy.

As for the tort of conspiracy, Justice Hourigan confirms and clarifies the application of this doctrine in the context of family law matters.  The tort of conspiracy is part of the judicial toolbox to ensure fairness and for deterrence.  It is also there for enforcement purposes because the purpose of the conspiracy is to hide income or assets and “a judgment against a co-conspirator will often be the only means which by which a recipient will be able to satisfy judgment” (paras. 46-47).

Justice Hourigan commented that

“a transfer of funds by loan, gift, or otherwise, is not the only way that the alleged co-conspirators could have acted in furtherance of the conspiracy.  If the trial judge is satisfied that [the husband] had an entitlement to funds and that a co-conspirator withheld the transfer of funds to him as part of a conspiracy with the understanding that he would receive the money at some future date, the withholding of funds may itself be an act in furtherance of the conspiracy.  It is not necessary to establish more than an acted-upon conspiracy to conceal [the husband’s] entitlement.” (para. 51).

The costs awards and the preservation order were also set aside.

This decision is certainly important to keep in mind when advising trustees of discretionary trusts.

Thanks for reading!

Doreen So

 

 

 

 

 

 

 

 

 

 

 

 

 

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