January 1, 2007

In Debora v. Debora, the Ontario Court of Appeal confirmed that a property will be considered a matrimonial home even if it is owned by a company instead of directly by a spouse.

The facts of the case make for interesting reading.  The parties went through a religious wedding ceremony in 1987, but did not obtain a license to marry.  They had one child born in 1989.  In July, 1994, the parties went through a civil marriage ceremony.  On October 19, 1993 a company, in which the husband was the sole shareholder, purchased a cottage property as an investment.  He provided all of the funding.  On September 11, 1995, the parties separated and became involved in contentious litigation which dragged on over a number of years.

The trial judge found that the cottage came within the definition of matrimonial home as set out in the Family Law Act.  The court of appeal agreed.

According to the appellate court, the husband was the sole shareholder and controlled the company through which the cottage was originally purchased.  The husband’s company did not pay for the renovation of the cottage.  Moreover, money from the couple’s joint bank account was used to pay ongoing expenses.  The court found that the company was essentially the alter ego of the husband and was being used by him to try to defeat the legitimate claim of his wife.  The husband was not allowed to hide behind the corporate veil.

The court of appeal agreed with the conclusion that the cottage was a matrimonial home based on the finding by the trial judge that the property “was ordinarily occupied by the person and his or her spouse as their family residence”.

The bottom line is that if you want to characterize a property as an investment, it should be treat as such in both substance and form.