ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FS – 09 – 348337
DATE: 20120829
BETWEEN:
Deborah Lynn Firestone Applicant – and – Christopher Andrew Pfaff Respondent
Thomas Bastedo Q.C ., for the Applicant
Nancy J. Iadeluca , for the Respondent
HEARD: July 31, 2012
kiteley j.
[ 1 ] This is a motion by the Applicant for an order directing the Respondent to make an immediate payment in the amount of $2million as an advance on the equalization payment.
Background
[ 2 ] After having lived together for two years, the Applicant and Respondent were married in May of 1990. They separated on February 23 rd , 2006. A divorce judgment was granted on July 2, 2010. There are no children of the relationship. The Applicant is now 52 and the Respondent is almost 52.
[ 3 ] Prior to the marriage, the Applicant and Respondent had entered into a marriage contract. When the Application was issued in 2006, the Applicant sought an order setting aside the marriage contract. After changing to her current counsel in 2009, she signaled that she no longer seeks to set it aside. She has not formally withdrawn that claim.
[ 4 ] At the time of the separation, the Applicant remained in the matrimonial home in Newmarket.
[ 5 ] On January 12, 2007, Justice S. Rogers made a consent order that required the Respondent to pay temporary spousal support in the amount of $15000 per month as well as $10000 per month in capital payments as an advance on the equalization payment. The Applicant was required to pay all expenses on the jointly owned Newmarket property while the Respondent was required to pay the expenses on the jointly owned cottage property. Each party was required to provide specified disclosure.
[ 6 ] The Applicant’s adoptive father died in 2009. The administration of his estate has been complicated and has resulted in litigation in Ohio that has cost the Applicant and her sister hundreds of thousands of dollars. There is still some uncertainty as to how much she will realize from the estate. Furthermore, capital will not be available before 2016. The emotional and legal challenges involved in dealing with these issues have been very taxing on the Applicant. The Applicant agrees that some of the reason for her 2006 proceeding not moving forward has been her preoccupation with those issues.
[ 7 ] In September 2011, the Applicant asked if the Respondent would consent to sale of the Newmarket property. He signed the listing agreement in November 2011. The closing of the sale is scheduled for late October, 2012. The Respondent estimates that his half share of the net proceeds of sale will be approximately $700,000. Until closing, the Applicant is responsible for the expenses which approximate $4600 per month.
[ 8 ] In February 2010, the Respondent’s solicitor suggested sale of the jointly owned cottage on certain terms. Counsel were unable to agree upon the terms. In April 2011, the Applicant’s solicitor initiated discussions about sale. The Applicant signed the listing agreement in July 2011, 17 months after he had suggested a sale. According to the Respondent, her delay has meant that he lost two selling seasons. The cottage continues to be listed. Upon sale, the Respondent estimates that his half share of the net proceeds will be $900000.
[ 9 ] Pursuant to the order of Rogers J., the Respondent had paid $670000 towards the equalization payment as of July 2012.
[ 10 ] In 2011, the Applicant purchased a substantial property in King Township. She did not have sufficient funds to close and borrowed from the estate of her adoptive father, from her sister and from the bank. Her carrying costs are over $15000 per month. The Applicant realizes that the purchase was unwarranted and she now regrets it. She has listed it for sale but does not anticipate a sale in the immediate future.
[ 11 ] The Respondent provided a net family property statement. The most valuable asset he owns is shares in a corporation which he values at $10.2 million. In her affidavit, the Applicant deposes that she has accepted that value for some time. Based on his calculation, he owes the Applicant an equalization payment of $2.7 million. After deducting the $670000 payments, the remainder is less than $2.1 million.
[ 12 ] The Respondent’s calculation of the net family property includes his assessment of substantial costs of disposition on those shares. I infer that he has relied on the highest calculation of such costs.
[ 13 ] The Applicant will be entitled to receive her half of the net proceeds of sale of the Newmarket property on closing in October 2012 and of the cottage when it is sold. The Respondent is willing to pay to the Applicant his share of the net proceeds of sale of the Newmarket property (estimated at $700000) and his share of the net proceeds of sale of the cottage property (estimated at $900000). The Respondent calculates that if he pays her the $700000 in October, 2012 and the $900000 when there is a sale of the cottage, he will have reduced the equalization payment to approximately $445000. He does not agree to make any further advance on the equalization payment. He characterizes her decision to purchase the King Township property as “imprudent”. He notes that the litigation in Ohio has nothing to do with these proceedings other than to determine what property should be included in the Applicant’s net family property. Based on the equalization payments he has made and will make, as well as the support he has paid, he takes the position that the Applicant is not entitled to any further spousal support. He observes that if the Applicant had wisely invested her asset base to maximize her return, she would have sufficient income to meet her needs.
