Ontario Superior Court of Justice

Court File No.: FC-09-033338
Date: 20130111

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

Laurie Straub

Plaintiff

– and –

Roy Straub

Defendant

Reesa Heft, for the Plaintiff

Gordon C. Vadum, for the Defendant

HEARD: June 18, 19, 20, 21, 22, 25, 27, 28 and 29th, 2012

REASONS FOR DECISION

MCKELVEY j.

Introduction

[1] Roy and Laurie Straub were married in July of 1984 and separated on March 1, 2009. They had three children together. This action addressed the financial issues arising out of their separation.

[2] There are no issues with respect to spousal support or custody and access. However, they have not been able to reach an agreement on the following financial issues:

(a) Equalization of net family properties;

(b) Child support obligation of Roy Straub; and

(c) Constructive trusts which are claimed by both the applicant and the respondent.

Background

[3] The applicant Laurie Straub is 51 years old and the respondent is 52 years old. They met in High School and started to live together in 1982. They purchased a cottage property in Muskoka in 1983 and were married in July, 1984. They had three children. Samantha Straub is currently 24 years old. Jamie Straub is 22 and Steven Straub is currently 17 years old. All three children currently live at home with their mother. Samantha Straub and Jamie Straub are both independent. Steven Straub is currently finishing high school. He was expected to start a community college program in September.

[4] In 1987 Roy and Laurie Straub purchased a matrimonial home at 3 Normandy Crescent in Richmond Hill. Initially Roy’s parents were also on title to the property. However, the sole ownership of the property was transferred by Roy’s parents to Laurie and Roy in 1996. Unfortunately Roy’s father died in 2000.

[5] Both Laurie and Roy work for the Royal Bank. Laurie’s job is working with the Royal Bank in Wealth Management in operations. Roy was employed by Royal Bank Wealth Management where he was an investment retirement planner. He earned a very substantial income in 2005 and 2006. However, due to a restructuring, Roy became an investment advisor with RBC Dominion Securities and his income dropped very substantially. He currently is paid on straight commission.

[6] Difficulties in the marriage surfaced at some point prior to the fall of 2005. Roy Straub moved out of the matrimonial home in or around November, 2005. There were a series of three separation agreements which were all signed by both parties. However, there was a reconciliation in November, 2007 and Roy Straub moved back into the matrimonial home.

[7] Following the reconciliation Roy and Laurie Straub resumed cohabitation. However, they subsequently separated on March 1, 2009 and have continued to live separately since that time. There is no reasonable prospect that they will resume cohabitation. It is apparent from the evidence at trial that the separation has been very acrimonious. Both parties are suspicious of the other and there has been a breakdown in any type of civilized communication between the parties.

Equalization of Net Family Property

[8] There has been an agreement on a number of the debts and liabilities owed by the parties at the time of separation. I have listed the items on which there is agreement and this is attached as Schedule “A”. There are, however, numerous issues on which they are not able to agree. These include:

(i) The amount of money owed by Roy Straub to his mother;

(ii) The value of the matrimonial home which is now owned by Ms. Straub;

(iii) The value of the cottage which is now owned by Mr. Straub;

(iv) The value of Laurie Straub’s pension;

(v) The value of the furniture in the matrimonial home and the cottage;

(vi) The value of automobiles in each party’s possession and whether a Cadillac automobile owned by Roy Straub was a gift from his mother;

(vii) The value of assets and liabilities held by each party at the time of marriage;

(viii) Whether the proceeds of sale from an investment property have properly been accounted for by Roy Straub; and

(ix) Whether a property owned in Florida by Roy Straub’s mother where he is also named as an owner should properly be considered as an asset owned by Roy at the time of separation.

Amount of Money Owed by Roy Straub to his Mother on March 1, 2009

[9] It is clear that the lifestyle enjoyed by Roy and Laurie Straub during their marriage was supported in large measure by financial contributions received from Roy’s parents. The Normandy Crescent property was purchased in September, 1987 for the sum of $235,000.00. The financial cost was totally underwritten by Roy’s parents. Roy’s parents emigrated to Canada in 1957. His father was a truck driver and his mother was a part owner in a deli. While they worked hard this was not a particularly wealthy family. In order to pay for the house on Normandy Crescent Roy’s parents had to take out a mortgage for $170,000.00. The interest rate on the mortgage was 11.25 per cent and required regular monthly payments of $1,754.15. This mortgage was eventually paid off by the parents according to the RBC banking records by September 30, 1991. Roy and Laurie were only required to pay $600.00 per month to Roy’s parents on account of the debt owed to the parents.

[10] On June 5, 1996 a transfer of ownership was registered so that Roy’s parents no longer were listed on title as owners. Instead, as of that date Roy and Laurie Straub were the sole owners of the property.

[11] It is also apparent that Roy’s parents contributed in a significant way to the cost of constructing a cottage on the Muskoka land which had been purchased in 1983. There is, however, conflicting evidence as to how much was contributed. Laurie Straub testified that Roy’s parents contributed the sum of $30,000.00 towards the construction of the cottage “shell”. She denied that any other funds were received for the cottage. Roy Straub on the other hand testified that his parents paid $45,000.00 towards the construction of the cottage shell and a further $55,000.00 towards the interior finishing of the cottage. Unfortunately there are no records which would clarify the contribution made by the parents.

