Reisman v. Reisman

Ontario Reports

Court of Appeal for Ontario,

Hoy A.C.J.O., Laskin and Tulloch JJ.A.

February 11, 2014

118 O.R. (3d) 721 | 2014 ONCA 109

Case Summary

Family law — Evidence — Wife attacking estate freeze undertaken by husband's father during marriage as fraudulent conveyance — Trial judge permitting husband to introduce affidavit of his father filed in previous rectification proceedings describing purpose of estate freeze as father suffered from Alzheimer's disease — Trial judge's ruling not depriving wife of fair trial because she could not cross-examine husband's father — Wife not having availed herself of earlier opportunities to cross-examine father and filing no evidence to contradict assertion that father was incapable of testifying.

Family law — Practice — Costs — Husband making three offers to settle on terms more favourable to wife than she obtained at trial — Trial judge awarding husband costs of $250,000 — Costs award reasonable.

Family law — Property — Net family property — Wife admitting in agreed statement of facts that common shares received by husband during marriage in his father's estate freeze were gift — Wife attacking husband's receipt of shares as fraudulent conveyance in her statement of claim but not claiming that it was not gift — Trial judge not erring in refusing to permit wife to withdraw admission near end of trial — Estate freeze not constituting fraudulent conveyance as wife was not creditor of husband when conveyance took place and as there was no evidence to suggest that estate freeze was undertaken with intent to defeat future equalization claim by wife — Wife not "other" person with standing to assert claim under s. 2 of Fraudulent Conveyances Act as she had no equalization claim at time of estate freeze — Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2.

Family law — Support — Spousal support — Parties separating after 20-year traditional marriage — Trial judge ordering husband to pay monthly spousal support of $4,500 (in addition to lump sum award of $119,956.34, which represented husband's overpayment of advance equalization payment) — Trial judge exercising her discretion appropriately in setting quantum of support but erring in limiting it to ten years to promote wife's economic self-sufficiency — Imposition of time limit being unreasonable in light of fact that wife had not had full-time job outside home since children were born and would be 56 years old when time-limited support order ended.

The parties separated in 2006 after a 20-year traditional marriage. They litigated two main issues: whether an estate freeze undertaken by the husband's father in 1998 amounted to a fraudulent conveyance; and the amount and duration of spousal support. The trial judge dismissed the wife's claim that the estate freeze was a fraudulent conveyance. She ordered the husband to pay the wife spousal support in the amount of $4,500 for ten years in addition to lump sum support of $119,956.34, which represented the husband's overpayment of an advance equalization payment. She awarded costs against the wife in the amount of $250,000. The wife appealed.

Held, the appeal should be allowed in part. [page722]

Taking into account the lump sum spousal award, the trial judge did not err in the exercise of her discretion in awarding monthly spousal support at the lower end of the Spousal Support Advisory Guidelines' range. However, she erred in imposing a ten-year limit on spousal support to promote the wife's economic self-sufficiency. In light of the facts that the wife was mostly responsible for maintaining the household and raising the children during the marriage, had not had a full-time job outside the home since the children were born, and would be 56 years old when the time-limited support order ended, it was unrealistic to impose a time limit on spousal support. Support should be indefinite, subject to variation or termination if there were a material change in circumstances.

The wife admitted in an agreed statement of facts that the common shares received by the husband in the estate freeze were a gift. While she attacked the estate freeze in her statement of claim as a fraudulent conveyance, she did not allege that the shares were not a gift. The trial judge did not err in refusing to allow the wife to withdraw her admission near the end of the trial as she gave no reasonable explanation for the request to withdraw and the husband would suffer non-compensable prejudice if she were permitted to withdraw the admission.

The trial judge did not err in permitting the husband to file an affidavit sworn by his father in previous rectification proceedings in 2008 in which his father set out his reasons for undertaking the estate freeze. The husband's father suffered from Alzheimer's disease and his memory was severely compromised. The trial judge's ruling did not deprive the wife of a fair trial on the basis that she was unable to cross-examine the husband's father. The wife had not availed herself of earlier opportunities to cross-examine the father. She filed no evidence to contradict the assertion that the father was incapable of testifying. The lawyer who dealt with the rectification application testified at trial and gave evidence about the objectives of the estate freeze, which corroborated the father's affidavit evidence.

The trial judge did not err in dismissing the wife's claim that the estate freeze was a fraudulent conveyance. Section 2 of the Fraudulent Conveyances Act gives "creditors or others" standing to set aside a conveyance of property made with a fraudulent intent. The wife was not a creditor of the husband at the time of the estate freeze. The debtor-creditor relationship between married spouses arises only when one spouse has the right to claim an equalization payment from the other. In 1998, the wife had no entitlement to an equalization payment. She was also not an "other" person with standing to assert a claim under s. 2 of the Act as she had no claim for equalization in 1998 and did not now claim that she would have contemplated separation had she known about the estate freeze. The trial judge was aware that taking advantage of the exclusions for gifted property under the Family Law Act, R.S.O. 1990, c. F.3 was one of the objectives of the estate freeze. However, she found that the freeze was mainly prompted by estate planning and tax considerations. That finding was entitled to appellate deference and there was no basis for interfering with it.

