Harrington v. Harrington, 2009 ONCA 39

CITATION: Harrington v. Harrington, 2009 ONCA 39

DATE: 20090119

DOCKET: C47432

COURT OF APPEAL FOR ONTARIO

Weiler, Juriansz and MacFarland JJ.A.

BETWEEN

Shelley Marlene Harrington

Applicant (Appellant)

And

Kevin Harrington

Respondent (Respondent)

David A. Seed, for the appellant

David J. Sherman and Ian D. Corneil, for the respondent

Heard: December 8, 2008

On appeal from the order of Justice William J. Festeryga of the Superior Court of Justice dated May 7, 2007.

Weiler J.A.:

OVERVIEW

[1] This is an appeal from the trial judge’s order of support and equalization under the Family Law Act, R.S.O. 1990, c. F.3. The appellant wife submits: first, that the trial judge’s reasons were insufficient; second, that he erred in concluding that she was able to contribute in part to her own support and that he committed various other errors relating to spousal support; third, that he erred in excluding from the respondent’s net family property money held by the respondent husband and his father in a joint account.

FACTS

[2] The parties were married on February 22, 1988 and separated some 13 years later on September 4, 2002. They had no children. The appellant was 44 and the respondent was 49 at the time of trial in 2007.

[3] At the time of marriage in 1988, the appellant was a dental assistant. She later left that job due to injuries from a motor vehicle accident. In 1994, she took up employment as a car salesperson. In 1998, with the concurrence of her husband, she left that job and has not been employed since.

[4] The respondent was an employee of DOFASCO and at the time of trial was earning an annual salary of approximately $100,000.

[5] The respondent managed his father Peter’s financial affairs pursuant to a power of attorney from 1995 until Peter’s death on December 11, 2002. In June and July of 1998, the respondent transferred approximately $500,000 out of a joint account with his father and invested the funds aggressively in accounts in his own name. By the date of separation in September of 2002, the money had grown to $640,000. Putting aside any legal arguments as to the effect of the funds having run through various accounts, the appellant’s expert, Mr. Joslin, agreed with the calculation and tracing of funds by the respondent’s expert, Mr. Sgro. Joslin noted, however, that some of the funds had been removed along the way.

[6] The respondent testified that, as a result of a conversation with his father, it was his understanding he could use the interest on his father’s money as his own but not the principal. He claimed that the $500,000 principal that originally went into the joint account was not “owned” by him within the meaning of the opening of s. 4(2) of the Family Law Act. He claimed a total of $635,568.40 on his Net Family Property Statement, describing it as “other excluded property by reason of implied trust for the benefit of Peter Harrington”.

THE TRIAL JUDGE’S DECISION

1. Spousal Support

[7] The trial judge rejected the appellant’s evidence that she was unable to work. He found that the appellant’s job of selling cars was still open to her if she wanted it.

[8] The trial judge found that while the appellant had “referred to Post-Traumatic Stress Disorder... many times in her testimony”, that it was not clear on all the expert evidence that “that is her problem.” He accepted that she may have had “something bothering her, like anxiety and/or depression” but could not “be clearly placed into the diagnosis of PTSD.”

[9] In reaching this conclusion, the trial judge noted that he was not “impressed” by the evidence of her medical providers. The trial judge considered the appellant’s evidence and found her to be “histrionic and exaggerating her position.” He disbelieved some specific incidents of alleged spousal abuse by the respondent. He also found that the medical evidence supporting her complaint of PTSD was based on her narrative. When admitted to hospital for observation, the appellant had checked herself out before a definitive diagnosis was obtained. The trial judge also noted that if the appellant were truly suffering from PTSD, she would not have continued to visit her husband and go to his apartment after their separation.

[10] The trial judge found that the appellant had suffered no economic disability as a result of the marriage. He attributed part-time income to the appellant of about $7,600 a year based on his finding that she was able to contribute to her own support through part-time employment. He applied the needs-based approach to support and, in the end, held that the appellant was entitled to support of $2,100 per month, as opposed to the $3,000 a month she had previously been receiving on an interim basis.

[11] The trial judge rejected the appellant’s request for retroactive support in part because she called no evidence to support this request and in part because she failed to establish a past need prior to the making of the interim support order.

