Arvai v. Arvai [Indexed as: Arvai v. Arvai]

52 O.R. (3d) 481

[2001] O.J. No. 561

Docket No. C32629

Court of Appeal for Ontario

Carthy, Laskin and Simmons JJ.A.

February 20, 2001

Family law--Support--Spousal support--Parties operated tobacco farming business during marriage--Wife sought retraining after separation--Husband obtained work as farm labourer--Both parties suffered economic disadvantages as result of breakdown of marriage but wife lost ability to support herself and husband did not--Trial judge did not err in ordering payment of spousal support out of husband's capital.

The parties were married in 1979 and separated in October 1996. During their marriage, they built and operated a tobacco farming business together. After the separation, the wife enrolled in a financial services course. Entry level salaries from her expected employment were in the $20,000 range. The husband obtained employment as a farm labourer. After the separation, the husband deposited a cheque in the amount of $9,782.92 drawn on the parties' operating line of credit into a Net Income Stabilization Account (NISA). The NISA account had always been in the husband's name. A NISA enables farmers to stabilize income by making deposits to the account in years of higher income and withdrawing from the account in years of lower income. The provincial government matches any deposits that are made. As of February 1998, the balance in the husband's NISA deposit account was $13,971.67, while the balance in the matching account (account 2) was $17,841.15. In March 1998, the wife obtained a consent order restraining both parties from dissipating farm assets without the written consent of the other. At the time of the trial, the parties' 1997 soya bean crop was still in storage in the husband's name awaiting sale. The wife claimed that the crop should have been sold in 1998 and that they lost $6,000 of profits by failing to sell it at the earlier date. The husband testified that he had not sold the beans earlier because the parties had been unable to agree on how the proceeds should be applied.

The parties agreed to the sale of the matrimonial home and the farm on the eve of trial, as well as to the sale of much of the farm equipment, many of the debts to be paid from the proceeds of sale of the farm and equipment, and many aspects of the equalization of net family properties calculation. The trial judge found that ultimately there was no equalization payment owing by one party to the other. However, she ordered the husband to pay the wife one-half of the estimated lost profits arising from the delay in selling the soya beans and one-half of the NISA deposits accumulated post-separation. The trial judge ordered the husband to pay spousal support in the amount of $1,000 per month from September 1, 1999 to December 1, 2000, reviewable as of January 1, 2001. She recognized that the husband would likely be required to pay at least part of these payments from his share of accumulated capital that was divided equally between the parties as of the date of the separation. The husband appealed. The appeal raised two issues: first, whether a court should order payment of spousal support out of a payor's capital and in circumstances where the economic disadvantages flowing from the breakdown of the marriage are the same for both parties; and second, the trial judge's conduct of the post-separation accounting.

Held, the appeal should be allowed in part.

In ordering the husband to account for one-half of the anticipated lost profits on the sale of the soya beans, the trial judge failed to take proper account of the language of the non-dissipation order. The meaning of "dissipation" is not free from doubt, particularly in the context of this order when read as a whole. Arguably, the husband would have contravened the order had he sold the inventory for any amount less than its optimum price. Moreover, non-dissipation orders are generally aimed, at least in part, at proscribing unilateral action. These parties were unable to agree on a course of action. It imposed too high a standard to say, from the perspective of hindsight, that the husband was responsible for failing to take unilateral action to sell the beans in the face of the order. The order requiring the husband to account for one-half of the anticipated lost profits on the sale of the soya beans should be set aside.

When performing the equalization calculation, the trial judge treated the amount in NISA account 1 as an asset belonging to the husband. Moreover, she found that he was entitled to possession of that account. She did not treat the funds in account 1 on the date of separation as a joint asset. Absent intervening considerations, the post-separation accounts should be treated the same way. The precise basis for the trial judge's conclusion that, as the wife bore responsibility for half the debts during the time the parties farmed together, she was entitled to half the benefits from the farming operation, and the resulting order that the husband pay the wife one-half of the NISA deposits received post-separation was not clear. The conclusion implied an interest in property, but did not specify how it arose. The equalization obligation imposed by the Family Law Act does not apply to assets acquired post- separation. Absent a finding of a proprietary interest, there was no basis for the order that the husband pay the wife one-half of that portion of the funds in NISA account 2, which consisted solely of matching government funds accrued post- separation. The funds drawn from the operating line of credit and deposited into NISA account 1 fell into a different category. There was no express agreement in place between the parties for use of funds from the joint operating line of credit when these funds were withdrawn. Absent agreement, it would be patently inequitable to permit the husband to incur a debt for which the wife was liable and use the money to create an asset for himself, without requiring him to indemnify her for her share of the debt created. The order that the husband pay the wife one-half of the NISA funds received post- separation should be set aside and replaced with an order that the husband pay to the wife one-half of the funds he withdrew from the operating line of credit to deposit into NISA post-separation.