The husband made three offers to settle, each on terms more favourable to the wife than she obtained at trial. Thus, the $250,000 costs order reflected partial indemnity costs to the date of the first offer and full indemnity costs after that date. There was no basis for interfering with the amount of the costs award.

Stone v. Stone (2001), 2001 CanLII 24110 (ON CA), 55 O.R. (3d) 491, [2001] O.J. No. 3282, 203 D.L.R. (4th) 257, 156 O.A.C. 345, 39 E.T.R. (2d) 292, 18 R.F.L. (5th) 365, 107 A.C.W.S. (3d) 269 (C.A.), consd [page723]

Other cases referred to

Allaire v. Allaire, 2003 CanLII 26263 (ON CA), [2003] O.J. No. 1069, 170 O.A.C. 72, 35 R.F.L. (5th) 256, 121 A.C.W.S. (3d) 504 (C.A.); Fisher v. Fisher (2008), 88 O.R. (3d) 241, [2008] O.J. No. 38, 2008 ONCA 11, 232 O.A.C. 213, 288 D.L.R. (4th) 513, 47 R.F.L. (6th) 235, 163 A.C.W.S. (3d) 432; Serra v. Serra (2009), 93 O.R. (3d) 161, [2009] O.J. No. 432, 2009 ONCA 105, 307 D.L.R. (4th) 1, 246 O.A.C. 37, 61 R.F.L. (6th) 1; Tedham v. Tedham, [2005] B.C.J. No. 2186, 2005 BCCA 502, 261 D.L.R. (4th) 332, [2006] 3 W.W.R. 212, 217 B.C.A.C. 250, 47 B.C.L.R. (4th) 254, 20 R.F.L. (6th) 217, 143 A.C.W.S. (3d) 722

Statutes referred to

Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), s. 15.2(6)

Family Law Act, R.S.O. 1990, c. F.3 [as am.]

Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 [as am.]

Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2

Rules and regulations referred to

Family Law Rules, O. Reg. 114/99, Rule 24 [as am.]

Authorities referred to

Rogerson, Carol, and Rollie Thompson, Spousal Support Advisory Guidelines (Ottawa: Department of Justice Canada, 2008)

APPEAL from the order of D.A. Wilson J., [2012] O.J. No. 2536, 2012 ONSC 3148, 22 R.F.L. (7th) 423 (S.C.J.) in a matrimonial litigation.

Gary S. Joseph and Serena Lein, for appellant.

Nancy Iadeluca, for respondent.

The judgment of the court was delivered by

LASKIN J.A.: —

A. Introduction

[1] Linda and Howard Reisman were married for 20 years. They separated in October 2006, though they remained in their matrimonial home until it was sold in April 2008. At the start of trial in September 2011, Linda was 46 and Howard was 48.

[2] The Reismans have four children: a daughter, 22 at the time of trial; and three sons, who were 20, 18 and 15. The two older children lived away from home; the two younger children lived alternatively with both their parents, though at the time of trial, Max, the 18-year-old, was living with his mother.

[3] In December 2007, the parties entered into an interim domestic contract under which Howard paid monthly spousal support and made an equalization payment to Linda on a "without prejudice" basis pending trial. Then, in November 2010, Linda [page724] and Howard settled all issues relating to their children, and agreed that neither would pay child support to the other.

[4] The parties litigated two main issues: first, whether an estate freeze undertaken by Howard's father, Fred Reisman in 1998 amounted to a fraudulent conveyance; and second, the amount and duration of spousal support. After a nine-day trial, the trial judge, in comprehensive reasons for judgment, dismissed Linda's claim that the estate freeze was a fraudulent conveyance. She ordered Howard to pay Linda monthly spousal support of $4,500 for ten years and lump sum support of $119,956.34,[^1] but awarded costs against Linda in the amount of $250,000.

[5] Linda Reisman raises five issues on her appeal:

(1) The trial judge denied Linda a fair trial by (a) permitting Howard to rely on his father's affidavit as evidence of the intent of the estate freeze; and (b) refusing to permit Linda to withdraw an admission that common shares Howard received on the estate freeze were a gift and thus excluded from his net family property.

(2) The trial judge erred in making a time-limited support order, and erred in awarding an amount at the low end of the Spousal Support Advisory Guidelines (Ottawa: Department of Justice, 2008) (the "Guidelines").

(3) The trial judge erred by accepting that the common shares Howard received in the estate freeze were a gift and consequently erred by awarding Linda an equalization payment that was far too low.

(4) The trial judge erred by failing to hold that the estate freeze amounted to a fraudulent conveyance.

(5) The trial judge's costs award was excessive.

[6] The first issue, whether Linda was denied a fair trial, concerns matters bearing on the effect and intent of the estate freeze. I will deal with these matters when I discuss whether the common shares Howard received in the estate freeze were a gift and whether the estate freeze was a fraudulent conveyance. [page725]

B. Analysis

(1) Did the trial judge err in her award of spousal support?

[7] Howard acknowledged that Linda was entitled to spousal support. Their dispute centred on the amount and duration of that support.

