Quebec divorcée deemed 'de facto' business partner of husband is awarded $2 million

The compensatory allowance, despite a marriage contract, underscores wife's contribution to business

Quebec divorcée deemed 'de facto' business partner of husband is awarded $2 million
Eric Kirshner is a partner in the law firm of Goldwater, Dubé in Montreal and represented the wife.

A Quebec superior court judge has awarded nearly $2 million to a divorced woman who, the judge found, co-managed and expanded her ex-husband’s business without fair compensation.

In the July 9 ruling, Honourable Justice Nathalie Pelletier of the Superior Court of Quebec awarded the woman a compensatory allowance of $1,985,086, to be paid by her ex-husband within 90 days, in addition to monthly spousal and child support payments.

Justice Pelletier found that the husband’s successful business endeavours were due in large part to the wife’s work in the office and in the home, deeming the couple to be in a “de facto partnership,” and noted that when the wife left her husband’s business following their separation, three employees were hired to replace her.

“This case provided full recognition for the arduous work that my client performed, as well as her commitment throughout the marriage,” says Eric Kirshner, a partner in the family law firm of Goldwater, Dubé in Montreal, and counsel for the wife.

“She was an office administrator, she was a right-hand woman, she supported all his promotional events, to promote his business,” and provided bookkeeping, project management and managerial services, Kirshner told Canadian Lawyer. “She ended up helping to build homes, and she was a domestic Superwoman” who managed the household and raised two daughters.

The parties (known by the pseudonyms Sylvie and Theodore) were married in 2000, had resided together before marriage, and had a notarized marriage contract. Under Quebec’s regime of separation as to property on divorce, the “family patrimony,” or property belonging to the two spouses -- including the family residence, furniture and appliances, cars and recreational vehicles such as boats and ATVs, and secondary residences – must be divided equally between the couple on divorce.

A marriage contract, notarized before a wedding, may stipulate – as in this case – that assets acquired outside the family patrimony will remain with the person who acquired them.

In this case, the wife was found to be undercompensated for the work she had been performing for her husband’s business, which sustained them both. In deciding on a compensatory allowance for the wife, the judge found that the husband had been unduly enriched. Evidence was also accepted that for nearly a decade of their marriage, Theodore would regularly take profits and keep them in his holding company, telling his wife they were going in the same pot for the “common good” of the couple’s retirement fund.

In court, Theodore argued that his wife had little education and a modest income when they married, and she enjoyed the lifestyle he provided to her. At the time of the couple’s separation in 2017, Sylvie’s assets totaled about $200,000, while Theodore’s amounted to over $4.5 million.

In awarding the compensatory allowance, the judge agreed that without Sylvie’s support and efforts, Theodore would not have been able to build his business alone.

“This is an important decision,” says Kirshner, “because the judge gave half of the non-patrimonial assets to my client, meaning my client was recognized as having a direct contribution towards the fortune that [Theodore] enjoyed at the time of the separation.”

When one spouse has assets of more than $4 million and the other has $200,000, “or $180,000 in Registered Retirement Savings Plans, it doesn’t create a presumption of inequity, but it's a leading indicator as to the fairness of the remuneration and to the fairness of the whole venture,” says Kirshner.

“This is an equitable remedy, which is the only remedy that allows for the sharing of these types of assets,” he adds. “The source of the judgement is not the regime of separation as to property, [but] the enrichment of the husband's patrimony and the correlating impoverishment of her patrimony.”

When courts are hesitant to award compensatory allowances or equitable remedies in such cases, “it really leads to generations of women who become impoverished, and … to a vicious cycle in the event of a breakdown of a marriage.”

Kirshner advises those working for their spouse’s businesses to keep as many records as possible, including timesheets, and even text messages. And anyone who is asked to sign a marriage contract should received independent advice from her own lawyer, who is specialized in family law, before signing, he says, adding that “it’s extremely difficult to cancel a marriage contact in the province of Quebec.”

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