Husband Wants Access To Funds From Family Owned Business
May 5, 2022
For people going through divorce or separation, there can be a lot of details to work out that might seem overwhelming at first. Even the most straightforward divorce can be a lot to work through in addition to the emotional stress it can cause. One area that can be the cause of significant complications is property division.
For many couples, the matrimonial home might be the only significant asset that has to be divided, but for families who own a business together or have a high net worth, there can be a great deal to work through. This was the case in a recent decision issued by the Court of Queen’s Bench of Alberta in which the parties owned a business that the husband essentially controlled but failed to provide details around. Nevertheless, he wanted the court to allow him to access funds from the company. Keep reading to see how the court addressed financial disclosure issues and the importance of being upfront with finances in separation.
Husband sells family-owned business and keeps a large chunk of money
The parties involved were in a long-term relationship that ended in 2010. They had one child together, and the three of them own a very successful business that takes on mega construction projects, including the building of the Confederation Bridge between New Brunswick and Prince Edward Island. We won’t get into the corporate structure of the businesses they own, but essentially, the husband still controls its day-to-day operations. While the wife and daughter are co-owners (and the wife is a director), the court said the husband “has had almost complete free reign to deal with these companies and their finances.”
A receiver (“MNP”) was appointed in 2020 by the courts after the wife brought an application to freeze or attach the proceeds of an anticipated sale of a subsidiary company they made. The wife was concerned that the sale proceeds might disappear if the husband was allowed to sell the subsidiary. The court agreed, but the sale had been concluded by the tie the order was issued. It was reported that the husband took $500,000 from the sale for his own use. Because of this, MNP was appointed to manage all the assets of the companies owned by the parties.
Husband seeks payment from family-owned company
The court stated that both MNP and the husband were frustrated with their relationship. MNP told the court it cannot get any information or cooperation from the husband, who it says has continued to travel around the world and work on projects without their approval. Meanwhile, the husband told the court he was frustrated that he didn’t have access to the income or operating funds needed to finance the company’s work. He told the court that he submitted an invoice of $660,000 to MNP last summer and that MNP has so far refused to pay it. He also said MNP refuses to pay out any of the remaining proceeds from the sale of the subsidiary.
The wife told the court she was adamantly opposed to the husband receiving any payments from the company until a scheduled matrimonial property division is complete. She said the family home has debt registered against it, and that the sale of the subsidiary is the only significant family asset they have left.
Court is sympathetic, but cooperation must to go both ways
The court said it could appreciate that the business the husband runs is the type that requires a significant amount of operating capital and that it can take a long time and a lot of money before any return on investment is earned. However, the court also said that the husband “created these obstacles by virtue of his own conduct,” stating that his failure to be forthright in his financial dealings and his refusal to cooperate with MNP despite a court order demanding he do so.
The court said that if MNP determines it has received the cooperating necessary to do its job, it could use its discretion to pay the husband, adding that the wife does not have the ability to veto payments MNP believes are necessary and appropriate.
The husband asked the court to direct MNP to pay him and the wife $15,000 each per month. However, the wife countered that this payment would not come from the husband’s earnings but instead from proceeds of the sale of the subsidiary, which are matrimonial property. She said that using matrimonial property to pay spousal support would be tantamount to her paying her own spousal support. The court agreed, stating that the husband took $500,000 from the sale of the subsidiary, and even though that was two years ago, he should not be complete without financial resources.
The court ordered that the husband wait for the full trial to determine whether he is entitled to the $660,000 he invoiced, but that MNP should pay invoices related to running the business, though the court said it could use its discretion when doing so. The court reminded the husband that MNP has full authority to manage the business and that he has no autonomy to incur expenses without authorization.
This means that the husband will have to wait until later this summer to find out if he can be paid for work he said he performed as well as whether or not he might regain control of the company.
Contact HMC Lawyers if you are involved in a separation and have business assets to divide
The family law team at HMC Lawyers is fully committing to protecting and advocating for your rights. Suppose you are expecting or are going through a separation from your spouse. In that case, it’s important to speak to a lawyer about the division of property in order to ensure your rights are protected and to help you anticipate and plan for life after separation. Please reach out to us online or contact us by phone at 1-800-480-3534 to schedule an initial appointment today.