It is common for couples to maintain joint accounts during marriage. Both parties will have equal rights to the account and can make deposits and withdraw funds from the account. Both parties will also be responsible for any account debts, such as on a joint line of credit. Joint accounts can be helpful during a marriage, but may be a financial risk when the relationship ends if one party tries to withdraw funds to avoid equalizing the account, or uses the money to obtain a financial advantage, leaving the other with fewer resources. Courts can address the distribution of joint property during divorce proceedings.

Withdrawals Can be Considered in Post Separation Adjustments

Section 114(1) of the Family Law Act states that “the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants”. This creates a presumption that money placed in a joint account during marriage is intended to be jointly owned.

Respondent Closes Joint Accounts Without Applicant’s Consent or Knowledge

In Ellis v. Ellis the applicant sought an order directing the respondent to remit 50% of the funds that he withdrew from their joint account after separation. There was no dispute that following the separation, the respondent withdrew $57,905.24 from the parties’ joint bank accounts and then closed the accounts without the applicant’s knowledge or consent. The applicant claimed that the respondent told her that he removed the funds because he did not want her to have money available to retain a lawyer. She further claimed that in addition to closing the joint accounts, he cancelled their joint line of credit. At this time, she had no income and had primary care of the children. She argued that the respondent’s actions were intended to cause her financial harm and amounted to family violence.

The respondent did not deny that he withdrew the funds and claimed that he needed to withdraw them to close the accounts. It was also clear that following the separation he transferred approximately $100,000 to the applicant. He argued that money should be considered repayment for the funds taken from the joint accounts. He also argued the withdrawal of the funds should be considered in the overall calculation of post separation adjustments.

Court Finds Respondent’s Actions Are “Severe and Not Child Focused”

The applicant explained that the $100,000 was used for expenses for her and the children during a period of time when the respondent was not paying spousal support and only an inadequate amount of child support. Another portion of the money was used to pay for expenses related to jointly owned investment properties. Overall, she claimed that she was legally entitled to the return of 50% of the funds removed from the joint accounts. Moreover, she indicated that she urgently needed the funds to undertake repairs to the property where she lived with the children.

The judge found that generally withdrawals from a joint account “should be considered in the overall accounting of post separation adjustments”. However, in this instance, the respondent’s actions were “severe and not child focused”. It was also in the children’s interests that the property be repaired, so the respondent was required to pay the applicant $25,000.

Drawing on Joint Line of Credit Amounts to Unjust Enrichment

In Al-Fatlawi v. Al-Bajawi the court had to decide how to deal with post separation adjustments arising from one spouse drawing the maximum available amount on the parties’ joint line of credit. As the parties’ marriage came to an end, the respondent drew a $222,229.29 loan from the parties’ joint line of credit and transferred the funds to his brother. This financially harmed the applicant as she unintentionally became liable for the debt as soon as the respondent drew the loan without notifying her.

The applicant argued that the respondent was unjustly enriched in the amount of $222,229.29 that he took from their joint line of credit. Courts have confirmed that establishing an unjust enrichment claim requires three elements: (i) an enrichment; (ii) a corresponding deprivation; and (iii) no juristic reason for the enrichment.

In this case, the court agreed that the respondent was enriched by taking the funds from the joint line of credit exclusively for himself. The court found that the applicant clearly suffered a deprivation, as she incurred an “onerous debt obligation on the $222,229.29 loan”. She never benefited from the money, and because of the respondent’s infrequent payments to pay off the loan, the applicant was forced to make interest payments to avoid foreclosure on the home where she resided with the children. Additionally, the judge found that the respondent was disinclined to repay the loan, and questioned whether he ever intended to repay the loan, which would be a long-term burden for the applicant and leave her unfairly stuck with the debt.

Respondent Wilfully Dissipated Marital Assets

There was also no juristic reason to support the respondent’s enrichment. The respondent claimed that he took the loan to repay a debt to his family that the parties jointly incurred. However, the judge found that his failure to service the loan defeated any argument that he was entitled to the funds. Instead, he willfully dissipated marital assets without consideration of the negative financial impact to the applicant. The unjust enrichment claim was successful.

The court looked to Kerr v. Baranow and explained that an appropriate solution “may require the unjustly enriched party to repay or reverse the unjustified enrichment by way of a monetary remedy”. In this case, the applicant was entitled to a remedial monetary award. This would permit the loan to be repaid and would remove the debt burden the applicant faced. The judge awarded a post-separation adjustment that captured the amount of $222,229,29 plus other costs of servicing the loan.

Interestingly, the applicant also hoped to repair her credit history by seeking a declaration that she was not at fault for any non-payment of the debt on their joint line of credit, and by seeking collateral relief against third-party credit rating agencies. However, the judge declined to grant that relief as the applicant did not plead that relief or deliver the required notice to the third parties.

Consider Your Joint Accounts Upon Separation

Generally, both spouses will have a claim to the funds in a jointly held account, and on a divorce, the funds would be divided. However, parties may try to avoid this equalization by unilaterally withdrawing funds from accounts. Courts may intervene if the withdrawal was intended to harm the other party.

Contact the Lawyers at NULaw in Toronto for Legal Advice on Property Division Matters

The experienced family lawyers at NULaw in Toronto regularly advise clients on various complex family law matters, including property division strategies that are tailored to your unique circumstances. To discuss your questions with a member of our team to learn how we can assist you, contact us online or call our office at 416-481-5604.

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