COURT FILE NO.: FS-11-4520-00 DATE: 2016 07 22
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
SUZANNE JENNIFER DERBYSHIRE Michael Nash, for the Applicant Applicant
- and -
JAMES DERBYSHIRE Evelyn Rayson, for the Respondent Respondent
HEARD: May 13, 14, 15, 19, 20, 21, 22, 2015; August 25 and 26, 2015; written submissions October 30 and December 15, 2015, and January 11, 2016.
Reasons for Judgment
Seppi J.
[1] The underlying premise in this spousal support dispute is the effect of the wife’s father’s asset transfers to his daughter and son-in-law during their marriage on the issue of spousal support. Much of the evidence at trial focused on those assets. The ultimate issues to be decided are the entitlement, quantum and date of commencement of a spousal support order for the wife. Her application was commenced on November 3, 2011 and amended on April 10, 2013. The answer is dated May 7, 2012.
Facts
[2] The Applicant, Suzanne Jennifer Derbyshire, was born in 1952. The Respondent, James Derbyshire, was born in 1950. They were married on March 16, 1973, separated in June 1999, and divorced on June 16, 2005.
[3] It was a traditional marriage. The wife abandoned her efforts at education in early childhood education to devote her time to the family, the home, and their two sons born in 1976 and 1979. She was a homemaker throughout the marriage to care for the children and maintain their family home.
[4] The Respondent’s career path in municipal tax assessment was uninterrupted throughout the marriage and thereafter. By the time the parties separated he had built a successful business, which throughout was the source of financial support for the family.
[5] In addition to the Respondent’s business, their matrimonial home, some personal investments and chattels, the parties held title to shares of Marathon Investments Limited (“Marathon 1976”). This business was built and operated by the Applicant’s father. The wife held 80 of the 100 issued common shares in Marathon 1976. The husband held 20. Neither the husband nor wife paid anything to acquire these shares. They never participated in the operation or control of the Applicant’s father’s businesses, either before or after the separation.
[6] Although the Respondent showed $12,000 taxable dividends from Marathon 1976 on his 1982 T1 General, it is agreed he received no income from Marathon 1976. On the evidence neither did the Applicant, who in 1994 and 1995, reported a capital gain on the shares. She also accepted transfer from the Respondent of his shares as a spousal rollover for purposes of the marital property settlement, to eliminate any potential tax obligations. Both the Applicant’s father, Lawrence Deakins, and the Applicant testified it was always Mr. Deakins’ intention and mutual understanding among all three persons involved, that the transfer of various assets was solely for Mr. Deakins’ estate planning purposes and never intended as a gift to the parties. Their overall conduct in relation to these shares and the father’s business interests throughout supports this assertion.
[7] In 1976 Mr. Deakins also invested in real estate known as Harbour Court Apartments (“Harbour Court”), in Wallaceburg Ontario, for approximately $1.5 million. He took title to this property together with the parties, one-third interest for each as tenants in common. He changed title to joint tenancy in 1995. In 1999 when the parties had separated, Mr. Deakins severed the joint tenancy. After the parties settlement in 2005, the Respondent transferred his Harbour Court interest to the Applicant. In December 2005, title to Harbour Court was registered in the names of Suzanne Jennifer Derbyshire and Lawrence Deakins as joint tenants.
[8] Mr. Deakins also purchased three parcels of land contiguous to Harbour Court (“the lots”). These he registered in his wife’s name in 1989, transferring title to himself in 1995 and then to his corporation Flex Pack Products Inc. (“Flex Pack”) in 1998. Title was transferred from Flex Pack to Suzanne Jennifer Derbyshire in 2007.
[9] Lawrence Deakins has controlled all material aspects of these investments throughout. Neither party contributed to the acquisition or the maintenance of these properties, nor did either party receive any income from these investments either during or after the marriage. Tax advantages of these holdings were sometimes shared, as seen for example in the financial statements for Harbour Court for the fiscal years ended in 1987, 1988, 1989 and 1990. These indicate a loss was allocated at one-third to each of the registered owners at the time, namely the Respondent, the Applicant and Mr. Deakins.
[10] Mr. Deakins’ business accountant, Bradley John Huggins, and Matthew Beck, the vice-president and general manager of Flex Pack, both testified about Mr. Deakins’ business operations and accounting policies.
[11] Mr. Beck has worked for Flex Pack since 2001 and is now in charge of customer relations, production, planning and supplies, while Mr. Deakins is responsible for the financial side of the business. The communication between them is mostly verbal. According to Mr. Beck, Mr. Deakins is “a renaissance man and his handshake is gold”. Mr. Beck trusts Mr. Deakins “100 percent” and Mr. Deakins clearly trusts and relies on Mr. Beck to run Flex Pack. He presented as an honest and reliable witness.