There was no doubt that both parties suffered economic disadvantages as a result of the breakdown of the marriage. The trial judge found that the husband was eager and willing to go back to farming and that he could use the knowledge of farming that he developed during the marriage. She found that the wife, on the other hand, could not realistically expect to find employment as a farm labourer, and that the marriage caused her to lose the ability to support herself. There was sufficient evidence to justify those findings. The intention of the trial judge was that the parties should share the burden of the wife's retraining. This would require both to encroach on capital. In the unusual circumstances of this case, there was no error in principle in this approach.

APPEAL by a husband from the support and property provisions of a divorce judgment.

Cases referred to Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420, 63 B.C.L.R. (3d) 77, 169 D.L.R. (4th) 577, 236 N.R. 79, [1999] 8 W.W.R. 740, 44 R.F.L. (4th) 1; Hamilton v. Hamilton (1996), 1996 CanLII 599 (ON CA), 92 O.A.C. 103 (C.A.); Hickey v. Hickey, 1999 CanLII 691 (SCC), [1999] 2 S.C.R. 518, 138 Man. R. (2d) 40, 172 D.L.R. (4th) 577, 240 N.R. 312, 202 W.A.C. 40, [1999] 8 W.W.R. 485, 46 R.F.L. (4th) 1; Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257, 34 N.R. 384, 8 E.T.R. 143, 19 R.F.L. (2d) 165 Statutes referred to Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3, s. 15.2(1), (4), (6) Family Law Act, R.S.O. 1990, c. F.3, ss. 4, 5 Rules and regulations referred to Child Support Guidelines, O. Reg. 391/97 (Family Law Act)

James G. McLeod and Alfred A. Mamo, for appellant. Barry M. Tobin, for respondent.

The judgment of the court was delivered by

[1] SIMMONS J.A.:-- James and Sherry Arvai built a tobacco farming business together during the course of their 17-year marriage. They separated on October 1, 1996 but decided to farm for one more year. Mrs. Arvai subsequently obtained an order to rent out their farmland in 1998. Each party accordingly sought a new source of income.

[2] Mrs. Arvai enrolled in a financial services course at Fanshawe College in the fall of 1997. She expected to complete the course in the spring of 2000. Entry-level salaries for her expected employment are in the $20,000 per year range.

[3] Mr. Arvai believes his strength is in farming. However he knows that significant capital would be necessary to acquire another farm. He started working as a farm labourer in 1998. The trial judge found his projected income for 1998 to be $20,948.

[4] The Divorce Judgment granted on June 24, 1999 contained 27 paragraphs, many of which dealt with post-separation accounting issues. The trial judge also ordered Mr. Arvai to pay spousal support to Mrs. Arvai in the amount of $1,000 per month from September 1, 1999 until December 1, 2000, reviewable as of January 1, 2001.

[5] The central issue on this appeal is Mrs. Arvai's entitlement to spousal support. Mr. Arvai also challenges aspects of the post-separation accounting as it relates to the 1997 crop year. The trial judge recognized Mr. Arvai would likely be required to pay at least part of these payments from his share of the accumulated capital that was divided equally between the parties as of the date of separation.

Background

[6] The Arvais were married on February 24, 1979. They have two children. During the course of their marriage, both parties were actively involved in farming. In the early years of the marriage, the couple lived in a home on a farm owned by Mr. Arvai's parents. The parties maintained the home but did not pay rent. Mrs. Arvai was paid for farm labour. Mr. Arvai did not receive a formal wage. However, in addition to free rental of their home, he shared in any profits earned by the farming operation.

[7] The Arvais purchased the home and farm they were operating at separation from Mr. Arvai's parents in 1985. The purchase also included farm equipment and a tobacco quota. Mr. Arvai's parents took back a $150,000 second mortgage as part of the purchase price. They subsequently forgave that debt. The senior Arvais also assisted the couple by allowing them to use farm equipment and [by] giving them $38,000 to help them restructure financially.

