Reasons for Decision

[1] The applicant wife seeks the following:

(a) An order for summary judgment in the amount of $12,500 net per month from December 1, 2014 and every month thereafter;

(b) In the alternative, temporary spousal support in the minimum amount of $28,000 per month commencing December 1, 2014;

(d) Health coverage;

(e) An advance on equalization of $750,000;

(f) In the alternative, interim disbursements in the amount of $450,000;

(g) A non-depletion and preservation order.

[2] The respondent husband seeks:

(a) Partition and sale of the matrimonial home and cottage.

Background

[3] The parties were married for 51 years. They married on March 4, 1961 when the wife was 20 years old and the husband was 25 years of age. They separated on May 25, 2012. She is 75 years of age. The husband is 80 years of age.

[4] The parties had four children, one of whom is deceased. The three remaining children are independent adults and are respondents in this action. The wife was a flight attendant prior to marriage but was required to retire upon marriage. The marriage was a long-term traditional marriage. The husband was the breadwinner. The wife spent her time raising the 4 children, managing the household and working part-time during some of the marriage. She deposes that she occasionally assisted with the family printing and copying business, Reprodux Limited,

which began out of the basement of the parties’ home. The husband denies that the wife played any role in the business. The wife has been retired for some time.

Reprodux Limited

[5] Reprodux Limited is described in the husband’s valuation report as one of Canada’s leading reprographers providing print, copy and document management solutions to its customers including large format document reproduction with a speciality in reprographic services i.e. reproduction of graphics. These services cater to architectural, engineering, manufacturing and advertising firms and typically involve large-format and wide-format reproductions of graphics. Reprodux is made up of 5 companies:

(a) Reprodux, the operating company, which runs a large scale reprographics business;

(b) 1208168 Ontario Ltd which is the sole shareholder of Reprodux and of which the husband has 90.91% of the voting shares and therefore control;

(c) 1176558 Ontario Ltd. which owns the property at 138 Willowdale Avenue, Toronto from which Reprodux operates on location alongside an unrelated second tenant;

(d) Curry Reprographics Ltd., a printing company in Windsor in which the Reprodux business purchased a 60% interest in 2009, with the other 40% belonging to an arm’s length third party who is only involved in Curry; and

(e) 2234303 Ontario Inc. which holds 60% of the shares in Curry and of which 1208168 is the sole shareholder.

[6] Two discretionary trusts were set up in 1996 and 2009:

(a) On September 16, 1996-The Long Family Trust, a discretionary trust, naming all the children and the husband as beneficiaries was set up to freeze the value of the husband’s interest in the business and move potential future growth to the trust and its beneficiaries;

(b) On February 13, 2009-The Long Family Trust (2009), a discretionary trust was established naming 2 of the parties’ children, JJ, Kim, their respective issue and the husband as beneficiaries for the same reason as the first trust was set up.

[7] The husband deposed that he was named as one of the beneficiaries of both trusts because it was his business. He also deposes that in conjunction with the 2009 trust he intended to set up a spousal trust for the wife using $4 million from his shares to provide income for her on his death. A unanimous shareholders agreement for the 2009 trust was entered into on September 16, 2009. Article 3 in the shareholders agreement entitled Agreement on Redemption states that shares were to be transferred to the spousal trust upon the husband’s death. The parties’ son, JJ,

signed as trustee of the Spousal Trust. Thereafter nothing further was done to proceed with setting up the spousal trust.

[8] The husband admitted on questioning that he owns the majority of the voting shares and maintains control of the operating company and the trusts. He takes the position in the litigation that his beneficial interest in the trusts has no value.

Lifestyle during the Marriage

[9] During the marriage the parties had an affluent lifestyle. They travelled extensively in Florida and in Europe. They owned a 54 foot boat purchased for $1.2 million. The husband took whatever he needed from the business as compensation and he had control over that.

