COURT FILE NO.: D 1388/11

DATE: 2012/02/22

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Diane Smith

Applicant

– and –

George Sinclair Smith

Respondent

Elaine Rosewell, for the Applicant

Cynthia Campling, for the Respondent

HEARD: November 7 and 18, 2011

The Honourable Madam Justice D.L. Chappel

JUDGMENT

I. INTRODUCTION

I. INTRODUCTION

1The Applicant Diane Smith (“the Applicant”) and the Respondent George Sinclair Smith (“the Respondent”) began cohabiting in 1994, and were married on March 14, 2001. They separated on August 1, 2008. On March 25, 2010, the Applicant issued an Application in which she requested a divorce and equalization of the parties’ net family properties. In his Answer and Claim issued on April 27, 2010, the Respondent requested an equalization of net family properties, exclusive possession of the matrimonial home located at 54 Woodlawn Park Lane, Nanticoke (“the Woodlawn property”) and spousal support retroactive to the date of separation.

2During the process of exchanging financial disclosure in this matter, it became apparent that the Respondent had significant assets as of the date of marriage. When it became clear that the Respondent intended to claim a large deduction on his Net Family Property Statement for these date of marriage assets, the Applicant responded by seeking to amend her Application to request an unequal division of net family properties pursuant to section 5(6) of the Family Law Act.¹ She was granted leave to amend her Application to advance this claim by order of Lafrenière, J. dated August 26, 2011. The Applicant subsequently served and filed an Amended Application in which she included this claim.

3At trial, the parties were able to narrow the property issues to be determined by the court. A Net Family Property Statement setting out the agreed upon values of most items for the purposes of the net family property calculations was filed and marked as Exhibit 8 at trial. Counsel indicated that the two issues that were in dispute in relation to this Net Family Property Statement, and respecting the property claims generally, were the value of a cottage property located at 69 Lakeside Drive, Nanticoke, Ontario (“the Lakeside Drive property”), and whether an unequal division of the parties’ net family properties should be ordered on the facts of this case.

4The issues to be determined in this case are therefore as follows:

1. Should a divorce order issue?

2. What was the value of the Lakeside Drive property as of the valuation date of August 1, 2008?

3. Has the Applicant made out her claim for an unequal division of the parties’ net family properties?

4. Is the Respondent entitled to spousal support from the Applicant, and if he is, what is the appropriate quantum of spousal support?

5With respect to the divorce claim, I find that the grounds for divorce have been made out. Accordingly a divorce order shall issue in the usual form.

6For the reasons that follow, I find that the value of the Lakeside Drive property as of the valuation date of August 1, 2008 for the purpose of the net family property calculations was $56,000.00. I have determined that there are no grounds for an unequal division of net family properties. On the issue of spousal support, I have concluded that the Respondent has not established an entitlement to spousal support from the Applicant.

II. VALUATION OF LAKESIDE DRIVE PROPERTY

A. Evidence and Positions of the Parties

II. VALUATION OF LAKESIDE DRIVE PROPERTY

7As noted above, the parties agreed on all property values for the purposes of the net family property calculations except for the value of the Lakeside Drive Property. The Applicant retained Mr. Glenn Rowell of Schinkel Appraisals Inc. to carry out an appraisal of the property. Mr. Rowell inspected the property on April 8, 2010, and his appraisal report dated May 11, 2010 sets out his opinion that the property had a value of $45,000.00 as of September 15, 2008. The Respondent retained Mr. Chuck Vitanza to carry out an appraisal. Mr. Vitanza inspected the property on July 8, 2010, and in his Residential Appraisal Report dated July 19, 2010, he estimated that the property had a value of $56,000.00 as of August 1, 2008. Both valuation reports were adduced as evidence at trial, and neither of the parties chose to cross examine either Mr. Rowell or Mr. Vitanza.

8The Applicant’s position is that the valuation of Mr. Rowell should be accepted. The Respondent argued that the court should ignore the valuations of both Mr. Rowell and Mr. Vitanza, and should instead find that the property had a value of $80,000.00 as of the valuation date of August 1, 2008. He argued that the parties had purchased the property in 2006 for $55,000.00, and that he had carried out numerous renovations that had significantly improved the property, including wiring, plumbing, insulation, landscaping and roofing. His argument was that these improvements, when considered in conjunction with his labour, increased the value of the property by approximately $50,000.00. Further, he argued that the Applicant failed to maintain the landscaping on the property, and had junk strewn throughout the yard when the appraisals were carried out. According to the Respondent, the Applicant’s conduct in relation to the property contributed to the low values which the appraisers attributed to it.

B. Analysis and Ruling

Analysis and Ruling

9I do not accept the Respondent’s opinion regarding the valuation of the Lakeside Drive property. While he has considerable experience in the area of real estate transactions, he is not a qualified residential property appraiser. His personal opinion regarding the value of the property is significantly higher than the values reached by the two residential appraisal professionals who the parties retained to carry out the appraisal task. It was also significantly higher than the value of the property as assessed by MPAC as of January 2008, which was $66,000.00. These considerations lead me to conclude that the Respondent’s estimate is not realistic or reliable.

10As between the valuations provided by Mr. Rowell and Mr. Vitanza, I find the opinion of Mr. Vitanza to be more persuasive. Accordingly, I find that the value of the Lakeside Drive property as of the valuation date of August 1, 2008 was $56,000.00. My reasons for preferring Mr. Vitanza’s opinion are as follows:

1. On a general level, Mr. Vitanza’s report is more comprehensive and detailed in the explanation as to how he reached his conclusion regarding the value of the property.

2. Mr. Rowell noted that according to the Applicant, the basement foundation was shifting and cracked in areas, and was in need of replacement. There is no clear indication in Mr. Rowell’s report as to whether he inspected the foundation or not. By contrast, Mr. Vitanza indicates in his report that he had a receipt relating to basement repairs carried out before the effective date of the valuation. Mr. Rowell made no reference to such repairs having been carried out at the relevant time.

3. Mr. Rowell provides only general references to the state of renovations as of the effective valuation date, and does not refer to having reviewed receipts to substantiate the information which he relied on. Mr. Vitanza, on the other hand, provides more details about the assumptions he used regarding the state of the property at the relevant time, and referred to having reviewed receipts to substantiate these assumptions.

4. Mr. Vitanza provides an opinion of the value as of August 1, 2008, which is the exact valuation date in this case for the purposes of the net family property calculations. Mr. Rowell’s valuation is as of September 15, 2008. While the difference does not seem significant at first blush, it is important to note that this is a “seasonal residential” property. In my view, this consideration makes the timing more significant.

5. The six comparables which Mr. Rowell used for his valuation ranged in price from $52,900.00 to $84,900.00, and therefore were all much higher than the valuation which he attributed to the Lakeside Drive property. In reviewing the comparables, he did not in my view provide sufficient specifics to assist in understanding his opinion regarding the Lakeside Drive property. For example, he mentioned that a number of the comparables were considered to be in superior condition by varying degrees, but did not provide details. By contrast, Mr. Vitanza provided more details as to how he compared the Lakeside Drive property with the other properties which were sold in the area around August 1, 2008.

6. Mr. Rowell’s valuation is considerably lower than the MPAC valuation as of January 1, 2008, which was $66,000.00. Mr. Rowell did not provide any explanation for this major discrepancy. Mr. Vitanza did not address the discrepancy between that valuation and his opinion either, but his valuation was much closer to the MPAC figure.

7. As indicated above, the Respondent testified that the Applicant had not properly attended to the landscaping on the property since the valuation date, and that there were items strewn about the property when the assessors carried out their inspections. He relayed concerns that these factors may have contributed to a lower valuation being given to the property. The Applicant chose not to testify at trial, and in fact did not even appear, and therefore this evidence is uncontroverted. It supports my conclusion that the higher valuation which Mr. Vitanza recommended should be accepted over Mr. Rowell’s valuation.

III. CLAIM FOR UNEQUAL DIVISION OF NET FAMILY PROPERTIES

A. Positions of the Parties

1. The Applicant’s Position

III. CLAIM FOR UNEQUAL DIVISION OF NET FAMILY PROPERTIES

11It is clear based on the evidence, and acknowledged by both parties, that if the Applicant’s claim for an unequal division of net family properties is not accepted, the Applicant will owe the Respondent a significant equalization claim due to the Respondent’s large deduction for the net value of his property as of the date of marriage.

