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Precedent-setting ruling nets client $331,000 from ex-spouse

A client of Calgary and Vancouver family lawyer Marcus Sixta has recouped more than $300,00 from his estranged spouse following a precedent-setting ruling from the Supreme Court of British Columbia.

The spouse had siphoned hundreds of thousands of dollars from a family business during their marriage to fuel a gambling habit, court documents show.

“Gambling corporate funds during the relationship was found to be dissipation of a family asset, and she will have to pay our client back,” Sixta, founder of Crossroads Law, tells AdvocateDaily.com

The court awarded the 64-year-old businessman more than $331,000, his half of the $663,000 of unauthorized company funds found to have been used for gambling by his ex-spouse.

The woman “regularly, and without authority, facilitated the use of company funds for the specific purpose of gambling,” wrote presiding Justice Joyce DeWitt-Van Oosten.

The case sets two major precedents on issues not often addressed in Canadian family or corporate law, says Sixta.

“One of the precedents is that the two actions which involve the same asset were heard at the same time. That asset was the family business,” he says. “She was using funds from the family business for many years to gamble, unbeknownst to our client.”

The woman’s lawyers argued that this was purely a family law case and that the corporate claim should be barred, Sixta says. They said, “It’s either one or the other. You have to choose.” 

But the court ruled that although the two actions are distinct, raising separate issues, the company was entitled to bring a corporate claim for breach of trust and breach of fiduciary duty against the ex-spouse during a family law proceeding about how to divide that asset, he says.

“The court said that the corporate proceeding will inform the family proceeding,” Sixta says.

In a second precedent, the court ruled it can examine financial dissipation that occurred during a marriage in the context of a business breach of trust, he says.

The woman’s lawyers argued that because the gambling took place before separation there could be no compensation claim under family law, Sixta says. The courts avoid getting involved in the minutia of a couple’s spending during their relationship, he says.

“We were able to convince the court that when it comes to this type of case where you have the dissipation of corporate family assets that leads to a breach of trust, that the legislation is broad enough to allow us to make those arguments for an unequal division of family property,” Sixta says.

“She was found to have breached the trust of this business, and that allowed us to go back into the spending in the relationship, which normally the court doesn’t allow you to do.”

The Crossroad’s legal team had difficulty finding any authority to line up perfectly with their case, he says. They found only two other B.C. cases of corporate and family law actions occurring at the same time.

And across Canada there are few cases in which gambling is a route to proving compensable dissipation during a relationship, Sixta says.

“And the two issues together have never been heard in this way,” he says. “There’s never been a case in Canada where it’s been the dissipation of a corporate family asset by way of gambling leading to a breach of trust that is then cause for an unequal division of family assets.”

Sixta’s legal team chose this route because they believed the law was on their side and that they needed the breach of trust evidence in the corporate action to make the case for the gambling dissipation, he says.

“Our strategy was that in proving the corporate actions, proving that this was a breach of trust, we could go after her, and we went back five years before the separation,” Sixta says. 

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