[ 14 ] In his affidavit, the Respondent has described two options. Option 1 includes payment of an advance of $400000 within 7 days; continuing to pay the $10000 on account of capital and $15000 on account of spousal support; payment to the Applicant of his share of the net proceeds of sale of the Newmarket property; if the cottage sells before trial, payment to the Applicant of his share of the net proceeds of sale on conditions related to discharge of mortgage, payment of a line of credit and sharing the capital gains taxes.
[ 15 ] Option 2 includes payment of $1million within 14 days; elimination of the payment of $10000 but continuation of the $15000; payment to the Applicant of his share of the net proceeds of sale of the Newmarket property; and payment of $300000 from his share of the proceeds if the cottage is sold before trial on the same conditions as in Option 1.
[ 16 ] At paragraphs 55 and 56 of his affidavit, the Respondent asserts that it is not fair that the Applicant move for an advance of $1million without making a commitment as to what will happen to his share of the proceeds of sale of the two jointly owned properties. Nor does he think it fair that he should have to continue to pay $10000 monthly if he pays a lump sum advance. In paragraph 57, the Respondent indicates he will consent to either Option 1 or Option 2 “provided that” the court makes an order consistent with his request in paragraph 19, namely for a settlement conference together with reports of experts and medical reports and comprehensive offers to settle and a trial in the fall of 2012 and a prohibition against the Applicant bringing any further motions pending the trial.
Analysis
Issue #1: References in the Responding Affidavit to Offers to Settle
[ 17 ] In his affidavit, the Respondent referred to an offer to settle all issues that he had made on May 8, 2012. He did not provide the contents of that offer. He did provide the terms of his alternative interim proposal, namely that he would pay $400000 within 3 days on certain terms.
[ 18 ] Mr. Bastedo takes the position that it was inappropriate to include reference to such offers but he says it demonstrates the Respondent’s ability to make a substantial payment. Ms. Iadeluca asserts that she is at liberty to reflect in her client’s affidavit the position he took, as long as he did not reflect the position that the Applicant took.
[ 19 ] Without deciding the appropriateness of the evidence, I agree with Mr. Bastedo that it indicates what the Respondent is able to do.
Issue #2: Other Timing Issues
[ 20 ] The Applicant brought this motion on the basis that the submissions on the discrete issue would take one hour. Her material and Mr. Bastedo’s submissions indicate that she also wanted to bring a motion to increase temporary spousal support but that would be long motion which, at the time the motion material was being prepared, would have been November at the earliest. She said that her financial circumstances were such that she could not wait that long.
[ 21 ] It was not included in her notice of motion but in paragraph 2 of her affidavit sworn July 10, 2012, the Applicant asked that a settlement conference be scheduled as soon as practicable and if the matter does not settle then a trial be set as soon as possible, preferably in the fall of 2012. She took the position that the outstanding issues include but are not limited to retroactive and prospective spousal support, the exact calculation of the equalization payment owing, and the method of its payment, and interest.
[ 22 ] The last settlement conference was held in November 2008 when the Applicant was still seeking to set aside the marriage contract. At paragraph 19 of his affidavit, the Respondent agrees that a settlement conference should be scheduled as soon as practicable. However, he asks that the parties be required to deliver 30 days in advance their respective reports with respect to the issue of contingent taxes and disposition costs on his corporate interests and any medical reports on which the Applicant intends to rely to support her position that she has no obligation to seek employment. In addition, he asks that the parties be required to deliver comprehensive offers to settle at least 15 days before the settlement conference. If a settlement does not materialize at the conference, he too asks that a trial be scheduled in the fall of 2012 and that there be no temporary motions for spousal support, interim disbursements or for further questioning pending trial.
[ 23 ] A settlement conference is available in the fall of 2012. A trial is not. As presently constituted, the trial would involve the issues referred to above which would inevitably include expert evidence and perhaps medical evidence. Assuming that the trial would be 7 to 10 days, the earliest availability is February, 2013.