The Separation

[10] The wife deposes that the separation occurred when she began to raise questions about her interest in the family business and her support in the event of the husband predeceasing her or in the event of his disability. She deposes that the revelation of the husband’s relationship with another woman (his girlfriend) before the separation which was confirmed to her by his girlfriend’s husband and her husband’s threats to financially destroy her have been extremely stressful to her. A letter from her family doctor reports that she is suffering from depression, anxiety and insomnia and states that she is also very stressed over her financial situation. The separation and ensuing litigation polarized the family with the parties’ daughter, Kim, and her family siding with the husband and the parties’ son, JJ, and the parties’ daughter, Kelly, siding with the wife. The husband dismissed JJ from the company in 2013, resulting in him bringing a wrongful dismissal action which was recently settled.

Position taken by The Husband Regarding the Wife’s Support Claim

[11] The husband denies that the wife is entitled to spousal support and has paid nothing to the wife since November, 2014. His explanation is that he was trying to settle the dispute and was acting in good faith in paying no support.

[12] At or near the date of separation, the husband stopped taking compensation from his company through salary/bonus and began to receive compensation through redemption of his preference shares. His position is that it would be double dipping for this income to be considered income for the purpose of paying spousal support, that he has no ability to pay spousal support and the wife’s claim should be dismissed.

Acts taken by the Husband leading up to or around time of Separation

[13] The husband acquired a vacation property in Florida at a price of $780,000 just prior to the separation in 2012. Although he lives there half the year with his girlfriend (a Florida resident) and spent his own funds on furnishing the household, he placed title to the property in the name of the daughter, Kim. He approved the advance to her from his company to purchase the property and had her assign the golf membership to him that went with the property. He maintains that it is Kim’s property and takes the position in the litigation that it is not part of his net family property. He denies having anything more than a friendship with his girlfriend prior to separation.

[14] Shortly before separation, the husband and his daughter, Kim, as 2 of the 3 trustees of the discretionary trust transferred 306.5 Class G shares to Kim worth approximately $2.3 million. The husband swore in his affidavit that these shares were transferred to provide protection for their disabled grandson. On his questioning in 2013, he admitted that the shares were transferred in anticipation of the matrimonial litigation and “in case anything happened” and stated that Kim will put the shares back. This has not occurred. He takes the position in the litigation that these shares are not part of his net family property.

The Husband’s Income

[15] The husband declared the following as his line 150 income to CRA:

2006-$503,692

2007-$559,233

2008-$652,351

2009-$646,065

2010-$552,337

2011-$907,396

2012-$1,101,011

2013-$1,146,142

2014-$546,696

[16] The above amounts do not include the approximately $150,000 per year of income that was attributed to the wife for income splitting for the years prior to separation. (The husband puts this slightly lower at $130,000 per year). They also do not include many expenses paid by the family business for:

a. Vehicle expenses including lease payments, insurance, gas, parking, etc.

b. All medical/dental payments and insurance payments;

c. Gardening and maintenance for the family residences;

d. European vacations and cruises for the entire family;

e. Golf club memberships

f. Cell phones

g. Entertainment and meals out.

[17] Both parties have retained experts to value the husband’s income. The wife’s valuator, Vivian Alterman of AP Valuations, assessed the husband’s income for the years 2009 to 2011 for support purposes as follows:

2009-$725,000

2010-$851,000

2011-$1,777,000.

[18] The husband’s valuators, Marmer Penner (for the years 2009-2011) and Paula White (for the years 2013-2014), assessed the husband’s income as follows:

2009-$677,000

2010-$752,000

2011-between $360,000 and $502,000

2012-does not appear to have been valued

2013-$48,000

2014-$21,000

[19] In performing the valuation of the husband’s income, the husband’s valuator was instructed by counsel not to include in his income the income received on the redemption of the husband’s preference shares. Accordingly, of the $1,146,142 the husband declared to CRA as his 2013 income, the husband’s valuator backed out all but $32,500 in employment income, $6,579 in CPP and $12,026 in CPP. For 2014, no employment income was declared so only OAS of $677 and $12,135 in CPP was counted as income available for the purpose of support. The husband admitted on questioning that the significant drop in his salary was tough to reconcile with the timing of the separation and did not look good.