12The Applicant’s claim for an unequal division of net family properties is founded on the circumstances surrounding the handling of funds from significant investments which the Respondent owned at the time of the parties’ marriage. These investments were held in a direct trading account with TD Waterhouse, and the parties agree that they had a value of $221,646.67 as of the date of marriage. The funds from this TD Waterhouse direct trading account were transferred to Wickham Investment Counsel Inc. (“Wickham”), an affiliate of TD Waterhouse, in 2004. On the Net Family Property Statement filed as Exhibit 8 at trial, what remains of these funds is described on page 2 of the Statement as the Wickham investment. These investments from this account from the time of the marriage until the valuation date will be referred to in these Reasons for Judgment as “the TD Waterhouse funds.”

13Counsel for the Applicant argued that there are two possible theories as to where the majority of the TD Waterhouse funds have gone since the date of marriage. First, she submitted that if the Respondent’s evidence on this question is accepted, most of the funds were spent on joint assets acquired and joint expenses incurred during marriage, gifts from the Respondent to the Applicant and her family, purchases for himself, and on “lifestyle” expenditures during the marriage. The other possibility, according to the Applicant, is that the Respondent lost the majority of the TD Waterhouse funds as a result of investment losses arising from his failure to maintain a diversified investment portfolio. Specifically, the Applicant argued that the Respondent lost these funds by investing excessively in Nortel Networks (“Nortel”) stock.

14The Applicant’s claim advanced two alternative bases for her claim for an unequal division of the parties’ net family properties. First, she argued that if the Respondent’s evidence about where the TD Waterhouse funds went is accepted, an unequal division of net family properties is warranted on the basis of sections 5(6) (c) and (h) of the Family Law Act. The essence of the argument is as follows:

1. The Respondent decided to expend most of the TD Waterhouse funds through gifts to the Applicant and her family, investing them during the marriage in assets owned jointly by the parties and for a joint business venture, and paying for joint daily and “lifestyle” expenses.

2. The TD Waterhouse funds can be traced in various ways to assets which the Applicant owned as of the valuation date, and the Respondent will derive a benefit from the inclusion of these assets in the Applicant’s net family property through the equalization process.

3. To allow the Respondent to claim the full amount of the date of marriage deduction for the TD Waterhouse funds when he chose to essentially gift those funds for the purposes stipulated in paragraph 1 is unconscionable, as it allows the Respondent to “take everything back” that he purported to give to the Applicant and her family during the course of the marriage.

15The Applicant argued that in determining the issue of unconscionability under section 5(6) of the Family Law Act, the focus must be on the results of equalizing the parties’ net family properties rather than on whether there has been misconduct on the part of the spouse against whom an unequal division is claimed. Her counsel submitted that while the Respondent’s actions in expending the TD Waterhouse funds as he did may have been well intentioned, the result of these actions for the purposes of the equalization process is unconscionable as it allows the Respondent to “take back” everything he gave to the Applicant, and leads to the Applicant being liable to the Respondent for a significant equalization payment after she relied on the Respondent’s generosity during the course of the marriage.

16The Applicant’s second argument in favour of an unequal division of net family properties is founded on the assumption that the Respondent’s explanation of where the TD Waterhouse funds went is not accepted by the court, in which case a large amount of the TD Waterhouse funds was unaccounted for as of the valuation date. The Applicant asks the court to infer that in this case, the funds were in all likelihood lost as a result of the Respondent’s investment losses prior to the valuation date. With respect to these investment losses, the Applicant argued that the Respondent invested the bulk of the funds in Nortel stock in the hope of gaining a “too good to be true” return on his money, and lost a large amount of money as a result of what she describes as this investment “gamble.” She alleges that she had no involvement or input into the Respondent’s investment choices with respect to the TD Waterhouse funds, that the Respondent “did not take heed of all investment direction to diversify a portfolio to ensure security and return” as stated in her Factum, and that the result of the Respondent’s improvident gamble is that his net family property is much lower than it would have otherwise been. It is on this basis that she argued that an unequal division of net family properties is warranted pursuant to section 5(6) (d) and (h) of the Family Law Act.

17Counsel for the Applicant submitted that the appropriate means by which to rectify the unconscionable outcome of equalizing the parties’ net family properties is to limit the Respondent’s date of marriage property deduction to the amount of the TD Waterhouse funds that remained in his possession as of the valuation date. She argued that the outstanding amount that has not been either lost through unwise investments or through expenditures on joint assets, gifts, and joint daily and lifestyle expenses is now found in the Respondent’s Wickham investment account, which had a value of $81,492.49 as of the valuation date.

2. The Respondent’s Position

18Counsel for the Respondent argued that there is no basis upon which to make a claim for an unequal division of net family properties in this case. With respect to the argument that allowing the Respondent a full deduction for the TD Waterhouse funds is unconscionable as it would be tantamount to allowing the Respondent to “take back” everything he gave to the Applicant during the marriage, counsel for the Respondent disagreed that the standard equalization approach would lead to such an outcome. She emphasized the numerous ways in which the Applicant benefited from the Respondent’s funds, both during the course of the marriage and on an ongoing basis as a result of the assets which she now has as a result of the Respondent’s generosity. Further, she noted that the Applicant did not adduce any evidence upon which the court could compare the Applicant’s actual financial situation at the date of separation with the financial situation she would have been in had the gifting by the Respondent to the Applicant not occurred, with the result that the court has no real reference point from which to even begin an analysis of the unconscionability claim.

19With respect to the Applicant’s alternative argument based on alleged over-investment in Nortel stock, counsel for the Respondent submitted that the evidence indicates that the Applicant was aware of the Respondent’s investments, and that the parties consulted with each other about investment decisions. Further, she submitted that there was no evidence upon which the court could conclude that the Respondent acted recklessly or even negligently in regard to his investments. She argued that there was no evidence to support the argument that the Respondent’s portfolio was not sufficiently diversified, and that the Respondent should not be penalized for market forces and illegal behaviour of Nortel professionals which caused many investors to suffer major stock market losses during the relevant time frame.

B. The Law

20Pursuant to section 5(1) of the Family Law Act, when spouses divorce or separate with no reasonable prospect that they will resume cohabitation, the spouse with the lesser net family property as defined in section 4 of the Act is prima facie entitled to receive an equalization payment of one half the difference between the parties’ net family properties. Section 5(6) of the Act grants the court the discretion to vary the amount of the equalization payment to an amount that is more or less than half the difference between the parties’ net family properties if an equalization would be “unconscionable” having regard to the factors listed in that section, which are as follows;

Variation of share

5(6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,

(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;

(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;

(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;

(d) a spouse’s intentional or reckless depletion of his or her net family property;

(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;

(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;

(g) a written agreement between the spouses that is not a domestic contract; or

(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.

21The Ontario Court of Appeal described the steps that must be undertaken when a request for a variation of the equalization payment is made pursuant to section 5(6) of the Family Law Act in Serra v. Serra.² As indicated in that decision, the court must first ascertain the parties’ respective net family properties applying the principles set out in section 4 of the Act, and must then determine what the equalization payment would be pursuant to section 5(1) of the Act. Finally, before making an order for equalization under section 5(1), the court must decide whether ordering an equalization of the net family properties would be “unconscionable” having regard for the factors outlined in section 5(6).

22The onus is on the party seeking a variation of the equalization payment under section 5(6) to establish that a variation is warranted. In order to succeed under the section, the party seeking a variation must bring their case within one or more of the subparagraphs of section 5(6).³ Once it is established that the case engages one or more of the factors set out in those subparagraphs, the court must then determine whether the implications of those factors considered in light of the overall factual context of the case at hand are such that an equalization of net family properties would be unconscionable.⁴ The factors outlined in section 5(6) need not be considered in isolation. The unconscionability of an equalization payment can arise as a result of multiple factors.⁵

23The threshold for establishing “unconscionability” under section 5(6) is exceptionally high.⁶ The test is not met by showing that equalization would lead to hardship to one spouse,⁷ or by the fact that an equalization payment would leave the parties with a different net worth.⁸ Nor is it met by simply demonstrating that an equalization of net family properties would be unfair, harsh, inequitable or unjust. In order to satisfy the test of unconscionability, the circumstances of the case must be such that equalization would be “repugnant to anyone’s sense of justice,”⁹ or that it would “shock the conscience of the court.”¹⁰

24Misconduct on the part of one of the spouses is not necessarily a precondition to the application of section 5(6). While some of the factors set out in section 5(6) involve fault-based conduct, others do not.¹¹ Although unconscionable conduct is an appropriate consideration in carrying out the analysis required under section 5(6), the true target of the section is a result that is unconscionable to one of the parties.¹²

25With respect to section 5(6)(d), it has been held that reasonably undertaking a business investment which does not meet a party’s financial expectations does not necessarily amount to reckless depletion of funds justifying a variation of the equalization payment.¹³

C. Evidentiary Findings Relevant to the Claim for Unequal Division of Net Family Properties

1. What Has Happened with the TD Waterhouse Funds?

Evidentiary Findings Relevant to the Claim for Unequal Division of Net Family Properties

26An understanding of the history of what has occurred with the TD Waterhouse funds is necessary in order to assess the merit of the Applicant’s claim that the Respondent’s dealings with those funds would lead to an unconscionable result if a straight equalization of net family properties were to be ordered.