[8] At some point Mr. Arvai arranged with his parents to grow their tobacco quota (in addition to his own) on their ground, using their equipment, and to pay them rent, initially $60,000 per year -- $70,000 per year as of the date of separation. Payments were made directly and by transferring some of the crop into Mr. Arvai Sr.'s name when it was stored for sale. Mrs. Arvai did not participate in the rental discussions but she was aware of the arrangement. Initially, she tried to keep track of the direct payments and payments in kind, however she did not have any real grasp on the payments that had been made as of the date of trial.

[9] Following the separation, Mrs. Arvai and the children remained in the matrimonial home. Mr. Arvai moved into a trailer located on the farm property. In about July of 1997, he moved into a house on a farm owned by his father.

[10] After they separated, the parties simply continued using their bank accounts and paying expenses as they always had. On December 30, 1996, Mr. Arvai deposited a cheque in the amount of $9,782.92 drawn on the parties' operating line of credit into a Net Income Stabilization Account (NISA). The parties gave evidence and filed exhibits to explain that a NISA enables farmers to stabilize income by making deposits to the account in years of higher income and withdrawing from the account in years of lower income. The provincial government matches any deposits that are made and interest is paid at premium rates. The account can also be closed at any time and the money withdrawn, however Mr. Arvai testified one could not then get back into the program for another three years.

[11] The NISA account had always been in Mr. Arvai's name. There was no dispute at trial that the balance in his deposit account (account 1) as of the date of separation was $4,398.49. [See Note 1 at end of document.] As of February 17, 1998, the balance in account 1 was $13,971.67, while the balance in the "matching account" (account 2), which is taxable upon withdrawal, was $17,841.15. Mr. Arvai had not withdrawn any amounts from either account as of the date of trial. He testified that he did not know whether one could make withdrawals while farming someone else's operation. He said that he had reservations about taking money out as if he had retired. If he did get back into farming, NISA is important to ensure there is money to fall back on in the event of a bad year.

[12] In early 1997, the Arvai's agreed each was entitled to a draw from the farm operating line of credit for personal expenses: $500 per month for Mr. Arvai and $1,100 per month for Mrs. Arvai and the children. In addition, the utilities on the matrimonial home were paid as part of the farming operation during 1997, as were most of the utilities in the trailer while Mr. Arvai lived in it.

[13] On March 6, 1998, Mrs. Arvai obtained a consent order restraining both parties from dissipating farm assets without the written consent of the other.

[14] Mr. Arvai rented out the unused portion of the parties' 1997 tobacco quota for $27,210. During the course of 1998, he paid a series of debts with the proceeds of that rental without Mrs. Arvai's consent. He also received a G.S.T. rebate in the amount of $4,050.80 and wheat deficiency cheques totalling $1,360.20 on account of the 1997 crop year. He deposited all of these funds into his personal account and used the proceeds for personal expenses.

[15] On May 7, 1998, Mrs. Arvai obtained an order that "the 86 acres of farm land . . . be rented during 1998 . . . for the amount of $100 per acre being the sum of $8600 payable in two installments . . . and that the funds be applied by [her] towards the expenses of the farm property". She accepted a reduced rental for the farmland without Mr. Arvai's approval when the tenant asserted there were only 76 useable acres.

[16] At the time of trial, the parties' 1997 soya bean crop was still in storage in Mr. Arvai's name awaiting sale. Mrs. Arvai claimed the crop should have been sold in 1998. She testified they lost $6,000 of profits by failing to sell at the earlier date. Mr. Arvai testified he had not sold the beans earlier because the parties had been unable to agree on how the proceeds should be applied -- he wished them applied to the debt owed to the storage facility, while Mrs. Arvai wished them applied to their operating line indebtedness owing to the bank.

[17] Mrs. Arvai earned $7,479 working as an intern for the Bank of Montreal during the summer of 1998. She anticipated similar earnings in subsequent summers until she completed her course in the spring of 2000.

[18] The parties agreed to the sale of the matrimonial home and the farm on the eve of trial as well as to the sale of much of the farm equipment, many of the debts to be paid from the proceeds of sale of the farm and equipment, and many aspects of the equalization of net family properties calculation.

Judgment at Trial

[19] The trial spanned four days in March and April of 1999. The trial judge issued a detailed endorsement on June 24, 1999. The parties made extensive further submissions relating to the implementation of that endorsement. The trial judge issued a second endorsement dated July 26, 1999 to deal with those submissions.

[20] In addition to the order for spousal support, the trial judge ordered Mr. Arvai to pay child support in the amount of $296 per month in accordance with the Child Support Guidelines, O. Reg. 391/97 based on his projected income of $20,948 for 1999. She also ordered the parties to share the children's extracurricular expenses.