[20] Sometime in 2011 the husband changed the way he was compensated from his company. The husband’s evidence is that he gradually reduced his active role in the business over the last 12 to 14 years. According to the valuation report by Marmer Penner obtained by the husband, he had not been actively involved in the business for several years prior to the 2012 separation. Nevertheless, as set out above, he continued to draw large employment income. He was largely retired from Reprodux in 2010[^1] but nevertheless took $667,630 in employment income that year. In the year leading up to separation that changed-he received almost all of his income through share redemption.

[21] The husband produced as Exhibit P to his February 17, 2016 affidavit a letter from Jason Safar, an accountant at Price Waterhouse, dated February 10, 2016. The letter purports to advise of “our recollection of the shift in compensation methodologies for Mr. Jack Long from salary/bonus to share redemptions.” He states that it was his recollection that they suggested that the family may want to consider changing from salary/bonus to share redemption to reduce the

tax liability at death for Mr. Long and that this is a common practice, commonly referred to as a “wasting freeze.”

[22] The adjusted pre-tax income for Reprodux (controlled by the husband ) for 2013 and 2014 according to his valuator, Paula White, was:

2013- $445,000

2014-$725,000

[23] The husband has not disclosed Reprodux’ 2015 income. His financial statement sworn February 17, 2016 claims his gross annual income as $21,000 and does not disclose Reprodux’s current income. His yearly expenses are claimed as $672,627 not including any support but including claimed income tax of $19,705/month.

[24] The husband has redeemed $2,663,148 from share redemption since separation. None of this appears as a current asset on his February 17, 2016 financial statement. His debts, instead of being reduced, have increased by almost $900,000.

[25] Since separation, the husband’s lifestyle has continued unabated. He and his girlfriend have travelled extensively and repeatedly to Florida, Croatia, Iceland, Baltic Sea and Russia. He has purchased a new Cadillac motor vehicle and belongs to a golf club in Florida at a cost of over $80,000.

[26] On questioning the husband acknowledged that the company continued to pay personal expenses for him after separation.

Was There An Agreement by Husband to pay the Wife $12,500 per month

[27] On August 1, 2013 the wife brought a motion for interim support for $25,000/month (undifferentiated). The husband had consented to this amount in February 2013 pursuant to which 5 payments were made. The husband sought an adjournment of the motion which was not opposed, subject to terms. The husband submitted (as he submits on this motion) that his income mainly derived from redeemed shares and to order what the wife sought would be double dipping. As a term of the adjournment, Penny, J. ordered 3 payments of $12,500 undifferentiated without prejudice to the parties’ positions. In addition, the husband was required to continue to pay the mortgage payment and line of credit payment on the house and cottage and provide health and dental coverage. Justice Penny commented that in his opinion it would be double dipping for the wife to obtain spousal support on the dividend income plus half of the value of his shares but noted that it was a long way from resolving that issue.

[28] For various reasons the motion did not proceed in October, 2013 as had been anticipated. The parties attempted mediation unsuccessfully with Philip Epstein and Justice Speigel. At his questioning on December 10, 2013, the husband agreed to continue to pay the amount awarded by Penny, J. until the motion was heard. He continued to pay the wife $12,500/month until November, 2014 and then discontinued paying anything further. At some point the $12,500 was paid on the basis that it was an advance of equalization.

Sale of the Homes

[29] The wife has lived in the Thornhill home for 36 years. She rented the Huntsville cottage over the summer of 2015 out of necessity. Until she knows her financial circumstances, she wants to maintain the matrimonial residence and cottage.

[30] On questioning, the husband stated that whatever the wife wanted to do with the house was fine with him.

Wife’s Income

[31] The wife’s only income since the husband ceased supporting her is Old Age Security and CPP of approximately $20,000/year. She has cashed in some of her limited RRSPs. In 2015, the wife obtained a $400,000 line of credit which was co-signed by her son. She had drawn down $261,581 of the line as of January 2016 and owed legal, appraisal and accounting fees of $69,355 and $17,500 in credit cards. At that time, she had in bank accounts and a GIC approximately $50,000.

