Joint Assets After Separation: Understanding the Law of Dissipation

In Alberta, the concept of “dissipation” of family property is a critical factor in determining how assets are divided upon the breakdown of a marriage.

The case of Cox v. Cox, 1998 ABQB 987 originally set out how Alberta courts assess whether a spouse has dissipated assets to the detriment of the other party. But in the years since Cox, Alberta courts have fine-tuned this area of law, introducing a slightly more lenient standard for proving dissipation and clarifying what constitutes “detriment” to the other spouse.

What Is Dissipation in Family Law?

Dissipation refers to the improper or imprudent use, depletion, or destruction of family property by one spouse after separation, typically for their own enjoyment, and often to the financial detriment of the other spouse. In family law, dissipation can lead to an unequal division of assets if it is found that one spouse has intentionally reduced the value of matrimonial property to the unfair advantage of the other.

Dissipation requires evidence that an asset is worth less at trial than it was at the date of separation. Proving dissipation also requires showing a degree of intent although that intent does not necessarily have to extend to intentionally depriving the other spouse of a fair distribution of matrimonial property.

Cox v. Cox

In Cox v. Cox, the Court set out a framework for understanding when dissipation occurs. The court outlined several principles that have been influential in family law since:

1. Equal Distribution is Presumed: The first step in dividing family property is the presumption that property will be divided equally. Displacing the presumption of equal distribution through the court’s discretionary function is not reached lightly and should only be rebutted in the “clearest of cases”. There must be some real imbalance in each party’s contribution or as found in the factors listed, or a clear case of inequity because unequal distribution is the exception, not the rule.

2. Dissipation as a Factor for Unequal Distribution: One factor that can lead to an unequal division is the dissipation of assets by one spouse, which harms the other spouse.

3. Intent and Detriment: Dissipation requires a degree of intent, though it does not have to involve malicious intent to deprive the other spouse of their fair share. It is sufficient if the dissipation harms the other spouse.

4. Expenditures and Detriment: The court will generally not find dissipation where a spouse’s spending was for reasonable family expenses or to maintain family assets. However, if personal expenses were paid out of family property, this may be seen as dissipation.

5. Tracing Assets: If an asset is sold or otherwise reduced, the court will not consider this dissipation if the proceeds can be traced to the purchase of another asset, which can be considered part of the overall family property.

In essence, the Cox decision provided a broad framework for analyzing whether dissipation had occurred, focusing on the intent of the spouse and the actual detriment to the other spouse.

Case Law Since Cox

In recent years, several Alberta courts have revisited the principles set out in Cox v. Cox, offering additional clarity and, in some instances, a more lenient approach to proving dissipation. Let’s examine a few key cases that have influenced this evolution.

Dobrovolsky v. Dobrovolsky, 2021 ABQB 62

In Dobrovolsky v. Dobrovolsky, Justice Kiss reiterated the principles from Cox, but added further nuance, particularly regarding the onus and the demonstration of dissipation. The case emphasized that the spouse alleging dissipation bears the onus to prove dissipation. However, it also highlighted that the bar for proving dissipation has been slightly relaxed, especially in terms of demonstrating intent and detriment.

While Cox required that dissipation be shown with a high degree of clarity, Justice Kiss in Dobrovolsky noted that the courts now may be more inclined to find dissipation where there is evidence of imprudent spending, even if the intent was not explicitly to deprive the other spouse of assets. This reflects a more flexible approach to how dissipation can be proven.

Fleming v. Fleming, 2016 ABCA 88

The Fleming decision emphasized the importance of proving dissipation. The Alberta Court of Appeal confirmed that the burden rests on the spouse seeking an unequal distribution to demonstrate that dissipation has occurred. This reinforces the idea that a party alleging dissipation must provide sufficient evidence to show that the assets were indeed dissipated and that it caused harm to the other spouse.

However, Fleming also clarified that the court does not require evidence of bad faith or malicious intent to find dissipation – intent simply means that the dissipating spouse must have acted in a manner that led to the depletion of assets to the detriment of the other party.

Shaw v. Shaw, 2014 ABQB 82

In Shaw v. Shaw, Justice Schultz discussed how dissipation should be examined based on the facts of each case, emphasizing that the total amount dissipated “to the detriment” of the other spouse is typically considered to be half the amount by which the asset was reduced. This case illustrates the nuanced approach that judges now take when considering the nature and extent of dissipation.

Key Takeaways: The Evolving Standard of Dissipation

1. The Onus: The onus remains on the spouse alleging dissipation to prove it. However, recent decisions have made it slightly easier to establish dissipation, as courts are more willing to find that assets have been dissipated if the behaviour of the spouse shows a pattern of wasteful or imprudent spending, even without direct malicious intent.

2. Intent vs. Detriment: While Cox emphasized that intent must be shown, recent decisions like Dobrovolsky and Shaw indicate that the courts are less rigid about requiring specific intent to deprive the other spouse of property. What matters more is whether the dissipating spouse’s actions resulted in actual detriment to the other spouse.

3. Consideration of Pre-Separation Behavior: Dissipation cannot be evaluated in a vacuum. The courts take into account the couple’s financial behaviour prior to separation and whether the spending habits were considered normal or acceptable at the time.

4. Flexible Remedies: The remedies for dissipation, such as unequal distribution of assets, remain within the discretion of the trial judge. However, judges have more leeway to adjust the remedies based on the circumstances of each case.

While Cox v. Cox laid the foundation for the law of dissipation in Alberta family law, recent cases have refined and, in some instances, relaxed the requirements for proving dissipation.

The evolving case law now recognizes that dissipation is not just about malicious intent, but about a pattern of imprudent spending that harms the other spouse.