[21] The trial judge dealt with many disputed issues relating to the property sales and the equalization calculation. Ultimately, she found there was no equalization payment owing by one party to the other. She declined to order an accounting of how the parties spent the farm funds following separation in 1996 and 1997. However, she did order Mr. Arvai to pay Mrs. Arvai the following specific amounts totalling $30,780 on account of monies he received following the separation:

i. 1/2 of the sale proceeds from his 1989 GMC pick-up truck which he owned as of the date of separation (1/2 of $2,000),

ii. 1/2 of the estimated lost profits arising from the delay in selling the soya beans (1/2 of $6,000),

iii. 1/2 of the tobacco rental money less $3,496.36 of approved debts attributable to the 1997 crop year (1/2 of $23,713.66) plus interest from the date of receipt. (She disallowed $22,943.86 in deductions claimed by Mr. Arvai for debts he said he had paid on account of the 1997 crop year),

iv. 1/2 of the NISA deposits accumulated post separation, namely 1/2 of $9,573.18 deposited into account 1 post separation, [See Note 2 at end of document] and 1/2 of $12,253.85 in account 2, [See Note 3 at end of document]

v. 1/2 of the wheat deficiency proceeds plus accrued interest from the date of receipt,

vi. 1/2 of the GST refund (1/2 of $4,050) plus accrued interest from the date of receipt.

Issues on Appeal

[22] The appellant raises two issues on appeal: first, whether a court should order payment of spousal support out of a payor's capital and in circumstances where the economic disadvantages flowing from the breakdown of the marriage are the same for both parties, and second, the trial judge's conduct of the post-separation accounting. A third issue relating to the calculation of the equalization payment was settled immediately prior to the hearing of the appeal.

[23] As the post-separation accounting affects the parties' respective asset positions, and since the overall means of each party is relevant to questions of support pursuant to s. 15 of the Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3, I will deal with the second issue first.

The Trial Judge's Conduct of the Post-Separation Accounting

[24] In addition to specific concerns relating to each amount ordered, Mr. Arvai also relies on a general submission that the specific orders for repayment were made in isolation, focusing on individual sums received by him out of context, without considering that his requests for an overall accounting of the monies received on account of the 1997 crop year and for a repayment of specific monies received post separation by Mrs. Arvai were refused. I will deal with this concern as the context requires.

i. Proceeds of 1989 GMC pickup

[25] Mr. Arvai says the 1989 GMC pickup was owned by him at the time of separation and therefore formed a part of the equalization calculation. He says requiring him to account for half of the proceeds of sale received by him following the separation amounts to double counting.

[26] The trial judge set out the details of the calculation she performed to reach the conclusion that no equalization payment was payable in her second endorsement. She said: "I did not include the 1989 GMC pickup when valuing the Respondent's assets at the valuation date. . . ." There is no basis for this court to conclude otherwise.

[27] Given that the GMC pickup was owned on the date of separation, the correct method of accounting for its value would have been to include it in the equalization calculation. Errors in applying the equalization provisions of the Family Law Act, R.S.O. 1990, c. F.3 can occur when assets are treated in isolation. For example, had Mr. Arvai's net family property, excluding the 1989 GMC pickup, been deemed to be zero because it amounted to a negative figure, treating the vehicle separately could have resulted in an error. While it is generally preferable not to depart from the scheme of computation prescribed by the Family Law Act, it does not constitute reversible error to deal separately with an asset omitted from the equalization calculation where doing so does not ultimately give rise to an error in that calculation: see Hamilton v. Hamilton (1996), 1996 CanLII 599 (ON CA), 92 O.A.C. 103 (C.A.). In this case, no such error has been demonstrated. The trial judge did not therefore err in requiring Mr. Arvai to account separately for half of these proceeds.

[28] As this asset was owned on the date of separation, no equities in relation to post separation accounting issues are raised.

ii. Soya bean profits

[29] The trial judge found that Mr. Arvai refused to sell the soya beans "at a time when the sale would have been profitable on the basis that there was a dispute as to how the sale proceeds would be used". She found Mr. Arvai had total control over the time of their sale because they were in his name alone, and he is responsible for his choice to refuse to sell.

[30] Mr. Arvai submits there was no evidence capable of supporting the trial judge's findings as to the quantum of any lost profits. In addition, he says it is inappropriate to allocate any losses to him when the parties were unable to agree on how the proceeds were to be applied, particularly in the face of a non-dissipation order.