Interim Disbursements

[32] The husband has advanced $15,000 for the wife’s interim disbursements to date. The wife’s expected legal fees to the end of trial are $360,000 including continued questioning of the parties, a settlement conference, a trial management conference and a trial which is estimated to take 2 weeks. In addition her further expert fees are estimated at $75,000 to $80,000. The husband has not estimated his further legal or expert fees.

Analysis

[33] The circumstances of how a marriage broke up and whether or not a spouse was having a premarital affair are not usually particularly relevant to the financial issues which have to be determined on marital break-up. However, in this case they inform the actions taken by the husband in the period leading up to the separation.

[34] For purposes of these motions, I conclude that the husband has deliberately pursued a 2-pronged course of action: First, he has not paid any support for fifteen months. His explanation that he was trying to settle the dispute and was acting in good faith in paying no support makes no sense. In my opinion he did not pay support to pressure his wife during the settlement process. Second, he has reduced his capital with a view to escaping his equalization obligations. All the while, he has maintained his own lifestyle and vigorously fought this lawsuit.

[35] I find that the financial statements sworn by him were deliberately intended to obfuscate and obscure the issues. For example, to swear that he has annual income of $21,000 and annual expenses of $672,626 including monthly income taxes that amount to almost his entire annual income is ludicrous. To have reduced his capital in the company by payment to himself of $2.66 million from around the time of separation which has disappeared as an asset on his financial statement at the same time as significantly increasing his debts is alarming.

[36] The reduction in his capital, one-half of which is prima facie the wife’s, by share redemption of $2.66 million which has disappeared, by transfer to his daughter “in anticipation of the matrimonial litigation” of shares worth $2.3 million and by company advance for the purchase of a Florida property registered in his daughter’s name but lived in and furnished by him, including an expensive golf membership, all support that he is engaged in a concerted effort to evade the wife’s property and support entitlements under the Family Law Act.

[37] The February, 2016 letter from Price Waterhouse that they recollect suggesting to the family that they may want to consider a wasting freeze to reduce the tax liability at the husband’s death would be more compelling if it was a reporting letter rather than a letter to the husband’s matrimonial counsel years after the fact. Be that as it may, it is clear that the change in compensation methodologies had nothing to do with the husband’s retirement from the company. He had not been actively involved in the business for several years prior to the 2012 separation. Nevertheless, as set out above, he continued to draw large employment income. He was largely retired from Reprodux in 2010[^2] but nevertheless took $667,630 in employment income that year. In the year leading up to separation that changed-he received almost all of his income through share redemption. In these circumstance, the evidence that he was having an affair preceding separation and that he was determined to see that his wife did not share in the value in the company becomes significant. Even if this played no part in his decision to change the compensation methodology from salary/bonus to share redemption, the husband does not have the right to engage in a wasting freeze to the detriment of his family law obligations. The husband controls the corporation. He is the one who decides how he is to be compensated. There is nothing to suggest that he cannot return to drawing his compensation by way of salary/bonus as he did up to 2011 rather than by diminishing his capital so that his heirs pay less tax on his death.

[38] The depletion of capital must stop. A non-depletion and preservation order shall issue. There will be no further redemption of preference shares by any respondent or any sales or encumbering of any other assets owned by any respondent other than by court order.

[39] I am satisfied that the husband who fully controls the operating company can receive conservatively a minimum of $500,000 a year from his company which showed in the year prior to separation a profit of $1,238,301. In 2014, the last year for which the husband has made disclosure, Reprodux had earnings of approximately $725,000. Moreover, the G series preference shares carry a 5% dividend rate and the portion controlled by the husband would have yielded a dividend return before transfer and redemption of these shares of more than $250,000 a year. I appreciate that the payment of the dividends would reduce corporate profit.

[40] In a 51 year traditional marriage, the words of Madam Justice L’Heureux-Dube in Moge v. Moge[^3] apply:

“…the longer the relationship endures, the closer the economic union, the greater will be the presumptive claim to equal standards of living upon its dissolution.”

