DATE: 20060117

DOCKET: C42199

COURT OF APPEAL FOR ONTARIO

DOHERTY, CRONK AND MACFARLAND JJ.A.

B E T W E E N :

MARY ANN RAAYMAKERS A.K.A. MARY ANN GREEN

Appellant (Applicant)

• and -

ROBERT GREEN

Respondent

Counsel: J. Thomas Curry and Daphne Johnston for the appellant D. Smith for the respondent

Heard: November 16, 2005

On appeal from the judgment of Justice Alan P. Ingram of the Superior Court of Justice dated April 28, 2005.

MACFARLAND J.A.:

[1] The appellant seeks to overturn an order dismissing her claim to set aside a separation agreement dated March 15, 1999 between herself and her former husband. She also seeks to appeal the order requiring her to pay costs in the sum of $57,880.63.

[2] The parties commenced cohabitation in 1979, and were married in 1983. There are three children of the marriage: Matthew, born in 1986; Lara, born in 1987; and Katherine, born in 1990. The parties separated in January 1999.

[3] In this court the appellant advanced two main grounds of appeal.

[4] The first ground of appeal relates to the process. The parties agreed that the application would proceed in two steps or stages, a bifurcated process. First, the trial judge was to decide whether the separation agreement would be set aside in whole or in part. The second stage of the proceeding would occur after the first and then only if the trial judge determined that some or all of the separation agreement should be set aside. The second stage would be concerned with the valuation of the disputed assets and the appropriate division of the matrimonial property.

[5] It is argued that the trial judge did not confine himself to the first stage of the process. Rather, as Mr. Curry (who was not counsel at trial) put it in argument, the trial judge “went right through the gate to the second hearing” when he made the adjustment in respect of what has been called the hidden gambling account, and when he refused to make other requested adjustments.

[6] The record discloses that the trial judge was asked, in the event that he was unwilling to set aside the entire separation agreement, to rectify all errors made in that document as submitted by counsel for the appellant. As he had been requested to do, the trial judge made a rectification order in relation to the hidden gambling account and ordered the respondent to make payment to the appellant in the sum of $10,755.26 and accrued interest.

[7] In my view, it is not open to the appellant to now argue in this court that there was not a proper evidentiary record before the trial judge to enable him to make the order he did. The appellant put rectification on the table and sought the order. Having made the request, and having been largely unsuccessful, the appellant cannot now take issue with that process. There is no suggestion that the appellant was in any way precluded from calling any evidence she wished to adduce in relation to those items for which she sought rectification. I would give no effect to this ground of appeal.

[8] It is also submitted on behalf of the appellant that comments made by the trial judge at the end of the fourth day of evidence were inappropriate. In my view, there was nothing improper in the trial judge’s comments. They reflect a well-intentioned effort on the part of the trial judge to try and have the parties resolve their differences and to provide them with judicial insight.

[9] The second ground of appeal advanced in this court relates to alleged mistakes in relation to a number of terms of the separation agreement. Part of this ground of appeal includes allegations of material non-disclosure on the part of the respondent, undue influence and inequality of bargaining positions.

[10] It is important to note, as the trial judge did, that the parties agreed that their number one priority in the separation would be the children. The children wished to remain in the matrimonial home, and therefore the parties agreed their three priorities were to:

1. develop a parenting agreement;
2. allow the wife to remain in the matrimonial home with the children; and,
3. allow the husband to maintain his business.

[11] There has never been any dispute as to whether these were the priorities.

[12] The appellant suggested that mediation would be the best means for resolving the matrimonial issues and she chose Janet Pond, a local lawyer, as mediator. The respondent agreed to the appellant’s choice of both the mediation procedure and the mediator.

[13] The evidence is overwhelming that, with one exception (the hidden gambling account referenced above), the respondent voluntarily made full and frank disclosure. The trial judge’s findings in this regard are well supported in the evidence.

[14] I shall deal with each of the alleged mistakes as they were argued in this court.