27As indicated previously, the parties agree that the TD Waterhouse funds had a value of $221,646.14 as of the date of marriage. The Respondent was questioned and testified about his recollection as to what has occurred with these funds since the date of marriage. While he had difficulty recalling details of specific amounts that he used from the funds at various times, he was able to give rough estimates. The Respondent presented as honest and credible in giving his testimony on this question. He acknowledged when he could not recall specifics, or when he was uncertain about an issue. His explanations of what he did with the funds made sense in light of the other evidence that was adduced at trial respecting the parties’ property investments during the course of their marriage. Further, I found that his testimony was not undermined on cross examination.

28The Respondent testified that the history of dealings respecting the TD Waterhouse funds since the date of marriage was as follows:

1. He used $50,000.00 to build a coach house for the home located at 3272 Homestead Drive, Hamilton, Ontario (“the Homestead property”), which the parties purchased in 1997 and which became the parties’ first matrimonial home. The parties operated this home as a bed and breakfast facility for approximately ten years, and sold the home in 2007.

2. He purchased a truck for approximately $27,000.00

3. He used approximately $10,000.00 to buy two motorcycles for the Applicant

4. He used approximately $30,000.00 for renovations on the Lakeside Drive property, which the parties purchased in 2006 and which was put into the Applicant’s name only.

5. He used approximately $25,000.00 for improvements and upkeep on the Woodlawn property, which was the parties’ second matrimonial home.

6. He used some of the funds to pay down the mortgage on the Homestead property from time to time.

7. He purchased new furniture and a television for the family.

8. A portion of the funds were spent on general daily and lifestyle expenses for the parties.

29In addition to these amounts, it is acknowledged by both parties that some of the TD Waterhouse funds remained in the Respondent’s Wickham investment account, which had a value of $81,492.49 as of the valuation date.

30Based on my assessment respecting the Respondent’s credibility, I accept the evidence of the Respondent about what has occurred with the TD Waterhouse funds, and find that the history of the dealings relating to the fund was as described by the Respondent and set out above.

31Based on these findings, I conclude that of the full $221,646.14 of the TD Waterhouse funds owned as of the date of marriage, the Respondent was able to attribute $142,000.00 to the specific items listed in paragraph 28(1) to (5) set out above. In addition, part of the funds remained in his investment account as indicated, and this had a balance of $81,492.49 as of the valuation date. The total of $142,000.00 + $81,492.49 is $223,492.49. This sum does not include the amounts which were incurred from the TD Waterhouse funds as described in paragraph 28(6) to (8) set out above. The total is amount which the Respondent accounted for was actually higher than the value of the funds as of the date of marriage. This higher amount is possibly due to some inaccuracy in the Respondent’s estimates described in paragraph 28 above. The Respondent clearly acknowledged that the amounts referred to in that paragraph were rough estimates. Based on these numbers, I conclude that the depletion of the TD Waterhouse funds since the date of marriage has been completely accounted for.

2. The History of the Parties’ Property Dealings and Evidence Relating to the Proceeds from Property Sales

32An understanding of the history of the parties’ property dealings, and how the proceeds of the properties which they owned were used, is necessary in order to evaluate the Applicant’s claim for an unequal division of net family property on the basis of unconscionability. It is only upon analyzing the overall picture of the parties’ financial dealings that one can gain a true appreciation of whether a straightforward equalization of the parties’ net family properties leads to an unconscionable result, as the Applicant alleges.

33Based on the evidence adduced by both parties, I make the findings set out below respecting the parties’ property dealings and the proceeds from their real estate transactions.

1416 Graham’s Lane, Burlington Ontario

34The Respondent owned a property located at 1416 Graham’s Lane in Burlington, Ontario, (“the Graham’s Lane property”) from where he operated a business. He sold this property for $600,000.00 in 2000. The net proceeds from the sale after he paid off two mortgages were $321,787.56. Based on the uncontroverted evidence of the Respondent, I find that the balance of these funds went to the following:

1. The Respondent placed approximately $200,000.00 into his investment account, which is the account referred to herein as the “TD Waterhouse funds.”

2. With respect to the remaining funds of $121,787.56:

i. He used $25,000.00 to purchase a truck which he used for maintenance purposes on the Homestead property.

ii. He used $10,000.00 to purchase a hobby truck

iii. He paid $1,500.00 for eye surgery for the Applicant.

iv. He placed a modest amount of the proceeds into an RRSP.

v. He used approximately $40,000.00 to $50,000.00 as part of the down-payment for the Homestead property which the parties purchased in 1997.

3272 Homestead Drive, Hamilton, Ontario

35As indicated previously, the parties purchased the Homestead property jointly in 1997. This property became their matrimonial home, and the parties operated a bed and breakfast from the home for ten years. The parties purchased the property for approximately $160,000.00, and the net proceeds from the sale were $370,296.15. Of these proceeds, the sum of approximately $200,000.00 was placed into the parties’ joint investment account. In addition, as set out in the Applicant’s Reply dated May 18, 2010, the proceeds also went towards the following:

1. $60,000.00 was used to pay off her line of credit, which she used to finance the Lakeside Drive property that the parties purchased in 2006.

2. Some of the proceeds were used to pay off her vehicle, and to purchase a car for her daughter.

3. Some of the proceeds were used to pay off the Respondent’s car.

45 King Street West, Hagersville, Ontario

36The Applicant owned a property located at 45 King Street West, Hagersville, Ontario (“the King Street property”) prior to the parties’ marriage. The Respondent carried out renovation work on this property for the Applicant, including building bedrooms and closets for the Applicant and her son. He paid for many of the materials for these renovations from his own funds. The Applicant sold this property in 1996, two years after the parties began cohabiting. Based on the Applicant’s evidence, I find that the net proceeds from this sale were approximately $25,000.00. These proceeds were used to pay part of the down-payment for the Homestead property, which as mentioned above the parties bought in 1997.

16 Tripar Lane, South Bruce Peninsula, Ontario

37The Respondent owned a property located at 16 Tripar Lane, South Bruce Peninsula, Ontario (“the Tripar Lane property”) prior to the parties’ marriage. He sold this property on December 6, 2002, and the net proceeds from the sale were $72,900.00. These proceeds were used for the down-payment on the Woodlawn property, which the parties purchased in 2003. This property became the parties’ matrimonial home after the purchase, and the parties continued to operate the Homestead property as a bed and breakfast until it was sold in 2007.

54 Woodlawn Park Lane, Nanticoke, Ontario

38The Woodlawn property is located in Nanticoke, Ontario. The parties purchased this home jointly for $174,000.00. The purchase was financed in part from the proceeds from the Tripar property, and the balance was financed from a joint mortgage. The Respondent currently resides at the Woodlawn property and wishes to retain the property. Both parties have therefore agreed and requested that both the property and the outstanding mortgage associated with the property of $95,073.00 as of the valuation date be attributed to the Respondent for the purposes of the net family property calculation.

69 Lakeside Drive Nanticoke, Ontario

39The parties purchased the Lakeside Drive property in Nanticoke, Ontario in 2006 for $55,000.00. Their intention was that this would be a cottage property. The property was placed in the Applicant’s sole name for tax reasons. The sum of $60,000.00 was drawn from the Applicant’s line of credit to pay for the property. As indicated in the Applicant’s Reply dated May 18, 2010, and as the Respondent confirmed in his testimony, the line of credit was paid off from the proceeds of the sale of the Homestead property. The Applicant is currently residing at the Lakeside Drive property and wishes to retain this property. The parties have agreed that both this property and a debt of $29,500.00 as of the valuation date related to the property should be attributed to the Applicant for the purposes of the net family property calculation.

3. Evidence Relating to the Respondent’s Investment Background and Investment Portfolio

40Based on the documentary evidence adduced by the Respondent and the Respondent’s testimony at trial, I make the following findings.

41The Respondent began investing when he was nineteen years of age. He has always considered himself to be a conservative investor, and feels that he also became a fairly sophisticated investor over the years. He has always worked with stock brokers in relation to his stock market investments. He testified that he has always followed the advice of his investment advisors, and there is no evidence before me to suggest otherwise.

42As stated previously, the Respondent invested approximately $200,000.00 from the proceeds of the Graham’s Lane property into an investment account. He also invested some of the proceeds into an RRSP account. The Respondent initially used Greenshield for his investment account portfolio, but in 2001 he transferred this portfolio to TD Waterhouse. In 2004, the account was transferred to Wickham. The funds in this account are the funds which have been referred to as the TD Waterhouse funds in these Reasons for Judgment. This account will be referred to as the Respondent’s TD investment account.

