Phelps v. Childs, 2015 ONSC 3482

Phelps v. Childs, 2015 ONSC 3482

COURT FILE NO.: FD13-1145

DATE: May 29, 2015

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Ryan Timothy Phelps

Applicant

– and –

Zoe Michelle Julia Childs

Respondent

Ms. E. Holly, for the Applicant

Ms. L. Hanson, for the Respondent

HEARD: Jan. 5-9 and May 4, 2015

REASONS FOR DECISION

QUIGLEY, J

1This is a trial involving parties who were married on November 5, 2005 and separated on April 24, 2013. Prior to the trial, the parties settled many of the issues including custody of and access to the children and agreed on valuations of the matrimonial home together with the encumbrances attached there, along with valuation of Sequitur common shares owned jointly by the parties.

2The issues left for determination in this trial are those issues outlined in paragraph 8 of this decision.

Background

3The parties met in the spring of 2005.

4The Applicant was a recent music graduate from the University of Western Ontario and was on a cross country tour sponsored by the Anglican Church of Canada. The parties met after a concert the Applicant had given in Kemptville, Ontario.

5The Respondent, at that time, had recovered from serious injuries sustained in a motor vehicle accident a number of years earlier.

6There are three children of the marriage, namely, Madeline Rose Phelps, born February 24, 2007, Noah Routley Phelps, born November 10, 2008, and Evelyn Ryann Phelps, born August 31, 2012.

7Prior to commencement of the trial, the parties had resolved the issues of custody and access with a joint custodial arrangement that provided for primary residence with Respondent and regular access to the Applicant.

8There are a number of issues which the court has been asked to rule on in this trial:

(i) Spousal support – it is understood by the parties that the only spousal support the Applicant is seeking totals $10,000.00, payable by the Respondent, for the two years post-separation;

(ii) Income of the parties for Section 7 expenses;

(iii) Retroactive child support in the amount of $7,860.22, claimed by the Respondent from the date of separation to the date of a consent child support court order;

(iv) Division of the matrimonial home which was owned, prior to the marriage, by the Respondent, but was placed in the joint names of the parties during the marriage; and,

(v) Division of Sequitur common shares that are held jointly by the parties, but originally had been paid for by a loan from the Respondent’s father. The parties repaid the Respondent’s father’s loan out of the Respondent’s annuity during the marriage.

Spousal Support

9The Respondent was involved in a motor vehicle accident on January 1, 1999, when she was seventeen years old. She sustained major injuries in that accident, including a T-10 spinal cord injury which has left her paralyzed from the waist down.

10As a result of the injuries sustained in the accident by the Respondent, she recovered $308,020.68 in cash from various settlements, which were used by her to purchase a property and build a home prior to her marriage. After her marriage, she transferred the home into joint tenancy with the Applicant.

11In addition to the cash payments received by the Respondent, she was the beneficiary of two structured settlements, the first one in the amount of $850,000.00, which pays her approximately $4,000.00 per month and another structured settlement in the amount of $400,000.00, which pays her $20,000.00 annually on December 1st. The two structured annuities paid the Respondent $68,458.15 in 2013.

12The Respondent was represented by the late Barry Laushway in the negotiation of the above mentioned settlements. Barry Laushway’s son, Scott Laushway, who is a partner in the law firm founded by his father, testified at trial that the heads of damages were not specified in the aforementioned settlement. In other words, there was no specific amount specified for economic loss. Mr. Laushway speculated that the vast majority of the settlement would have included general damages and future care costs of the Respondent.

13Under the SABS policy, Mr. Laushway testified that the Respondent would not have qualified for income replacement benefits as she was an unemployed student at the time of the accident.

14An expert report prepared by Ms. Sandra Poulin-Guest, namely, the life care plan dated June 15, 2000, was filed on consent on this trial. In her report, she provided an opinion that the total life care plan costs of the Respondent would be $1,628,525.00, which was more than the Respondent received, namely, $308,020.68 in cash and $1.25 million in structured settlements.