(a) The interim agreement and the trial judge's award

[8] Under the interim domestic contract, which the parties signed in December 2007, Howard agreed to pay Linda spousal support of $5,750 per month pending trial, and without prejudice to his right to seek to pay a lower amount. He also paid Linda an advance equalization payment of $226,538.

[9] The trial judge awarded Linda an equalization payment of only $106,581.66, leaving an overpayment of $119,956.34. Howard agreed to forgo the overpayment in return for paying less monthly support. The trial judge ordered that $119,956.34 be treated as lump sum spousal support. That amount is equivalent to $1,500 per month for ten years.

[10] In addition, the trial judge ordered monthly spousal support of $4,500 for ten years (unless there is an earlier material change in circumstances). In arriving at this amount, she took Howard's 2011 income for support purposes to be $192,000, and she imputed to Linda annual income of $30,000. Under a "no child support scenario" with a payor earning $192,000 and a recipient earning $30,000, the Spousal Support Advisory Guidelines yield a monthly support payment of $4,050 at the low end and $5,400 at the high end.

[11] The trial judge's support order was thus at the lower end of the Guidelines. She also time-limited support for ten years because "this is an appropriate period of time to recognize any economic disadvantage that was suffered by the Applicant by reason of the marriage and it promotes the economic self-sufficiency of the applicant within a reasonable period of time" (para. 41). The trial judge did not, however, require Linda to pay back the difference between the support she had been receiving under the interim agreement and the support ordered at trial.

(b) Positions of the parties

[12] Linda submits that the trial judge erred by focusing on the goal of self-sufficiency and did not take account of all the considerations that go into an appropriate support order. She contends that after a largely traditional marriage of 20 years, during which [page726] she never held a full-time job outside the home, she is entitled to a higher amount of support payable indefinitely.

[13] Howard submits that in making a time-limited order at the lower end of the Guidelines, the trial judge exercised her discretion reasonably. Even if we might be inclined to make a different order, we are not justified in interfering with the trial judge's award.

(c) The parties' backgrounds

(i) Howard

[14] During the marriage, Howard worked mainly for his father's real estate company, Fred Reisman and Associates. His salary increased over the years, and by the time of trial he was earning nearly $200,000 annually. Although Linda took on more of the responsibilities for maintaining the household and raising the children, Howard also assisted in household chores and childcare.

(ii) Linda

[15] Before marriage, Linda earned a diploma in early childhood education. However, she has not worked in that field for over 20 years. During marriage, she had a series of part-time jobs in retail, event planning and design. For a time, she also ran her own gift basket business. She earned between $4,000 and $24,000 annually.

[16] Linda testified that she could not have taken on a full-time job outside the home because she assumed most of the responsibility for raising the children -- two of whom have learning disabilities -- and for maintaining the household. She said that now, even though the children are grown up, she has to be available for Max, who is living with her and suffers episodes of severe depression.

(iii) Howard's parents

[17] While they did not live extravagantly during their marriage, Linda and Howard lived well. That they did so was partly attributable to the generosity of Howard's parents, Fred and Marian Reisman. Mr. and Mrs. Reisman gave their son and daughter-in-law a loan to assist them in buying their first home, eventually paid off the mortgage on the home and purchased RRSPs for each of them. At the date of separation, Linda had almost $243,000 in her RRSP.

[18] In addition, Fred and Marian Reisman arranged for each of their 16 grandchildren, including Howard's and Linda's four [page727] children, to have their own income. Linda and Howard used this income -- approximately $70,000 annually -- to fund their living expenses. However, once they settled issues relating to their children, that income was no longer available to them.

(iv) After separation

[19] After separating from Howard in 2006, Linda significantly changed her lifestyle. She quit her part-time job and for three years made no effort to find other work. Eventually, in 2010, she took a part-time retail position with Swarovski Crystal, working 26 hours per week at $13 an hour. She admitted, however, that she could earn more money working as an event planner, something she had done for several years.

[20] Linda also began to live extravagantly. She took ten trips to Amsterdam. She renovated and furnished her new home. And she paid her boyfriend $4,000 per month to help her decorate the home. Overall, she spent nearly $900,000, depleted her capital and went into debt. The trial judge justifiably found that Linda is in debt because of the choices she made.

(d) Discussion

[21] Linda challenges both the amount and duration of the trial judge's support order. I will deal first with the amount.

[22] In fixing the amount, as I have said, the trial judge imputed annual income of $30,000 to Linda. Linda had asked to impute only $20,000, but I would not interfere with the trial judge's figure.

[23] The trial judge then considered the range stipulated by the Spousal Support Advisory Guidelines -- between $4,050 and $5,400 -- and selected an amount at the lower end of the range, $4,500. She noted that "the children have their own income and the Applicant is capable of working".

[24] Linda agrees that, though obviously not binding, the Spousal Support Advisory Guidelines are a useful benchmark for determining spousal support: see Fisher v. Fisher (2008), 88 O.R. (3d) 241, [2008] O.J. No. 38, 2008 ONCA 11, 232 O.A.C. 213. But she argues that the trial judge erred by ordering an amount at the lower end of the range rather than the higher end of the range. In support of her argument, she points to the following passage from the Guidelines [on p. 54]:

Long marriages will generate generous spousal support awards on an indefinite basis that will provide the spouse with something approaching equivalent standards of living after marriage breakdown. [page728]

Alternatively, Linda asked for an equal division of net disposable income, which would yield monthly spousal support of approximately $7,700.

