Parties who are going to court need to be prepared for a range of allegations that can arise from a dispute. In some cases, a party’s conduct may trigger the “clean hands” doctrine. This is a principle in which a party who seeks an equitable remedy from the court must come with clean hands. If the party has engaged in wrongful conduct related to the matter that is before the court, the judge may refuse to grant the relief that is sought.
This blog will explore how and when this doctrine can arise in family law cases, and will consider what type of misconduct can disqualify a party from obtaining a remedy.
In Hrvoic v. Hrvoic, the appellant appealed the trial judge’s finding that the respondent was entitled to 50% of the common shares of a company the parties co-founded. The respondent had sought a declaration that she was the owner of 50% of the company shares. One of the issues the trial judge considered was certain withdrawals the respondent made from the company while she was employed, as well as a $600,000 withdrawal from the appellant’s personal line of credit.
The appellant argued that the respondent’s improper withdrawals should have disentitled her from the equitable remedy that the trial judge granted. However, the court of appeal disagreed and found that the clean hands doctrine did not apply in these circumstances. First, the court noted that the trial judge did not grant equitable relief. Instead, the judge found that there was an agreement between the parties to increase the respondent’s shareholding to 50%. This meant that the relief flowed from the existence of that agreement and was not equitable relief.
The respondent’s withdrawals from both the company and the appellant’s line of credit were also unrelated to the division of the shares. Consequently, it did not appear that her conduct could not fall within the application of the clean hands doctrine, as it is applicable only where the wrongful conduct is directly related to the transaction in dispute.
The court noted that in City of Toronto v. Polai, Justice Schroeder cautioned that “the misconduct charged against the plaintiff as a ground for invoking the maxim against him must relate directly to the very transaction concerning which the complaint is made, and not merely to the general morals or conduct of the person seeking relief”. Further, in BMO Nesbitt Burns Inc. v. Wellington West Capital Inc , the court of appeal agreed that the requirement of a direct connection was sensible, and that relying on a broader connection between the impugned conduct and the relief sought was not justified.
The Court also explained that the clean hands doctrine “does not automatically disentitle a party with “unclean hands” from obtaining any relief”. Equitable principles do not rely on strict rules but instead follow general guidelines. Previous cases have emphasized that equitable remedies are crafted given the specific circumstances of each case, and that they are awarded at a judge’s discretion, who can decide whether to grant relief to a party who has not come to the court with clean hands.
In this case, the trial judge found that the respondent’s $150,000 withdrawal from her shareholder’s loan account followed the long-standing compensation practice that the parties followed, and ultimately was legitimate as the withdrawals would be reconciled at the year end. When it came to the respondent’s unauthorized withdrawal of $600,000 from the appellant’s line of credit, while the trial judge did not condone the action, she considered the family dynamics and exercised discretion to grant relief. The trial judge found that the appellant’s conduct precipitated the wrongful withdrawals by cutting off the respondent’s only source of employment income and refusing to authorize company dividends when she had no other source of income. Accordingly, there was no basis to interfere with the trial judge’s decision.
In McNutt v. McNutt, the respondent brought a motion for an order reducing his spousal support obligation. The judge looked to Berta v. Berta, which set out the criteria to weigh when considering whether to make a temporary adjustment to a support payor’s support. It required the requesting party to prove:
1. a strong prima facie case;
2. a clear case of hardship;
3. urgency; and
4. that the moving party has come to court with “clean hands”.
The judge considered the clean hands doctrine, finding that it allowed a court to refuse to grant equitable relief to a person who has participated in dome discreditable conduct. In this case, it necessitated considering the financial disclosure obligations. Rule 13(15) of the Family Law Rules requires a party to provide an updated or corrected document as soon as they discover that financial disclosure documents that have been served are incomplete, incorrect, or out of date.
The question was whether the respondent failed to comply with his financial disclosure requirements under the Family Law Rules. The judge decided that the issue was not a lack of financial information as he had provided more documents than most litigants provide. However, the issue was their accuracy and reliability. Although the judge acknowledged there was some difficulty in projecting income changes, it appeared that the respondent failed to comply with the Rule.
Looking to Roberts v. Roberts, the case emphasized that the “most basic obligation in family law is the duty to disclose financial information” and that failure to meet this fundamental obligation “impacts the administration of justice”. In other words, non-compliance has consequences. In Berta, the respondent sought an interim variation of the final spousal support order, but he had ignored multiple disclosure orders and ceased paying court ordered support without any justification. In that case, the clean hands doctrine was relevant.
Here, the judge did not believe that the respondent’s non-compliance was as egregious as had occurred in the case of Berta. Consequently, the Court was not prepared to deprive the respondent of a remedy only on the basis of the clean hands doctrine. However, there was another matter pertaining to support payments and the release of funds that needed to be clarified that worked against the request for relief. The result was that the respondent’s motion adjusting his support payments was dismissed.
The clean hands doctrine, like other equitable principles, is flexible and can help guide the court in deciding whether to grant a remedy. Discreditable conduct, such as a party’s failure to abide by a court order, or efforts to manipulate the litigation can make obtaining a remedy more difficult if the judge views the actions as unjust. However, the doctrine does not automatically disentitle a party from relief, and judges will look at the specific circumstances of each case.
Separation, divorce, and parenting disputes often involve complex and emotional issues. If you are contemplating a separation or divorce, it is important to seek legal advice from a trusted family lawyer who can assess your circumstances and advise you on your options to move forward. At NULaw, our team of knowledgeable family lawyers help clients navigate complicated family law issues. To speak with a member of our team regarding your family law dispute, contact us online or call us at 416-481-5604.
Tel: +1 416 481 5604 Fax: +1 416 481 5829
NULaw proudly services clients in Toronto and throughout Ontario
© 2024 NULaw. All Rights Reserved. Privacy Policy and Disclaimer. Website designed and managed by Umbrella Legal Marketing