Jan 10, 2009 04:30 AM
Divorce lawyers and the courts are seeing a surge – expected to become a "flood" – of requests from men seeking to slash their support payments to their ex-wives and children, citing job losses or drastic drops in bonuses, salaries and stocks.
At the same time, many couples who had hoped to move on with their lives are finding themselves in a hellish kind of legal and emotional limbo – unable to sell their homes and cash out.
"People always ask, `Do couples separate more in good times than in bad times?' " says Philip Epstein, a veteran divorce lawyer. "Normally, the answer is that they separate in both.
"No one's ever asked the question, `Do they separate in cataclysmic times?'"
Especially devastated have been men who separated last summer and are now finding themselves essentially forced, by law, to hand over a share of assets to their ex-wives wildly out of whack with their current value, leaving some of them virtually bankrupt.
Just this week, family law lawyer Martha McCarthy finalized a settlement for a couple in which the husband, a high-paid executive, had opted last August to hang on to $1 million in
stocks and options. This week he should have, under law, written a $500,000 cheque to his ex-wife – half their value as required under Ontario's Family Law Act – but, since they've now plummeted to just $300,000 she agreed to be "generous" and accept less.
Many ex-wives haven't.
"Those are the people who are most bitter. They gave away half of everything and, 15 minutes later, the half they kept was worth half, or even less. Their deals are done, inked, cheques written," says McCarthy.
Divorce experts – not to mention people simply trying to get out of loveless marriages and on to new lives – are finding themselves so "paralyzed" by all the uncertainty, many lawyers aren't even bothering to have houses appraised, says McCarthy, a $500 process that's been considered critical in assessing a couple's worth.
"Why would we bother? Nobody knows what their houses are worth right now," she says, adding that she's not seen this kind of "uncertainty" in 19 years as a family law lawyer, including the 1991 recession. Instead, both sides are trying to reach a consensus on house values, "and where it might go," she says.
"Everyone" is awaiting the outcome of what McCarthy calls a "watershed" appeal, Serra v. Serra, that divorce lawyers are hoping will set some new rules for how couples split assets that have been decimated by factors beyond their control.
Ironically, Serra is a bitter and acrimonious divorce case that predates the recent downturn. Husband Harold Serra has told the court he can't afford to pay his wife the $4.1 million she's technically owed under the law because, since their 2000 split, his Ajax-based textile company has been hard hit by competition from China that's left Canadian textile businesses "on the verge of extinction." His ex-wife, Barbara, has accused him of "creative accounting" and has refused to sell their Florida condo, which was worth more than $2 million U.S. before the housing collapse.
Lawyers are expecting to see a decision from the Ontario Court of Appeal soon, but no matter which way it goes, the case is likely to be appealed to the Supreme Court of Canada, leaving divorcing couples, their lawyers and the courts struggling for two more years to come up with decisions getting them out of failed marriages – with their rightful share of assets – in the midst of the most debilitating financial meltdown since the Depression.
A complicating factor during this unusually severe and rapid downturn, family law lawyers say, has been Ontario's Family Law Act. That act was introduced in 1986 and set a strict date for a divorcing couple to assess their worth – V-day or valuation date – the day of separation.
Family law lawyers have been sickened to see even the most civil of couples who separated in 2007 or early 2008 – who've moved as quickly as possible with lawyers, financial advisers and even family counsellors to finalize a settlement that best protects their children – hard hit by tanking stocks, RRSPs, pension plans and house values even as they talked.
Settlements have proven to be particularly tricky in some acrimonious cases where the husband has been forced to "look to his wife to be fair and reasonable," says family law lawyer Avra Rosen. "In law, she doesn't have to be because she could say, `Look, we separated in '07. You had a year and a half to be a nice guy and pay me what I was owed and you chose not to. So now, because you've been dragging your heels and we're fighting about the kids, you want me to be nice? Forget it.'
"That's already happening out there."
Other lawyers, such as Judith Huddart, has had eight recent cases where ex-wives have agreed voluntarily to ignore the V-day provisions of the act and divide assets based on their current value, so as not to bankrupt their husbands and further harm their children.
But more women have been calling their lawyers in a panic the last few weeks, saying that their husbands – from Bay St. brokers to Big Three assembly-line workers – are talking about having to reduce, or even stop paying, support in light of bonus and salary cuts, or layoffs.
In fact, requests for cuts in payments now outstrip the more usual requests to increase payments filed the last few weeks in the Ontario Superior Court, says Epstein, who sits on a panel of senior family law lawyers who review such applications to vary support payments.
Other couples are finding themselves unable to sell their biggest asset – their home.
All the economic uncertainty is forcing lawyers to look at more "open-ended" divorce settlements that can be revisited in months – or years – as things stabilize, says Huddart, who helps couples settle through collaboration.
"I'm looking forward to seeing more creative solutions (especially among divorcing couples forced, by economics, to co-habit indefinitely). Somebody who's already found a new person might be anxious to move, but I hope that new person has a house ... because (in some cases) it ain't going to happen any other way. I think part of our job as lawyers is to help our clients manage their expectations."
(Another story that the Star closed off commentary to.)