COURT FILE AND PARTIES

COURT FILE NO.: 47422-13

DATE: 2014-04-28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DEBORAH TEN PAS, Applicant

AND:

ROBIN TEN PAS, Respondent

BEFORE: The Honourable Mr. Justice D.A. Broad

COUNSEL:
D. Pilat, for the Applicant
D. Olsen, for the Respondent

HEARD: April 24, 2014

ENDORSEMENT

Background

[1] The applicant wife and the respondent husband were married on January 14, 1995. They had one child of the relationship, Tyler, born January 11, 1996. The parties initially separated in June of 2003. They subsequently entered into Minutes of Settlement which were incorporated into an Order of Justice Reilly dated December 18, 2003. The Order of Justice Reilly dealt with custody, access and child support. It also provided for the wife to pay to the husband $75,000 in exchange for the transfer of his interest in the matrimonial home and adjacent 25 acres. Neither party sought a divorce following their initial separation.

[2] The parties reconciled in or about May or June, 2008. On June 17, 2008 the respondent husband purchased a one half interest in the matrimonial home from the applicant wife and an individual who had acquired an interest in it during the period prior to the reconciliation, Mr. Remer. The respondent husband paid the sum of $16,220.84 in cash and the applicant wife and respondent husband increased the existing mortgage from $243,681.71 to $345,000. Mr. Remer received $114,109.33 for the sale of his interest. The balance of the proceeds of the increased mortgage was used to pay land transfer tax and the legal costs of the transaction.

[3] The parties separated again on March 20, 2012. The respondent husband brought an application under the Partition Act R.S.O. 1990, c. P.4 for the sale of the matrimonial home. By Order dated December 13, 2012 Justice Hambly ordered that the matrimonial property be sold and that the net proceeds of sale be held in trust pending written agreement of the parties or further order of the court.

[4] The applicant and the respondent each received $25,000 from the net proceeds of the sale of the matrimonial home and the initial balance of the net proceeds in the sum of $363,225.91 was held in trust by the lawyers who acted on the sale.

[5] The applicant wife brought the present Application on February 13, 2013 seeking a divorce, spousal support, child support and an unequal division of net family properties in her favour.

Nature of the Motion

[6] The respondent husband brought the present motion, originally returnable December 19, 2013, seeking an order that the amount of $140,504.06 of the net proceeds of sale of the matrimonial home be paid to Canada Revenue Agency (“CRA”) to his credit. In his affidavit in support of the motion the respondent deposed that at the time of the reconciliation in 2008 he owed no money to CRA, but during the period of the second cohabitation from 2008 to 2012 he utilized funds from his self-employed business that he ought to have paid to CRA for HST and income taxes in order to extensively renovate the matrimonial home. He says that the renovations and upgrades to the property increased its value from $460,000 in August 2008 to its ultimate sale price of $675,000 in December, 2012.

[7] As a result of his diversion of funds from his business towards renovations to the matrimonial home, the respondent states that he became indebted to CRA in the sum of $130,472.76 in respect of income tax arrears for the years 2008 to 2012 inclusive and $10,031.30 in respect of HST payments owing by him from 2008 to and including 2011.

[8] The applicant brought a cross-motion seeking ongoing child support commencing January 1, 2014, retroactive child support of $11,299 for the period June 2012 to December 2013, ongoing spousal support commencing January 1, 2014, and retroactive spousal support in the amount of $17,796 for the period March 2012 to December 2013.

[9] The parties agreed to an interim equal distribution from the proceeds of sale, so that there is now, according to counsel, approximately $80,000 being held in trust. The funds received by the respondent from the funds in trust have been utilized to pay down his tax liability. The amount currently owing by the respondent to CRA is the sum of approximately $32,000. The respondent seeks an order for the payment of this amount out to him in order to retire his tax liability, stating that unless it is paid off, his self-employed business will fail. CRA has issued a third party demands in respect of the outstanding liability, including to his lawyer in respect of any funds held in trust for him.

[10] The applicant's motion for child support and spousal support has been adjourned and was not the subject of argument before me.

Analysis

[11] Although the parties did not address the question of the jurisdiction of the court to make the order sought by the respondent, it is useful to review whether the court has such jurisdiction, and if so, the principles which should guide the court in the exercise of any such jurisdiction.

[12] There does not appear to be any explicit provision in the Family Law Act, R.S.O. 1990, c. F.3 authorizing the court to order an interim advance on the equalization payment owing to a spouse. Notwithstanding this, Lane, J. in the case of Zagdanski v. Zagdanski (2001) 2001 27981 (ON SC), 55 O.R. 6 (S.C.J.), aff’d (2002) CarswellOnt 614 (C.A.) held that the court has the inherent jurisdiction to make such an award, and set forth some of the factors to be considered in the determination of whether such an award should be made.

[13] Kiteley, J. considered and applied the principles in Zagdanski in Firestone v. Pfaff 2012 ONSC 4909 (SCJ), at paras. 24-26 as follows:

24. Counsel for the Applicant takes the position that, based on sections 5(1), 7(1) and 7(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. [Counsel] relies on the factors identified by Lane J. in Zagdanski v. Zagdanski 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.