[25] I would not interfere with the amount of spousal support ordered by the trial judge. She did not err by looking to the Guidelines to arrive at a fair figure for support. Even though I am inclined to agree that an award at the higher end would be appropriate, the monthly figure ordered by the trial judge cannot be considered alone. It must be considered together with the lump sum support order of $119,956.34, the equalization amount that Howard overpaid in the interim domestic contract and agreed to forgo in return for paying lower monthly support. $119,000 is equivalent to monthly payments of $1,500 for ten years. Thus, at least for ten years, Linda's effective monthly spousal support is $6,000. That figure is above the high end of the range established by the Guidelines for a "without child support scenario" and for a couple with the income or imputed income of Howard and Linda. Accordingly, this court has no basis to adjust the amount of support ordered by the trial judge.

[26] The duration of support raises a more difficult issue. At various points in her analysis, the trial judge emphasized that Linda had not done enough to become self-sufficient. At para. 29, the trial judge said:

I am not persuaded that the Applicant is working at her capacity or that duties associated with her children prevent her from working more hours than she currently is or at a higher level of employment.

At para. 31, the trial judge noted that "[t]he demands from the children are less than they were seven years ago". And, at para. 36, she said:

In this case, the Applicant has enjoyed the benefit of significant payments of spousal support; yet, she has not taken the opportunity to upgrade her skills, retrain or pursue other employment opportunities. She has evinced an attitude of entitlement to a certain lifestyle and there is no basis for this. The Applicant is young, in good health and is certainly able to take steps to move into becoming self sufficient or, if she chooses not to do so, she must adjust her lifestyle accordingly.

[27] The trial judge concluded, at para. 41, that time-limited support of ten years was warranted:

If there is no material change in circumstances, after the expiry of 10 years, the Respondent's obligation to pay spousal support shall terminate. In my opinion, this is an appropriate period of time to recognize any economic disadvantage that was suffered by the Applicant by reason of the marriage and it promotes the economic self-sufficiency of the Applicant within a reasonable period of time, which is one of the primary purposes of any spousal support order. [page729]

In making this order, I am mindful of the fact that given the quantum of spousal support that the Respondent has been paying on a regular basis since April 2008, there is an argument that there has been an overpayment of spousal support. My order has taken this into consideration and there shall be no issue taken by the Respondent with respect to past support payments.

[28] Insofar as is practicable, promoting "the economic self-sufficiency of each spouse within a reasonable period of time" is one of the four statutory objectives of a spousal support order: see the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), s. 15.2(6). The trial judge was right to emphasize its importance in this case. However, promoting self-sufficiency cannot be the only consideration that determines the duration of a support order. The court also has to take into account the recipient spouse's age, skills, education, opportunities for retraining and, importantly, her realistic prospects of being able to find a job that enables her to become self-sufficient: see Tedham v. Tedham, [2005] B.C.J. No. 2186, 2005 BCCA 502, 261 D.L.R. (4th) 332, at para. 33. Also, as this court noted in Allaire v. Allaire, 2003 CanLII 26263 (ON CA), [2003] O.J. No. 1069, 170 O.A.C. 72 (C.A.), at para. 21, "self-sufficiency is not a free-standing concept. It must be seen in the context of the standard of living previously enjoyed by the parties.": see, also, Fisher, at para. 73.

[29] Here, five undeniable facts stand out. First, this was a long marriage: it lasted 20 years. Second, during the marriage Linda was the one mostly responsible for maintaining the household and raising the children. Third, Linda has not had a full-time job outside the home since the children were born. Fourth, Howard and Linda lived well during their marriage: they "never had to worry about income". Fifth, when the time-limited support order by the trial judge ends, Linda will be 56 years old. In the light of these five facts, it seems to me unrealistic to impose a time limit on spousal support.

[30] The Guidelines support this view. They state that for long marriages -- defined as marriages of 20 years or more -- spousal support awards should be "indefinite". By "indefinite" support, the Guidelines do not mean permanent support or even support that will continue indefinitely at the level set by the formula, but instead "support that is subject to the normal process of variation and review". Through this process, the amount of support may be varied and support may even be terminated if the incomes of the parties change. Also, and importantly for this appeal, the Guidelines caution, at p. 61, that "to ignore duration is to misapply the without child support formula": [page730]

Amount and duration are interrelated parts of the formula -- they are a package deal. Using one part of the formula without the other undermines its integrity and coherence.

[31] Thus, I would follow the recommendation in the Guidelines. Instead of imposing a ten-year limit on spousal support for Linda, I would order that support be indefinite. In addition, I would make the order subject to variation or termination on a material change in circumstances.

(2) Were the common shares Howard received in the estate freeze a gift?

[32] The other highly contested issue between the parties was the intent and effect of the estate freeze undertaken in 1998 by Howard's father, Fred Reisman. At trial, Linda's principal claim was that the estate freeze amounted to a fraudulent conveyance, a claim that the trial judge dismissed. Although Linda maintains this claim on appeal, her main submission in this court is that the common shares given to Howard on the estate freeze were improperly excluded from his net family property as a gift. If Linda succeeds in showing that the estate freeze was a fraudulent conveyance or that the common shares were not a gift, her equalization entitlement increases dramatically from the amount ordered by the trial judge, $106,581.66, to an amount in excess of $2 million.