[12] It is agreed by both parties that the funds advanced by Roy’s parents were given as a loan with the expectation that they would be repaid over time. This is reflected in a promissory note dated October 30, 1987 which was signed by both Laurie and Roy Straub. It deals with the sum of $235,000.00 which was advanced for the purchase of the Normandy Crescent property. There is a serious dispute as to what amount, if any, was owing to Roy’s parents as of the date of separation, March 1, 2009. The calculation of the amount owing is a difficult and challenging exercise. It consumed a considerable amount of time at trial. There are a number of factors that make the calculation of the amount owing difficult. First, as noted above, there is no agreement as to the amount contributed by Roy’s parents to the construction of the cottage and there are no records to document their contribution. Secondly, there is no agreement as to the amount of interest, if any, that Roy’s parents expected on the loan. Laurie Straub testified that Roy’s parents did not expect payment of any interest and that all payments made to the parents were on account of capital. Roy Straub on the other hand testified that his parents did not expect the commercial rate of interest but did expect to be paid something less than the commercial rate. For example on the purchase of the Normandy property for $235,000.00 he stated that the expectation was that his parents would be paid 8 per cent interest, as compared to the 11.25 per cent which his parents were required to pay to RBC on the mortgage they took out to finance the purchase.

[13] Matters are made more difficult by the fact that there are few records which provide a guide to the amounts owing over time. For the records that do exist there are allegations that they have been altered by Roy Straub. The way the evidence has been presented at trial has also been confusing much of the time. There was no joint document brief filed at trial. There were large volumes of documents which have been exchanged by the parties and which were referred to and made exhibits as the trial progressed. However, there was no attempt made to coordinate these into an organized package. In many cases there were problems with the legibility of the documents filed as exhibits. In addition, as the trial progressed it appeared that the positions of the parties changed as the evidence evolved.

[14] Mr. Straub’s position is that his mother was paid off in full for the debts owing on the Normandy and cottage property as of August 24, 2005. However, subsequently additional loans were extended by his mother and evidenced by a promissory note which was signed only by him and his mother. Mr. Straub asserted that as of March 1, 2009 the sum of $235,000.00 plus $3,750.00 on account of interest was owing to his mother.

[15] The applicant takes the position that there were no liabilities at the date of separation owed by Roy Straub to his mother and that the alleged debt is a sham. It is alleged that Mr. Straub diverted funds to his mother in order to prevent his wife in sharing in the wealth accumulated over the marriage. The applicant says that any loans owing to Mr. Straub’s mother have been paid in full and that in fact there has been an overpayment to the mother in the sum of $280,230.00 which Mr. Straub should be required to include as an asset for purposes of the equalization. The applicant asserts, in effect, that Mr. Straub is attempting to commit a fraud on the court by attempting to create “false loans” through the diversion of the funds to his mother and thereby permitting Mr. Straub to benefit when the mother eventually returns the overpayments to him. The applicant further asserts that Mr. Straub has deliberately hidden assets which have not been accounted for in his financial disclosure. No expert forensic evidence was rendered by either the applicant or respondent at trial to either support or refute the allegation of fraud. This type of evidence might have been of assistance to the court in considering whether there has been any improper diversion of funds.

[16] In considering the parties’ positions credibility is an important consideration. Having listened to the evidence in this case I have serious reservations about the credibility of both Roy and Laurie Straub. It is apparent to me that this has been a very hard fought law suit. It may well be that both Laurie and Roy Straub are good, hard working people in general. However, during the course of their litigation they have both demonstrated a willingness to mislead the court and the opposite party.

[17] In dealing with the evidence of Roy Straub it is apparent that during the litigation Mr. Straub has been less than forthright about his financial status. For example, on a motion where his obligation for support was being taken into consideration he listed his gross commission sales at $62,981.00 which is generally consistent with the information filed subsequently on his tax return. He claimed expenses, however, of $38,650.00 which reduced his net income to $24,331.00. His tax return which was subsequently filed showed expenses of only $16,384.00 which was significantly lower than what was presented in court. Mr. Straub testified that on the motion for support he was hoping to negotiate to a figure in the area of $45,000.00. What is apparent, however, is that for purposes of these “negotiations” the financial information he provided to the court was very misleading.

[18] Mr. Straub also testified that he altered the interest rate on a promissory note which served to increase the debt owed. He further acknowledged having included for the purposes of valuation additional amounts relating to the applicant’s pension which served to increase the value of her pension by over $70,000.00. He did this without having any specific knowledge to support the additional assets he claimed were owned by her.

[19] With respect to Laurie Straub she filed documentation early on in the law suit denying that any promissory notes were signed by her. Subsequently in the action there were a number of promissory notes which were produced and which bore her signature. In her evidence at trial she then asserted she had a specific recollection of signing the notes and what the notes contained at the time that she signed them. She asserted that there had been changes made to the notes based on her own recollection of the notes at the time they were signed. I found this evidence difficult to accept given that the notes went back to October 30, 1987 and taking into account her earlier assertion that she had no recollection of the notes. She further testified with respect to the promissory note on October 30, 1987 that the interest rate shown on the note at the time it was signed was zero percent. This was consistent with her firmly stated evidence that there was never an intention by Roy’s parents to charge interest on the sums which were loaned to them. However, for reasons which I will elaborate on further in these reasons it is clear to me that while it may not be possible, because of Roy Straub’s alterations, to determine what the original interest rate was on the note of October 30, 1987, it was clearly not zero.

[20] In the circumstances I have concluded that great care must be taken in relying on either Roy or Laurie Straub’s evidence about the value of assets or liabilities held by the parties at the time of separation. For purposes of my assessment when dealing with the parties evidence I have looked carefully to see whether there is any corroborating evidence which would assist in understanding the financial information which was presented during the trial.

... (continues exactly as in the source HTML through paragraph [111])

Date: January 11, 2013
Justice M. McKelvey