[31] Mrs. Arvai submits sale of the beans would not have constituted a breach of the non-dissipation order. She says, in effect, that because the beans were stored in Mr. Arvai's name alone, he had the sole authority, and therefore the obligation, to dispose of them in a prudent fashion.

[32] The trial judge obviously accepted Mrs. Arvai's evidence that she believed that the parties would have realized a profit of approximately $6,000 had the 1997 bean crop been sold in the spring of 1998. Mr. Arvai did not seriously challenge her claim that there would have been a profit. He declined however to attempt any quantification.

[33] It was open to the trial judge to accept Mrs. Arvai's evidence. The Arvais were the only witnesses to testify at trial. Both had been engaged in the business of farming throughout their married life. Although not the best evidence on the issue, Mrs. Arvai's testimony constituted some evidence on the point. It is implicit in the trial judge's finding that she found Mrs. Arvai's evidence sufficiently reliable and credible to permit such a finding. Matrimonial litigation would become expensive and protracted in the extreme if trial judges were prohibited from relying on this type of evidence.

[34] I find however that the trial judge failed to take proper account of the language of the non-dissipation order in making her decision. The order restrained each party:

. . . from dissipating the assets and equipment of the farming operation including . . . the inventory of [soya] beans and funds received on account of the 1997 crop year without the written consent of the other, to facilitate the ordinary operation of the farming operation. . . .

(Emphasis added)

[35] Mrs. Arvai may be correct that technically there would have been no breach of the order had Mr. Arvai simply sold the beans and held the proceeds for subsequent distribution. The meaning of "dissipation" is not however free from doubt, particularly in the context of this order, when read as a whole. Arguably, Mr. Arvai would have contravened the order had he sold the inventory for any amount less than its optimum price. Moreover, non-dissipation orders are generally aimed, at least in part, at proscribing unilateral action. These parties were unable to agree on a course of action. It was open to either of them to obtain a court order compelling sale of the inventory. I consider it imposes too high a standard to say, from the perspective of hindsight, that Mr. Arvai is responsible for failing to take unilateral action to sell the beans in the face of this order. The order requiring Mr. Arvai to account for one half of the anticipated lost profits on the sale of the soya beans is accordingly set aside.

iii. Unused tobacco quota rental proceeds

[36] As noted, the non-dissipation order dated March 6, 1998 also prohibited use of funds received on account of the 1997 crop year by one party without the written consent of the other party. There is no dispute that the unused 1997 tobacco rental proceeds fall within the category of funds received on account of the 1997 crop year, that subject to payment of proper expenses, these funds were to be shared equally between the parties, and that Mr. Arvai used them for payment of expenses without Mrs. Arvai's consent. The trial judge accordingly found that Mr. Arvai bore the burden of establishing that the items on which the monies were spent were legitimate debts arising from the 1997 crop year. Mrs. Arvai agreed that some of the expenses were properly paid. The trial judge ruled others had been properly paid. Mr. Arvai appeals the order disallowing the remaining expenses paid by him as follows:

a. payment to Louis Arvai of $20,000

[37] Over and above this claimed deduction for a payment of $20,000 he made to his father on April 22, 1998, Mr. Arvai claimed an outstanding debt to his parents was properly payable from the proceeds of sale of the farm, equipment and soya beans. The trial judge noted that "the loan" from Mr. Arvai Sr. was the subject of a separate legal proceeding and that there would be a complete accounting of the debt and payments on it and a determination of whether interest was to be charged in that other proceeding. She said "the matter of the loan is properly the subject matter of that other proceeding. No amount is ordered to be paid in this proceeding." The trial judge declined to accept this $20,000 payment as a legitimate expense properly payable from the tobacco quota rental money for the same reason. She said: "The amount of the debt outstanding, if any, will be determined in the action brought by Louis Arvai."

[38] The senior Arvais commenced their action on September 2, 1998. They were not made parties to this proceeding. Their claim is for farm and equipment rental for the 1996 and 1997 crop years. The $33,586.83 balance they claim is net of the $20,000 payment made on April 22, 1998. The interest component of that balance is less than $1,000.

[39] Mr. Arvai's claim relating to any indebtedness still outstanding to his parents is not before this court. This disputed $20,000 payment, though part of the account in the other proceeding, does not form part of the lis in the other proceeding -- it has already been paid. It should therefore have been dealt with in this action.