[33] In this section, I will consider Linda's submission that the common shares Howard received were not a gift. In doing so, I will discuss Linda's admission that they were a gift, which the trial judge refused to permit her to withdraw and which is one aspect of her argument that she was denied a fair trial. In the next section of my reasons, I will consider Linda's fraudulent conveyance argument. In doing so, I will consider the trial judge's ruling that Howard could rely on his father's affidavit, which is the other aspect of Linda's argument that she was denied a fair trial.

(a) The Howard R. trust

[34] On the date of marriage, Howard was the beneficiary of the Howard R. trust, which was settled by Fred Reisman in 1965. Through its ownership of certain preference shares, the trust held a 13.89 per cent interest in the equity of MRL, a real estate holding company, which held income producing properties and land. MRL was named for Howard's mother, Marian, but both it and the trust were controlled by Howard's father, Fred. Howard never personally received any distribution from his interest in the trust. [page731]

[35] Howard's valuation expert, Bonnie Prussky, valued the trust's 13.89 per cent interest in MRL at $1,048,000. The trial judge accepted that valuation. Accordingly, that amount was appropriately deducted on Howard's net family property statement as a date of marriage asset.

(b) The 1998 estate freeze

[36] In 1998, on the recommendation of his financial advisors, Fred Reisman undertook a complicated reorganization and estate freeze of MRL. The purpose and mechanics of the estate freeze are concisely and admirably summarized by the trial judge, at paras. 49-52 of her reasons. I have reproduced her summary at Appendix 'A' to these reasons.

[37] The trial judge found, at para. 53, that the reorganization and estate freeze had three objectives:

-- (1) to freeze the value of the equity shares in MRL;

(2) to cause a distribution of trust to the children and grandchildren;

(3) to protect the future growth in MRL in order to take advantage of exclusions under the [Family Law Act, R.S.O. 1990, c. F.3] for gifted property.

[38] This third objective is central to Linda's submission that the estate freeze was a fraudulent conveyance. I will address this submission in the next section of these reasons.

[39] For Howard, the estate freeze had two important consequences. First, the preference shares of MRL held by his trust were exchanged for frozen shares of MRL. Through a series of transactions, these frozen shares were converted into 24,500 fixed value Class A common shares in Howardco., a holding company incorporated in the corporate reorganization. The Howard R. trust, along with five other trusts, was then wound up.

[40] Howard included these Class A common shares in his net family property. Both Howard's expert, Ms. Prussky, and Linda's expert, Neil Maisel, valued these shares at the date of separation. The trial judge preferred Ms. Prussky's valuation, which was $1,193,000, and used that amount in calculating Howard's net family property. Linda does not challenge that valuation on appeal.

[41] The second important consequence of the estate freeze was that Howard received from Fred Reisman 50 Class D common shares of MRL, which represented 25 per cent of the future [page732] growth of MRL.[^2] Howard then rolled these 50 Class D common shares into Howardco. in exchange for one Class B common share in Howardco. Howard's treatment of this one Class B common share in his net family property statement became a contentious issue at trial and remains so on appeal.

[42] Howard took the position that this Class B common share was a gift from his father and thus was excluded from his net family property. Linda initially agreed that it was a gift, but then sought to retract her position and argue that only the value of the share representing 11.11 per cent of MRL was a gift and that the remainder ought to be included in Howard's net family property -- a position she reiterates on appeal.

[43] In essence, Linda contends that Howard, through his trust, went from owning a 13.89 per cent interest in MRL at the date of marriage to owning a 25 per cent interest after the estate freeze. As the 13.89 per cent was deducted from his net family property as a date of marriage asset, only 11.11 per cent (25 per cent less 13.89 per cent) should be deducted as a gift. To permit Howard to deduct the entire 25 per cent as a gift would amount to "double counting".

[44] I do not agree with Linda's contention both because she admitted in an agreed statement of facts that the Class B common share was a gift, and because the evidence shows that it was a gift and treating it as one does not amount to double counting.

(c) Linda's admission that the Class B common share was a gift

[45] In October 2010, nearly a year before trial, the parties signed an agreed statement of facts. The agreed statement included a joint net family property statement signed by both parties. In this statement, Linda agreed that Howard's "1 Class B share" was "acquired by gift" and was excluded from his net family property.[^3] On a later net family property statement filled out by Linda alone, she again showed the Class B share as a gift to Howard and therefore excluded it from Howard's net family property.

[46] Not only did Linda admit that the Class B share was a gift, she did not allege otherwise in her pleadings. In her [page733] amended statement of claim, she attacked Howard's receipt of the share as a fraudulent conveyance but did not claim that it was not a gift.

