Debora v. Debora

83 O.R. (3d) 81

Court of Appeal for Ontario,

Weiler, Rosenberg and LaForme JJ.A.

December 6, 2006

Civil procedure -- Costs -- Premium -- Trial judge in matrimonial proceedings erring in awarding premium to reflect exceptional skill of wife's solicitors, result achieved at trial, difficulties caused by husband's bad faith litigation and financial risk if proceedings failed.

Family law -- Property -- Matrimonial home -- Trial judge not erring in finding that husband had interest in cottage property owned by his numbered company so that cottage property came within definition of matrimonial home and subject to equalization -- Family Law Act, R.S.O. 1990, c. F.3, s. 18(1).

Family law -- Property -- Valuation -- Hindsight information not admissible to determine whether assumptions made by valuator correct.

Before the marriage, a company of which the husband was the sole shareholder (the "company") purchased a cottage property as an investment. The cottage was used by the parties and their children. The trial judge found that the original investment purpose was abandoned, that the cottage was ordinarily occupied as a residence by the parties and that the husband had an interest in the property, so that the cottage came within the definition of "matrimonial home" in s. 18(1) of the Family Law Act and was subject to equalization. The trial judge also ordered the husband to pay retroactive child support in the amount of $951,346 and ongoing child support of $23,000 for one child, and made a costs order against the husband which included a premium of $150,000. The husband appealed. The wife cross-appealed from the award of pre-judgment interest.

Held, the appeal should be allowed in part; the cross-appeal should be dismissed.

Section 18(2) of the Family Law Act, which provides that the "ownership of a share or shares, or of an interest in a share or shares, of a corporation entitling the owner to occupy a housing unit owned by the corporation shall be deemed to be an interest in the unit for the purposes of subsection (1)" is not limited to a spouse's interest in a condominium or co- operative apartment. Legal control over a corporation amounts to legal control over the residence for the purposes of the matrimonial home provisions. As the husband was the sole shareholder and director of the company, there was no concern that piercing the corporate veil might adversely affect the interests of innocent third parties. The court's power to pierce the corporate veil in the family law context is not limited to situations where the purpose of placing the asset in the corporation's name was fraudulent or improper. The real focus must be on how the corporation is used. In this case, the evidence established that the company was the alter ego of the husband and was being used by him to try to defeat the wife's legitimate claim. The husband ought not to be allowed to hide behind the corporate veil. The trial judge correctly concluded that the cottage was a matrimonial home.

In determining the value of a group of companies owned by the husband, both the husband's valuator and the wife's valuator used the capitalization of earnings method, which involved determining the amount of maintainable earnings the businesses could generate and multiplying that amount by an earnings multiple to determine their fair market value. The husband's valuator used the same multiple at the date of marriage and at the date of separation. The wife's valuator applied a lower multiple to the company at the date of marriage and a higher [page82 ]multiple at the date of separation. He relied on two factors to explain the increase in the multiple. The first was that at the date of marriage, one of the companies was facing a charge under the Competition Act, R.S.C. 1985, c. C- 34, as were three of its distributors. The charges were settled two weeks after the marriage. The second factor was the valuator's opinion as to the group's ability to repeat its level of earnings during the year of marriage. The trial judge did not err in accepting the wife's valuator's multiples. Hindsight information is generally inadmissible and cannot be used as part of the process of establishing the value of shares at a particular date. The valuator must make assumptions as to how a prospective purchaser would have evaluated the business based on the purchaser's knowledge at the time in question and the amount of risk the purchaser would likely have been willing to assume concerning a lawsuit. Hindsight information is not admissible on the question of whether that assumption was correct, but it can be used to test whether that assumption was reasonable. The trial judge was entitled to find that the settlement of the Competition Act charges was not imminent at the time of the marriage. That finding, in turn, supported her adoption of the wife's valuator's lower earnings multiple.

The trial judge had jurisdiction to award child support for the period that pre-dated the coming into force of the Federal Child Support Guidelines, SOR 97/175 and to make the award of retroactive support that she did. The onus was on the husband to establish that the amount of ongoing child support ordered by the trial judge was excessive, and he failed to do so.

The trial judge erred in awarding a premium of $150,000 against the husband based on the exceptional skill of the wife's solicitors, the result achieved at trial, the difficulties caused by the husband's bad faith litigation and the financial risk if the proceedings failed. Unsuccessful defendants should expect to pay similar amounts by way of costs across similar pieces of litigation. Since a defendant has no knowledge of the fee arrangement made by the plaintiff, the defendant would have no means of measuring the risk of engaging in litigation insofar as costs were concerned.

A trial judge's exercise of discretion in awarding pre- judgment interest is entitled to deference. The trial judge found that her award of costs had already addressed the husband's misconduct in lengthening the proceedings unnecessarily by his persistent refusal to make full disclosure of his income and assets, and she declined to use pre-judgment interest to punish him further. The amount of pre-judgment interest awarded by the trial judge took into considerations the fluctuations in the applicable rate of interest during this lengthy litigation and was rationally connected to the interest rates that prevailed over the relevant period. There was no basis for appellate intervention.

APPEAL AND CROSS-APPEAL from the judgments of Backhouse J., 2004 44791 (ON SC), [2004] O.J. No. 4826, 8 R.F.L. (6th) 32 (S.C.J.) and 2005 7671 (ON SC), [2005] O.J. No. 1055, 14 R.F.L. (6th) 245 (S.C.J.), in a matrimonial action. [page84 ]