[41] The wife has significant need for support and the husband has a substantial ability to pay. She has had to take on significant debt to support herself since the husband ceased to do so. Her support should not be restricted to her budget. She has had restricted means of support available to her. Her “need” should not be determined only in light of her frugality but in accordance with her lifestyle during the marriage. Given the length of the marriage, the parties’ age and the husband’s income, she is entitled to support sufficient to maintain the level of comfort on par with the husband. Accordingly, I award $20,000/month as interim spousal support effective March 1, 2016. Although the Spousal Support Advisory Guidelines were not designed to apply to income over $350,000, I note that a 50/50 NDI split would be accomplished if support was set at $20,000/month assuming an income for the husband of slightly over $400,000 and for the wife of $20,000.

[42] For the 15 months when no support was paid from December 1, 2014 to February 1, 2016, I award a lump sum of support of $187,500 based on the sum of $12,500/month that the husband agreed on questioning to continue to pay until the motion was heard. I do not consider it appropriate to order that this amount be undesignated or an advance against equalization, given the husband’s failure to support the wife and his depletion of capital since separation.

[43] The husband shall continue to be responsible for the mortgage and line of credit on the house and cottage which were loans related to the business and which he has ben responsible for since separation. The husband shall continue the health coverage for the wife.

Sale of house and cottage

[44] The right to partition and sale is not an absolute one and is subject to the exercise of discretion by the court. [^4] The court should not make such orders as a matter of course but should consider the propriety of directing the sale before the family law issues have been resolved, particularly the determination of the equalization payment.[^5]

[45] The expectation of both counsel is that the trial in this case will take place in 2016. The husband stated on questioning that whatever the wife wanted to do with the home was fine with him. The husband has depleted assets, lives in a $750,000 home in Florida for half of the year and takes the position in the litigation that the wife is not entitled to support and owes him an equalization payment. In these circumstances, the wife’s desire to retain the house and cottage until trial when the uncertainty with respect to her financial circumstances will be resolved, is reasonable.

Interim Disbursements

[46] The court has discretion to award interim disbursements under Rule 24(12) of the Family Law Rules. The test was articulated by Justice Karakatsanis in Laamanen v Laamanen[^6] at paragraph 15:

…The Court may use its discretion to order an advance on equalization where:

there is a reasonable requirement for the funds;
there is little doubt that the person will receive an equalization payment of at least that amount; and
it is just to do so in the circumstances, including the payor’s ability to pay.

[47] The wife estimates that her equalization payment is in the region of $3 million($2 million net of tax) plus half the house and cottage. The husband has set out various scenarios for the equalization payment at tab 14 of his compendium. He submits that the equalization payment could range from the husband being entitled to an equalization payment from the wife of $800,000 plus half the house and cottage to the wife’s best day of an equalization payment to her of $515,000 plus half the house and cottage. None of the scenarios proffered by the husband include the $2.3 million in shares transferred to Kim or the advances from the company to buy the Florida condominium in which the husband resides. I am satisfied that the wife will be entitled to an equalization well in excess of the amount she seeks for interim disbursements.

[48] The husband has sold off $2.66 million of assets, a lot of it subsequent to separation and the rest of it likely in anticipation of the separation, given the evidence that he was carrying on an affair with his girlfriend prior to separation. The husband’s approach both to his income and to the assets which he owns or controls requires the wife’s counsel and experts to undertake extensive investigations into his activities both post separation and prior to separation when the pattern of salary taking and asset disposition began. A more candid approach would reduce these legal and expert costs considerably. But at the moment, there seems little prospect of reality overcoming obstinance. Speed is of the essence because of the parties’ age, and because the husband’s lifestyle is continuing apace while the wife’s situation deteriorates. In these circumstances, I do not consider it just to require the wife to go further into debt, deplete her

savings or to encroach on the real property. I am satisfied that the wife is entitled to interim disbursements. I have taken into account the $187,500 lump sum support. This is not sufficient.