43Correspondence from Mr. Michael Bowman, Executive Vice President/Portfolio Manager of Wickham, dated August 15, 2011 confirms that as of 2001, a year after the sale of the Graham’s Lane property and the year when the parties were married, the Respondent’s TD investment account included holdings from eleven companies, namely: Sears, TD Bank, Shell Canada Ltd., Nortel, Canadian Natural Resources, WestJet Airlines, BCE Inc., Royal Bank, Manulife Financial Corporation, TransCanada Pipelines and Laidlaw.

44I find based on the Respondent’s testimony and the evidence of Mr. Michael Bowman, set out in his Affidavit sworn October 17, 2011 that the Respondent has generally maintained a reasonably broad-based investment portfolio since Mr. Bowman became his investment advisor in 2004. I also find based on this evidence that the Respondent has accepted advice from Mr. Bowman, and has maintained a fairly conservative portfolio base aimed at growth.

45The Respondent acknowledged that he made the decisions respecting his investment portfolio, but testified that he discussed investment options with the Applicant. He testified, and I find, that although he made the final decisions on his investments, the Applicant knew the content of his investment portfolio based on their discussions and also because she was his bookkeeper and saw all of his financial records including his TD investment account statements.

46With respect to his Nortel stock, the Respondent acknowledged that he lost money on this investment, but emphasized that he followed the suggestions of his advisors at the time when he purchased the stock. He testified, and I find, that at the time he invested in this stock, it was paying very good dividends and had a yield of approximately 8 or 9%. According to the Respondent, the losses which he suffered from his Nortel stock were attributable to Nortel’s fraudulent managers, and thousands of investors lost as a result of this misconduct.

47The statements from the Respondent’s TD Waterhouse investment account for the months of March, July and September 2001 were submitted as evidence at trial. These statements show that in March 2001, Nortel stock represented 11.39% of the Respondent’s portfolio, in July 2001 it represented 7.62 % of his portfolio and by the end of September 2001, it represented 66.05% of his portfolio. No other statements from this account were entered as evidence, and therefore I have no evidence as to the percentage of his portfolio which Nortel stock represented over time from September 30, 2001 until the valuation date of August 1, 2008. Furthermore, I have no evidence about the performance of this stock over the period that the Respondent held them, or the overall performance and rate of return of the Respondent’s total investment portfolio from the date of marriage until the valuation date.

D. Analysis of Claim for Unequal Division Based on Respondent’s Expenditure of TD Waterhouse Funds on Joint Needs, Joint Investments and Gifts During Marriage

Analysis of Claim for Unequal Division Based on Respondent’s Expenditure of TD Waterhouse Funds on Joint Needs, Joint Investments and Gifts During Marriage

48I conclude that the Applicant’s argument based on sections 5(6)(c) and (h) of the Family Law Act for an unequal division of net family properties based on the Respondent’s expenditure of the TD Waterhouse funds on joint needs, joint property investments, a joint business enterprise and gifts during the marriage cannot succeed.

49In my view, in order for this argument to have any chance of success, the Applicant would have had to prove the following:

1. That the Respondent’s decision to expend the TD Waterhouse funds on joint needs, joint investments and gifts to the family has led to a situation where a straight equalization of the parties’ net family properties would result in a worse equalization outcome for the Applicant than would have would have been the case had the Respondent not used the funds in this manner; and /or

2. That carrying out a straight equalization of net family properties would result in allowing the Respondent to completely, or at least to a large extent, “take back” everything that he gave to the Applicant and her family from the TD Waterhouse funds, and that this would create an unconscionable result for the Applicant.

50The Applicant has not proven either of the above on a balance of probabilities. With respect to #1, she has not led any evidence to demonstrate the overall impact on her of the Respondent having expended the TD Waterhouse funds on gifts and joint expenditures and assets, as opposed to what her situation would have been for the purposes of the net family property calculation if he had not done so. It is highly doubtful that she would be able to produce any compelling evidence on this point, given the extent to which the parties co-mingled their assets and co-ordinated their investment efforts, and how they divided the proceeds of their investments. From early on in their relationship, the parties cooperated with respect to their individually held assets, including the TD Waterhouse funds, pooled the proceeds of those assets, applied those proceeds to other jointly held assets, and divided proceeds from the sale of the jointly held Homestead property. Trying to ascertain how the Applicant would have fared in the net family property analysis had the Respondent not applied the TD Waterhouse funds for her benefit would be an exercise in speculation about what the parties would otherwise have done with their assets, and what kind of return they could have made on other types of investments. Assuming that it is possible to answer this question, I would clearly require the assistance of a financial and investment expert to resolve the issue.

51The evidence that I do have suggests that the Applicant would have an extremely difficult time proving that the Respondent’s generosity with respect to the TD Waterhouse funds has impacted her negatively in terms of the equalization analysis. This evidence indicates that the Respondent’s use of the TD Waterhouse funds for joint expenses, joint assets and gifts to the Respondent has in fact benefitted her significantly in terms of her overall financial worth and in other ways. Even if a straight equalization of net family properties occurs, her financial situation will be much improved from what it was at the time of the parties’ marriage. While this is not determinative of the issue to be decided, it is one factor for the court to consider.

52The following are examples of how the Applicant’s situation has been improved as a result of the TD Waterhouse funds being applied for her benefit:

1. The Respondent’s uncontroverted evidence is that the $50,000.00 which he put towards the building of the coach house at the Homestead property increased the value of the Homestead property. A significant portion of the proceeds from the sale of that property were eventually placed in the parties’ joint investment account, and a portion of those proceeds were also directed to the Applicant’s own investment portfolio.

2. Part of the TD Waterhouse funds was used to pay down the Homestead property mortgage, which increased the net gain to both the Respondent and the Applicant when the property was sold in 2007.

3. The funds were used to purchase two motorcycles, worth a total of approximately $10,000.00, for the Applicant.

4. A portion of the proceeds from the sale of the Homestead property was also used to discharge the line of credit that was used to purchase the Nanticoke property, which is to remain in the Applicant’s name. Some of the benefit derived from the TD Waterhouse funds in regard to the Homestead property can therefore be traced to the Nanticoke property.

5. The proceeds from the sale of the Homestead property were also used to pay off the Applicant’s vehicle. The benefit of the TD Waterhouse funds in relation to the Homestead property can therefore also be traced to this asset.

6. In addition, approximately $30,000.00 of the TD Waterhouse funds were used for improvements on the Nanticoke property, again directly benefitting the Applicant in terms of the value of that property.

7. A portion of the TD Waterhouse funds was used to cover the parties’ daily and lifestyle expenses.

8. Approximately $25,000.00 of the TD Waterhouse funds was used for improvements to the Woodlawn property, which was the parties’ matrimonial home from 2003 until the parties separated. The Applicant enjoyed the benefit of those improvements during that period of time.

53The Net Family Property Statement filed on consent as Exhibit 8 in this trial, which sets out most of the values agreed upon between the parties, indicates that the Applicant had no property at the date of marriage. By contrast, using the valuation of the Lakeside property of $56,000.00 which I have accepted, the Applicant’s net worth as of the valuation date, only seven years later, was $199,136.64. A straight equalization of net family properties would result in her being obliged to make an equalization payment to the Respondent of $92,338.55. Even if she has to make this payment, her net worth as of the valuation date after deducting that payment would have been $106,798.09. Upon considering this information along with the specifics of how the TD Waterhouse funds have contributed to the improvement in the Applicant’s financial status, I am not satisfied that allowing the Respondent a full date of marriage deduction for the TD Waterhouse funds according to a straight equalization of the parties’ net family properties would be unconscionable. It is true that the Respondent will have a higher net worth than the Applicant after an equalization is carried out. However, the goal of the net family property scheme set out in the Family Law Act is not to ensure that the parties are in the same financial situation upon separation; it is to equalize the increase in the asset value of the parties during the marriage.¹⁴

54With respect to the issue raised in paragraph 49 (2) above, I do not accept the Applicant’s argument that allowing the Respondent to claim a date of marriage deduction for the full value of the TD Waterhouse funds would be tantamount to allowing him to “take back” all the benefit that he conferred on the Applicant through his dealings with the funds. The Applicant has clearly derived significant benefits from those funds over the years, in the ways described above. These benefits would not be reversed by allowing the Respondent to deduct the full amount of the date of marriage deduction for the funds.

