COURT FILE AND PARTIES

COURT FILE NO.: 45307-11
DATE: 2012-10-04
SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Lucilia Maria Garcia King

and

Darryl Joseph King

BEFORE: The Honourable Mr. Justice P.J. Flynn

COUNSEL: Jennifer Breithaupt, Counsel for the Applicant
Filomena Andrade, Counsel for the Respondent

HEARD: September 11, 2012

ENDORSEMENT

[ 1 ] The Applicant seeks an advance of $250,000 on the equalization payment that will be due and owing to her.

[ 2 ] At the end of the day there is absolutely no chance that the amount of the advance requested will exceed the equalization payment owing by the Respondent. The parties are in agreement that that amount properly speaking will be in excess of $800,000.

[ 3 ] The Applicant’s Financial Statement shows that she has monthly expenditures of about $5,300 and she receives from the Respondent $12,000 per month for child and spousal support.

[ 4 ] The parties separated on February 9, 2010, after a 12 year marriage. They have two daughters, 12 and 9.

[ 5 ] The Respondent is a successful businessman and owns corporations of significant value.

[ 6 ] The issue of the requested advance on the equalization payment owed by the Respondent to the Applicant was raised at the case conference of October 14, 2011. A settlement conference is scheduled for the middle of December.

[ 7 ] In Zagdanski v. Zagdanski 2001 27981 (ON SC) , 55 O.R. (3d) 6 (2001) S.C.J., Lane J. followed a line of cases which authorized the making of advance payments upon an equalization obligation in a proper case. Such a case is defined by Lane J. this way:

[39] ... Such a case will have certain characteristics of which the following seem reasonable based on the cases cited above and what I hope is common sense:

• 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.

[40] There are cases which have held that expenses for legal fees, or past expenses, are not appropriate matters for which interim disbursements may be ordered. One must remember, however, that what is happening here is simply an advance of the Applicant’s own money. Provided the safeguards as to the amount are observed, there is no reasonable objection to the use of the funds to pursue the action itself. Where, as there often is, there is a great disparity in the resources controlled by the parties, there can be no justification in withholding from the weaker party a portion of the equalization which would enable the field of battle to be levelled.

[ 8 ] The Applicant sets out her plea and concern in the 27th paragraph of her Affidavit:

Based on all of the foregoing, there is no doubt in my mind that Darryl has no intention of providing me with an advance on the equalization payment properly due and owing to me. Two and a half years have passed since our separation, and I truly and verily believe that Darryl is refusing to advance any funds to me on account of the equalization payment so as to prevent me from continuing to fund this litigation and to retain the appropriate accounting expert to enable me to make an informed decision regarding the value of the companies.

[ 9 ] Now there is clearly a great disparity in the resources controlled by the parties. But the Applicant resides in a mortgage free house and has income by way of support, which far exceeds the needs she has shown on a monthly basis, as demonstrated by her Financial Statement. In her Affidavit material she asserts that the legal fees required to review the disclosure in detail and generate a strategy for questioning “will cost close to $5,000 in professional fees” and that the lowest estimate for the preparation of a professional valuation report is $7,500 in fees. The Applicant sets out that these amounts do not include any trial preparation or attendance.

[ 10 ] The Respondent complains that the Applicant has not shown a reasonable requirement for funds. And while I agree that she has shown nothing like that in respect of the $250,000 she seeks as an advance, she has set out some amounts that she says will assist her in advancing the litigation.

[ 11 ] Indeed, what is set out in her own Affidavit is that the Applicant “needs funds for the purpose of “leveling the field of battle” with respect to the analysis of the voluminous financial disclosure which underpins the valuation of Darryl’s corporations.”

[ 12 ] The Applicant does not suggest that the Respondent has unnecessarily delayed or protracted this litigation but is concerned that the Respondent is recklessly spending money and dramatically reducing the liquidity of the corporations thus jeopardizing the Applicant’s ability to collect an equalization payment once the issue is finalized.

[ 13 ] The Respondent complains that the Applicant has not shown a reasonable requirement for funds. He argues that she has to prove that she requires it. The Respondent relies on the Platherwick v. Platherwick case, 212 ONSC 2456 (), a decision of Lemon J. who follows the test in Laamanen v. Laamanen 2005 50808 (ONSC) which stands for the proposition that the court may use its discretion to order an advance on equalization where:

(1) There is a reasonable requirement for the funds;

(2) There is little doubt that the person will receive an equalization payment of at least that amount, and

(3) It is just to do so in the circumstances including the payor’s ability to pay.