[40] The trial judge did not make a finding concerning Mr. Arvai's evidence on this issue. I note however that the parties' agreement to farm in 1997 involved Mr. Arvai making an arrangement with his parents, as he had in years past, to rent their farm, equipment and tobacco quota for the sum of $70,000. The parties were able to generate an income for the 1997 crop year, in part, because of this agreement. Mr. Arvai says a substantial balance remains owing over and above this $20,000 payment.

[41] Although she was never happy about the quantum of the rent, Mrs. Arvai acknowledged she was aware of it being the agreed amount. Her real dispute is with the accounting. She indicated at trial she has no personal knowledge of the payments in kind made during the course of any given crop year and was not aware of any agreement for interest.

[42] Mr. Arvai acknowledged he had not produced the ledger from the crop storage facility disclosing the payments in kind to his father. However he was not asked if he had it.

[43] No evidence was adduced at this trial to prove payments either in cash or kind beyond those set out in the statement of account that was filed. The parties' banking records were before the court. Given her testimony about anticipated profits on the soya bean inventory, it is reasonable to infer Mrs. Arvai was sufficiently informed to know of any real basis for concern about the propriety of this $20,000 payment on account. In the circumstances, the order disallowing a deduction for this expense is set aside and, in its place, an order is made permitting it and reducing the amount Mr. Arvai must pay to Mrs. Arvai on account of the tobacco quota rental proceeds by $10,000.

b. Union Gas expense of $1,283.82; WSIB expense of $193.61 payment to Ed Czajkowski of $500; and Visa and MasterCard expenses totalling $966.51.

[44] The trial judge disallowed these expenses on the basis that Mr. Arvai had not demonstrated that they related to the 1997 crop year. Mr. Arvai disputes her findings. The findings were available on the evidence. I see no basis to interfere.

iv. NISA Accounts

[45] The trial judge ordered Mr. Arvai to pay Mrs. Arvai one half of "the N.I.S.A. deposits received post separation". She said:

The respondent shall pay to the petitioner one half of the N.I.S.A. deposits received post separation[.] They were derived from the farming operation, which was jointly owned. As the petitioner bears responsibility for half the debts during the time they farmed together she is entitled to half the benefits from the farming operation.

I reject the argument that N.I.S.A. Fund 2 ought not to be included. The evidence is that the deposits of farmers into NISA accounts are matched by the government.

In her second endorsement, the trial judge clarified that she had not included any amounts from NISA Fund 2 in the equalization calculation as she had not assumed Mr. Arvai had or could get the NISA Fund 2 account at that time.

[46] Mr. Arvai submits the trial judge treated the accounts as if they were part of a community of property regime. He also says the court should not engage in a partial accounting of the use of jointly held funds. He complains in particular about Mrs. Arvai's use of funds for vacation. He says he received far less than Mrs. Arvai from the post-separation farm resources, even taking the cheque for the NISA deposit into account.

[47] Mrs. Arvai says that use of funds from the joint line of credit to fund NISA deposits was different in character from her use of funds. It was not a draw for expenses but rather a draw used to create a farming asset to be shared.

[48] There are two categories of funds involved in this issue: first, monies Mr. Arvai withdrew from the operating line account post-separation to make the deposit into account 1; and, second, matching government funds received post-separation in account 2. [See Note 4 at end of document.]

[49] It is instructive to examine the trial judge's approach to the account in existence at separation to determine the correct approach to the post-separation accounts. When performing the equalization calculation, the trial judge treated the amount in account 1 as an asset belonging to Mr. Arvai. Moreover, in her second endorsement, she found he was entitled to possession of that account. Put another way, the trial judge did not treat the funds in account 1 on the date of separation as a joint asset. Absent intervening considerations, the post-separation accounts should be treated in the same way.

[50] The precise basis for the trial judge's conclusion that "[a]s the petitioner bears responsibility for half the debts during the time they farmed together, she is entitled to half the benefits from the farming operation", and resulting order that Mr. Arvai pay Mrs. Arvai one-half of the NISA deposits received post-separation, is not clear. The conclusion implies an interest in property but does not specify how it arises. As noted, the trial judge did not find the parties had decided, in effect, to pool their assets pre-separation. Rather, she recognized separate rights of ownership for assets in existence on the date of separation. The trial judge's finding that the parties agreed to farm in 1997 and share revenues and expenses for the 1997 crop year falls short of finding an intention that assets acquired post-separation would be jointly owned. Moreover, the matching government funds were not brought into income for 1997. Those funds were not therefore part of 1997 farm revenue. Finally, the trial judge did not refer to constructive trust principles, nor is there any indication a constructive trust was claimed. If the trial judge in fact relied on the doctrine of constructive trust, she did not make a finding concerning the requisite element of deprivation: Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257. It is unclear that that finding would be available in this case. Mr. Arvai funded the post-separation NISA deposit by drawing on the joint line of credit. Although he incurred a joint debt, there is no indication that the debt was paid. As between the parties, the obligation for repayment of the debt is within the control of the court.