55Even if the Applicant had proven that allowing the Respondent a full date of marriage deduction for the TD Waterhouse funds had the effect of either partially or even completely “taking back” the benefit which he gave to the Applicant, that analysis would not end there; I would still have to decide that this result would be unconscionable. Upon reviewing the entirety of the parties’ financial dealings, I conclude that the result would not be unconscionable. This conclusion is based on the extent to which the Respondent’s contributions other than through the use of the TD Waterhouse funds have also benefitted the Applicant. These additional contributions include the following:

1. He invested between $40,000.00 and $50,000.00 from the proceeds of sale of a pre-marriage asset, the Graham’s Lane property, to finance the Homestead property which was jointly owned and which eventually yielded the parties a significant profit as well as income as a bed and breakfast.

2. The Respondent put a significant amount of what he referred to as “sweat equity” into the various properties which the parties owned as a result of his renovation work and coordination and supervision of other trades people who worked on the properties.

3. The Respondent used his own funds to purchase materials for improvements to the Applicant’s King Street West property.

4. The Respondent used the proceeds of $72,900.00 from his Tripar Lane property for the general support of the family, and for the down-payment on the Woodlawn property, which became the parties’ matrimonial home.

56The Applicant also contributed to the parties’ financial success over the course of their relationship, and my analysis of the Respondent’s contributions to this success should not be taken as minimizing her role. However, my job is not to precisely weigh the parties’ respective contributions to their financial success as a couple over the many years of their relationship. The issue to be determined is whether the Applicant has met the high onus of demonstrating that an equalization of net family properties would be unconscionable. The reality is that the Respondent brought a greater asset base into the marriage than the Applicant did. The picture of the Respondent which emerges from the evidence is that of a man who viewed marriage as both an emotional and financial partnership, and who leveraged his pre-marriage assets for the benefit of both parties throughout their relationship, with very positive results for both of them. I find that he was extremely generous in sharing his assets with the Applicant, and that he was genuinely interested in advancing the position of both parties. This type of generosity and commitment to marriage as a true economic partnership should be supported by the court rather than discouraged by reducing the amount of date of marriage deductions as has been requested in this case.

E. Analysis of Claim for Unequal Division Based on Respondent’s Alleged Failure to Diversify His Investment Portfolio

Analysis of Claim for Unequal Division Based on Respondent’s Alleged Failure to Diversify His Investment Portfolio

57As noted previously, the Applicant’s case for an unequal division of net family properties based on the Respondent’s alleged loss of a large proportion of the TD Waterhouse funds from gambling on Nortel stock is premised on a finding that the Respondent’s accounting of those funds is not accepted by the court. To reiterate, counsel for the Applicant suggested that if I do not accept the Respondent’s accounting of how the funds were reduced from $221,646.14 from the date of marriage to the $81,492.49 that now remains in his investment account, I should conclude that the money was lost as a result of excessive investment in Nortel stock

58I have accepted the Respondent’s accounting of where the TD Waterhouse funds went from the date of marriage until the valuation date, and this is sufficient to dispose of the Applicant’s alternative argument based the Respondent’s investment activities in regard to the funds. However, even if I had rejected all or part of the Respondent’s accounting of the TD Waterhouse funds, I would not have granted an unequal division of net family properties on this alternative argument advanced by the Applicant for the reasons set out below.

59With respect to the argument based on section 5(6)(d) of the Family Law Act, the evidence would not have been sufficient for me to conclude on a balance of probabilities, or to even infer, that the TD Waterhouse funds were lost as a result of reckless investment in Nortel stock. As indicated previously, there was no evidence relating to the percentage of the Respondent’s portfolio which Nortel investments represented past September 30, 2001. Although the Respondent acknowledges that he, like thousands of other investors, lost money on Nortel stock, I have absolutely no evidence about how much he lost. Furthermore, there was no evidence before me regarding the overall performance of and rate of return on the Respondent’s overall portfolio after September 30, 2001. Even if it is assumed that the Respondent lost money on Nortel stock, I conclude that a consideration of any such losses in isolation would not have necessarily been sufficient to establish that the Respondent’s investments were inappropriate. In order to properly assess the Respondent’s decisions respecting Nortel stock, it would be necessary to consider the amount of any losses which he incurred on the stock in conjunction with the overall performance of his investment portfolio during the relevant period. Investment in the stock market inevitably involves risk, and part of the goal is to balance the risk. I have no evidence before me as to whether the Respondent appropriately balanced any risk involved in investing in Nortel stock through more stable or predictable investments in other companies over the period from September 30, 2001 until August 1, 2008.

60Dealing still with the Applicant’s argument founded on section 5(6)(d) of the Family Law Act, I find based on the evidence of the Respondent and Mr. Michael Bowman that the Respondent took the advice of his investment advisors, and that he has maintained a fairly broad-based and conservative portfolio since 2004. I accept the Respondent’s testimony that the losses from Nortel stock were unexpected not only on his part, but also on the part of thousands of others who invested in the company. These findings all lead me to conclude that the Respondent was not reckless with respect to the handling of his investments generally, or in regard to his purchase and sale of Nortel stock.

61With respect to the Applicant’s argument based on section 5(6)(h), the element of “recklessness” is not required to make out a claim under that section. However, the Applicant must still pursuant to this section establish an evidentiary foundation upon which the court could conclude that the Respondent’s handling of his TD Waterhouse funds led to results that would create unconscionability to the Applicant if a straight equalization of the parties’ net family properties were to be carried out. The evidentiary deficiencies described above preclude such a finding. The onus of proving that an unequal division of net family property should be ordered is on the Applicant, not on the Respondent. She has failed to meet this onus.

IV. NET FAMILY PROPERTY CALCULATIONS AND RULING ON PROPERTY ISSUES

IV. NET FAMILY PROPERTY CALCULATIONS AND RULING ON PROPERTY ISSUES

62Counsel advised me that all household goods and furniture have been divided between the parties, and that these items therefore did not have to be addressed in the net family property calculation. Based on my rulings and the figures which the parties have agreed upon as set out in the Net Family Property Statement marked as Exhibit 8 in this trial, the equalization calculation is as follows:

Applicant Respondent

Assets on Valuation Date

Woodlawn property (Respondent wishes to keep it) $231,000.00

Lakeside Drive property (Applicant wishes to keep it) $56,000.00

Truck $29,000.00

Joint TD/Wickham Investment Counsel Inc. investment account (50% each) $ 90,354.64 $ 90,354.64

TD RSP $ 23,103.00

RRSP $ 24,779.00

Personal investment- RRIF $ 27,841.23

Sole Wickham investment account $ 81,492.49

Cash Surrender Value of Manulife Life Insurance Policy $ 5,400.00

Totals: $228,636.64 $430,688.36

Debts and Liabilities On Valuation Date

Mortgage on Woodlawn Property $ 95,073.00

Business Line of Credit $29,500.00

Totals: $29,500.00 $ 95,073.00

Property on Date of Marriage

Tripar Lane property $ 72,900.00

RRSP $ 26,609.67

TD Waterhouse Investment Account $221,646.14

Totals: $0 $321,155.81

Debts and Liabilities on Date of Marriage $0 $0

Value of Property Excluded under s. 4(2) of the Family Law Act $0 $0

NET FAMILY PROPERTY $199,136.64 $ 14,459.55

EQUALIZATION PAYMENT:

$199,136.64-$14,459.55=$184,677.09÷2= $92,338.55

63An order will therefore issue directing the Applicant to pay to the Respondent the sum of $92,338.55 on account of the equalization payment. An order was made by Glithero, J. on September 23, 2010 providing that the Applicant shall receive a credit of $5,000.00 towards any equalization payment. No evidence was led as to whether the Respondent has paid this amount, but I have addressed this issue in the terms of the order to issue set out in Part VI below.

V. SPOUSAL SUPPORT CLAIM

A. Positions of the Parties

V. SPOUSAL SUPPORT CLAIM

64The Respondent has advanced a claim for spousal support from the Applicant in the mid range under the Spousal Support Advisory Guidelines, retroactive from the date of separation. Counsel for the Respondent acknowledged that this claim is based on need, and not on compensatory grounds. She argued that the Respondent is now 74 years of age, is no longer able to work full time, and has been supporting himself from his monthly Old Age Pension and Canada Pension benefits and by collapsing the capital in his R.R.I.F. She further submitted that the Applicant is healthy, able to work and is currently earning $2,200.00 per month, and that she is therefore able to contribute to the Respondent’s support.

65The Applicant does not agree to an order requiring her to pay spousal support. She argued that the Respondent has not established an entitlement to support on the basis of need, and that even if entitlement were to be established, she does not have the financial means to support the Respondent. With respect to entitlement, she noted that the Respondent has always been able to support himself gainfully through self employment initiatives, but that he deliberately chose to retire soon after the parties’ separation. She submitted that the Respondent made this choice out of “litigation convenience,” that he has not made any efforts to supplement his income despite having the capacity to do so, and that he should be imputed an income of at least the same amount as the Applicant’s income.