Issue #3: Applicable Legal Principles
[ 24 ] Counsel for the Applicant takes the position that, based on sections 5(1), 7(1) and (9) of the Family Law Act, the court has an inherent jurisdiction to award an advance on the equalization payment owing to the spouse with the lesser net family property. Mr. Bastedo relies on the factors identified by Lane J. in Zagdanski v. Zagdanski [1] at paragraph 39 as relevant to whether an order should be made:
• There will be little or no realistic chance that the amount of the contemplated advance will exceed the ultimate equalization amount;
• There will, therefore, be some considerable degree of certainty about the right to, and likely minimum amount of, an equalization payment;
• There will be need, not necessarily in the sense of poverty, but a reasonable requirement for funds in advance of the final resolution of the equalization issue, including funds to enable the continued prosecution or defence of the action;
• There may be other circumstances such that fairness requires some relief for the applicant; frequently, but not necessarily, there will have been delay in the action, deliberate or otherwise, prejudicing the applicant by, for example, running up the cost.
[ 25 ] As Lane J. observed in paragraph 40 on the topic of whether it is appropriate to make an order when the Applicant seeks an advance for purposes of paying legal expenses, what is happening in these circumstances is that the applicant wants an advance of her own money and that may be a justification to enable the “field of battle to be leveled”.
[ 26 ] Counsel for the Respondent does not challenge the jurisdiction of the court to make an order for an advance on the equalization payment. It is her position that the Zagdanski factors need to be revisited to include a consideration of fairness to her client.
Issue #4: What is the Equalization Payment owing to the Applicant?
[ 27 ] In her materials in support of the motion, the Applicant referred to her most recent financial statement (sworn March 6, 2012) and the Respondent’s most recent financial position (sworn March 1, 2012). She did not file a net family property statement but she deposed that based on their respective net family properties in those financial statements, the Respondent owed to her an equalization payment of almost $3million. She pointed out that there are two issues that impact the Respondent’s net family property: whether 50% of a shareholder’s loan that existed at valuation date is excluded by reason of the marriage contract; and the costs of disposition on the shares owned by the Respondent. She observed that there might be a small increase to her net family property.
[ 28 ] In his material, the Respondent referred to their most recent financial statements and he provided a net family property statement which indicated that he owed an equalization payment of $2.7million less the advances made pursuant to the order by Rogers J. leaving a net of approximately $2.1million.
[ 29 ] For purposes of this motion only, I accept that the Respondent owes an equalization payment of no less than $2million.
Issue #5: Is it appropriate to make an order in this case?
[ 30 ] I turn now to the application of the factors identified in Zagdanski .
[ 31 ] I agree with Mr. Bastedo that there is little or no realistic chance that the amount of the contemplated advance will exceed the ultimate equalization amount. The Applicant has accepted his estimated share value and he has used the maximum disposition costs. There is no question that she is entitled to an equalization payment. There is some considerable degree of certainty about the likely minimum amount.
[ 32 ] Lane J. spoke of need but “not necessarily in the sense of poverty”. The Respondent may disparage her imprudent choices and take the position that the legal expenses she is incurring in Ohio are irrelevant, but the fact is that if she wants to spend her money on bailing herself out of what she acknowledges was unwarranted and regrettable decisions and on legal expenses to maximize her recovery from the estate, those are her choices.
[ 33 ] As for delay, Mr. Bastedo acknowledges that there has been delay in the proceedings and does not assert that it was caused by the Respondent. Ms. Iadeluca argues that the delay since the order was made in January 2007 was caused by the Applicant. I have insufficient evidence to make a determination as to the causes of the delay but that is not necessary in any event. The Application was issued in October 2006. Almost 6 years have passed. Regardless of the reason for the delay, the Applicant’s entitlement to an equalization payment is unaffected although her claim to prejudgment interest may be affected if she is found to have been responsible.
[ 34 ] Relying on subrules 2(2), 2(3) and 2(5) of the Family Law Rules , Ms. Iadeluca takes the position that the fourth factor identified by Lane J. requires an analysis of fairness to both spouses. He articulated it as circumstances such that fairness requires some relief for the applicant. I agree with Ms. Iadeluca that the court ought also to consider fairness to the Respondent.
[ 35 ] On the one hand, the Respondent has been regularly paying $10000 per month and, over more than 5 years, he has reduced his obligation by $670000 which is a sizeable percentage of the total he agrees that he owes. He has made proposals that would assist the Applicant in solving her cash flow problems that she has not found acceptable. If substantial legal and other professional expenses were incurred as a result of the challenge to the marriage contract which is not being pursued, he may be entitled to a substantial costs award. Although not formally claimed, the Respondent has raised the prospect that he will claim a loss as a result of the delay in listing the cottage for sale earlier than July 2011. In his Answer, the Respondent asked that any equalization payment he was required to pay be paid over 10 years.