Cases referred to Ford Motor Co. of Canada v. Ontario Municipal Employees Retirement Board, [2000] O.J. No. 1480, 48 C.P.C. (4th) 272 (S.C.J.); Mancini v. Mancini, 1982 4748 (ON SC), [1982] O.J. No. 1108, 31 R.F.L. (2d) 418 (U.F.C.); Martin v. Martin, 1988 8611 (ON SC), [1988] O.J. No. 1756, 17 R.F.L. (3d) 78 (H.C.J.); Walker v. Ritchie, [2006] S.C.J. No. 45, 2006 SCC 45, 353 N.R. 265; Wildman v. Wildman, 2006 33540 (ON CA), [2006] O.J. No. 3966, 151 A.C.W.S. (3d) 666 (C.A.), apld D.B.S. v. S.R.G.; L.J.W. v. T.A.R.; Henry v. Henry; Hiemstra v. Hiemstra, [2006] S.C.J. No. 37, 2006 SCC 37, 270 D.L.R. (4th) 297; Domglas Inc. v. Jarislowsky, Fraser & Co., [1980] S.C. 925, 13 B.L.R. 135 (Que.); Toneguzzo-Norvell (Guardian ad litem of) v. Burnaby Hospital, 1994 106 (SCC), [1994] 1 S.C.R. 114, [1994] S.C.J. No. 4 , 87 B.C.L.R. (2d) 1, 110 D.L.R. (4th) 289, 162 N.R. 161, [1994] 2 W.W.R. 609, 18 C.C.L.T. (2d) 209, consd [page83 ] Rohani v. Rohani, [2004] B.C.J. No. 2493, 2004 BCCA 605, 34 B.C.L.R. (4th) 62, 8 R.F.L. (6th) 179, 135 A.C.W.S. (3d) 672, distd Other cases referred to 131843 Canada Inc. v. Double "R" (Toronto) Ltd., [1992] O.J. No. 3872, 11 C.P.C. (3d) 190, 35 A.C.W.S. (3d) 29 ( (Gen. Div.); 642947 Ontario Ltd. v. Fleischer (2001), 2001 8623 (ON CA), 56 O.R. (3d) 417, [2001] O.J. No. 4771, 209 D.L.R. (4th) 182, 47 R.P.R. (3d) 191, 16 C.P.C. (5th) 1 (C.A.); Bobyk v. Bobyk Estate (1993), 1993 8535 (ON SC), 13 O.R. (3d) 559, [1993] O.J. No. 1323, 50 E.T.R. 186, 47 R.F.L. (3d) 310 (Gen. Div.); Burgess v. Burgess (1995), 1995 8950 (ON CA), 24 O.R. (3d) 547, [1995] O.J. No. 2242, 16 R.F.L. (4th) 388 (C.A.); CMLQ Investors Co. v. 530995 Ontario Ltd., 1995 7353 (ON SC), [1995] O.J. No. 3159, 1 R.P.R. (3d) 17, 17 R.F.L. (4th) 313 (Gen. Div.); Francis v. Baker, 1999 659 (SCC), [1999] 3 S.C.R. 250, [1999] S.C.J. No. 52, 44 O.R. (3d) 736n, 177 D.L.R. (4th) 1, 246 N.R. 45, 50 R.F.L. (4th) 228, affg (1998), 1998 4725 (ON CA), 38 O.R. (3d) 481, [1998] O.J. No. 924, 157 D.L.R. (4th) 1, 34 R.F.L. (4th) 317 (C.A.) [Leave to appeal allowed [1998] S.C.C.A. No. 191]; Gold Coast Selection Trust Ltd. v. Humphrey (Inspector of Taxes), [1948] A.C. 459, [1948] 2 All E.R. 379, 30 Tax. Cas. 209, 27 A.T.C. 149, 41 R&IT 469, [1948] WN. 280 (H.L.); Harry v. Harry, 1987 8288 (ON SC), [1987] O.J. No. 2028, 9 R.F.L. (3d) 121 (Dist. Ct.); Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518, [1999] S.C.J. No. 9, 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; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 219 Sask. R. 1, 211 D.L.R. (4th) 577, 286 N.R. 1, 272 W.A.C. 1, [2002] 7 W.W.R. 1, 30 M.P.L.R. (3d) 1, 2002 SCC 33, 10 C.C.L.T. (3d) 157; Kosmopoulos v. Constitution Insurance Co. of Canada, 1987 75 (SCC), [1987] 1 S.C.R. 2, [1987] S.C.J. No. 2, 21 O.A.C. 4, 34 D.L.R. (4th) 208, 74 N.R. 360, 36 B.L.R. 233, [1987] I.L.R. Â1-2147; Manufacturers Life Insurance Co. v. Riviera Farm Holdings Ltd. (1998), 1998 1481 (ON CA), 39 O.R. (3d) 609, [1998] O.J. No. 1913, 159 D.L.R. (4th) 193, 18 R.P.R. (3d) 171, 39 R.F.L. (4th) 1 (C.A.); Simon v. Simon (1999), 1999 3818 (ON CA), 46 O.R. (3d) 349, [1999] O.J. No. 4492, 182 D.L.R. (4th) 670, 1 R.F.L. (5th) 119 (C.A.) [Leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 36]; Somers v. Fournier (2002), 2002 45001 (ON CA), 60 O.R. (3d) 225, [2002] O.J. No. 2543, 214 D.L.R. (4th) 611, 22 C.P.C. (4th) 264, 27 M.V.R. (4th) 165, 12 C.C.L.T. (3d) 68 (C.A.), supp. reasons [2002] O.J. No. 3080 (C.A.); Stellarbridge Management Inc. v. Magna International (Canada) Inc. (2004), 2004 9852 (ON CA), 71 O.R. (3d) 263, [2004] O.J. No. 2102, 187 O.A.C. 78 (C.A.); Tauber v. Tauber (2000), 2000 5747 (ON CA), 48 O.R. (3d) 577, [2000] O.J. No. 2133, 187 D.L.R. (4th) 1, 6 R.F.L. (5th) 442 (C.A.), supp. reasons (2000), 2000 22280 (ON CA), 51 O.R. (3d) 81, [2000] O.J. No. 3355, 8 R.F.L. (5th) 441 (C.A.); Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., [1997] O.J. No. 3754, 74 A.C.W.S. (3d) 207 (C.A.), affg (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423, [1996] O.J. No. 1568 (Gen. Div.); Woeller v. Woeller, 1988 8616 (ON SC), [1988] O.J. No. 728, 15 R.F.L. (3d) 120 (Dist. Ct.) Statutes referred to Competition Act, R.S.C. 1985, c. C-34 Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 128 [as am.], 130 Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), ss. 2 "child of the marriage", 15.1 [as am.] Family Law Act, R.S.O. 1990, c. F.3, ss. 4 [as am.], 18 Family Law Reform Act, R.S.O. 1980, c. 152, s. 39 Rules and regulations referred to Federal Child Support Guidelines, SOR/97-175, ss. 4, 7 [as am.] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49 [as am.]

Melvyn L. Solmon and Nancy J. Tourgis, for appellant/ respondent by way of cross-appeal. Gerald P. Sadvari, Stephen M. Grant and Jennifer A. McKendry, for respondent/appellant by way of cross-appeal.

The judgment of the court was delivered by

WEILER J.A.: --

A. Overview

[1] A property in which a person has an interest, which at the time of separation was ordinarily occupied as a residence by the person and his or her spouse, is a matrimonial home and subject to equalization upon separation pursuant to the provisions of the Family Law Act, R.S.O. 1990, c. F.3 (the "FLA"). There is no issue on this appeal that the cottage property owned by the appellant's numbered company was ordinarily occupied as a residence by him and his spouse. The issue is whether the trial judge erred in holding that the appellant had an interest in the cottage property sufficient to render it a matrimonial home pursuant to the FLA.

[2] A further issue is whether, in valuing Lifestyles, a group of corporations owned by the appellant at the date of marriage, the trial judge erred in accepting the expert evidence of the valuator for the respondent as to the multiple to be used in determining the value of the business.

[3] The outcome of these two issues will determine whether the $3.3 million equalization payment the appellant was ordered to pay should be upheld.

[4] In addition, the appellant appeals both the award of retroactive child support in the amount of $951,346 as well as the ongoing child support of $23,000 per month he was ordered to pay, and the costs, fixed in the amount of $2.25 million, inclusive of a premium of $150,000, awarded against him. The respondent cross-appeals from the award of pre-judgment interest in the amount of $2.4 million and seeks a higher amount.

[5] An issue relating to ownership of money withdrawn from two trading accounts in the respondent's name was abandoned at the outset of this appeal. Similarly, a motion to dismiss the appellant's appeal for failing to comply with a court order to post additional security was dismissed as, at the date of hearing this appeal, he had posted additional security.

[6] For the reasons that follow, I would dismiss both the appeal and the cross-appeal, with the exception of the costs premium awarded in the amount of $150,000. [page85 ]

B. Facts

[7] The careful findings and very detailed reasons of the trial judge are reported at 2004 44791 (ON SC), [2004] O.J. No. 4826, 8 R.F.L. (6th) 32 (S.C.J.) and 2005 7671 (ON SC), [2005] O.J. No. 1055, 14 R.F.L. (6th) 245 (S.C.J.). As a result, a bare outline of the facts will suffice to give context to the issues raised here. The trial judge's findings as to the respondent's credibility, and the appellant's corresponding lack of credibility and lack of disclosure, are not challenged on this appeal.

[8] The parties met in June 1985. Each had two children from a prior relationship. In December 1986, the respondent moved into the appellant's home and on April 3, 1987, they went through a religious wedding ceremony but did not obtain a licence to marry. Their union produced one child, born in 1989. In 1994, the respondent had an intimate relationship with a contractor who had been hired to work on the parties' home. She consulted a matrimonial lawyer. After the relationship with the contractor ended the respondent and the appellant went through a civil marriage ceremony on July 20, 1994. On September 11, 1995, they separated and have been involved in litigation ever since.

[9] In 1999, in reasons reported at 1999 1840 (ON CA), [1999] O.J. No. 2, 43 R.F.L. (4th) 179 (C.A.), this court ruled that the 1987 marriage did not qualify as the date of marriage for purposes of the FLA and that the date of the marriage for purposes of calculating the property excluded from equalization was July 20, 1994.

C. Issues and Analysis

(1) Valuation issues

(a) The cottage property

[10] On October 19, 1993, 1048762 Ontario Limited, a company in which the appellant was the sole shareholder, purchased a cottage property as an investment. The appellant provided all the funding. The trial judge stated at para. 34 of her reasons:

The wife testified as to her understanding that the cottage was held in a numbered company because it was intended to be an investment. They were not sure, according to her, whether they would like owning a cottage, in which event they might flip it and make a profit. However, after the renovations were completed and the family started to use it, there was no further discussion about selling it.

The trial judge then discussed the use that had been made of the cottage by the family and commented at para. 39:

The wife kept a list of expenditures that she incurred on the cottage property including the carrying costs, which were paid for from the parties' joint account. The renovations which were mainly paid for by Lifestyles, [page86 ]were the subject of a re-assessment by CCRA and the expenses were disallowed as a business expense.

