When a marriage ends, the parties must determine issues such as the division of family property, child support, and spousal support. In an effort to equalize the parties in terms of assets after a divorce, courts will often require one spouse to make an equalization payment to the other. Business interests can further complicate matters, whether the business is a family-run operation, or the property of just one spouse. Generally, the value of the business, if owned by just one of the spouses, will factor into the equalization payment. However, in a recent Alberta case, the wife was granted an equitable interest in her former husband’s business after he went into considerable arrears with respect to property equalization, and support payments.
However, the financial holdings of the business were largely tied up in commercial real estate properties in downtown Calgary, which the husband and his business partner objected to selling. In order to realize the funds owing to her, the wife then brought a claim for oppression under the Alberta Business Corporations Act, as a beneficial shareholder in the company, against both companies, her former spouse, and his partner.
In 2019, the wife was awarded an equalization payment in the amount of $917,816 following the breakdown of the couple’s marriage. In addition, the court awarded child and spousal support over $300,000, and future support totalling over $150,000. All told, the husband owed the wife $1,379,432. He claimed he was unable to pay this amount, stating that his only assets were his business interests in two corporations he owned with his business partner. The businesses oversaw the management and development of various commercial properties in the Calgary area. At the trial noted above, the husband claimed to have been unemployed, saying his actual work for the corporations had come to an end, and as a result, he had no liquid assets. His sole asset was his stake in the two corporations, which was valued at approximately $2 million.
In response, the wife asked the court to consider granting her an equitable share in the businesses, following the approach taken in a 2015 case called Peregrym v. Peregrym. The court agreed, and granted her an equitable interest in her former spouse’s shares, in the same amount he owed to her for the equalization payment, with the value of the support payments secured against the remaining value of his shares.
Since the value of the businesses was not liquid, meaning the husband had no cash on hand to resolve his debts to his former wife, the wife initiated an action for oppression. She sought an order that the companies liquidate their assets in order to satisfy the judgment owing to her.
Oppression is a remedy available against a corporation when the actions of the corporation have been oppressive or unfairly prejudicial to the complainant’s interests. In this case, the failure of the corporation, and the two partners, to sell off assets and dissolve the companies was oppressive to the wife’s ability to realize her interest in the husband’s shares.
This was not the first time the oppression remedy has been sought in a family matter. In some cases, oppression is used to compel the sale or dissolution of a family business following a divorce. However, this case was unique in two respects:
Given these complications, the court examined whether it could find oppression against the corporation as a whole, or against the business partner. Ultimately, it was determined this would be an overreach, and unfair to both:
[The wife] has sought the liquidation and dissolution of the companies, stating that it is the only way she can realize upon her judgment. Although this might be the quickest way to do so, it is not responsive to the oppression I have found. I did not find [the wife] had a reasonable expectation that the corporation would sell its assets in order to pay the judgment. Liquidation goes too far and is non-responsive to what I have found to be [the wife]’s reasonable expectations. Nor would such a remedy be equitable, due to the disproportionate and unwarranted detrimental effects upon [the business partner]’s interests.
While forcing liquidation of the companies’ assets would have been the fastest way for the wife to realize her claim, it was not equitable in this case. The court asked the parties to consider options other than forced liquidation and come back before the court at a later date.
At Mincher Koeman, our lawyers have the experience and skill necessary to handle any matter involving the division of family property, no matter how complicated. We provide knowledgeable and candid advice to our clients, working to efficiently traverse the process of valuing and dividing shared property, including business interests. If you are facing the end of a relationship and require the services of an effective family law lawyer for the fair division of your family property, contact our office to make an appointment to discuss your matter by calling us at 403-910-3000 or by contacting us online.
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