The Deficiency of Section 213 of the Family Law Act for Out of Court Agreements

The court in B.L.S v D.J.S 2022 BCSC 764 took a tapered interpretation of s. 213 of the Family Law Act. This interpretation may incentivize improper disclosure for settlement agreements outside of court.

Background

The plaintiff in this case was the wife of the defendant. After separating in 2011, the pair entered into a separation agreement that determined the division of property. The defendant misrepresented his financial condition and withheld information during the negotiation. The plaintiff under the agreement would have received under 5% of the matrimonial property. Luckily for the plaintiff, she discovered documents relating to these hidden financials, which ultimately lead to this case being brought. She sued for equal division.

Spouses hiding financial information is nothing new in the realm of family law. However, this case is noteworthy for its interpretation of S. 213. The Trial judge awarded ordinary costs to the plaintiff at a more than ordinary difficulty scale. However, the plaintiff’s claims for legal expenses and disbursements pursuant to sections 213 and 214 of the Family Law Act were dismissed.

When the court awards costs to the successful party, one might think they are being completely reimbursed for all legal fees. In reality, this only covers a fraction of the expenses incurred. This is why full reimbursement pursuant to the Family Law Act was sought by the plaintiff.

Law

S. 213 of the FLA applies to a person who provides information that is incomplete, false or misleading. In response, the court may do one or more of the following:

(d) make an order requiring the person described in subsection (1) to pay

  • a party for all or part of the expenses reasonably and necessarily incurred as a result of the non-disclosure of information or the incomplete, false or misleading disclosure, including fees and expenses related to family dispute resolution,
  • an amount not exceeding $5 000 to or for the benefit of a party, or a spouse or child whose interests were affected by the non-disclosure of information or the incomplete, false or misleading disclosure, or
  • a fine not exceeding $5 000;

(e) make any other order the court considers appropriate.

The plaintiffs argues that they should be compensated under s.213(2)(d)(i). It was only because of the incomplete and false information that the original separation agreement was signed. The majority of the litigation was spent setting aside this agreement.

Judgement

The judge engages in statutory interpretation, following the modern approach. The court arguably narrowed the remedy under subpara (i) by reference to its neighboring subparagraphs. The maximum amount for subparas (ii) and (iii) is $5 000. The court took the view that this was an indication that the expenses incurred “as a result” of the non-disclosure were intended to be circumscribed. The court recognizes subsection (i) is not explicitly limited to $5 000. However, it was not meant to cover the legal expenses in a case such as this where expenses of the plaintiff exceeded $500 000. In the courts view if the legislature had intended an order of this magnitude, it would not have placed subparagraph (i) within the same subsection as (ii) and (iii).

The court also states that the interpretation of the plaintiff would effectively create a new statutory claim for compensation for the legal fees incurred to set aside a separation agreement tainted by failed disclosure. This would remove any consideration of the conduct of the respondent in the litigation.  

Possible arguments on Appeal

The judge narrows the power of s.213(2)(d)(i) by referring to the neighboring limits. However, despite appearing under the same subsection, they are very distinct. Subpara (i) is about restitution, that is restoring the wronged party to where they would be if not for the lack of honesty from the other party. Subparas (ii) and (iii) are more penal. They do not go to the expenses of the innocent party. Rather they go to punishing the conduct of the wrongful party. The different purposes of the subparas explain why the legislature did not place a monetary cap on subpara (i).

Subpara (i) is already limited as the expenses must be reasonably and necessarily incurred as a result of the non-disclosure. The legislature then already dealt with limiting this subpara, and deliberately chose not to include an arbitrary ceiling.

Providing relief in this instance would also not create a new statutory claim or ignore conduct during litigation. This provision is largely discretionary. Ss. 2 states that the court “may” do one or more of the following. The court can also make any other order they consider appropriate under ss.2(e). s.213(2)(d)(i) also states the payment may be for “all or part” of the expenses. Certainly, the conduct of the defendant during litigation would affect the court’s decision and amount to award with regards to these provisions.  

Concerns

The intent of s.213 is to secure disclosure. Non-disclosure of assets has been stated to be the cancer of family law litigation. Section 213 was meant to address this by sanctioning improper disclosure. The legislature’s curious choice of a $5,000 limit for fines weakens this section’s ability to meet its purpose. Hidden assets can range in the millions, as they did in this case. Wealthy parties are then strongly incentivized to attempt concealment of assets, as s.213 provides for a relatively paltry fine. By not making any order for payments, the court in this case further weakened the ability of this section to deter improper disclosure, as well as restoring the wronged parties.

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