[11] In her findings regarding the cottage, the trial judge stated at paras. 367-68:

The parties ordinarily used the cottage as an all season recreational residence at both the date of the civil marriage and the date of separation. They entertained family and friends at the cottage. It was maintained from the joint bank account. As such, it comes within the definition of "matrimonial home" in s. 18(1) of the Family Law Act. (Berdette v. Berdette (1988), 1988 4605 (ON SC), 66 O.R. (2d) 410 (Ont. H.C.); Reeson v. Kowalik (1991), 1991 12833 (ON SC), 36 R.F.L. (3d) 396 (Ont. Gen. Div.)).

The fact that the parties may have considered the cottage an investment at the time they purchased it, that title was put in a numbered company, that Lifestyles paid for the renovations (which were subsequently found to be personal expenses and disallowed as a business expense) and that the cottage was used on one occasion for a meeting of Lifestyles' distributors, do not render this property a business asset. Accordingly, no deduction may be taken for this property at the date of the marriage.

[12] Ordinarily, property owned by a spouse at the date of marriage is excluded from the calculation of their net family property on marriage breakdown under s. 4 of the FLA. Because the matrimonial home is a unique asset, the value of a matrimonial home owned on the date of marriage is not excluded from the calculation of net family property under the Act. The trial judge found that the cottage came within the definition of a "matrimonial home" pursuant to s. 18(1) of the FLA, which provides:

18(1) Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.

[13] The jurisprudence relied on by the trial judge and her reasons deal with the issue of whether the property was "ordinarily occupied by the person and his or her spouse as their family residence" within the meaning of s. 18(1). On this appeal, the appellant does not contest the trial judge's conclusion that the cottage was ordinarily occupied by the parties as their residence. He does, however, contest the implicit finding of the trial judge that he had "an interest" in the property.

[14] The appellant submits that as a shareholder has no interest in the assets of a corporation, he had no interest in the cottage. Rather, it is his ownership of the shares in the company that are subject to equalization. Using this approach, the value of the shares of the company as at the date of marriage would be deducted from his net family property. Only the increase in value of the shares of the corporation from the date of the marriage to [page87 ]the date of separation would be used to calculate net family property. Assuming that as of the date of marriage the value of the shares was equal to its sole asset, the cottage, the value of the shares at the date of marriage would be $840,000. At the date of separation the cottage had a value of $1 million. Thus, the difference of $160,000 would be subject to equalization. As a result the appellant submits that the trial judge erred in piercing the corporate veil and in valuing the cottage as a matrimonial home whose entire value of $1 million dollars at the date of separation was subject to equalization and part of the appellant's net family property.

[15] The question of whether the appellant has an interest in the cottage property requires me to consider how s. 18(2) of the Family Law Act and its statutory predecessor, s. 39(3) of the Family Law Reform Act, R.S.O. 1980, c. 152 (the "FLRA"), should be interpreted. As well, the evolving jurisprudence at common law as to when a court is entitled to pierce the corporate veil must be considered.

[16] Subsection 18(2) provides:

18(2) The ownership of a share or shares, or of an interest in a share or shares, of a corporation entitling the owner to occupy a housing unit owned by the corporation shall be deemed to be an interest in the unit for the purposes of subsection (1).

[17] The appellant contends that s. 18(2) primarily applies to a situation where a matrimonial home is a co-operative apartment or where the purpose of putting the home in the name of the corporation is to defeat the FLA. In this regard, the appellant's submission echoes the obiter comments of the motion judge in CMLQ Investors Co. v. 530995 Ontario Ltd., 1995 7353 (ON SC), [1995] O.J. No. 3159, 17 R.F.L. (4th) 313 (Gen. Div.).

[18] I disagree with this interpretation. The plain wording of the subsection does not limit a spouse's interest to a condominium or co-operative apartment and I can think of no reason to so limit it in this manner. The simple device of holding a house in the name of a personally owned corporation prior to the date of marriage would deprive the other spouse of the rights associated with the matrimonial home: an equal right to possession; the requirement that the consent of the other spouse to alienate or encumber the home be obtained; and the full value of the home being included in the calculation of a spouse's net family property on separation. Such an interpretation would defeat the desired effect of the FLA, which regards the matrimonial home as a unique asset and gives it special treatment.

[19] In Mancini v. Mancini, 1982 4748 (ON SC), [1982] O.J. No. 1108, 31 R.F.L. (2d) 418 (U.F.C.), Steinberg U.F.C.J. interpreted s. 39(2) of the FLRA, [page88 ]a provision nearly identical to the present s. 18(2) of the FLA. He focused on the phrase "entitling the owner to occupy a housing unit", and held that if the owner of a share or shares in the corporation has a controlling interest so as to enable him to vote his shares so as to give him a right of residence, then the owner has an "interest" in the property for the purposes of the statute. In other words, legal control over the corporation amounts to legal control over the residence for the purposes of the matrimonial home provisions. Alternatively, he held that if a company has passed a resolution entitling its owner to reside in the home, it would be a matrimonial home. [See Note 1 below]

[20] In Manufacturers Life Insurance Co. v. Riviera Farm Holdings Ltd. (1998), 1998 1481 (ON CA), 39 O.R. (3d) 609, [1998] O.J. No. 1913 (C.A.), property owned by the husband's company had granted him a lease. Rosenberg J.A. held that as a leasehold interest was an interest in property pursuant to s. 18(1), the house was a matrimonial home. As a result, he found it unnecessary to consider s. 18(2); however, he commented with respect to Mancini [at p. 616 O.R.]:

It may well be that as argued by the appellant, in view of [the husband's] control over the shares of Riviera he also had "an interest" in the property as a result of s. 18(2).

[21] The appellant submits that this court ought not to adopt the reasoning in Mancini. He submits that the wife indirectly benefited from the incorporation of the company and that the principle articulated in Kosmopoulos v. Constitution Insurance Co. of Canada, 1987 75 (SCC), [1987] 1 S.C.R. 2, [1987] S.C.J. No. 2, at para. 13 and applied in the family law context in Rohani v. Rohani, 2004 BCCA 605, [2004] B.C.J. No. 2493, 8 R.F.L. (6th) 179 (C.A.), at para. 19 should apply. Briefly stated, that principle holds that in deciding whether to lift the corporate veil, a court should bear in mind that those who have chosen the benefits of incorporation should bear the corresponding burdens.

[22] In Wildman v. Wildman, 2006 33540 (ON CA), [2006] O.J. No. 3966, 151 A.C.W.S. (3d) 666 (C.A.), this court recently rejected the argument that if the wife indirectly benefited from the property being held by the corporation, she should now have to bear the burden [page89 ]of incorporation and the court should refuse to pierce the corporate veil. MacPherson J.A. observed that it was the husband alone who chose the benefit of incorporation and he, as well as the wife, enjoyed those benefits. To maintain the corporate structure in these circumstances means that the wife alone would bear the burden of incorporation and would not be fair. That reasoning assists in the interpretation of s. 18(2).

[23] The reasoning in Mancini, supra, accords with the purposes of the FLA respecting the treatment to be afforded to a matrimonial home and I would adopt it. If the owner of shares in a corporation has a controlling interest that would enable him to vote his shares so as to give him a right of residence, then the owner has an "interest" in the property for the purposes of the statute.

[24] The interpretation of s. 18(2) I propose also accords with the evolving common law jurisprudence as to when the corporate veil should be pierced. Simply put, there is no one all-encompassing rule as to when a court will pierce the corporate veil. A contextual approach is required. A court will not enforce the "separate entities" principle when it would yield a result too flagrantly opposed to justice, convenience or would defeat the desired effect of legislation: See Kosmopoulos, supra, at para. 12; Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423, [1996] O.J. No. 1568 (Gen. Div.), at para. 21, affd [1997] O.J. No. 3754, 74 A.C.W.S. (3d) 207 (C.A.); 642947 Ontario Ltd. v. Fleischer (2001), 2001 8623 (ON CA), 56 O.R. (3d) 417, [2001] O.J. No. 4771 (C.A.), at para. 69. Here the interpretation proposed by the appellant would defeat the desired effect of the legislation.