[12] Both counsel appear to have agreed that a review order was appropriate. The appellant’s lawyer sought a review after four or five years and the respondent’s lawyer after three years. The trial judge ordered that support be reviewed in three years time, on May 1, 2010 “with need to show material change in circumstances by either party, Shelley Harrington’s efforts to secure employment and a review of her mental health issues.” It appears from the record that the trial judge omitted a word such that the review order should have read, “with no need to show material change in circumstances” (emphasis added).

2. Equalization of Property

[13] The trial judge found that the respondent had a power of attorney to manage his father’s funds in the joint account. He described the respondent’s use of the funds as follows:

He moved funds in and out of various accounts for various reasons…. He invested the funds which brought good returns. He used some of these increases from investment for Peter’s benefit. He also used some for the benefit of himself and Shelley.

[14] The trial judge found that the manner in which the respondent handled the funds “did not alter their nature”. In his view, they were the father’s funds and ultimately formed part of his estate which was divided between the respondent and his sister. As such, he accepted the respondent’s contention that they did not form part of his net family property pursuant to s. 4(2) of the Family Law Act.

[15] The trial judge stated that “[t]he amount to be excluded is difficult to determine. The original funds in 1998 were approximately $500,000 but grew to approximately $640,000 in 2002.” He held that the entire amount of $640,000.00 should be excluded.

[16] In relation to a yacht, the trial judge found that it was purchased by the respondent but was jointly owned. The trial judge valued it at $56,400 in total ($28,200 for each spouse) using the valuation date nearest to the date of trial. He accepted an expert valuation of the respondent’s pension.

[17] After setting out the equalization calculation, the trial judge ordered the respondent to pay the appellant $28,200 for her share in the yacht and a further $56,379.62. Because the appellant wished to purchase the respondent’s interest in the matrimonial home, valued at $152,500, he ordered a set-off against this amount as well as a sum previously owing by the appellant of some $11,053. In the result, the appellant was ordered to pay the respondent a total of $78,974.29.

ISSUES

[18] The issues raised by the appellant may be summarized as follows:

1. Were the trial judge’s reasons sufficient?

2. Did the trial judge err in concluding that the appellant was able to contribute in part to her own support or otherwise err in ordering support as he did?

3. Did the trial judge err in his treatment of the $500,000 capital from the respondent’s father or the increase on those funds by excluding them from the respondent’s net family property?

1. Sufficiency of Reasons

[19] A trial judge’s reasons serve the function of explaining the decision to the parties, providing public accountability and permitting effective appellate review. The trial judge’s reasons, read in the context of the record as a whole, must demonstrate that he or she was alive to and resolved the central issues before the court: R. v. R.E.M., 2008 SCC 51.

[20] There were two live issues at trial. The first issue was whether the appellant was incapable of working outside the home and therefore entitled to full spousal support. The second, which the trial judge characterized as “the major dispute” between the parties, was the treatment of the money originating from the respondent’s father.

[21] In relation to the first issue, the appellant complains that the trial judge did not mention aspects of the evidence that were favourable to her. However, the mere fact that the trial judge did not mention all the evidence adduced at trial does not mean that the reasons are inadequate: R.E.M. Moreover, it is clear that the trial judge’s view of the appellant’s credibility and his overall acceptance of the respondent’s evidence was a critical factor in his conclusion that she would be able to contribute to her own support. As such, he did not refer to aspects of the appellant’s own evidence and specific evidence that was dependent on her narrative. The appellant cannot now ask us to substitute our own assessment of credibility for the trial judge’s opinion by impugning the reasons for judgment.

[22] With respect to the second issue, the appellant complains that the trial judge failed to refer to a number of pieces of evidence such as the conclusion of a forensic accountant and the fact that the respondent reported income from his father’s funds on his tax return. In my view, although the trial judge could have explained his reasons for excluding the entire amount of $640,000 from the respondent’s net family property more fully, his reasons were nonetheless adequate.

[23] The trial judge rejected the appellant’s contention that the money became the property of the respondent by way of gift from his father. He also rejected her argument that the parties’ use of the funds demonstrated that they were a family asset. Although the trial judge did not refer to all of the evidence adduced at trial, again, this in itself is by no means fatal. Moreover, in relation to the evidence regarding the tax treatment of the funds, the trial judge did refer to this issue obliquely when he stated “I make no finding that a criminal or otherwise improper act transpired. They are not in issue here.”