15In the years between 2005 and 2012, the Applicant asserts that his main priority was to care for Respondent and the children and the family’s needs were placed ahead of his pursuit of a fulltime career as a musician. In effect, the demands of the Respondent and family made the Applicant financially dependent on the Respondent.

16The Applicant’s tax returns for the years 2005 through 2012 support the Applicant’s position. His highest earning year during that period of time was in 2010, having a taxable income of $15,994.00.

17The Applicant further asserts that the Respondent’s tax free income from the annuities in 2015 will amount to $72,827.00.

18Between 2009 and 2012, the Applicant and Respondent benefitted from child tax credits and universal child care benefits totalling approximately $12,000.00 per year, which were deposited into the couple’s joint bank account.

19Since separation, the Respondent is receiving the above mentioned benefits. In 2013, those benefits totalled $19,380.00.

20The Applicant’s income from the date of separation until the end of December, 2013, was $18,000.00. His gross income for 2014 would have been annualized at $48,899.00, less his expenses related to income of $14,374.00, leaving a net income of $34,525.00.

21The Respondent is asking the court to impute income for the year of 2013 to the Applicant in the amount of $20,000.00. There is no evidence at this trial, which I am prepared to accept, which would result in any imputation of income to the Applicant for 2013. Similarly, I am prepared to accept the Applicant’s evidence that his net income for 2014 was $34,525.00. Accordingly, an order shall go requiring child support based on that income.

22Therefore, the issue to be decided with respect to spousal support is whether or not the court can attribute any income to the Respondent for the years 2013 and 2014, which could be used to calculate spousal support.

23Although the Respondent had during those years in excess of $80,000.00 being deposited into her bank account, I am not persuaded that any of that amount would qualify as income for the purpose of calculating spousal support payable by her. I will have more to say about the respective financial positions of both parties when I deal with the issue of calculation of their respective obligations for Section 7 expenses.

24Therefore, there an Order shall go dismissing the Applicant’s claim for spousal support for the years 2013 and 2014.

Income of the parties for Section 7 expenses

25Evidence was tendered by both parties in this trial respecting the Section 7 expenses incurred by the parties for the three children of the marriage.

26The Applicant called Daniel Shouldice, former owner of the Montessori school in Kemptville, who described the Applicant as an engaged parent who delivered and picked up the children more than half the time, but also did volunteer work in music at the school for the children in summer school. He described both parents as “role model” parents. Daniel Shouldice’s evidence supports the Applicant’s position that he devoted most of his time during the marriage to “family-related matters” and, thus, was unable to establish a full time career.

27Both parents testified as to the desire to involve the children in extracurricular activities. The Section 7 expenses incurred for 2014 amounted to $16,826.15. I find no difficulty in concluding that the Section 7 expenses incurred in 2014, and continue to be incurred for the children, are beyond the scope of parents with modest incomes. No doubt, these monies continue to be expended because of the substantial tax free monies accruing to the Respondent.

28Any calculation of income for the purpose of Section 7 expenses of necessity will have to be arbitrary. To calculate Section 7 expenses based on the income of the Applicant, $18,000.00 (2013) and $34,525.00 (2014), and only the taxable income of the Respondent (ignoring the Respondent’s structured settlements) would be grossly unfair to the Applicant and not affordable by him.

29Therefore, for the year 2013, I assess the obligation of the Applicant for Section 7 expenses in the amount of $600.00. In the year 2014, based on an income of $34,525.00, I assess his obligation for Section 7 expenses in the amount of $1,200.00 per year.

30Any future Section 7 expenses incurred will be charged to the Respondent’s capital payments in her structured settlement. I arrive at this calculation with the understanding that the Applicant is paying child support to the Respondent for the three children pursuant to a consent order in the amount of $615.00 per month or $7,380.00 per year. This calculation was arrived at using Quebec Child Support Guidelines since the Applicant’s residence is in Gatineau, Quebec. If the Applicant’s income increases in future years, it is understood that he would share a proportionately greater percentage of the Section 7 expenses based on his increase in income.