[25] An important consideration that affects whether the corporate veil will be pierced is whether the interests of third parties would be affected: Kosmopoulos, supra, at para. 14. That consideration assists in explaining the result in Rohani, supra, a decision relied on by the appellant's counsel that is distinguishable on its facts. In Rohani the husband was not the sole shareholder or director of the company in issue and the company was merely used by him to participate in a much larger business enterprise that involved other owners. Similarly, third party interests would have been adversely affected by piercing the corporate veil in CMLQ, supra, and in Mancini, supra. These cases illustrate the point made by Rosenberg J.A. in Manufacturers Life Insurance Co. v. Riviera Farm Holdings Ltd., supra, at para. 19 that "the nature of the interest that a court may be prepared to recognize will depend on the particular circumstances and the purpose for which the spouse seeks to rely on s. 18". [page90 ]

[26] Here, unlike in CMLQ, Mancini and Rohani, the husband is the sole shareholder and director of the corporation and there is no concern that piercing the corporate veil may adversely affect the interests of innocent third parties.

[27] With respect to the appellant's argument that s. 18(2) should not apply where the property was not placed under corporate ownership for the purpose of defeating the FLA, the reasoning in Wildman is again instructive. The principal issue in Wildman was whether the trial judge erred in ordering all amounts owed by the husband for support to be secured and enforceable not only against his personal assets but also against his corporation. In upholding the trial judge's decision to pierce the corporate veil, MacPherson J.A. rejected the same argument advanced here, namely, that if the purpose of placing the asset in the corporation's name was not a fraudulent or improper one, the corporate veil should not be pierced. Rather, he held that the history of how a spouse sets up his business affairs is a relevant, but not a controlling, factor in resolving the financial issues in a matrimonial case. The purpose of incorporation is a starting point. The real focus must be on how the corporation is used. See paras. 35-41.

[28] In Wildman, the corporation was solely owned and controlled by the husband. He used the corporation to minimize his personal income while at the same time using corporate funds for personal purposes. MacPherson J.A. held that the corporation was the husband's alter ego. The husband was using the corporation to defeat the interests of his wife and their children to the money various courts had found they should receive. The husband's use of his company's funds amounted to misconduct in the broad sense. MacPherson J.A. held it would be flagrantly opposed to justice to allow the husband to hide behind the corporate veil.

[29] In the appeal before us, the appellant is the sole shareholder and controls the numbered company. This company did not pay for the renovations and did not pay the ongoing expenses for the cottage property. Money from the couple's joint bank account was used to pay ongoing expenses. The appellant's attempt to deduct expenses related to the cottage as a business expense was rejected. The corporation is the alter ego of the husband and is being used by him to try to defeat the legitimate claim of his wife. As in Wildman, supra, the husband ought not to be allowed to hide behind the corporate veil.

[30] I would uphold the trial judge's conclusion that the cottage property is a matrimonial home. [page91 ]

(b) Did the trial judge err in accepting the respondent's expert's evidence as to the multiple to be applied with respect to the value of Lifestyles?

[31] In 1988, the husband started a multi-level marketing company making diet products and nutraceuticals. It was profitable from the outset and he continued to grow and expand the business in other countries. There were no comparable companies at either the valuation date or the date of the marriage. In order to determine the value of the companies, known as the Lifestyles Group, both valuators used the capitalization of earnings method. This involves determining the amount of maintainable earnings the business can generate and multiplying this amount by an earnings multiple to determine its fair market value.

[32] Mr. Rudson, the husband's valuator, valued Lifestyles as being worth $19,800,000 at the date of marriage and $13,560,000 at the date of separation about 14 months later. He used a multiple of 3.5 to 4.0 both at the date of marriage and at the date of separation. The trial judge rejected his evidence because his conclusions "on a number of significant matters were shown to be inaccurate and misleading because he was not in receipt of all of the relevant information . . . ". She further found, "The husband's deliberate obfuscation and failure to disclose infected Mr. Rudson's work." For example, Rudson made a $3.7-million error with respect to how marketable securities were booked in Lifestyles Canada's financial statements, thereby lowering the appellant's net family property. The trial judge concluded that the evidence of Mr. DeBresser, the respondent's valuator, was more reliable.

[33] Although there was no significant change in the income of Lifestyles between the date of the marriage and the date of separation, DeBresser applied a lower multiple to the company at the date of marriage (2.75-3), and a higher multiple at the date of separation (4.0-4.25). The result was that his valuation of the business was $15,233,000 at the date of marriage and $21,005,000 at the date of separation. The increase in value is almost entirely attributable to the change in the multiple.

[34] In determining the appropriate multiple for each date, DeBresser used his professional judgment. He relied specifically on two factors to explain the increase in the multiple. The first was that, at the date of marriage, Lifestyles Canada (one of the entities that comprised the Lifestyles Group) was facing a charge under the Competition Act, R.S.C. 1985, c. C-34, as were three of its distributors. The charges were settled two weeks after the marriage. The second factor affecting the multiple was [page92 ]DeBresser's opinion as to the Lifestyle Group's ability to repeat its level of earnings during the year of marriage.

[35] Regarding the Competition Act charges, at the date of marriage, one charge was pending against Lifestyles Canada and 11 charges were pending against three major distributors of Lifestyles. The charges were the first ever laid pursuant to amendments to the Act designed to regulate multi-level marketing entities. Those charged faced a maximum penalty of $200,000 per charge and/or imprisonment. Lifestyles' solicitor had expressed concern that the distributors were the "lifeblood of the company". Two weeks after the date of the marriage, Lifestyles Canada reached a settlement whereby it pleaded guilty to its charge and paid a $35,000 fine; the charges against the distributors were withdrawn.

[36] DeBresser testified that the appellant refused to answer questions during his examination for discovery regarding the Competition Act charges, which forced DeBresser to consider the range of possible outcomes. In his opinion, the litigation risk weighed down the multiple at the date of marriage and conversely the absence of risk elevated the multiple at the valuation date. The appellant testified at trial that as at the date of marriage a settlement of the charges had been reached. The trial judge rejected the appellant's evidence that the litigation was settled at the date of the marriage and accepted DeBresser's evidence.

[37] Regarding the sustainability of earnings, DeBresser was of the opinion that a further year of sustained profits reduced the risk for a potential purchaser and therefore justified a higher multiple.

[38] On this point, the trial judge rejected the evidence of the appellant and his business partner that the sales of Lifestyles diminished as a result of problems with its main product "Intra", as their evidence was not credible or supported by any documentation. She accepted DeBresser's evidence that the maintainable earnings were between $4.7 million and $5.3 million, but lowered the latter amount by making an adjustment that resulted in it being $5,100,000.

[39] The trial judge's findings are at paras. 356-60 of her reasons and are reproduced below:

I accept the multiple chosen by Mr. DeBresser for the date of marriage. I do not agree with Mr. Rudson's view that the impact of the pending charges against Lifestyles was limited to the maximum fine under the Competition Act. Mr. Drutz testified to the mobility and lack of loyalty of distributors in multi-level marketing businesses. Eleven charges pending against three major distributors of Lifestyles would have created uncertainty in a potential buyer about the distributorship base, the "lifeblood of the company". [page93 ]Pending criminal charges can also affect reputation which is important to any company. These uncertainties would have made it difficult to know how much to put aside as an indemnity.

The critical issue is whether there is justification for increasing the multiple 14 months later at the date of separation, as a result of the resolution of the Competition Act charges and another year of profits. I prefer Mr. DeBresser's view that there should be a higher multiple at the date of separation for the following reasons.

I draw an adverse inference against the husband on the issue of whether by the date of the marriage, a deal had been worked out on the Competition Act charges. The correspondence which Mr. Drutz acknowledged existed between Lifestyles and its lawyer was not produced nor was Lifestyles' lawyer, Mr. Nuttall, called to testify as to what occurred at the various stages of the negotiations. I note that the husband refused to answer any questions regarding the Competition Act charges until trial. I reject the evidence of Mr. Drutz as self- serving.

Given the huge increase in profits in the year of marriage, I find that a further year of sustained profits would have allayed concerns in a potential buyer that the profits could not be repeated. This fact would definitely warrant an increase in the multiple.

Mr. Rudson's suggestion that it was a negative factor that profits did not grow further in the 14-month period following the marriage may have some theoretical validity. However, this is not a case of a publicly traded company where there is a large multiple based on the expectation of continued growth. This was a relatively young, small, privately owned company for whom the increased certainty of earnings at this level on a sustained basis would justify the increase in the multiple that Mr. DeBresser attributed to it.