[51] The equalization obligation imposed by the Family Law Act does not apply to assets acquired post-separation: Family Law Act, ss. 4 and 5. Absent a finding of a proprietary interest, I do not see any basis for the order that Mr. Arvai pay Mrs. Arvai one half of that portion of the funds in NISA account 2, which consisted solely of matching government funds accrued post separation.

[52] The funds drawn from the operating line of credit and deposited into NISA account 1 fall into a different category. There was no express agreement in place between the parties for use of funds from the joint operating line of credit when these funds were withdrawn. Absent agreement, it would be patently inequitable to permit Mr. Arvai to incur a debt for which Mrs. Arvai is liable and use the money to create an asset for himself, without requiring him to indemnify her for her share of the debt created. As for any equities claimed to arise based on the overall drawings of the parties, the trial judge declined to order a general accounting based on a finding that their other drawings, which were for expenses, appeared reasonable and "consistent with their lives prior to separation". I see no basis to interfere with that finding. The parties had not agreed they were entitled to equivalent drawings. It is implicit in her reasons that the trial judge did not consider that Mr. Arvai should be entitled to draw on the joint line of credit to create an asset for himself without indemnifying Mrs. Arvai for her share of the indebtedness thereby created.

[53] The order that Mr. Arvai pay Mrs. Arvai one-half of the NISA funds received post-separation is set aside. In its place there will be an order that Mr. Arvai pay to Mrs. Arvai one- half of the funds he withdrew from the operating line of credit to deposit into NISA post-separation, namely one-half of $9,782.92 being $4,891.46 together with interest from December 30, 1996.

v. Wheat deficiency cheques and G.S.T. rebate

[54] Mr. Arvai does not dispute that he received these funds relating to the 1997 crop year in 1998, deposited them into his personal bank account, and used them on account of personal expenses. There was no agreement in place between the parties in 1998 to permit payment of personal expenses from joint funds. Counsel did not really contest in oral argument that this should not have occurred. Therefore, I see no basis for interfering with the order of the trial judge.

Award of Spousal Support

[55] Mr. Arvai submits that a court should not require a payor spouse to draw down his or her capital in order to pay periodic support while allowing a payee spouse to maintain his or her capital. He says "[o]rdering the husband to pay support from his capital to make up for the wife's income shortfall so that she can maintain her capital while she retrains and upgrades is not an equitable distribution of the consequences of this marriage". He submits as well that in this case the parties suffered the same economic disadvantages arising from the breakdown of the marriage, the parties are left with roughly equivalent capital and Mrs. Arvai will end up with better prospects for future income than Mr. Arvai.

[56] The trial judge noted that Mr. Arvai had taken a job as a farm labourer. She found "[he] is eager and willing to go back to farming" and "[h]e can use the knowledge of farming that he developed during the marriage" (emphasis added). As for Mrs. Arvai, the trial judge said:

. . . The petitioner, on the other hand, cannot realistically expect to find employment as a farm labourer. The marriage caused her to lose the ability to support herself as she cannot support herself in the field of farming. She has taken appropriate steps to become self-sufficient by enrolling in studies that will enable her to work in the field of finance. It is anticipated that she will find work upon graduation and that she will earn approximately $20,000 per year but that remains to be seen. Spousal support is ordered for the few months following graduation to enable her to have an opportunity to find employment and get settled. If she finds work promptly after graduation, it will also carry her through any probationary period until she is secure in her employment.

Entitlement arises on both the compensatory and non- compensatory bases. The quantum is based on a balancing of the financial needs of the parties.

I have not ordered the spousal support to be retroactive because of a consideration of the needs and means of the parties . . . I appreciate that the order for spousal support may require the respondent to use some of his capital. The order for spousal support is not a form of disguised redistribution of family assets. It is an appropriate recognition of the length of the marriage, the roles and contributions of the parties during the marriage and the need for the petitioner to become self-sufficient. The petitioner is entitled to support during this transition period.