[49] I do not accept the husband’s submission that only interim disbursements up to the settlement conference should be considered. In this case the parties have attended extensive mediation with highly experienced mediators, both private and judicial. If the case were going to settle, it would likely have already occurred. If it turns out that the case resolves without a trial and the wife has not spent the interim disbursements, she will have to account for what is unspent. Considering the husband’s misconduct, he should be required to make funds available so that there is a reasonably even litigation playing field. I award $200,000 for interim disbursements to be taken into account at the trial by the trial judge dealing with the equalization and costs and who will make the ultimate decision as to how this sum should be designated.

Advance on Equalization

[50] Given the uncertainty over the equalization and the fact that the trial is expected to occur this year, I make no order in respect of an advance on equalization.

Case Manager

[51] I will remain seized both as case manager and should any compliance difficulties arise. If any further motions are necessary, I will hear them. A teleconference shall be scheduled before me in one month’s time to set a firm schedule for next steps and to set an early trial date.

Costs

[52] The wife shall have 14 days from the date of release of these Reasons to make brief written submissions on costs. The husband shall have 14 days thereafter to respond.

Conclusion

[53] In the result:

(a) The husband shall pay interim spousal support of $20,000/month to the wife commencing March 1, 2016 and shall continue to be responsible for the business mortgage and line of credit on the home and cottage;

(b) The husband shall pay retroactive spousal support for the period from December 2014 to February 1, 2016 in the lump sum amount of $187,500;

(d) The husband shall pay interim disbursements in the amount of $200,000 to the wife to be taken into account at the trial by the trial judge dealing with the equalization and costs who will make the ultimate decision as to how this sum shall be designated;

(e) No further order for an advance on equalization shall be made at this time.

(f) The motion for the sale of the house and cottage is adjourned to the trial judge;

(g) The husband’s depletion of capital shall cease. A non-depletion and preservation order shall issue. There will be no further redemption of preference shares by any respondent or any sales or encumbering of any other assets owned by any respondent other than by court order.

(h) I will remain seized both as case manager and should any compliance difficulties arise. If any further motions are necessary, I will hear them. A teleconference shall be scheduled before me in one month’s time to set a firm schedule for next steps and to set an early trial date.

(i) Costs are reserved. The wife shall have 14 days from the date of release of these Reasons to make brief written submissions on costs. The husband shall have 14 days thereafter to respond.

Released February 29, 2016 ________________________

Backhouse, J.

CITATION: Long v. Long, 2016 ONSC 1454

COURT FILE NO.: FS-12-383259

DATE: 20160229

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ROBIN PENNY LONG

Applicant

and -

JACK ALAN LONG

Respondent

REASONS FOR DECISION

BACKHOUSE J.

Released: February 29, 2016

[^1]: Reasons of Bellamy, J. released February 4, 2010 in Qubti and Reprodux Ltd., para. 22 [^2]: Reasons of Bellamy, J. released February 4, 2010 in Qubti and Reprodux Ltd., para. 22 [^3]: [1992] 3 S.C.R. 813 (S.C.C.) at para. 84 [^4]: Davis v. Davis, 1953 CarswellOnt 106 (C.A.) para. 9 [^5]: Martin v. Martin, 1992 CarswellOnt 226 (C.A.) [^6]: Laamanen v Laamanen, 2005 CarswellOnt 8037 (S.C.J.)

Long v. Long, 2016 ONSC 1454

Case Summary

Reasons for Decision

Background

Reprodux Limited

Lifestyle during the Marriage

The Separation

Position taken by The Husband Regarding the Wife’s Support Claim

Acts taken by the Husband leading up to or around time of Separation

The Husband’s Income

Was There An Agreement by Husband to pay the Wife $12,500 per month

Sale of the Homes

Wife’s Income

Interim Disbursements

Analysis

Sale of house and cottage

Interim Disbursements

Advance on Equalization

Case Manager

Costs

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Issues

Statutory Provisions 1

Legal Tests 2