Property & Financial Restraining Orders

By
Categories: Blog, Family Law

One of the most formidable tools available to a spouse who is separating from their partner is an interim restraining order from the court if there is a risk that their former partner has disposed (or threatened to dispose) of family property, or otherwise deal with that property in a manner that could adversely affect their rights and until such time it can be properly valued and equitably divided.

As a rule only legally married couples, or common law spouses – that is those individuals who have been in a marriage-like relationship for no less than two years – may seek an order under s.91 of the Family Law Act for injunctive relief.

Strategically, restraining orders are ordinarily sought in the early stages of litigation and are often presented to the court without notice to the other spouse so as to limit the potential for further cause issue with family assets had the perpetrating spouse received advance notice.

How do I know if I need a restraining order against my spouse?

While the range of circumstances that may warrant a restraining order are theoretically limitless, some of the more conventional grounds for seeking this type of relief arises in situations where a spouse:

  • Solely controls the family bank account(s) and/or investment account(s);
  • Has unilaterally withdrawn funds from a joint bank account(s); diverted funds to a new account, or conducted other unusual financial transactions;
  • Operates a family business(es), or is the principal income earner;
  • Retains funds personally from a family business, or investment income for personal gain;
  • Has access to substantial credit facilities to fund their lifestyle, or there is a risk of accessing credit to disproportionately increase family debt;
  • Is under reporting their personal or business income, or undervaluing assets;
  • Is non-communicative or surreptitious in dealing with the family finances and assets generally;
  • Threatened bankruptcy;
  • Has made non-arm’s length transactions to friends or family so as to defeat claim by their spouse;
  • Has sold (or threatened to sell) assets of value, including vehicles, art, jewelry, and other personal property;
  • Has assets outside the province or country that pose risk to recovery, or otherwise defeat a family property claim.

Restraining Orders Against a Business

Apart from obtaining a restraining order to protect family property, in certain situations it may be prudent to seek a financial restraining order against a company or business venture controlled by a spouse if there is risk that assets may be sold, dissipated, or they may take actions “outside the normal course of business” that serve to either devalue or otherwise obstruct a claim.  This type of relief is governed by Rule 12 of the Supreme Court Family Rules.

Potential orders against a spouse who has a controlling interest in a company may include:

  • Limiting them from withdrawing funds, or fixing the amount of funds that may be available for personal use;
  • Confining the management and usage of company funds for normal business operations exclusively;
  • A general prohibition on disposal of any company assets, or material changes to the nature of the business and/or operations generally;
  • Restrictions on voting rights;
  • Mandatory reporting requirements to ensure compliance.

The essence of a financial restraining order is to tightly govern the conduct of a spouse in relation to management of a family business. While these types of orders are on its face prejudicial the court will take care to ensure the viability of that business as a going concern so that it may continue to carry out regular commercial functions such as remaining sufficiently capitalized to service customers, meet payroll and debt obligations, and conduct other activities germane to its core business.

Apart from the obvious benefits a restraining order provides, it can also deliver strategic advantages in negotiations and expedite settlement. Indeed, a spouse who is subject to a court ordered restraining order may soon discover a renewed sense of motivation to bargain in good faith and seek final settlement with their spouse.

When exercised properly, a property or financial restraining order can be a potent instrument that immediately “levels-the-playing field”.

Whether a restraining order is appropriate measure requires a careful analysis of the party’s circumstances, a history of their relationship, and relevant conduct post-separation. The process for obtaining injunctive relief can be procedurally complex and requires technical precision. A spouse who believes that their rights may be at risk would be well served to seek legal advice with respect to their interests.