[ 14 ] Ms. Andrade, for the Respondent, relies entirely on that case, where Justice Lemon says at para. 16:

In determining whether or not to exercise my discretion to order an advance on equalization, I need to consider whether I have enough evidence before me to assess the reasonableness of the request.

And he comes to the conclusion that he did not have enough information to make the request reasonable.

[ 15 ] I am in a like position here. Certainly with respect to a request for an advance of $250,000.

[ 16 ] One must remember that the Laamanen test, Karakatsanis J. sets out a test which is conjunctive. In other words, first what has to be shown is a reasonable requirement for funds in circumstances where there is little doubt that the person will receive an equalization payment of at least that amount and finally that it is just in the circumstances including the payor’s ability to pay.

[ 17 ] Justice Lemon in Blatherwick says with respect to the “just in the circumstances” provision:

[21] While “justness” might support the request based on Mr. Blatherwick’s admitted behavior, it cannot support such an order in light of the failure of Mrs. Blatherwick to meet the other factors.

[ 18 ] The battlefield here is badly tilted in favour of the Respondent, at least with respect to equalization. There is little doubt that the Applicant, at the end of the day, will receive an equalization payment of a considerable amount, well in excess of the amount she seeks.

[ 19 ] But I am not satisfied that she has demonstrated a reasonable requirement for $250,000. On the other hand, I am satisfied that just to get to questioning, she has demonstrated a need for $5,000 in legal fees and $7,500 in expert fees and that further amounts will be required to get this matter to the settlement conference and beyond.

[ 20 ] At the end of the day, the matter of advances on equalization payments are in some sense discretionary and it cannot be only the court’s concern about leveling the playing field but the court must be concerned that it is just in the circumstances to order an advance.

[ 21 ] The actual amount demonstrated by the Applicant is $12,500 and it would not be inappropriate for me to make an allowance for a greater amount – though certainly not $250,000.

[ 22 ] While Applicant’s counsel in this case never took me through that exercise, I am prepared to allow a multiple of four to be applied against the specified amounts.

[ 23 ] I would order an advance on the equalization that would otherwise be made to the Applicant of $50,000.

[ 24 ] I agree with the Respondent that the equalization owing by the Respondent to the Applicant is based almost exclusively upon values attributable to his corporations. But I am satisfied that the ordering of an advance in the amount of $50,000 will not seriously jeopardize the viability of the husband’s companies. Those companies and their revenue and attributable expenses have jumped by leaps and bounds in the last several years and in my view, the advance on equalization will not seriously impair the operation of the operating business, because there is a reasonable alternative method of satisfying the award, namely the residence that the husband purchased through his numbered company. That is so whether or not the assets in that company are used to secure the operating line of credit in the operating company.

[ 25 ] While the web might be tangled and corporately complex, I am satisfied that the Respondent has the accounting and legal resources available to him to get himself out of any fix that my interim order will cause.

[ 26 ] Nor am I concerned that this amount of advance will prejudice the husband’s ability to ask at trial that the equalization be paid over time.

[ 27 ] I concede that the wife has not alleged any need for monies other than to fund litigation. And in my view she has demonstrated a reasonable requirement for some funds.

[ 28 ] And for justice to be done we must put away such concerns as whether or not the wife Applicant has brought the motion under the right rule. The Respondent argues that because what is sought is only money to fund litigation, the motion should have been brought under Rule 24 (12) of the Family Law Rules with respect to interim disbursements. The same result would obtain in my view. The ordering of interim disbursements is discretionary and I am satisfied that the Applicant here has demonstrated that those funds are necessary to pursue settlement or trial. In other words the disbursements are necessary and reasonable given the needs of the case and the funds available. Moreover, an order for $50,000 is not such that the Applicant will feel a license to litigate. The amount of $250,000 might give her just that.

[ 29 ] So at the end of the day the Applicant is not successful in her request for $250,000 but I am satisfied that she has made out a claim for a $50,000 advance on equalization and accordingly there will be an order in that amount.

Costs

[ 30 ] There has been some success for the Applicant here though not the success she sought. That must be reflected in any cost award that I make. I would ask the Applicant to prepare, serve and deliver to me at my Kitchener chambers a Costs Outline and Bill of Costs by October 19, 2012. The Respondent must serve and deliver to me in Kitchener her costs submissions with a Costs Outline and Bill of Costs by October 31, 2012.

P.J. Flynn J.

Released: October 4, 2012