Retroactive Child Support

31The claim for retroactive child support is in the amount of $7,860.22.

32There was insufficient evidence tendered in this trial which would convince me that the Applicant had an income which would require child support payable prior to the consent order. Therefore, an order will go dismissing the Respondent’s claim for retroactive child support.

Division of matrimonial home

33The matrimonial home is jointly owned by the parties and the parties have agreed on evaluation at separation fixed at $467,000.00.

34The Respondent acquired the lot and built the home with cash money she received in her settlement. She owned the home, which was fully furnished, before the marriage.

35The Respondent is claiming an unequal division in the matrimonial home pursuant to Section 5(6)(h) of the Family Law Act where a court may award an amount that is more than one-half of the difference between the net family properties if the court is of the opinion that equalizing the properties would be unconscionable, having regard to “any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement to property” and in particular how and why the property was acquired.

36For the purposes of determining the net equity in the home, I have calculated the equity in the home based on the agreed value of $467,500.00, less the mortgage of $252,594.22, less a line of credit of $38,286.36 (Geronimo Café), a further line of credit of $51,512.12, a car loan of $24,298.66, and property taxes of $3,600.00, leaving a net equity of $97,208.64.

37I accept the evidence from the Applicant that the limited amount of monies that he brought into the marriage, went into the household joint account that paid for the honeymoon and expenses relating to day-to-day living.

38In a Superior Court of Justice decision of Morrison v. Barclay-Morrison, 2008 Can LII 60330 (ONSC), Czutrin J. states in paragraphs 68, 69 and 70, as follows:

68The Court of Appeal in Levan v. Levan (2008), 2008 ONCA 388, 90 O.R. (3d) 1, affirmed that the proper approach to the application of s.5(6), following its decision in Stone v. Stone (2001), 2001 24110 (ON CA), 55 O.R. (3d) 491, is as follows:

(1) Establish each spouse’s net family property pursuant to s. 4 of the FLA by determining and valuing the property owned by each spouse on the valuation date;

(2) Apply s. 5(1) of the FLA and determine the equalization payment; and

(3) Decide whether, in view of circumstances in s. 5(6), it would be unconscionable to equalize net family properties.

69The circumstances claimed to be unconscionable must come within one of the subsections of s. 5(6); Berdette v. Berdette (1991), 1991 7061 (ONCA), 3 O.R. (3d) 513 (C.A.). Section 5(6)(h) provides for an unequal division of property due to unconscionability resulting from circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.

70The onus is on the party claiming an unequal division to establish unconscionability: Abdilla v. Abdilla (2004), 134 A.C.W.S. (3d) 1034.

39In view of the Applicant’s commitment to the family, including his care of the Respondent, I find no compelling reason to award the Respondent with an unequal share of the net equity in the matrimonial home.

40Therefore, an Order will go dividing the net proceeds of the matrimonial home equally between the parties.

Division of Sequitur common shares

41The shares in the above mentioned company were initially acquired during the marriage. The share purchase initially came from monies lent to the couple from the Respondent’s father, Andrew Paul Childs. After the acquisition of the shares, he was paid back in funds that came into the household income from the Respondent’s structured settlement.

42The Respondent’s claim to the Applicant’s interest in the shares, again, is based on unconscionability. As was stated in the Court of Appeal, Serra v Serra 2009 ONCA 105, 93 O.R. (3d) 161, a person claiming unconscionability must establish unconscionability and not just fairness. Again, for similar reasoning to the matrimonial home, I find the Respondent has failed to establish the basis upon which an unequal division of these shares can be granted.

43Therefore, an Order shall go dividing the Sequitur shares equally between the parties.

44If the parties cannot agree on costs, they may submit written submissions to me, on no more than two typewritten pages, at my Brockville chambers on or before July 15, 2015.

The Honourable Mr. Justice Michael J. Quigley