[47] However, toward the end of the trial and in closing argument, Linda sought to withdraw her admission. The trial judge refused to permit Linda to do so. At para. 81 of her reasons, she explained why:

In order to withdraw an admission, which is what changing the Agreed Statement of Facts would result in, there requires an explanation and well [sic] as demonstrating to the Court that any prejudice to the other party caused by the withdrawal can be compensated for in costs: Forget v. Forget. In this case, there is no satisfactory explanation that has been put forward. Further, it was during the course of trial that the issue was raised and in my view, the prejudice to the Respondent at that point could not have been compensated for by costs or an adjournment.

[48] Linda now says that Ms. Prussky could have been asked to value Howard's interest in the one Class B share of Howardco. and the court could have compensated Howard in costs by ordering Linda to pay for the valuation. It seems to me that this would have been an unrealistic option in the middle of the trial, and it was an option that was never put to the trial judge. I agree with the trial judge's refusal to permit Linda to withdraw her admission, and I agree with the reasons for her refusal.

(d) No double counting

[49] Moreover, permitting Linda to withdraw her admission that the Class B share was a gift would not assist her.

[50] Howard did not, as Linda claims, go from having an excluded 13.89 per cent interest in MRL to having an excluded 25 per cent interest in MRL. At the date of marriage, he did not own -- either legally or beneficially -- an interest in MRL. Rather, he had a beneficial interest in a trust, which had an interest in MRL, but which was entirely controlled by his father as trustee. Linda conceded that the value of this 13.89 per cent interest in the trust was properly excluded from Howard's net family property as a date of marriage asset.

[51] On the estate freeze, the trust interest in MRL was converted into frozen shares of MRL and then converted again into fixed value Class A common shares in Howardco., all at Fred Reisman's sole discretion. The difference between the value of the trust's interest in MRL at the date of marriage and the value of these Class A common shares at separation was appropriately included in Howard's net family property.

[52] In separate transactions, Fred Reisman "gifted" to each of his four children 50 Class D common shares of MRL, representing [page734] the future growth of the company. In Howard's case, his 50 Class D shares were converted into one Class B share in Howardco. That one Class B share represented 25 per cent of the increase in value of MRL since the estate freeze in 1998, not 25 per cent of the value of MRL. It was properly excluded on Howard's net family property statement as a gift.

[53] A gift is a voluntary transfer of property to another without consideration. Typically, a gift has three elements: an intention to donate, an acceptance and a sufficient act of delivery: see Serra v. Serra (2009), 93 O.R. (3d) 161, [2009] O.J. No. 432, 2009 ONCA 105. On the evidence led at trial, all three elements were made out. Fred intended to donate the 50 Class D shares to his son Howard and his other children; Howard accepted the donation, which was eventually converted into one Class B share in Howardco.; and the shares were actually delivered to Howard and his holding company.

[54] Thus, Linda's "double counting" argument must fail. There is simply no basis in the evidence to treat only part of the value of the Class B share as a gift.

(3) Was the estate freeze a fraudulent conveyance?

[55] Section 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 gives "creditors or others" standing to set aside a conveyance of property made with a fraudulent intent:

2. Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

[56] Linda claimed that the estate freeze was a fraudulent conveyance contrary to s. 2 because it was "designed to intentionally reduce Howard's net family property in the event of a breakdown of the marriage", and thus deprive her of the equalization payment to which she would otherwise be entitled.

[57] The trial judge correctly recognized that the Fraudulent Conveyances Act can apply to equalization proceedings under the Family Law Act. Nonetheless, she dismissed Linda's claim for two reasons. First, relying on this court's decision in Stone v. Stone (2001), 2001 CanLII 24110 (ON CA), 55 O.R. (3d) 491, [2001] O.J. No. 3282 (C.A.), the trial judge held that Linda was not a creditor of Howard at the relevant time, 1998, when the conveyance she challenges took place. Second, the trial judge held that the estate freeze was not undertaken with an intent to defeat an equalization claim by Linda. In finding the absence of a fraudulent intent, the trial judge relied on the affidavit of Fred Reisman, which set out [page735] the objectives of the estate freeze. She concluded, at para. 66 of her reasons:

When the reorganization and estate freeze was done in 1998, there were legitimate purposes for undertaking the work, and there was no evidence to suggest one of the motives was to defeat the Applicant's entitlement under the FLA.

[58] Linda submits that in dismissing her s. 2 claim, the trial judge made three errors. First, she ought to have found that Linda had standing to assert a claim under s. 2 as an "other" person. Second, she ought not to have admitted or relied on Fred Reisman's affidavit. Third, on the question of Fred's intent, she failed to take into account that one of the reasons for the estate freeze was to take advantage of the Family Law Act exclusions. I would not give effect to any of these three submissions.

(a) "Creditors or others"

[59] In Stone, Feldman J.A. extensively canvassed the meaning of "creditor" and of "creditors or others" under s. 2 of the Fraudulent Conveyances Act. She rejected the proposition that spouses are in a "constant debtor-creditor relationship". Instead, she held that the debtor-creditor relationship between married spouses arises only when one spouse has the right to claim an equalization payment from the other; in other words, a debtor-creditor relationship arises when one of the events triggering an equalization claim under the Family Law Act occurs: for example, on death, on divorce or on separation with no real prospect of the resumption of cohabitation. Unquestionably, in 1998, Linda was not a creditor of Howard. Back then, she had no entitlement to an equalization payment.