[ 36 ] On the other hand, there is no suggestion that he does not have the ability to pay the $2million. Indeed, in Option 1 and Option 2 found in his affidavit, he demonstrates the ability to raise $400000 within 7 days or $1million within 14 days. His issue was the conditions he sought to attach. In his financial statement sworn March 1, 2012, he indicates that his interest in land had doubled since valuation date, his liquid assets had increased by about 30% while the category of “money owed to you” had been reduced by over 60%. Ignoring the disposition costs, his liabilities have increased by about $600000 but that is largely due to a mortgage on the real estate he acquired after valuation date. He has not provided a value for his shares at date of statement from which I infer that the value has not gone down. The payments of capital he has been making since January 2007 appear not to have negatively affected his capital position. I acknowledge that the Respondent has asked that he be permitted to pay over 10 years but he has already had over 6 years since the date of separation.
[ 37 ] Considering the Applicant’s entitlement to no less than $2million, and balancing that against those factors, I am satisfied that the Respondent should be required to make an advance on the equalization payment in two installments: $1million within 14 days and his share of the net proceeds of sale estimated at $700000 no later than the date of closing of the Newmarket property. As Karakatsanis J. held in paragraph 20 of Laamanen v Laamanen [2] that strikes a balance between the Applicant’s need and entitlement and the Respondent’s ability to pay bearing in mind his request that the balance be paid over time and recognizing that he has had the use of the money since the separation in February 2006.
[ 38 ] Mr. Bastedo resisted tying any payment to the closing of the sale of the Newmarket property because of the risk that the sale might not close. There is no evidence that there is any uncertainty. For purposes of this motion, I assume that the deal will close in late October, 2012 as scheduled. If the deal does not close, the Respondent will be required to pay the amount he now estimates he would have paid within the time set out below.
[ 39 ] The Respondent tied his willingness to make payments to the conditions set out in paragraph 19 of his affidavit. The court is not required to adopt those conditions. Simply because he was not successful in negotiating an interim resolution with the Applicant does not mean that the court must adopt one or the other of his positions. Having a balance outstanding on his calculation of approximately $300000, that would compensate for any costs award in his favour which would reduce his obligation. While the interest claim to which he is exposed may be moderated if the Applicant is found to have caused delay, it is a reasonable expectation that he will be required to make some payment on account of interest and that would increase his obligation. Assuming that a trial might occur in the spring of 2013, I see no reason to terminate the ongoing monthly payment of $10000 nor to prohibit her from bringing any other motions pending the trial.
ORDER TO GO AS FOLLOWS:
[ 40 ] The Respondent shall pay to the Applicant as an advance against the equalization payment, the following:
(a) By 5:00 p.m. on September 12, 2012, the sum of $1million;
(b) By close of business on the day following the closing of the sale of the Newmarket property, all of his share of the net proceeds of sale;
(c) If that deal does not close, then within 14 business days, the Respondent shall pay $700000.
[ 41 ] Counsel shall forthwith arrange a settlement conference with one of Justices Czutrin, Goodman or Mesbur, likely in November or December, 2012 provided that:
(a) 30 days before, counsel shall serve all experts’ reports on which either intends to rely at trial relating to the costs of disposition;
(b) 30 days before, counsel for the Applicant shall serve any medical reports on which she intends to rely at trial relating to her ability to contribute to her own support;
(c) 15 days before, counsel for the Applicant shall serve an offer to settle all outstanding issues;
(d) 10 days before, counsel for the Respondent shall serve an offer to settle all outstanding issues.
[ 42 ] If by September 12 th , 2012 counsel are unable to reach agreement as to costs of this motion, then counsel shall make written submissions not exceeding 3 pages plus offer to settle, if any, plus costs outline if appropriate on the following schedule:
(a) By September 19 th : counsel for the Applicant;
(b) By September 26 th : counsel for the Respondent.
Kiteley J.
Released: August 29, 2012
COURT FILE NO.: FS – 09 - 348337
DATE: 20120829
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Deborah Lynn Firestone Applicant – and – Christopher Andrew Pfaff Respondent
REASONS FOR DECISION
KITELEY J.
Released: August 29, 2012
[^1]: 2001 ONSC 27981 , 2001 CarswellOnt 2517, 55 O.R. (3d) 6, 19 R.F.L. (5 th ) 458
[^2]: 2005 ONSC 50808 , 2005 CarswellOnt 8037 W.D.F.L. 1472, 25 R.F.L. (6 th ) 441