The Alberta Court of Appeal considered whether a lack of timely financial disclosure should affect the granting of tracing of property under the Matrimonial Property Act.
After several years of marriage, the parties divorced. During the course of the marriage, Ms. Krassman inherited her deceased brother’s estate including a pension payout and a life insurance policy. Ms. Krassman did not make timely disclosure of the bank account statements into which these monies were deposited. Rather, she disclosed these statements at the commencement of trial. On division of assets, Ms. Krassman sought to have the pension and life insurance policy exempted from the matrimonial assets. She claimed that they could be traced to the purchase a new home. The trial judge did not create exemptions for these portions of the inheritance. Ms. Krassman appealed.
Under s. 7(2) of the Matrimonial Property Act, if property is acquired by a spouse by gift, inheritance, or before the marriage, it is exempt from distribution if it was kept separate from the matrimonial property. The party seeking exemption can employ tracing to meet its burden of establishing that the exempt property has not been commingled with joint matrimonial property but instead can still be characterized as exempt.
The majority of the court held that the lack of financial disclosure does not exclude the long-standing presumption that tracing can be inferred, implied, or presumed (Harrower v. Harrower (1989), 97 AR 141 (CA)). Mr. Scheffelmeier submitted that the inheritance was used to cover living expenses not to purchase an asset. However, the majority accepted Ms. Krassman’s evidence that she had lived off the interest of the assets (although it made a small deduction from the exemption based on the estimated living costs). The majority accepted that Ms. Krassman could not have purchased the new home without the use of the entire inheritance. Thus, the inheritance is traced to the new home and exemption was granted.
In dissent, Justice MacDonald held that the deliberate non-disclosure of relevant information prohibits a party from meeting the burden of proof in the circumstances. He did not dispute the idea that pointing to a lack of alternative funds that could have been used to acquire a property can satisfy the requirements of tracing. However, the dissent found that Ms. Krassman was not a credible witness and should not be entitled to the benefits of tracing because she did not comply with the timely disclosure obligations under the Matrimonial Property Act.
February 18, 2011
Link to Decision
Julia Wilkes
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