B. The Law

1. The Legislative Framework

The Law

66The legislative framework that applies to the spousal support claim in this case is set out in section 15.2 of the Divorce Act. Sections 15.2(1) and (2) set out the court’s jurisdiction to make either an interim or final order requiring a spouse to pay such spousal support as the court considers reasonable. Section 15.2(4) of the Act directs the court hearing a spousal support claim to take into consideration “the condition, means needs and other circumstances of each spouse,” including:

i. The length of time the spouses cohabited;

ii. The functions performed by each spouse during cohabitation; and

iii. Any order, agreement or arrangements relating to support of either spouse.

67Section 15.2(6) of the Divorce Act sets out the objectives of a spousal support order as follows:

15.2(6) Objectives of Spousal support Order - An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should:

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

(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

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

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

68Section 15.2(5) establishes the principle that misconduct of a spouse in relation to the marriage is not a relevant consideration in a spousal support proceeding under the Divorce Act.

2. Statutory Objectives and Factors

69In determining the issue of spousal support, the court is required by section 15.2(4) to consider the “condition, means, needs and other circumstances of each spouse.” The condition of a spouse includes such factors as their age, health, needs, obligations, dependants and their station in life.¹⁵ A spouse’s “means” encompasses all financial resources, capital assets, income from employment and any other source from which the spouse derives gains or benefits.¹⁶

70The Supreme Court of Canada has held that all of the statutory objectives set out in section 15.2(6) of the Divorce Act must be considered, since no single objective is paramount.¹⁷ However, trial judges have a significant amount of discretion to determine the weight that should be placed on each objective, based on the particular circumstances of the parties.¹⁸

3. Entitlement- General Principles

71The statutory factors and objectives referred to above inform the issues of entitlement, quantum and duration of spousal support. As McLachlin, J. stated in Bracklow v. Bracklow, “the same factors that go to entitlement have an impact on quantum. In terms of the underlying theories, there is no strong distinction. The real issue is what support, if any, should be awarded in the situation before the judge on the factors set out in the statutes. The issue of entitlement is the preliminary issue to determine in any spousal support claim.” ¹⁹

72The Supreme Court of Canada articulated the fundamental principles respecting entitlement in the cases of Moge v. Moge²⁰ and Bracklow v. Bracklow.²¹ There are three conceptual bases for entitlement to spousal support. First, a spousal support obligation may arise on a compensatory basis, in recognition that upon marriage breakdown, there should be an equitable distribution between the parties of the economic consequences of the marriage. ²² Entitlement can also arise in appropriate circumstances on a contractual or consensual basis, as a result of express or implied agreements between spouses that purport to either create or negate a spousal support obligation.²³ Finally, entitlement may exist on a non-compensatory basis, as a result of the needs of a spouse. This ground for spousal support establishes that a spouse may be obliged to pay support based on the other spouse’s economic need, even if that need does not arise as a result of the roles adopted during the marriage. This basis for spousal support is founded on the view that “marriage is a relationship involving mutual obligations and interdependencies that may be difficult to unravel when the marriage breaks down.”²⁴

73While the Supreme Court of Canada delineated several fundamental principles and guidelines respecting the issue of spousal support in Moge v. Moge and Bracklow v. Bracklow, it also emphasized in Bracklow that the determination of spousal support claims ultimately remains a highly discretionary and individualized undertaking by the trial judge, who must take into consideration the various factors and objectives set out in the Divorce Act and the particular circumstances of each case.

4. Quantum and Duration

74The issues of quantum and duration of spousal support must be determined taking into consideration the factors and objectives set out in section 15.2 of the Divorce Act. However, the advent of the Spousal Support Advisory Guidelines has provided considerable assistance in addressing these issues. In Fisher v. Fisher,²⁵ the Ontario Court of Appeal held that although the Spousal Support Advisory Guidelines are not legislated or binding, they are a useful tool, provided that “the reasonableness of an award produced by the Guidelines must be balanced in light of the circumstances of the individual case, including the particular financial history of the parties during the marriage and their likely future circumstances.”²⁶ The court further held that “when considered in their entirety and subject to their limitations, the Guidelines also assist in informing an appellate standard of review.”²⁷ While the Guidelines are not binding, they provide a valuable litmus test for assessing the range within which spousal support should be ordered based on traditional principles, and the duration of spousal support.

5. Income

75The financial means of a spousal support claimant and payor spouse are critical factors in determining the issues of entitlement, quantum and duration of spousal support. The income of the parties is one of many factors that are relevant to their financial means.

76For the purposes of the Spousal Support Advisory Guidelines, the starting point for determining the income of the parties is the definition of income under the Federal Child Support Guidelines.²⁸ Section 16 of the Federal Child Support Guidelines provides that the determination of annual income starts with the sources of income set out under the heading “total income” in the T1 General form issued by the Canada Revenue Agency. The total of these sources of income is then adjusted in accordance with Schedule III under the Federal Child Support Guidelines.

77Section 16 of the Federal Child Support Guidelines does not mandate using the previous year’s total income as set out in the T1 General form for the previous year as a basis for determining ongoing support; rather, the goal is to ascertain current income based on the sources set out in the T1 form, and to base the support award on that income. ²⁹

78The determination of income for the purposes of applying the Spousal Support Advisory Guidelines differs than for child support cases, in that social assistance is not treated as income for the purposes of the Spousal Support Advisory Guidelines, and the Child Tax Benefit and other government child benefits are included in income under the “with child” formula.³⁰

79Where a party’s prior year’s income is not predictive of what they are likely to earn in the upcoming year, the court should determine the party’s anticipated income for the upcoming twelve months from when support will be paid.³¹

80In both spousal support and child support cases, the courts have imputed income to parties in circumstances where it is determined that they are not reasonably using their resources, or have not reasonably explained why they have no income or are underemployed. The principles that apply in determining whether to impute income are the same in both child support and spousal support cases.³²

81The relevant factors in this case for determining whether to impute income include the following:

1. The onus is on the party seeking to impute income to establish an evidentiary basis upon which to establish that the other party is intentionally unemployed or underemployed.³³

2. It is not necessary to establish bad faith or an attempt to thwart support obligations before imputing income. A payor is intentionally underemployed if they earn less than they are capable of earning having regard for all of the circumstances. In determining whether to impute income on this basis, the court must consider what is reasonable in the circumstances. The factors that the court should consider include the age, education, experience, skills and health of the party, the party’s past earning history and the amount of income that the party could reasonably earn if they worked to capacity.³⁴

3. There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their dependants. ³⁵

4. The court will not excuse a party from their support obligations or reduce these obligations where the party has persisted in un-remunerative employment, or where they have pursued unrealistic or unproductive career aspirations. A self-induced reduction of income is not a basis upon which to avoid or reduce support payments.³⁶

5. If a party chooses to pursue self employment, the court will examine whether this choice was a reasonable one in all of the circumstances, and may impute an income if it determines that the decision was not appropriate having regard for the party’s support obligations.³⁷

6. Where a party fails to provide full financial disclosure relating to their income, the court is entitled to draw an adverse inference and to impute income to them.³⁸

7. The amount of income that the court imputes to a party is a matter of discretion. The only limitation on the discretion of the court in this regard is that there must be some basis in the evidence for the amount that the court has chosen to impute.³⁹

C. Evidentiary Findings Relating to Spousal Support Claim

1. The Respondent’s Income History and His Condition, Means, Needs and Circumstances Since Separation

Evidentiary Findings Relating to Spousal Support Claim

82Based on the testimony of the Respondent and his Financial Statements sworn April 27, 2010 and October 14, 2011, I make findings respecting his income history and his financial situation since the parties’ separation as set out below.

83The Respondent was born on May 11, 1937, and is therefore 74 years of age. He was 71 years old when the parties separated. He has been an active investor since he was approximately nineteen years of age, both in the stock market and in real estate. For the past 40 to 45 years, his income has derived largely from various self employment initiatives and from capital gains from his real estate investments. This is the first time in his adult life that he can recall when he has owned only one property. Overall, he has done quite well with his property investments. He owned and operated four companies over the past four decades, namely: Sinclair Smith Printing and Lithographic Company Ltd., that company’s sales division and subsidiary company Sinclair Smith Press, a real estate investment and rental company G and M Investments, and Lawnamat, which was a lawn maintenance business.

84The Respondent decided to wind down Sinclair Smith Printing and Lithographic Company Ltd. after he sold the Graham’s Lane property in 2000. He made this decision as a result of declining business caused in large part by the computer industry. The Sinclair Smith Press brokerage company continued, but the business was not very profitable due to various market forces.