[60] Feldman J.A. also considered the long line of decisions interpreting "creditors or others". She noted that "others" includes persons who, though not judgment creditors at the time of the challenged conveyance, nonetheless have a claim for unliquidated damages. Feldman J.A. concluded, at para. 25, that in the family law context:

[I]n order for a spouse to qualify as a person who is intended to be protected from conveyances of property made with intent to defeat her interest, she must have had an existing claim against her husband at the time of the impugned conveyance that is a right which she could have asserted in an action.

[61] Linda testified that she did not know about the reorganization and the estate freeze when it took place. However, her lack of knowledge does not help her. The claim Linda asserts is a claim to an equalization payment. But she had no claim for [page736] equalization in 1998. She does not claim, for example, that she would have even contemplated separation had she known about the estate freeze. Thus, she was not an "other" person with standing to assert a claim under s. 2 of the Fraudulent Conveyances Act.

(b) Admissibility of Fred Reisman's affidavit

[62] At the beginning of the trial, Howard brought a motion to introduce the affidavit of his father, Fred Reisman, sworn in November 2008, nearly three years before trial. The affidavit had been filed in one of the several rectification proceedings needed to correct errors in the documents for the estate freeze. In the affidavit, Fred described the estate freeze and said that it was undertaken at his sole discretion for legitimate tax, estate planning and family law purposes.

[63] In his affidavit in support of his motion, Howard said that his father was 86 years old, suffered from Alzheimer's disease and serious memory loss, and could not give viva voce evidence at trial.

[64] Howard attached to his affidavit a letter from Fred Reisman's doctor who said that it would be "pointless" for Fred to give evidence at trial as his ability to recall past events and details was severely compromised. The trial judge admitted the affidavit of Fred Reisman and then relied on it in finding that the estate freeze was not undertaken with a fraudulent intent.

[65] Linda submits that the trial judge erred in admitting Fred Reisman's affidavit. She makes the corollary submission that the trial judge ought not to have considered the letter from Fred's doctor, as it was unsworn and he did not have any expertise on a person's fitness to testify. Linda's overall contention is that the trial judge's ruling prejudiced her and deprived her of a fair trial because she could not cross-examine Fred Reisman, the architect of the estate freeze.

[66] This contention cannot succeed for three reasons. First, Linda had several opportunities to cross-examine Fred Reisman and did not avail herself of any of them. She had notice of the rectification application in which Fred Reisman's affidavit was filed. Indeed, Goodmans LLP, the law firm that acted for Fred Reisman, agreed to Linda's request to adjourn the rectification application so that she could put in responding material and cross-examine her father-in-law. She did neither. In addition, at no time in the matrimonial proceedings did Linda seek to add Fred Reisman as a party and examine him. Finally, two months before trial, Howard's lawyer put Linda on notice that she [page737] was not going to call Fred Reisman as a witness at trial. Again, Linda did not subpoena Fred Reisman or ask to examine him.

[67] Second, Linda filed no evidence to contradict the opinion of Howard and of Fred's doctor that Fred was incapable of testifying.

[68] Third, I do not think that Fred's unavailability to testify at trial prejudiced Linda. The Goodmans lawyer who dealt with the rectification application did testify at trial and gave evidence about the objectives of the estate freeze, which corroborated Fred's affidavit evidence. Those objectives were hardly controversial.

[69] Accordingly, I conclude that the trial judge did not err in exercising her discretion to admit Fred Reisman's affidavit and rely on it.

(c) Intent

[70] Linda argues that in finding no fraudulent intent, the trial judge erred because she did not consider that one of the objectives of the estate freeze was to take advantage of the exclusions for gifted property under the Family Law Act. I do not accept this argument.

[71] The trial judge was well aware that taking advantage of the exclusions was one of the objectives of the estate freeze. She said so explicitly, at para. 53 of her reasons. However, she found that estate planning and tax considerations mainly prompted Fred Reisman to undertake the estate freeze. That finding is entitled to appellate deference and I see no basis to interfere with it.

[72] The estate freeze took place in 1998, nine years before Linda and Howard separated. Linda did not testify about any marital discord at the time or suggest that she would have considered separating from Howard had she known about the estate freeze. Moreover, Linda maintained that she had an excellent relationship with Fred Reisman. And she has made no complaint about the portion of the estate freeze that benefitted Fred Reisman's 13 grandchildren, including her own four children.

[73] The facts of this case differ significantly from the facts in Stone. In Stone, the husband, with his death imminent, conveyed virtually all of his property to the children of his former marriage. He did so without telling his wife and with the obvious intent to deprive her of a fair equalization payment. The trial judge found that the husband's dispositions amounted to fraudulent conveyances and this court upheld his finding.

[74] On the facts of the case before us, no fraudulent intent lay behind the estate freeze. It was a legitimate transaction undertaken by Fred Reisman to preserve his family's wealth. The trial [page738] judge was therefore correct in dismissing Linda's claim under s. 2 of the Fraudulent Conveyances Act.

(4) Did the trial judge err in her costs award?