[40] As noted earlier in these reasons, the appellant does not seek to set aside the trial judge's findings respecting the appellant's credibility or non-disclosure. At paras. 346, 350 and 351 of her reasons the trial judge stated:

I have rejected the husband's evidence as not worthy of credit. It follows that, to the extent that Mr. Rudson's opinion is based on what the husband told him, it must also be rejected by me. . . . . .

In my view, Mr. Rudson fell short of the independence required of an expert witness. It seems that the husband's deliberate obfuscation and failure to disclose infected Mr. Rudson's work.

I have concluded that DeBresser's evidence is more reliable and I accept it in preference to Mr. Rudson's evidence, except where specifically noted.

[41] Before addressing the appellant's submissions concerning the trial judge's findings of fact and the inferences she drew, I will make brief reference to the standard of review. In Toneguzzo-Norvell (Guardian ad litem of) v. Burnaby Hospital, 1994 106 (SCC), [1994] 1 S.C.R. 114, [1994] S.C.J. No. 4, the Supreme Court addressed the standard of review for an appellate court regarding a trial [page94 ]judge's findings of fact based on inferences drawn from conflicting testimony of expert witnesses. The appellant relies on a portion of the reasons of McLachlin J. (writing on behalf of the court) for the submission that the deference ordinarily applicable to a trial judge's findings of fact and inferences does not apply with the same force to inferences drawn from conflicting expert testimony. This submission does not accurately reflect McLachlin J.'s holding in Toneguzzo. In Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, at para. 24 the majority cited the relevant passage in Toneguzzo from pp. 121-22 S.C.R. of the reasons of McLachlin J.:

A Court of Appeal is clearly not entitled to interfere merely because it takes a different view of the evidence. The finding of fact and the drawing of evidentiary conclusions from facts is the province of the trial judge, not the Court of Appeal.

I agree that the principle of non-intervention of a Court of Appeal in a trial judge's findings of facts does not apply with the same force to inferences drawn from conflicting testimony of expert witnesses where the credibility of these witnesses is not in issue. This does not however, change the fact that the weight to be assigned to the various pieces of evidence is under our trial system essentially the province of the trier of fact, in this case the trial judge.

(Emphasis added by Iacobucci and Major JJ.)

The majority then stated:

We take the above comments of McLachlin J. to mean that, although the same high standard of deference applies to the entire range of factual determinations made by the trial judge, where a factual finding is grounded in an assessment of credibility of a witness, the overwhelming advantage of the trial judge in this area must be acknowledged. This does not, however, imply that there is a lower standard of review where witness credibility is not in issue, or that there are not numerous policy reasons supporting deference to all factual conclusions of the trial judge. In our view, this is made clear by the underlined portion of the above passage. The essential point is that making a factual conclusion of any kind, is inextricably linked with assigning weight to evidence, and thus attracts a deferential standard of review.

[42] The majority then observed at para. 25 that other areas in which the trial judge enjoys an advantage include the trial judge's relative expertise with respect to weighing and assessing evidence, the trial judge's familiarity with what are often vast quantities of evidence and the judge's exposure to the entire factual nexus of the case. These and other policy reasons led the majority to conclude that a deferential approach applies to inferences of fact and that "there is one, and only one, standard of review applicable to all factual conclusions made by the trial judge . . . that of palpable and overriding error". [page95 ]

[43] With these comments in mind, I now propose to deal with the appellant's submissions respecting the valuation of Lifestyles. The first submission is that there was no objective support for DeBresser's conclusion that the company's value had risen by $8.2 million in 14 months. The second is that the trial judge did not correctly use hindsight to test the assumptions of the valuator and did not consistently apply the hindsight principle to all of the evidence before her. The appellant submits that the settlement under the Competition Act ought to have been used to test the reasonableness of DeBresser's assumptions. Third, the appellant challenges DeBresser's reliance on Lifestyle's duplication of its most profitable year. I will deal with these factors in inverse order.

(i) DeBresser's reliance on repeat performance

[44] In selecting the multiple of earnings for the date of marriage, DeBresser stated he was "particularly influenced" by the lack of a track record for sales and earnings at the levels experienced during fiscal 1994. In selecting the multiple for the valuation date at the date of separation, DeBresser cited the trend of revenues and earnings since 1992, the stabilization of sales and earnings levels during the most recent fiscal year and the ability of Lifestyles Group to repeat its unprecedented results first achieved during fiscal 1994. The trial judge was entitled to adopt DeBresser's opinion, and this court defers to her decision to do so.

(ii) The Competition Act and use of hindsight

[45] With respect to the Competition Act charges, the appellant submits that it is open to a trial judge to use factual hindsight information to determine whether or not subsequent events confirm the reasonableness of the assumptions made by the valuator. To support this argument, the appellant relies on two cases: Domglas Inc. v. Jarislowsky, Fraser & Co., [1980] S.C. 925, 13 B.L.R. 135 (Que.), and Ford Motor Co. of Canada v. Ontario Municipal Employees Retirement Board, [2000] O.J. No. 1480, 48 C.P.C. (4th) 272 (S.C.J.). Both of these cases involve disputes between a company's minority and majority shareholders. In both, the majority shareholder restructured the company in a manner that required the majority to purchase the minority's shares. In order to determine a fair price for the shares, it was necessary to determine the fair market value of the company.

[46] The general principle that emerges from both Domglas, supra, and Ford, supra, is that hindsight information is generally inadmissible and cannot be used as part of the process of [page96 ]establishing the value of shares at a particular date. An exception to this principle is that hindsight, or the actual results achieved after the valuation date, maybe compared against the projected or forecasted corporate results made by valuators and used to test the reasonableness of the assumptions made by those valuators.

[47] A similar consensus respecting the use of hindsight emerges in the family law context when the value of a business for equalization purposes is in issue. See: Harry v. Harry, 1987 8288 (ON SC), [1987] O.J. No. 2028, 9 R.F.L. (3d) 121 (Dist. Ct.); Woeller v. Woeller, 1988 8616 (ON SC), [1988] O.J. No. 728, 15 R.F.L. (3d) 120 (Dist. Ct.); Martin v. Martin, 1988 8611 (ON SC), [1988] O.J. No. 1756, 17 R.F.L. (3d) 78 (H.C.J.); and Bobyk v. Bobyk Estate (1993), 1993 8535 (ON SC), 13 O.R. (3d) 559, [1993] O.J. No. 1323, 47 R.F.L. (3d) 310 (Gen. Div.), at para. 33. As stated in Harry, supra, at para. 17, "when evaluating the fair market value of a business hindsight is inappropriate". However, as in the corporate context, "one cannot entirely ignore events which followed [the valuation date] in assessing the fundamental assumptions underpinning the opinions expressed by [the experts]," Woeller, supra, at para. 31.

[48] A case that is particularly relevant to the current appeal is Martin, supra. In that case, the court had to determine the fair market value of a parcel of land owned by one of the spouses. At the date of marriage, the land was zoned agricultural. By the valuation date, the land had been re-zoned commercial, but the re-zoning by-law was under appeal to the Ontario Municipal Board and it faced considerable opposition. Notwithstanding this opposition, the appeal was dismissed a year after the valuation date.

[49] At trial, one of the appraisers had valued the land without considering the appeal, while the other appraiser valued the land as if the re-zoning would fail. In his reasons, the trial judge agreed with the second appraisal, noting at para. 15:

A prudent purchaser on [the V-date] would have been buying land of which the rezoning . . . was the subject of a hotly contested appeal; he would, in effect, have been buying a lawsuit in this regard. There was no knowledge at that time whether the appeal would be successful or unsuccessful. The fact that it proved to be unsuccessful a year after separation cannot be taken into account.