[24] In relation to the father’s capital, I am satisfied that the reasons disclose a logical connection between the evidence and the trial judge’s decision and demonstrate that he grappled with the substance of the live issues at trial. Any deficiency in the reasons by no means precludes this court from conducting meaningful appellate review. In relation to the increase in the father’s capital, I would hold that the reasons do permit appellate review although, as I explain below, I would disagree with the conclusion reached by the trial judge.

[25] Accordingly, I would reject this ground of appeal.

2. Spousal Support

[26] The appellant submits that the trial judge failed to consider or appropriately weigh the following evidence in concluding that she would be able to contribute to her own support:

• the evidence of an executive director of a woman’s shelter who treated the appellant and concluded that she suffered from domestic abuse;

• the opinion of the appellant’s therapist that she would require years of therapy before she would be able to return to work;

• the evidence of the appellant’s family physician who agreed with the conclusion that the appellant suffered from post-traumatic stress disorder and thought that the appellant was employable in the medium or long-term but not immediately;

• a psychiatrist’s opinion that the appellant was depressed, had anxiety disorder and could not hold down a job;

• a discharge sheet from a 2004 hospital admission stating that the appellant had PTSD and was in partial remission.

[27] The significance of the above evidence was dependent on the appellant’s narrative. Again, nothing turns on the fact that the trial judge did not refer to the detail of this evidence in his reasons. It certainly does not mean that he misapprehended the evidence or failed to consider relevant evidence. Moreover, the trial judge’s conclusion that it was unclear whether the appellant was suffering from PTSD was consistent with the evidence of the appellant’s own family physician, Dr. James, as well as another doctor, Dr. Murphy. Having regard to the trial judge’s assessment of the appellant’s credibility, I cannot say that he erred in attributing to her some ability to support herself.

[28] Although the appellant’s factum adverted to the failure of the trial judge to consider her argument for retroactive support that issue was not pursued before us. In any event, I would not disturb the trial judge’s conclusion in this regard.

[29] Both counsel, at trial and on appeal, agreed that a review order was appropriate (although there was some disagreement as to when the review should take place). As such, I make no comment on the appropriateness of the trial judge’s review order in general. I would, however, alter the order so as to correct the omission of the word “no” so that it reads: “with no need to show a change in material circumstances by either party”.

[30] Otherwise, I would dismiss the appeal with respect to support.

3. Equalization of Property

[31] There is a rebuttable presumption that an adult child holds funds in a joint account with their parent on resulting trust. That presumption may be rebutted if the evidence establishes that the transferor’s intent was to make an outright gift. Though each case turns on its own facts and the overall inquiry is the transferor’s intent at the time of the transfer, particularly relevant evidence includes: the granting of a power of attorney, the wording of bank documents, the control and use of the funds in the account, the tax treatment of the joint account and evidence subsequent to the transfer if it is relevant to the transferor’s intention at the time of transfer: Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795.

[32] The respondent claimed that both the $500,000 capital as well as the $140,000 increase in the funds should not be included in the calculation of his net family property because he held them by way of a resulting trust for his father. However, in relation to the increase of $140,000 the respondent’s own evidence belies that position.

[33] The respondent testified that in 1998 he invested his father’s capital of $500,000, originally held in his father’s account at TD Waterhouse, in various Royal Bank mutual funds. The mutual funds were in the respondent’s name only and he contributed and withdrew from them depending on world market conditions. The Royal Bank didn’t like him going “into and out of” the funds so frequently, so he went to CIBC and started doing the same thing. He then moved the money from the CIBC account into a joint account at TD Canada in the name of himself and his father, used it to transfer drafts in and out, and eventually put the money back into his father’s account at TD Waterhouse. The TD Waterhouse account became the estate account which was divided equally between the respondent and his sister.

[34] As stated previously, the respondent testified that his understanding was that he was not to have access to the principal. At the beginning of the investment arrangement, he did not access the income either. However, as a consequence of a conversation he had with his father, he understood that he could use these funds for himself. The respondent testified that he used some of the income for his own purposes and the purposes of his family. Examples he gave were the purchasing of vacations for himself and his wife and to purchase a boat in 1998 or 1999. That boat was sold and the yacht purchased in 2000. He also paid some of his credit card bills and some of his COSTCO bills using his power of attorney respecting his father’s account.

[35] The respondent also used some of the income on the $500,000 to pay for his father’s cost of care after the father moved to a care facility. At one point, the respondent testified that the cost of his father’s care was $4,000 a month. At another point, he testified that it was $5,000. He acknowledged that the last facility his father resided in cost only about $1,800 a month.