[75] The trial judge awarded Howard costs of $250,000, payable by Linda over ten years, in equal monthly installments of $2,083.33, unless Howard's obligation to pay spousal support ends earlier, in which case the entire amount remaining would become due and payable. The trial judge also ordered that the costs award be enforced as a support order under the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31. Linda challenges both the amount of costs ordered and the schedule of payments.

(a) Amount

[76] Howard made three offers to settle, each on terms more favourable to Linda than she obtained at trial. Thus, the $250,000 order reflects partial indemnity costs to the date of the first offer in February 2010, and full indemnity costs after that date. Linda does not contest the scale of costs.

[77] Linda does, however, submit that the amount of costs is excessive. I do not see any basis to interfere with the amount ordered. The trial judge applied the proper principles: she took into account the cost factors in Rule 24 of the Family Law Rules, O. Reg. 114/99 and arrived at a figure that she considered fair and reasonable. In doing so, she concluded that the substantial disbursements for expert fees were reasonable because of the importance and complexity of the issues arising out of the estate freeze, but that the hours charged by Howard's lawyers were excessive. As the trial judge exercised her discretion reasonably and gave reasonable explanations for her award, I would uphold the amount she ordered.

(b) Schedule of payments

[78] The trial judge tied Linda's obligation to pay the costs award to her receipt of spousal support. The net result under the trial judge's order is that for the period Linda receives spousal support, she will receive only $2,416.67 monthly ($4,500 - $2,083.33).

[79] As I would set aside the ten-year upper limit on spousal support, I would correspondingly reduce the monthly amount Linda is required to pay to satisfy the costs award. I would order that she pay the costs award of $250,000 at the rate of $1,000 per month. That will leave her with net monthly spousal support of $3,500. [page739]

[80] If Linda's entitlement to spousal support ends, she must then pay the outstanding amount of costs. The trial judge ordered that the costs award be enforced under the Family Responsibility and Support Arrears Enforcement Act, 1996. Linda did not challenge this order on appeal.

C. Conclusion

[81] I would not interfere with the amount of spousal support ordered by the trial judge. However, I would set aside the ten-year limit ordered by the trial judge, and in its place order that spousal support be paid to Linda "indefinitely", but subject to variation or termination on a material change in circumstances.

[82] I would not give effect to any of Linda's arguments arising out of the estate freeze.

[83] I would vary Linda's obligation to pay the costs award from $2,083.33 monthly to $1,000 monthly.

[84] The parties may make written submissions on the costs of the appeal within three weeks of the release of these reasons.

Appeal allowed in part.

Appendix 'A'

[49] Since the existing trusts were approaching the deemed disposition date, in order to defer the taxes on future growth and provide some protection against family law issues, it was determined to do an estate freeze, which is a mechanism by which future growth in a company is transferred, and the freeze is usually intergenerational. The objective of an estate freeze is to deal with the tax on the trust, because every trust is deemed to dispose of its assets every 21 years and is required to pay tax.

[50] It was decided to wind up the trusts, freeze the value of the MRL shares they owned and transfer the frozen value to Fred and Marian, their children and grandchildren. In addition, a new trust was created, F&M GrandKidsCo, for the 13 grandchildren of Fred and Marian and 26 per cent of the frozen value was transferred to this new company. The frozen share in MRL was replaced by new equity shares which were gifted to Fred's children. Exhibit 9, tab 60 contains a chart prepared by the lawyers who acted on this transaction, showing the steps related to the 1998 MRL freeze. Since the passage of the Family Law Act in 1986, such gifted shares are considered excluded property.

[51] To put it simply, the value of the MRL shares was frozen and new classes of shares were created. Howard R. Trust received 24,500 Class A Special Shares in exchange for the shares it owned in MRL. Fred gifted 50 Class D Common Shares of MRL to Howard. 1330650 Ontario Inc. ["Howardco"] was incorporated as a holding company and Howard subscribed for one Class D Common Share. Howard R. Trust transferred its 24,500 frozen shares of MRL to Howardco in exchange for 24,500 Class A Common Shares. Howard then rolled the 50 Class D Common Shares of [page740] MRL which had been gifted to him by Fred into Howardco for one Class B Common share. Howardco then sold 24,500 Class A Special Shares in MRL to MRL in exchange for 50 Class D Common Shares in MRL. There was a period of perhaps 10 days when Howardco had retractable shares. Each child of Fred was treated in the same manner in the estate freeze, as they each received 25 per cent of the MRL shares.

[52] The final allocation was that Howard had one Class D Common Share in Howardco and all of his siblings subscribed for one Class D share in their own holding company; 24,500 Class A Common Shares in Howardco; and one Class B Common Share in Howardco. It is to be noted as well that Howardco had 100 Class D Common Shares in MRL which are neither redeemable nor retractable. Howardco had no other material assets. Following the reorganization, Fred continued to control MRL.

Notes

[^1]: The trial judge awarded Linda an equalization payment that was $119,956.34 less than the amount Howard had paid under the interim domestic contract. Howard agreed to waive repayment of this amount on the understanding that it would be treated as lump sum spousal support: see paras. 7 and 8 of these reasons.

[^2]: Each of Howard's three siblings similarly received 50 Class D common shares of MRL.

[^3]: Neither party valued the Class B share, but in my opinion nothing turns on their failure to do so.

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