[50] Martin adopts the approach to the use of hindsight information that conforms to the general principle that one must base valuation on the knowledge available at the valuation date. The first appraiser's reliance on the ultimate outcome of the appeal was unreasonable because a prudent purchaser would not have paid the higher purchase price for commercially zoned land at that time, as he could not be certain he would be able to use the land for commercial purposes. [page97 ]

[51] While other exceptions may evolve from the jurisprudence over time, I would adopt the Ford articulation of the hindsight rule and the exception I have discussed for valuations under the Family Law Act. In both corporate law and family law, where the goal is to determine the fair market value of the business, perfect accuracy is impossible. As Viscount Simon wrote in Gold Coast Selection Trust Ltd. v. Humphrey (Inspector of Taxes), [1948] A.C. 459, [1948] 2 All E.R. 379 (H.L.), at p. 473 A.C., "Valuation is an art, not an exact science. Mathematical certainty is not demanded, nor indeed is it possible." The valuator must make assumptions as to how a prospective purchaser would have evaluated the business based on the purchaser's knowledge at the time in question and the amount of risk the purchaser would likely have been willing to assume concerning a lawsuit. Hindsight information is not admissible on the question of whether that assumption was correct but, as indicated in Ford, supra, it can be used to test whether that assumption was reasonable.

[52] In the present case, the appellant submits that the state of knowledge of a prospective purchaser at the date of marriage would have included the fact that several meetings had been held by counsel for the appellant with those responsible for the prosecution of the Competition Act charges. However, there is no evidence as to what was said at those meetings.

[53] The trial judge considered the state of knowledge regarding the outcome of the Competition Act charges when she found that DeBresser's assumptions were reasonable. The trial judge's findings, in para. 358 of her reasons reproduced above, clearly demonstrate that she rejected the appellant's evidence that the charges had been effectively settled on the date of marriage. She noted the lack of credible evidence to support this assertion. The trial judge assessed the state of knowledge of a prospective purchaser on the date of marriage regarding the charges and determined that the settlement was not yet imminent. On the evidence that was and wasn't before her, particularly the lack of credible evidence that the settlement was imminent on the date of marriage, she was entitled to make the finding that the settlement was not yet imminent. This finding, in turn, supports her adoption of DeBresser's lower earnings multiple.

[54] The appellant's submissions amount to an argument that the settlement alone is conclusive evidence that the charges were irrelevant to the valuation on the date of marriage. As the jurisprudence put forward by the parties demonstrates, the test for the trial judge was whether DeBresser's assumptions were reasonable and she was entitled to conclude that they were. [page98 ]

[55] I will now deal with the argument that the trial judge did not adopt a consistent approach towards hindsight. On valuation day, the fact that CCRA was going to conduct an audit of Lifestyles, the amount of understated income that had to be added back and the fact that certain expenses would also be added back to the company were not known. DeBresser said the income on valuation day was understated. With the benefit of hindsight from the CCRA audit, DeBresser increased the income by adding $583,263 to the company's income. That allocation was accepted by the trial judge and was used in determining the maintainable earnings. Yet when dealing with the Competition Act charges the trial judge rejected the use of hindsight.

[56] This further argument can be disposed of quickly. The trial judge was of the opinion that a vendor would disclose the hidden income in order to increase the value of the business he was selling. Further, the facts as to the company's income were known on the valuation day; they were simply hidden by DeBora. He knew that the sales were being understated at valuation day. Thus, DeBora's knowledge was not hindsight. The trial judge did not apply the hindsight principle in an inconsistent or inappropriate manner.

[57] Finally, DeBresser was proffering an assumption with respect to risk and value and he admitted that his determination of the multiples, particularly at the date of marriage, was based on his judgment. That judgment was, however, based on a list of objective factors outlined in his report including a survey of literature respecting nutraceuticals and general industry conditions. There is no question that the settlement of the charges under the Competition Act and the repetition of the outstanding earnings reduced the risk to the Lifestyle Canada's maintainable earnings as of the date of separation.

[58] I would dismiss this ground of appeal. The trial judge was entitled to accept DeBresser's evidence as to the sustainability of Lifestyles' earnings on the date of separation and the risk to the company from the charges under the Competition Act at the date of marriage and the corresponding multiples he chose. Nor did the trial judge err in the manner in which she applied the hindsight principle. Finally, DeBresser was entitled to use his judgment in proffering his opinion.

(2) Support issues

(a) Retroactive child support

[59] The trial judge held at para. 416 of her reasons:

The husband misrepresented his income during the course of this action. As a result, the amount of child support that he paid was lower than it [page99 ]should have been. I accept the wife's evidence that she exhausted her savings and went into debt to support the children and herself prior to the increase in child support [of $23,000 per month effective July 1, 2001] ordered by Justice Greer.

[60] With one five-month exception, from the date of separation in September 1995 until July 2001, the husband paid the wife $10,000 a month for the support of the three children living with her. The amount did not vary depending on the number of children living with her at a given time.

[61] The respondent's claim for retroactive child support was made from February 1996 to the date of Greer J.'s order in July 2001. The trial judge found that on a conservative estimate, the husband's income for this period exceeded $3 million net of taxes each year, the equivalent of approximately $5.5 million Canadian gross income, and that he certainly had the ability to pay the retroactive support claimed. She noted that the Federal Child Support Guidelines, SOR/97-175 came into effect in May 1997 and recognized that prior to this time the amount of child support may have been lower. She concluded that the amount of retroactive child support sought, namely, $23,000 a month as had been ordered by Greer J., was lower than the amount that would have been awarded on a strict application of the Guidelines but that the amount claimed was nonetheless reasonable for the pre-Guidelines period.

[62] The appellant submits that during the 15 months the Guidelines were not in force, the trial judge lacked the jurisdiction to award net child support and that any such order could only be made on a gross basis. The appellant further submits that the trial judge's award of retroactive support as a whole was excessive.

[63] Following the release of the trial judge's reasons, and shortly before this appeal was heard, the Supreme Court of Canada released its decision in four appeals that raised the issue of retroactive child support: D.B.S. v. S.R.G.; L.J.W. v. T.A.R.; Henry v. Henry; Hiemstra v. Hiemstra, [2006] S.C.J. No. 37, 2006 SCC 37. I propose to use this decision as the framework for my comments concerning the appellant's submissions.

[64] The first consideration in determining retroactive support is the prevailing legislation and child support scheme: D.B.S., supra, at paras. 40-54. Here, the prevailing legislative scheme from February 1996 to May 1997 was primarily based on the needs of the children and the ability of the parents to pay and was shared in proportion to their incomes. However, even before the enactment of the guidelines, child support extended well beyond the obligation to provide necessities. D.B.S., supra, at [page100] para. 40. After May 1997, the Federal Child Support Guidelines, a scheme that is not purely needs-based, were in force. The Guidelines create a freestanding obligation to pay child support with the total amount fluctuating based on the payor parent's income. At para. 45 of his reasons, Bastarache J., writing for the majority of the court, explained:

[A] parent's increase in income will not only increase his/ her share of the child support burden; it will increase the total amount of support owed . . . . [U]nder the general Guidelines regime, the underlying theory is that the support obligation itself should fluctuate with the payor parent's income . . . . [W]hen a payor parent does not increase the amount of his/her support when his/her income increases, it is the child who loses[.]

(Emphasis in original)

Further, at para. 54, the court held, "Thus, under the federal scheme, a payor parent who does not increase his/her child support payments to correspond with his/her income will not have fulfilled his/her obligation to his/her children."

[65] Upon separation, children are entitled, as much as possible, to the same standard of living they enjoyed when their parents were together. After separation, the children's lifestyle was not commensurate with the appellant's income. His financial statement at trial indicated an income of just over $500,000, less than one-tenth of what the trial judge found to be his minimum income. In dealing with the situation where, as here, a court order for child support did not exist during the relevant time over which retroactive support is claimed, and where, based on the payor parent's income, child support has been underpaid, the court stated at para. 80 of D.B.S., supra:

[A]bsent special circumstances (e.g. hardship or ad hoc sharing of expenses with the custodial parent), it becomes unreasonable for the non-custodial parent to believe (s)he was acquitting him/herself of his/her obligations towards his/her children. The non-custodial parent's interest in certainty is generally not very compelling here.

The court also noted at para. 81 that under s. 15.1 of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), the statute in issue here, there is no restriction as to the date from which the court may order that the award take effect and it was open to courts to enforce obligations that predated an order for support. Thus, the trial judge had the jurisdiction to award child support for the period that pre-dated the coming into force of the Guidelines and to make the award of retroactive support that she did.

[66] In D.B.S., Bastarache J. opined at para. 123 that ordinarily a retroactive order for support should not be longer than three years and should run from the date when effective notice of [page101] a request for increased support was given to the payor parent. However, where the payor parent has engaged in blameworthy conduct, the presumptive date of the award is, as he stated at para. 134, "the date when circumstances changed materially", that is, when the payor parent's income increased. Having regard to the payor parent's misconduct in concealing his income, and the length of time over which he did so, the length of the award of retroactive support awarded by the trial judge can be sustained.