[57] The relevant portions of s. 15.2(1), (4) and (6) of the Divorce Act provide as follows:

15.2 (1) A court of competent jurisdiction, may, on application by either or both spouses, make an order requiring a spouse to . . . pay . . . such . . . periodic sums, as the court thinks reasonable for the other spouse.

(4) In making an order under subsection (1) . . . the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including

(a) the length of time the spouses cohabited;

(b) the functions performed by each spouse during cohabitation; and

(6) An order made under subsection (1) . . . that provides for the support of a spouse should

(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;

(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

[58] The approach a trial judge must take in applying these factors was set out in Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420 at p. 440, 44 R.F.L. (4th) 1 at pp. 26-27:

Moge, supra, sets out the method to be followed in determining a support dispute. The starting point is the objectives which the Divorce Act stipulates the support order should serve: (1) recognition of economic advantage or disadvantage arising from the marriage or its breakdown; (2) apportionment of the financial burden of child care; (3) relief of economic hardship arising from the breakdown of the marriage, and (4) promotion of the economic self-sufficiency of the spouses: s. 15.2(6). No single objective is paramount; all must be borne in mind. The objectives reflect the diverse dynamics of the many unique marital relationships.

Against the background of these objectives the court must consider the factors set out in s. 15.2(4) of the Divorce Act. Generally, the court must look at the "condition, means, needs and other circumstances of each spouse". This balancing includes, but is not limited to, the length of cohabitation, the functions each spouse performed, and any order, agreement or arrangement relating to support. Depending on the circumstances, some factors may loom larger than others. In cases where the extent of the economic loss can be determined, compensatory factors may be paramount. On the other hand, "in cases where it is not possible to determine the extent of the economic loss of a disadvantaged spouse . . . the court will consider need and standard of living as the primary criteria together with the ability to pay of the other party" [citations omitted]. There is no hard and fast rule. The judge must look at all the factors in the light of the stipulated objectives of support, and exercise his or her disc retion in a manner that equitably alleviates the adverse consequences of the marriage breakdown.

The decision of the trial judge in balancing these factors is entitled to considerable deference: Hickey v. Hickey, 1999 CanLII 691 (SCC), [1999] 2 S.C.R. 518 at pp. 525-26, 46 R.F.L. (4th) 1 at pp. 16-17.

[59] There can be no doubt that both of these parties suffered economic disadvantages as a result of the breakdown of their marriage. However, the trial judge found as a fact that Mrs. Arvai lost the ability to support herself as a result of the breakdown of the marriage while Mr. Arvai did not. The evidence concerning Mrs. Arvai's ability to support herself without retraining was minimal. However, there was sufficient evidence to justify the findings of the trial judge.

[60] The intention of the trial judge was clearly that the parties should share the burden of Mrs. Arvai's retraining. Although the trial judge did not review Mrs. Arvai's financial position in detail, her financial statement disclosed a monthly shortfall of $1,373.40. Her income figure was based on 1998 and included $7,500 of annual farm rental income. Given that the farm was to be sold, that income would be eliminated, increasing her monthly shortfall to $1,998.40. Obviously Mrs. Arvai would have to find new accommodation and her expenses would change, but clearly she would have to find reasonable accommodation for herself and the children. Considering as well that spousal support is taxable in Mrs. Arvai's hands and deductible for Mr. Arvai, it is apparent the trial judge attempted to implement her intention that the parties share the burden of Mrs. Arvai's retraining in the award of support she made. Undoubtedly, this would require both to encroach on capital. In the unusual circumstances of t his case, I see no error in principle in this approach.

Conclusion

[61] The orders for payment by Mr. Arvai to Mrs. Arvai are varied as provided herein. The appeal is otherwise dismissed. As success was divided, there will be no order as to costs.

Appeal allowed in part.

Notes

Note 1: According to exhibit 34, the balance was $4,188.75.

Note 2: This figure appears to be the difference between the total amount in the account on December 30, 1996 -- $13,971.67 -- and the amount the parties agreed was in the account on the date of separation -- $4,398.49.

Note 3: This figure appears to be the difference between the total amount in accounts 1 and 2 on April 22, 1997, i.e., $30,624.01, less $13,971.67 in account 1, less $4,398.49.

Note 4: The trial judge found it was not clear that any matching government funds were received pre-separation. She accordingly excluded them from the net family property calculation. The funds she ordered repaid from account 2 do not, however, seem to include matching funds pertaining to Mr. Arvai to pay Mrs. Arvai one-half of part of the balance in account 2 only: see footnotes 2 and 3.