Error in the Valuation of the Respondent’s Business

[15] The appellant argues that the business was erroneously valued in the separation agreement at $550,000.

[16] The basis for her argument is that the financial statements used to arrive at this number were those for the company fiscal year ending February 28, 1998. At the time the separation agreement was being negotiated (from January through March of 1999), the most recent formal financial statements were not yet available. When they became available, they were disclosed, but this was after the agreement had already been sent out to the parties.

[17] The mediator valued the business at liquidation value, which she arrived at by using a formula of 85% of retained earnings less standard disposition costs of $12,000. Had the mediator used the company’s financial statements for the year ended February 28, 1999, the number for the liquidated value of the company would have been much higher – nearer in fact to $700,000.

[18] During the marriage, the family had used Mintz & Partners both as their personal and business accountants.

[19] Mintz prepared a report dated March 23, 1999 wherein they expressed an opinion that the fair market value of the company “for tax purposes in connection with a reorganization of the share ownership of the company” was estimated to be $700,000. The appellant suggests in her evidence that, having seen this report, she was under the impression that $700,000 was the “bottom line” value of the company.

[20] Her evidence contradicts the specific terms of the separation agreement wherein the parties agreed and accepted that the value of the company was $550,000.

[21] The appellant’s argument is premised on the position she took before the trial judge that she is entitled to one half of that increased value – somewhere around $70,000.[^1]

[22] Her position now ignores the fact that these parties chose mediation and a division of property which suited their particular family situation at the time. They did not choose to proceed through the court process where a more formal division of property would have occurred. They preferred instead the flexibility of the mediation approach.

[23] The terms of the separation agreement are very clear. The parties agreed at para. 21 that:

[E]ven if at any time in the past, at present, or in the future, the company (such term to include Longview Gas Plant) has a greater or lesser value than $550,000, Robert shall retain his entire interest in the company and Mary Ann transfers to Robert any interest she might have in the company, directly or indirectly and whether or not contingent, so that Robert shall own the entire interest in his company for his own use absolutely. Mary Ann releases unconditionally and irrevocably to Robert for his own use absolutely any and all interest in the company and the proceeds thereof and this provision shall apply notwithstanding any change in the circumstances of the parties in any event.

The parties agree that they have been advised to obtain a business valuation of the company by a certified Business Valuator to determine the Market Value of the company. Notwithstanding this advice, the parties hereto do not wish to obtain a certified business valuation based upon the disclosure which has existed between the parties and agree and accept that the value of the company is $550,000.00.

[24] Further, the agreement also provides in paragraph 32(a)(vi) that:

The Husband and Wife each warrants that he or she:

(vi) specifically waives a business valuation and warrants that neither party will at any time hereafter bring an action against the other party nor their solicitor alleging any non-disclosure or relying on any such alleged non-disclosure as a basis for further claim.

[25] There is no dispute that the draft bookkeeping statements for the year ending February 28, 1999 were available for the preparation of the Mintz & Partners report and were available to the appellant. When the more formal statements were prepared they were provided. However, with the assistance of the mediator, the parties agreed on a valuation based on information in the 1998 statements, as they were entitled to do. The only “error” in the separation agreement was a typographical error that dated the Mintz report April 3, 1998 when, in fact, it was dated March 23, 1999.

[26] Had the parties wished to use the 1999 retained earnings to calculate the liquidated value of the company it was open to them to do so and they had all the necessary information that would have enabled them to do so.

[27] It is of particular note that Tom Strezos, who prepared the Mintz report, stressed that his $700,000 figure for the fair market value as at February 1999 was a before-tax figure. He said that if had been asked to value the company for family law purposes his number would have been significantly lower.

[28] I would give no effect to this ground of appeal.

Arithmetical Error In Calculating The Net Family Property

[29] The appellant argues that in calculating the net family property a mathematical error was made by the mediator that no one caught at the time. As a result of the error, the appellant appeared to owe the respondent about $80,000.00. In fact, when calculated correctly the respondent owed the appellant approximately $1,000.00.