[67] Specific issues affecting retroactive child support awards mentioned by Bastarache J. at para. 86 of D.B.S. include the status of the child, that is, whether the child was still a "child of the marriage" as defined in the Divorce Act [s. 2] and whether, at the time of the application, the child was still entitled to support.

[68] In the case before us, the issues of which parent the children were living with at various times and whether a child over age 18 continued to be a child of the marriage because the child was attending school were canvassed by the trial judge. The appellant has not convinced me that she committed any error that would meet the standard of review for overturning an award of support. See D.B.S. at para. 136.

[69] Other factors in determining whether a court should exercise its discretion to order retroactive child support articulated by Bastarache J. include (1) whether the child would get no discernible benefit from the award or the award would cause hardship to a payor parent (at para. 95); (2) a reasonable excuse for why support was not sought earlier (at paras. 100-04); (3) blameworthy conduct of the payor parent, that is, conduct that privileges the payor parent's own interests over his/her children's right to an appropriate amount of support (at paras. 105-09); (4) whether the payor parent has indirectly met his/her support obligation; the present circumstances of the child and whether, in the past, the child suffered hardship because the proper amount of support was not paid (at paras. 110-13). The Supreme Court also stressed at para. 99 that a holistic approach should be used and that support in each case is dependent on the particular factual matrix.

[70] The appellant submits that because the court did not impose a trust on the amount of retroactive support in favour of the children, they will not benefit from the award but that it represents, instead, a transfer of wealth to the respondent. The appellant has not discharged the onus of proof regarding this allegation. The fact that the respondent will indirectly benefit is not a reason to refuse to make the award of support. I would also [page102] reject the appellant's request to impose a trust over these funds. This court has held in Simon v. Simon (1999), 1999 3818 (ON CA), 46 O.R. (3d) 349, [1999] O.J. No. 4492, 1 R.F.L. (5th) 119 (C.A.), at para. 38, that absent a good reason to do so, a court should not interfere with the way in which the parent balances the present and future needs of the child in his or her custody. Here, the strong evidence required to establish the need for a trust is not present.

[71] The appellant submits that the respondent has no reasonable excuse for not making an application for support at an earlier date. The respondent submits the appellant's deception concerning his income made the interim amount he agreed to pay in 1997 seem reasonable. After the forensic efforts by the respondent indicated he was grossly under- representing his income, the claim for retroactive support was made. I would accept the respondent's submission.

[72] As found by the trial judge, the appellant engaged in a lengthy period where he deliberately concealed his income. As Bastarache J. stated in D.B.S. at para. 106:

Courts should not hesitate to take into account a payor parent's blameworthy conduct in considering the propriety of a retroactive award. Further, I believe courts should take an expansive view of what constitutes blameworthy conduct in this context. I would characterize as blameworthy conduct anything that privileges the payor parent's own interests over his/her children's right to an appropriate amount of support. A similar approach was taken by the Ontario Court of Appeal in Horner v. Horner (2004), 2004 34381 (ON CA), 72 O.R. (3d) 561 at para. 85, where children's broad "interests" -- rather than their "right to an appropriate amount of support" -- were said to require precedence; however, I have used the latter wording to keep the focus specifically on parents' support obligations. Thus, a payor parent cannot hide his/her income increases from the recipient parent in the hopes of avoiding larger child support payments: . . . . And a payor parent cannot mislead a recipient parent into believing that his/her child support obligations are being met when (s)he knows that they are not.

(Citations omitted)

[73] The appellant also submits that the trial judge misapprehended the evidence in finding that the respondent depleted her capital. He submits that at most the respondent depleted her capital to the extent of $250,000; otherwise she lost money she gave to her paramour, lost on an investment and spent money on legal and forensic accounting fees that were not connected to supporting the children. As a result the appellant submits that the award of $950,000 was not justified. At the time of her decision, the trial judge did not have the benefit of the Supreme Court's reasons in D.B.S. wherein Bastarache J. held at para. 113 that ". . . hardship suffered by other family members (like recipient parents forced to make additional sacrifices) are irrelevant in [page103] determining whether retroactive support should be owed to the child". Thus, whether the trial judge was correct or not in finding that the respondent depleted her capital is irrelevant. The trial judge was correct in holding that the circumstances justified a retroactive award of support.

[74] Finally, the evidence does not indicate that the appellant has indirectly discharged his support obligations by making an equivalent payment in kind to the children.

[75] With respect to the amount of retroactive support ordered after the introduction of the guidelines, Bastarche J. held in D.B.S. at para. [127] that after the coming into force of the Guidelines, "the Guidelines must be followed in determining the quantum of support owed" subject, of course, to the court's discretion to depart from the Guidelines in cases where the amount earned by the payor spouse exceeds $150,000 a year and the payor spouse has discharged the onus of establishing that the guideline amount is inappropriate. The amount of retroactive support the trial judge awarded for the period following the coming into force of the Guidelines is less than a strict application of the Guidelines. The appellant has not shown any error in principle in the manner in which the trial judge exercised her discretion.

[76] In determining the amount of retroactive support that pre-dated the Guidelines, the trial judge was not required to follow a strict needs-based approach for that period. As Bastarache J. stated at para. 47 of his reasons, the Guidelines do not represent "a complete departure from the principles of child support that existed in the past"; they build on a premise that already existed. That premise included the right of the children to be supported in accordance with their parents standard of living had they not separated. The appellant has not satisfied me that the trial judge imposed a retroactive support payment that regarded the needs of the children as completely irrelevant in ordering support prior to the coming into force of the Guidelines or that she otherwise erred in principle.

[77] I would dismiss this ground of appeal.

(b) Ongoing child support

[78] The trial judge found that it was reasonable to assume that the husband's income, which she found to be $5.5 million a year, had not deteriorated and was more than sufficient to support the wife's claim for $23,000 a month in child support for the remaining child under her care. This amount was intended to be inclusive of s. 7 expenses and was substantially less than the amount under a strict application of the pre-May 2006 Guidelines which presume a payment of $36,952 for one child. [page104]

[79] In Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518, [1999] S.C.J. No. 9, the Supreme Court of Canada reaffirmed the high deference owed by appellate courts to a trial judge's award for child support and held that the award should not be overturned absent an error in principle, a misapprehension of the evidence or unless the award was clearly wrong. The appellant submits that the amount awarded by the trial judge for support is "clearly wrong" because it is simply too high for one child.

[80] In Simon v. Simon, supra, this court held that the mother was not required to justify the Table amount of support under s. 4 of the Guidelines. Rather the onus was on the appellant to establish that the amount of support ordered by the trial judge was excessive and in that case he had not done so. As a result, the court allowed an award of $9,200 a month for a five-year-old boy. In Francis v. Baker (1998), 1998 4725 (ON CA), 38 O.R. (3d) 481, [1998] O.J. No. 924, 34 R.F.L. (4th) 317 (C.A.), Abella J.A. held that a court should not reduce the Table amount of child support simply because it involves the transfer of some wealth from the payor to the payee. On the further appeal to the Supreme Court of Canada the sheer size argument was dismissed and Bastarache J. for the court agreed with both the trial judge and the Court of Appeal on this point. See: 1999 659 (SCC), [1999] 3 S.C.R. 250, [1999] S.C.J. No. 52, at para. 52. Basic needs of the child are not the sole or even dominant support in cases involving very wealthy payor spouses: Tauber v. Tauber (2000), 2000 5747 (ON CA), 48 O.R. (3d) 577, [2000] O.J. No. 2133, 6 R.F.L. (5th) 442 (C.A.). Here the amount awarded by the trial judge is significantly below the guideline amount. I would not interfere with the reasonable exercise of the trial judge's discretion.

(3) Costs at trial and the costs premium

[81] The trial judge awarded the respondent $2,250,000 in costs. The appellant's offers were all significantly less than the trial judgment. The appellant withdrew all offers minutes before the trial started. In coming to her award of costs the trial judge took into account the lack of specificity in the accounts of the respondent's previous solicitor, Mr. Zaldin and, in coming to her ultimate award, reduced his costs.