85As indicated previously, the parties purchased the Homestead property in 1997, and operated it as a bed and breakfast operation for ten years before selling it in 2007. According to the Respondent, the bed and breakfast did not make large amounts of money, but provided the parties with “a place to live for free” to use his words. The real advantage of investing in this property was in the capital gains which the parties realized upon the sale of the property. The net proceeds of sale were $370,296.15. The parties initially had the bed and breakfast property listed for sale with real estate agents, without success in selling it. The property eventually sold largely due to the marketing efforts of the Respondent.

86The Respondent’s current sources of income are Canada Pension Plan (“CPP”) and Old Age Security (“OAS”) benefits, and he also draws from RRIF. He also receives investment income from his investment portfolio. A review of his Financial Statement sworn October 14, 2011 indicates that his monthly deficit is $2,481.71. However, it is important to note that this Financial Statement does not include any income from the Respondent’s investments.

87The evidence relating to the Respondent’s income history is as follows:

a. 2006: His total 2006 income as reported on his 2006 Income Tax Return was $31,635.37, consisting of CPP and OAS benefits, investment and trust income and self employment income.

b. 2007: His total 2007 income as reported on his 2007 Income Tax Return was $37,970.39, consisting of trust income, investment income, capital gains on the Homestead property, and self employment income.

c. 2008: His total 2008 income as reported on his 2008 Income Tax Return was $22,334.64, consisting of CPP and OAS income, interest and other investment income and trust income.

d. 2009: His total 2009 income as reported on his 2009 Income Tax Return was $20,919.25, consisting of CPP and OAS income, income drawn from his RRIF, investment income and trust income.

e. 2010: In his Financial Statement sworn April 27, 2010, the Respondent swore that his annual income for 2010 was $14,090.40, consisting of Canada Pension Plan and Old Age Security benefits. However, in his 2010 Income Tax Return, he indicates that his total income for that year was $22,982.56, consisting of CPP and OAS benefits, dividends, interest and other investment income.

f. The Respondent testified that he did not expect any significant change in his final 2011 income as compared to his 2010 income.

88The Respondent has not taken steps to augment his income since the parties’ separation. His explanation for this is that he is 74 years old, he has been self employed for 45 years, and does not feel that he would be able to find a job due to his age and the shortage of jobs at the present time. He has not re-opened his brokerage business because he does not feel that there would be a sufficient clientele to sustain the business.

89The Respondent is healthy and remains active. He volunteers in the community three times per week, driving cancer patients.

2. The Applicant’s Income History and Her Condition, Means, Needs and Circumstances Since Separation

90I make the findings set out below based on the evidence adduced by the Applicant and the Respondent’s testimony at trial.

91The Applicant began to work for the Respondent in his business endeavours soon after they met, and continued to work for the Respondent throughout the parties’ marriage. She initially had a desk job, doing inside sales, but took over as the Respondent’s bookkeeper within six months after she began working for him. As previously discussed in these Reasons for Judgment, she shared in the benefits of the parties’ joint investments during the marriage. In addition, she operated the couple’s bed and breakfast enterprise, Homestead House, and derived an income from that business.

92The evidence relating to the Applicant’s income history is as follows:

a. 2005: Her total income in 2005 as reported in her Income Tax Return Information Regular for that year was $28,807.00. Of that amount, $7,200.00 was on account of spousal support from her former spouse, which she is no longer receiving.

b. 2006: Her total income in 2006 as reported in her Income Tax Return Information Regular for that year was $25,551. Of that amount, $5,040.00 was on account of spousal support from her former spouse.

c. 2007: Her total income in 2007 as reported in her Income Tax Return Information Regular for that year was $16,482.00. Most of this income was on account of the taxable capital gains in the amount of $14,117.00.

d. 2008: In 2008, the year after the parties sold the Homestead property from which they operated the bed and breakfast operation, the Applicant’s income was only $1,332.67, consisting mostly of a small income from a coffee house business.

e. 2010: In her Financial Statement sworn March 24, 2010, the Applicant indicated that her annual income from employment is $27,540.00.

93No evidence was adduced respecting the Applicant’s 2011 income, but counsel for the Applicant submitted that the Applicant’s income situation has not changed. The Respondent did not insist that the Applicant attend for cross examination on this issue at trial. The Applicant has been working in the kitchen at Godfather’s Pizza to support herself. Her March 24, 2010 Financial Statement indicates that she is running a monthly deficit of $1,282.60. Most of her expenses appear to be reasonable, with the exception of a monthly car insurance expense of $500.00 and a monthly expense of $500.00 on account of children’s school fees, books, tuition etc. There are no children of the relationship. However, even if these items are removed altogether from the Applicant’s list of expenses, the Applicant appears to be in a monthly deficit situation of at least approximately $282.00 per month.

D. Analysis and Ruling on Spousal Support Claim

Analysis and Ruling on Spousal Support Claim

94Upon carefully reviewing and considering the condition, means, needs and general circumstances of both parties, I conclude that the Respondent has not established an entitlement to spousal support.

95As indicated previously, the Respondent has based his spousal support entitlement on his need for financial assistance from the Applicant. His claim that he is in need of spousal support must be evaluated in conjunction with the ability of the Applicant to meet his alleged need in addition to her own reasonable needs.

96I find that the parties did not have an extravagant lifestyle during the course of their relationship. Neither of them has had a significant income since the separation. Based on my findings respecting the approximate current incomes of both parties, it is apparent that the Applicant’s recent annual income is only approximately $4,500.00 per year higher than the Respondent’s. Her sources of income since she met the Respondent in the early 1990’s have been from the Respondent’s businesses or as a result of the parties’ joint undertakings, which were successful in large part because of the Respondent’s business and investment experience and expertise. She no longer has the benefit of the Respondent’s experience in these matters to assist her in supporting herself. With respect to the year that the parties separated, 2008, her income was minimal and much lower than the Respondent’s. However, she has made efforts since that time to become self sufficient, with the result that her income has actually increased. Despite the progress which the Applicant has made in her efforts to become financially independent, she continues to struggle to meet her own basic needs on her minimal income of approximately $28,000.00 per year. There is no evidence to support a finding that her income level is likely to improve significantly in the future. After paying the equalization payment that she owes to the Respondent, her net worth will be in the area of $102,000.00. She does not have a pension plan through employment, and will have to draw upon her asset base to support herself when she is no longer able to work.

97While the Respondent’s annual income since the separation has ranged between approximately $21,000.00 to $23,000.00 per year, I am not satisfied that he has been maximizing his income earning potential. Unlike the Applicant, he has not made any efforts since the separation to increase his income, even marginally. Although he is 74 years of age, he is healthy and active in the community. While he may have difficulty obtaining employment from a third party due to his age, he was quite upfront about the fact that he has not even tried to do so. He acknowledged that he could probably get a job as a greeter at Walmart, but stated that this type of job “does not appeal to him.”

98Furthermore, the Respondent has a significant asset base, and he has a well established history of using his investments and properties for business endeavours that have provided a reasonable source of support or rate of return for him. There is no evidence since the time of separation that he has leveraged this asset base to maximize his earning potential. The Respondent is an extremely resourceful and enterprising individual, and the combination of these characteristics and his solid asset base lead me to conclude that he should have reasonably been able to supplement his income to bring it up to at least the same level as the Applicant’s since the time of the separation. It is understandable that the Respondent wishes to retire after many years of hard work. However, when a party advances a spousal support claim, the issue is not whether or not they wish to work any longer; it is whether they have the capacity to do so or to augment their existing income. For all of these reasons, I impute an income of $28,000.00 to the Respondent since 2008.

99A consideration of the conditions, means, needs and circumstances of the parties also requires an analysis and comparison of both parties’ net worth. As previously indicated, the Applicant will have a net worth of only approximately $102,000.00 after making the equalization payment. She has no pension from employment, and will in all likelihood have to draw significantly from this asset base when she is no longer able to work. By contrast, the Respondent’s net worth after receipt of the equalization payment will be approximately $433,000.00.

100Based on all of the following considerations, I conclude that the Respondent has not established an entitlement to spousal support from the Applicant.

VI. TERMS OF ORDER TO ISSUE

VI. TERMS OF ORDER TO ISSUE

101Based on the foregoing, a final order shall issue upon the following terms and conditions:

1. A divorce order shall issue in the usual form.

2. Subject to paragraph 2 herein, the Applicant shall make a payment to the Respondent in the amount of $92,338.55 by certified cheque, to be delivered by March 14, 2012 at the latest to the offices of Cynthia Campling, Barrister and Solicitor, Suite 1505, 105 Main Street East, Hamilton, Ontario, in default of which post-judgment interest pursuant to the Courts of Justice Act shall accrue on any amounts remaining unpaid, from the date of this order. This payment is an equalization payment in satisfaction of all claims under Part I of the Family Law Act.