[30] The trial judge held that this error was of no consequence. The respondent, at the time, waived the payment. It was agreed among the parties that the waiver would be treated as a one-time spousal support payment and the appellant waived her right to spousal support and did not pay any sum to the respondent by way of equalization payment.

[31] The appellant argues that she erroneously gave up her right to spousal support to which she was properly entitled.

[32] On settling their affairs, the respondent agreed to pay the sum of $3,600 per month to the appellant and to characterize the sum as child support. The Federal Child Support Guidelines SOR/01-292 indicated that on the respondent’s agreed income of $105,000 per year the required child support was about $1,680 per month. The overpayment was voluntarily made by the respondent to achieve the parties’ goal of keeping the appellant and the children of the marriage in the matrimonial home and maintaining the lifestyle they had enjoyed during the marriage. It cannot be doubted that the appellant benefited from this overpayment.

[33] While the parties did not characterize the overpayment as spousal support, it certainly had that effect. The respondent continued to pay this amount until his business ran into financial difficulties in 2001, at which time he reduced the payment, and, in response, the appellant commenced this proceeding.

[34] The parties agreed in December 2003 to a temporary order whereby the respondent paid $1,480 per month for child support and $1,200 per month for spousal support retroactive to March 1, 2002. Prior to trial, the parties settled the issues of child and spousal support and the December 2003 order is now a final order which continues to this day.

[35] Consequently, any claim for spousal support could only be for the period from separation to March 1, 2002. For part of that period the wife received support indirectly. While not characterized as spousal support at the time, in all the circumstances, I see no error in the trial judge’s finding that the appellant in fact received spousal support, albeit indirectly, until March 1, 2002.

[36] I would give no effect to this ground of appeal and agree with the trial judge’s effective conclusion that this “mistake” was of no consequence and provides no basis upon which to set aside the separation agreement.

Error In Income Calculation

[37] The appellant argues that the separation agreement by its terms was based on the respondent having an income of $105,000 per year. She says that, in reality, his income was much higher and on this ground the separation agreement should be set aside.

[38] Paragraph 10(a) of the separation agreement provides:

The parties acknowledge that Robert would ordinarily be required to pay $1,680.00 per month as child support for the three children pursuant to the Child Support Guidelines and based upon Robert receiving an average income from Robert G. Green Equipment Sales Ltd. of $105,000.00 over a period of four years.

[39] The appellant argues that to obtain the figure of $105,000 per annum, one must average yearly income over five years as opposed to four and in one of those years there was a particularly low income. Further, the appellant argues that the figure does not take into account the fact that during those years used for averaging the parties were income splitting – a practice that would not continue after separation. As well, the appellant maintains that the respondent’s bonuses were not taken into account.

[40] The respondent’s income was calculated after full disclosure was made. The appellant was well aware of the income splitting that took place during the marriage and she knew of any bonuses paid. The time for her to have made the argument she now makes in this court was at the time the agreement was made. The evidence is overwhelming that all this information was available to her at the time the separation agreement was being negotiated. She agreed to the figure of $105,000 and there is no basis to conclude that any “mistake” was made. The appellant entered the agreement with full knowledge of the financial numbers. In any event, the respondent paid substantially more child support than required by the Guidelines. I would give no effect to this ground of appeal.

The Respondent’s Failure to Disclose the Hidden Gambling Account

[41] The respondent readily conceded that he did not disclose this account to the appellant during their negotiations.

[42] The respondent did not want to separate from the appellant. He hoped throughout the negotiations for a reconciliation. He knew that the appellant strongly objected to his gambling. Because he hoped to reconcile, he chose not to disclose this account, the existence of which he knew would upset her. The account should have been disclosed and the respondent readily agreed once disclosure was made to pay over half of that account plus interest to the appellant. The trial judge was asked to make this correction and did so. I see no error in what he did. This error or “mistake” as the appellant characterizes it, in the overall context must be considered de minimis. It is no basis upon which to set aside the entire separation agreement.