[82] In his factum, the appellant submits that the costs award includes costs by Mr. Zaldin for issues that were not part of this proceeding in that they related to the issue of what the date of marriage should be. However, the trial judge specifically held at para. 38 of her reasons on costs that such prior proceedings could not form part of the costs fixed by her. [page105]

[83] The appellant also submits that some of the fees awarded on interlocutory matters were "topped up" from a partial indemnity scale to a substantial indemnity scale and that the trial judge was not entitled to do this. The trial judge's rationale for "topping up" interlocutory orders where costs were fixed on a partial indemnity scale was that the respondent was entitled to be reimbursed on a substantial indemnity scale throughout. In coming to her conclusion the trial judge relied on the decision of Blair J. in 131843 Canada Inc. v. Double "R" (Toronto) Ltd., [1992] O.J. No. 3872, 11 C.P.C. (3d) 190 (Gen. Div.) in which he commented at para. 25 that topping up the award "was simply a question of providing to the successful party the full indemnity that such an award envisions". I would agree.

[84] Subject to my comments respecting the premium awarded by the trial judge, I would not disturb the award of costs made at trial.

[85] The trial judge concluded that this was an appropriate case in which to award a premium to reflect the exceptional skill of the respondent's solicitors, the result achieved at trial, the enormous difficulties caused by the appellant's bad- faith litigation and the financial risk if the proceedings failed. She concluded that a premium of $150,000 was warranted.

[86] Following the trial judge's award of a premium and the argument of this appeal, the Supreme Court of Canada released its decision in Walker v. Ritchie, [2006] S.C.J. No. 45, 2006 SCC 45, on October 13, 2006, in which it held that unsuccessful defendants did not have to pay the premium charged by counsel for a successful plaintiff. The rationale for the court's decision was that unsuccessful defendants should expect to pay similar amounts by way of costs across similar pieces of litigation. Since a defendant has no knowledge of the fee arrangement made by the plaintiff, the defendant would have no means of measuring the risk of engaging in litigation insofar as costs were concerned. The court also held that the application of Rule 49 [of the Rules of Civil Procedure, R.R.O., Reg. 194], and the award of substantial indemnity costs, did not warrant a difference in approach. Finally, the opportunity for counsel to charge his or her own client a risk premium, or (as the law now allows) a contingency fee, encourages competent counsel to take on the cases of impecunious persons and disallowing a premium would not impede access to justice. See paras. 24, 28, 30 and 40. Accordingly, I would allow the appeal with respect to the premium imposed and set it aside. [page106]

D. Conclusion on the Appeal

[87] For the reasons given, I would dismiss the appeal and affirm the order made by the trial judge with the exception of the premium on costs in the amount of $150,000. I would allow the appeal with respect to the premium on costs and set it aside.

E. The Cross-Appeal with Respect to Pre-judgment Interest

[88] After inviting the parties to make submissions on the rate of pre-judgment interest, the trial judge fixed the amount of pre-judgment interest at $2,400,000. In doing so she dealt with the same argument advanced by the appellant by cross- appeal advanced here as well as an argument by the respondent to the cross-appeal. She stated at paras. 50-52 and 57:

It is submitted by the wife that the highest interest rate allowable under the law should be awarded to discourage "bad faith" conduct. In this case, the fluctuation in interest rates has a significant impact (approximately a $2.3 million difference). In my view, it is appropriate in the exercise of my discretion to award an average of the rates which more accurately reflects the true prevailing rate over the entire period. The purpose of pre-judgment interest is to compensate for the loss of use of money and ought not to be used as a reward or a punishment. (Armak Chemicals Ltd. v. Canadian National Railway (1991), 1991 7060 (ON CA), 5 O.R. (3d) 1, [(sub nom. Oakville Storage & Forwarders Ltd. v. C.N.R. Co.) 1991 8353 (ON CA), 84 D.L.R. (4th) 326] (Ont. C.A.). In any event, the award of costs already addresses the husband's misconduct.

It is submitted that the pre-judgment interest rate on the funds removed by the husband from the TD Greenline accounts in the wife's name should be reduced to .4% per annum from the date the funds were paid into court pursuant to court order. This is the net interest rate that the funds yielded after the court deducted its management fees.

I do not agree. The wife was awarded the return of these funds under the judgment. It was open to the husband to return the funds to her, pending trial. In all the circumstances, an average interest rate is fair. . . . . .

Taking all of the circumstances into account, I fix pre- judgment interest in the amount of $2,400,000.

[89] Mrs. Debora, the appellant by cross-appeal, submits that by averaging the rate of interest the trial judge has allowed the respondent to the cross-appeal to make a profit on the capital at issue in this appeal at her expense and thereby erred. She submits that the respondent by cross-appeal should be required to disgorge this profit and seeks interest at the rate of 10 per cent per annum. Alternatively Mrs. Debora seeks interest at 6 per cent from the date the proceedings began in March 1996 or at 8 per cent from April 1995. The latter is a date that Mrs. Debora [page107] argues the appellant wrongfully removed money from an account held in her name at Toronto Dominion. In the further alternative, compound interest is sought.

[90] The jurisdiction to award pre-judgment interest is conferred by ss. 128 and 130 of the Courts of Justice Act, R.S.O. 1990, c. C.43. As noted by Cronk J.A. in Stellarbridge Management Inc. v. Magna International (Canada) Inc. (2004), 2004 9852 (ON CA), 71 O.R. (3d) 263, [2004] O.J. No. 2102 (C.A.), at para. 85:

Trial judges enjoy a wide discretion under s. 130 of the CJA to allow pre- or post-judgment interest at a rate higher or lower than the rate of interest prescribed by the CJA where they consider it just to do so. An appellate court may interfere with the discretionary decision of a trial judge only where it reaches the clear conclusion that there has been a wrongful exercise of discretion by the trial judge in that no weight, or insufficient weight, has been given to relevant considerations:. . .

(Citations omitted)

[91] In the family law context, this court affirmed the deference owed to the trial judge's exercise of discretion in awarding pre-judgment interest in Burgess v. Burgess (1995), 1995 8950 (ON CA), 24 O.R. (3d) 547, [1995] O.J. No. 2242 (C.A.).

[92] In the current case, the trial judge considered the argument of the appellant by cross-appeal and rejected it. She further held that her award of costs had already addressed the husband's misconduct and she declined to use pre-judgment interest to punish him further.

[93] The wording of s. 130 is very broad and, in addition to enabling the trial judge to consider the circumstances of the case, specifically allows the trial judge to take into account Mr. DeBora's conduct in lengthening unnecessarily the duration of the proceeding by his persistent refusal to make full disclosure of his income and assets. As Cronk J.A. noted in Somers v. Fournier (2002), 2002 45001 (ON CA), 60 O.R. (3d) 225, [2002] O.J. No. 2543 (C.A.), at para. 25, Armak concerns an older version of the pre-judgment interest provision, and s. 130(2)(f) grants the trial judge the jurisdiction to consider a litigant's conduct during the proceedings when determining whether to exercise her discretion to vary the rate of pre-judgment interest. While the trial judge may have erred in her reliance on Armak, this error does not change the outcome on this issue. In addition to her reliance on Armak, the trial judge was of the opinion that she had already punished Mr. Debora's conduct by her award of costs. The amount of pre-judgment interest awarded by the trial judge took into consideration the fluctuations in the applicable rate of interest during this lengthy litigation and is rationally connected to the interest rates that prevailed over the relevant [page108] period. The cross-appellant has failed to demonstrate that, aside from her reliance on Armak, the trial judge proceeded on an erroneous principle of law. Since the award of pre-judgment interest is a matter of discretion for the trial judge, I see no basis for appellate intervention.

[94] I would dismiss the cross-appeal.

F. Costs of this Appeal and Cross-Appeal

[95] Having regard to the submissions of counsel, I would award the costs of the appeal to the respondent and fix them at $75,000 all inclusive. I would fix the costs of the cross- appeal at $5,000 and award them to the respondent to the cross-appeal.

Appeal allowed in part; cross-appeal dismissed.

Notes

Note 1: In Mancini, neither condition was met. The husband and his wife occupied the house at sufferance through his status as mamager of the company; even if the husband had an interest in the company, it was not a controlling interest. Nor had the company passed a resolution entitling the husband to reside in the premises. Accordingly, Steinberg U.F.C.J. refused to pierce the corporate veil.