[36] The respondent declared all of the income from the money invested in his name on his tax returns for 1998, 1999, and 2000. In 2001, he also declared some of the income on his tax return and caused some to be declared by the appellant as she was not working and would pay less tax on it.

[37] The timing of the movement of the funds is also instructive. On September 5, 2002, the day after the appellant and respondent separated, the respondent caused $379,402.97 to be transferred from the joint TD Canada Account #015-0525020 in the name of his father and himself to his father’s TD Waterhouse account #68X186A. He transferred a further $250,000 on December 19, 2002, eleven days after his father died, and a further $9,000 on December 30 to account #68X186A. The total amount transferred was $638,402.17.

[38] The trial judge found that by the date of separation in 2002, the original $500,000 investment had grown to $640,000. At a later point in his reasons he observed that the exact amounts in the CIBC and TD Waterhouse accounts totalled $635,242.61. In his reasons, however, the trial judge commented that these were assets of the estate and then added “[t]here is no evidence that the property existed on the valuation date.” This may have been an acknowledgment that on the valuation date, none of the funds were in the father’s TD Waterhouse account #68X186A.

[39] The trial judge held that the funds did not change character when they left the joint account and were transferred into an account in the respondent’s name. In so holding, the trial judge was effectively saying that the presumption of resulting trust had not been rebutted. Despite the late payment of the funds to the TD Waterhouse account, I would not disturb the trial judge’s conclusion in regard to the $500,000 principal amount. The respondent testified that it was never the father’s intention to allow him to access the principal and it was open to the trial judge to accept his evidence.

[40] The same cannot be said of the income stream from the capital. The respondent generated all of the increase in the capital from investment accounts in his name only. While ordinarily the income or growth on trust funds would also be held in trust for the beneficiary, the respondent’s evidence was that he was entitled to use the income for himself. He declared the income as his own on his income tax returns. As noted above, he used the increase to make significant purchases for himself and to pay his own bills. The evidence does not support the trial judge’s conclusion that the $140,000 was held by the respondent in trust for his father and that it never belonged to the respondent. Rather, the $140,000 increase fell within the definition of “property” under section 4(1) of the Family Law Act as, “property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself.”

[41] Pursuant to s. 4(3), the onus of proving a deduction or exclusion is on the person claiming it. The respondent has not discharged this onus. Accordingly, the $140,000 increase should not be excluded pursuant to s. 4(2) of the Family Law Act.

[42] The appellant also refers to “unidentified and undisclosed” assets and seeks to attribute further sums to the respondent. However, the uncontradicted testimony of the respondent was that he had no other bank accounts, savings, securities or other assets at the date of separation or the date of trial other than those described in his Net Family Property Statement and his financial statement. While the appellant now complains that the extent of financial disclosure was inadequate, this was a matter to be dealt with before or at the trial. I would therefore reject her contention that further amounts should be added to the respondent’s net family property.

CONCLUSION

[43] I would dismiss the appeal with respect to support. However, I would order that the portion of paragraph 1 of the trial judge’s order respecting a review of spousal support be changed to read “with no need to show material change in circumstances by either party” as the omission of the word “no” in the trial judge’s order appears to be an error.

[44] In relation to the equalization payment, I would allow the appeal in part and order that $140,000 be added to the respondent’s property on his Net Family Property Statement and that the equalization payment be recalculated accordingly.

COSTS

[45] At the time of hearing this appeal we received counsel’s submissions on the costs of this appeal and we have no need of further submissions in that regard. However, the result of our order may affect the award of costs at trial. Indeed, in awarding costs to the respondent, the trial judge stated that, in particular, the last offer made by the respondent played a significant part in his fixing of costs. It is therefore necessary to consider what that offer was in order to deal with the costs below as well as the parties’ bills of costs.

[46] The parties shall recalculate the equalization payment in accordance with these reasons. Having regard to any rule 49 offers, the appellant shall then file written submissions concerning the costs at trial totalling no more than four pages in length within seven days of the release of these reasons for judgment. The respondent may file a four page response in writing within seven days thereafter. The appellant may make a two page reply in writing within five days after the respondent’s filing.

RELEASED: January 19, 2009 “Karen M. Weiler J.A.”

“KMW” “I agree R.G. Juriansz J.A.”

“I agree J. MacFarland J.A.”