3. In the event that the Respondent has paid the Applicant the sum of $5,000.00 as an advance on an equalization payment, as ordered on September 23, 2010, the payment referred to in paragraph 2 herein shall be $97,338.55 rather than $92,338.55.

4. The Applicant and the Respondent shall retain the items of personal property now in their possession, free from any claim made by the other.

5. The Applicant shall forthwith take all steps required to transfer her interest in the property located at 54 Woodlawn Park Lane, Nanticoke, Ontario to the Respondent. The Respondent shall be responsible for all costs associated with carrying out this transfer. Both parties shall execute all documentation required to effect the transfer in a timely manner.

6. The Respondent shall forthwith take all steps required to obtain a release of the Applicant’s mortgage obligations from McMaster Savings and Credit Union Ltd. (“McMaster”) in connection with the mortgage on the property located at 54 Woodlawn Park Lane, Nanticoke Ontario. If he cannot obtain the Applicant’s release, he indemnifies the Applicant for all claims which McMaster may make against the Applicant on the mortgage. The Respondent will be responsible for all penalties, interest and costs resulting from this mortgage.

7. The Respondent shall forthwith execute and deliver to the Applicant a release of interest in the property located at 69 Lakeside Drive Nanticoke, Ontario.

8. If she has not already done so, the Applicant shall assume full liability for the line of credit with the CIBC, and shall forthwith take all necessary steps to arrange for the Respondent’s release from this debt. If she cannot obtain the Respondent’s release, she indemnifies the Respondent for all claims which CIBC may make against the Respondent on the line of credit. The Applicant will be responsible for all penalties, interest and costs resulting from this line of credit.

9. Both parties shall keep, hold and maintain their interests in all bank accounts, savings and securities as referred to in Part 7 of the Net Family Property Statement entered and marked as Exhibit 8 at trial.

10. The Respondent’s claim for spousal support is dismissed.

11. If the parties require clarification or directions respecting any terms of this order, or minor consent adjustments to the order arising out of calculation issues or desired changes to the mechanics of carrying out the order, they may contact the Trial Coordinator’s office and arrange a date before me to speak to the matter.

12. If either party wishes to pursue a claim for costs in connection with this matter, they shall serve and file written submissions, relevant case-law and a detailed Bill of Costs by March 21, 2012. Reply submissions shall be served and filed by March 30, 2012.

Released: February 22, 2012 The Honourable Madam Justice Chappel

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Diane Smith

Applicant

– and –

George Sinclair Smith

Respondent

REASONS FOR JUDGMENT

Chappel, J.

Released: February 22, 2012

Footnotes

1. 1Family Law Act, R.S.O. 1990, c. F-3, as amended.
2. 2Serra v. Serra, 2009 CarswellOnt 51 (Ont. C.A.); see also Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70 (S.C.C.).
3. 3Serra v. Serra, Ibid.; Levan v. Levan, 2008 ONCA 388, 2008 CarswellOnt 2738 (Ont. C.A.).
4. 4Serra v. Serra, Ibid.
5. 5Roseneck v. Gowling, 2002 CanLII 45128 (ON CA), 2002 CarswellOnt 4396 (Ont. C.A.); additional reasons at 2003 CarswellOnt 159 (Ont. C.A.); further additional reasons at 2003 Carswell Ont 649 (Ont. C.A.).
6. 6Serra v. Serra. Supra.
7. 7Arndt v. Arndt, 1991 Carswell Ont 354 (Ont. Gen. Div.); affirmed 1993 CarswellOnt 351 (Ont. C.A.).
8. 8L.(J.W.) v. M. (C.B.), 2008 CarswellNS 358 (N.S.S.C.); additional reasons at 2008 CarswellNS 496 (N.S.S.C.); additional reasons at 2008 CarswellNS 727 (N.S.S.C.).
9. 9Levan v. Levan, Supra., at para. 258.
10. 10Merklinger v. Merklinger, 1992 CanLII 7539 (ON SC), 1992 CarswellOnt 304 (Ont. Gen. Div.); affirmed 1996 CarswellOnt 4494 (Ont. C.A.); Serra v. Serra, Supra.; Valenti v. Valenti, 1996 Carswell Ont 514 (Ont. Gen. Div.); affirmed 1998 CarswellOnt 2275 (Ont. C.A.).
11. 11Kean v. Clausi, [2010] O.J. No. 2941 (Ont. S.C.J.).
12. 12Serra v. Serra, Supra., at para. 58; Dillon v. Dillon, 2010 ONSC 5848 (Ont. S.C.J.).
13. 13Fraser v. Fraser, 2004 CarswellOnt 3343 (Ont. S.C.J.); Meade v. Meade, 2002 CanLII 2806 (ON SC), 2002 CarswellOnt 2670 (Ont. S.C.J.).
14. 14Best v. Best, 1999 CanLII 700 (SCC), [1999] S.C.J. No. 40 (S.C.C.).
15. 15Metz v. Metz, 2004 ABQB 528, [2004] A.J. No. 925 (Alta. Q.B.); supplementary reasons, [2004] A.J. No. 1558 (Alta. Q.B.); Bennett v. Bennett, 2005 ABQB 984, [2005] A.J. No. 1824 (Alta. Q.B.); Bockhold v. Bockhold, 2010 BCSC 214, [2010] B.C.J. No. 283 (B.C.S.C.).
16. 16Strang v. Strang, 1992 CanLII 55 (SCC), [1992] S.C.J. No. 55 (S.C.C.); Leskun v. Leskun, 2006 SCC 25, [2006] S.C.J. No. 25 (S.C.C.).
17. 17Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] S.C.J. No. 14; Moge v. Moge, 1992 CanLII 25 (SCC), [1992] S.C.J. No. 107 (S.C.C.).
18. 18Miglin v. Miglin, 2003 SCC 24, [2003] S.C.J. No. 21 (S.C.C.).
19. 19Bracklow v. Bracklow, Supra., at para. 50.
20. 20Moge v. Moge, Supra.
21. 21Bracklow v. Bracklow, Supra.
22. 22Moge v. Moge, Supra., paras. 68-70.
23. 23Bracklow v. Brackow, Supra., para. 38.
24. 24Professor Carol Rogerson and Professor Rollie Thompson, Spousal Support Advisory Guidelines (Ottawa: Department of Justice, July 2008), at p. 9.
25. 25Fisher v. Fisher, 2008 ONCA 11, [2008] O.J. No. 38 (Ont. C.A.).
26. 26,Ibid., at para. 96.
27. 27Ibid., at para. 102.
28. 28Federal Child Support Guidelines, S.O.R./197-97, as amended.
29. 29Coghill v. Coghill, 2006 CanLII 21778 (ON SC), [2006] O.J. No. 1489 (Ont. S.C.J.); L.(R.E.) v. L. (S.M.), 2007 ABCA 169, 2007 CarswellAlta 690 (Alta. C.A.).
30. 30Spousal Support Advisory Guidelines, Supra., p. 47.
31. 31Nelson v. Nelson, 2005 CarswellNS 18 (N.S.S.C); Kimla v. Golds, 2005 CarswellOnt 1000 (Ont. S.C.J.); Bonthron v. Bonthron, 2004 CarswellOnt 96 (Ont. S.C.J.); Lemmon v. Lemmon, 2004 CarswellOnt 771 (Ont. S.C.J.), additional reasons at 2004 CarswellOnt 1541 (Ont. S.C.J.)
32. 32Rilli v. Rilli, 2006 CanLII 34451 (ON SC), 2006 CarswellOnt 6335 (Ont. S.C.J.); Perino v. Perino, 2007 CanLII 46919 (ON SC), 2007 CarswellOnt 7171 (Ont. S.C.J.); Decker v. Fedorsen, 2010 ONCJ 618, 2010 CarswellOnt 9891 (Ont. C.J.).
33. 33Drygala v. Pauli, 2002 CanLII 41868 (ON CA), 2002 CarswellOnt 3228 (Ont. C.A.).
34. 34Ibid; Lawson v. Lawson, 2006 CanLII 26573 (ON CA), 2006 CarswellOnt 4789 (C.A.).
35. 35L.(N.) v. P.(B.), 2000 CanLII 22516 (ON SC), 2000 CarswellOnt 2487 (Ont. C.J.).
36. 36Hanson v. Hanson, 1999 CanLII 6307 (BC SC), 1999 CarswellBC 2545 (B.C.S.C.); L.(N.) v. P. (B.), Ibid.
37. 37Lawson v. Lawson, Supra.; Blake v. Blake, 2000 CarswellOnt 2477 (Ont. S.C.J.).
38. 38Daulby v. Daulby, 2007 CarswellOnt 7842 (Ont. S.C.J.).
39. 39Korwin v. Potworowski 2007 CarswellOnt 6852 (Ont. C.A.).