Error in Respect of the Income Tax Refund

[43] The evidence before the trial judge was that both the appellant and the respondent would receive income tax refunds in the year of their separation and both knew it at the time. Copies of the respondent’s tax information – including his refund – were provided to the appellant at the time.

[44] While the reasons for judgment do not expressly deal with the tax refund, it is implicit from his reasons that the trial judge did not accept that any mistake had been made in this respect. Under his heading “Mistake” the trial judge noted “There was one mutual mistake in the calculation of the equalization payment.” One can only conclude from this statement that the trial judge rejected the appellant’s position in respect of other alleged “mistakes”, including the tax refund.

[45] I would give no effect to this ground of appeal.

[46] In my view, the evidence here was overwhelming that with the one minor exception noted, the respondent made full and frank disclosure to the appellant during their negotiations.

[47] The parties proceeded, as was their right, without the assistance of professional valuators despite advice to the contrary. They rejected the advice of the mediator and their lawyers to obtain professional valuations of the business. Both rejected their respective lawyers’ advice not to sign the agreement.

[48] The agreement that they signed met the goals they had set for themselves at the outset.

[49] The appellant has not been disadvantaged in any sense. The trial judge’s conclusion that “she has received a fair distribution of property which if re-opened has the potential to benefit her former husband ” is well supported in the evidence and I agree with it.

[50] The appellant, as the trial judge noted, is a highly intelligent woman. Since the separation she has received two degrees from York University and now teaches high school. She took the lead in choosing the process and selecting the mediator. She ignored the advice of the mediator to obtain valuations and to seek advice from both accounting and legal professionals. She reviewed the draft separation agreement with her own counsel and chose to ignore his instructions and advice. I agree with the trial judge’s conclusion that it cannot be said that she failed to understand the nature of the contract.

Costs

[51] It appears from the reasons of the trial judge that both the appellant and the respondent sought costs on a substantial indemnity basis. The trial judge found that the respondent was entitled to costs.

[52] The respondent’s cost figure of $43,475.24 for the period to April 5, 2004 was, after a $7,500 reduction in respect of a motion that was settled, reduced by one third “… to reflect only partial recovery”.

[53] For the period from April 5, 2004 to the date of judgment, the sum sought was $34,584.87. The trial judge reduced this sum by only 15% to reflect the wife’s recovery in relation to the hidden gambling account.

[54] In my view, the costs ought to have been awarded to the respondent only on a partial indemnity basis throughout. There is nothing in the reasons to suggest any basis upon which substantial indemnity costs should be awarded. The costs for the initial period were reduced by one third. Costs had been requested on a substantial indemnity basis and the one third reduction suggests a conversion using the rough rule-of-thumb methodology to partial indemnity.

[55] No similar reduction was made to the costs requested for the second period, which included the trial time. If those costs are similarly reduced by one third the resulting figure is $23,056.58. To reflect the appellant’s partial success in relation to the gambling account the trial judge reduced the costs for this period by a further 15%. When the 15% is applied to the lower number, it results in an overall costs figure for this period on a partial indemnity basis of $19,598.09. I would reduce the costs for this period owed by the appellant to the respondent to this amount. In all other respects I would not interfere with the costs disposition.

[56] In the result, leave to appeal is granted on the question of costs and the appeal is allowed in part by reducing the costs awarded to the respondent at trial by the sum of $11,528.29. In all other respects the appeal is dismissed.

[57] Costs of the appeal are to the respondent fixed in the sum of $10,000 inclusive of disbursements and G.S.T.

RELEASED: January 17, 2006 “DD”

“J. MacFarland J.A.”

“I agree Doherty J.A.”

“I agree E.A. Cronk J.A.”

[^1]: Calculated as the approximate difference between $700,000.00 and $550,000.00 less disposition costs.