[14] In the case of Beauregard v Beauregard (2008) 2008 198 (ON SC), 49 R.F.L. (6th) 213 (S.C.J.), being a case not dissimilar to the present case in which the husband sought an advance from the proceeds of sale of the matrimonial home to satisfy a claim by CRA for outstanding taxes where the wife had advanced a claim for an unequal division of the net family properties, McKinnon, J. stated the principles derived from Zagdanski, as follows, at para. 9:

In determining whether or not to order an advance against equalization, the case of Zagdanski v. Zagdanski (2001), 2001 27981 (ON SC), 55 O.R. (3d) 6 (Ont. S.C.J.) at para. 39 is instructive. Certain characteristics should be present, including that 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 and 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.

[15] In Beauregard, McKinnon, J. treated the motion for an advance of equalization as a motion for partial summary judgment pursuant to Rule 16 of the Family Law Rules and stated, at para. 10, that:

In considering whether or not there will be little or no realistic chance that the amount of the contemplated advance will exceed the ultimate equalization amount, a hard look must be taken at Mother's claim for an unequal distribution.

[16] The respondent husband in the present case states that, in comparing the parties' net family properties, and accepting the applicant's calculations and ignoring his CRA debt, he would be required to pay to her an equalization payment of only $9,150.

[17] The applicant responds by arguing that the respondent's net family property calculation is premised on the date of marriage being the parties' reconciliation date of March 2008 and not their actual date of marriage on January 14, 1995. She says that the question of which date should be used to determine their respective net family properties is a triable issue.

[18] The applicant argues that it is necessary to look at the dealings of the parties with the matrimonial home over the entire period following the original date of marriage. She estimates that the equity in the home on the original separation in 2003 was $150,000 (being two times the amount she paid to buy out his interest). She says that following their reconciliation in 2008 the value of the property had increased by $218,633.65 and that when they refinanced in 2008 the respondent only contributed $16,222.84 in exchange for obtaining a half interest in the property worth $34,316.83 (218,633.64 - $150,000/2 = $34,316.83), thereby profiting by $18,093.98. She says that, should the respondent recover one half of the net sale proceeds in total he will have received for his interest in the property the sum of $274,206.61, calculated as follows:

(a) $75,000.00 – 2003 buy-out

(b) $18,093,98 – increase in equity between 2003 and 2008

(c) $181,112.63 – half net sale proceeds in 2012

$274,206.61

[19] The applicant also disputes that the respondent's renovations to the home between 2008 and 2012 increased its value to the extent claimed by the respondent or at all. She says, for instance, that the horse barn and the riding area built by the respondent consisted only of a shell of the building and fences which were not completed, and the new owners have torn down the fences for the riding area. She states that the property values in the area of the matrimonial home increased in general, and therefore any increase in value during the second period of co-habitation was not attributable to improvements made to the home. She also says that much of the funds which were diverted from the respondent’s business from paying income taxes and HST were used by the respondent to accumulate toys such as a pick-up truck, a tractor and a horse trailer.

[20] The respondent disputes the calculations asserted by the applicant, and states that the equity in the home in 2003 was $294,000, and not $150,000, as asserted by the applicant. He says that he accepted a payout of $75,000 on the home in consideration of there being no spousal support payable by him, as reflected in the order dated December 18, 2003. He also says that he became completely responsible for the increased mortgage by over $100,000 which allowed him to purchase the one half interest of Mr. Remers, and as a result, his contribution to the purchase of the one half interest was over $118,000.

[21] Moreover, the respondent says that, if for some reason there were to be an equalization payment owing by him to the applicant, he has other assets in the form of RRSPs which could be rolled over to the applicant. He appended to his reply affidavit sworn December 17, 2013 a Portfolio Summary of his investments with Sun Life Financial totaling $96,925.73 as of December 13, 2013, of which $71,289.88 was in the form of non-locked in RRSP funds. He stated that taking these monies out of the non-locked in RRSP would simply increase the money that he owes to CRA for the current year or for next year by including in his income the taxes payable on those funds.

[22] In argument, counsel for the respondent was not in a position to confirm that the funds shown on the Portfolio Summary of December 13, 2013 remain available to stand as security for the applicant's claims for an unequal division of net family properties and retroactive spousal and child support. Moreover, it is not clear why the respondent cannot liquidate sufficient funds from his non-locked in RRSP, net of taxes, to retire the arrears of income tax and HST in the sum of approximately $32,000.

[23] Based upon my review of the conflicting affidavit material, I am not satisfied that there will be little or no realistic chance that the amount of the contemplated advance will exceed the ultimate equalization amount to which the respondent is entitled, and that there will be the necessary degree of certainty about the right to, and likely minimum amount of, an equalization payment to which he will ultimately be entitled. Moreover, given the apparent existence of over $71,000 in non-locked in RRSP funds available to the respondent, I am not satisfied that the respondent has demonstrated that there is a need or a reasonable requirement for funds in advance of the final resolution of the issues of equalization and retroactive child and spousal support.

Disposition

[24] Accordingly, the motion of the respondent for an order directing the payment out to him of $32,000 from the funds being held in trust from the net proceeds of sale of the matrimonial home is dismissed.

[25] If the parties cannot agree upon costs they may make written submissions with respect to costs, with the applicant's submissions to be received within 14 days hereof, and the respondent's within 7 days thereafter. The submissions shall be limited to three double- spaced pages excluding any costs outlines, bills of costs and offers to settle and are to be delivered to Judges Chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. If submissions are not received within the time frames set forth above it will be assumed that the parties have settled the question of costs.

D. A. Broad J.

Date: April 28, 2014