[12] In 2007 Mr. Deakins offered, and Mr. Becks accepted, a 25% ownership in Flex Pack. He has paid for this through credits from his remuneration each year end. Without reservation he confirmed that the Applicant wife has had no role in the management or finances of Flex Pack.
[13] Mr. Huggins’ association with and knowledge of Mr. Deakins’ business interests goes back to 1990, when he began as an employee with the accounting firm that did the annual financial statements. When his principle retired in 2004 he took over all the accounts. He had dealings with the Applicant in relation to Mr. Deakins’ business only when she had to sign some papers. He said there were never any discussions about the businesses at these meetings with the Applicant. He said all decisions in relation to the financial statements are made by Mr. Deakins, and he advises him about the tax impact to minimize taxes. According to his evidence no salary, no dividends, nor any of the profits have ever been paid to the Applicant. To his knowledge the Applicant has also not drawn any form of income from any of Mr. Deakins’ businesses.
[14] Mr. Huggins testified that when he first worked on the business financial statements in 1990 he never questioned why shares in Marathon 1976 were in the names of the Derbyshires, nor has any explanation ever been given to him about that. Nor was he ever made aware of the rationale for why title to Harbour Court in 1990 was in their names, or why the title later changed to Mr. Deakins and Ms. Derbyshire, other than that at the time of this latter change he understood there had been a marriage breakdown.
[15] In substance it is clear from his testimony and that of Mr. Beck that Mr. Deakins throughout has been the sole operating mind for all of these businesses and that neither party has ever contributed money or money’s worth in return for the shares Mr. Deakins placed in their names over the years of the parties marriage and thereafter.
[16] The Respondent’s evidence did not contradict this. He said Mr. Deakins was “running the thing”. He never challenged his father-in-law about not getting any money from Marathon 1976 or from Harbour Court. He never challenged Mr. Deakins’ decisions on the structuring or title transfers, which were done entirely in Mr. Deakins’ discretion. He and his wife signed whatever documents were asked of them by Mr. Deakins or his accountant.
[17] Mr. Derbyshire also did not dispute the benefit of having been able to include the value of shares in Marathon 1976 and interest in Harbour Court as part of his net worth when he submitted applications to lenders for operating capital for his own business, which was growing exponentially during the marriage. He acknowledged the use of various tax strategies which were made available by the accountants on account of the shares being in his and his wife’s names.
[18] The mutual benefit of this arrangement among the Derbyshires and Mr. Deakins was that Mr. Deakins could ensure the business did not form part of his estate. His hope was that at his death it would eventually go to the parties’ children, his two grandsons. He testified the goal was to prevent his estate from being liable to claims from certain other potential beneficiaries. The parties, for their part, had the benefit of building the husband’s business using the shares, which were in their name, as collateral to leverage credit and banking requirements, a strategy that financially benefited the parties during their marriage.
[19] Mr. Derbyshire’s business became immensely successful during the marriage and after, to the point that it was acquired by a public company in 2005. When the parties separated in 1999 it was after 26 years of marriage. By the time the parties settled their property and support issues in 2005, their two sons were grown and not dependent. The shareholding in the Applicant’s father’s business holdings caused problems in the material settlement at the time, and it is still a complicating factor raised by the Respondent in connection with the parties’ conflict over spousal support.
[20] When the Respondent initiated his divorce application in April 2000, he took a hard line on spousal support in his pleadings. He did this despite the clear history of the Applicant’s dependency throughout the marriage. Referring to the shares of the privately held corporations managed by Lawrence Deakins, which had been transferred to him and his wife by a series of transfers between about 1978 and 1987, he alleged the Applicant did not require any spousal support because she was financially self-sufficient with holdings of considerable value in relation to her father’s business. He advances the same argument today.
[21] After the separation and upon his commencement of divorce proceedings, Mr. Derbyshire refused to return to Mr. Deakins the shares that had been transferred to him during the marriage. For the first time he claimed beneficial ownership of those shares and of Harbour Court. Thus on December 27, 2000, Mr. Deakins, who has always believed he was the sole beneficial owner of those assets, commenced an action in the Superior Court of Justice “the trust action” against the Respondent and Applicant for the return of his shares.
[22] Both the divorce action and the trust action were ultimately settled. Minutes of Settlement were filed in the divorce action, and also signed by the parties, including Lawrence Deakins, in the trust action on December 2, 2003. Throughout the progress of both actions all parties were represented by counsel, who also witnessed the execution of the Minutes of Settlement. The settlement was facilitated by Madam Justice Speigel of the Superior Court of Justice. She endorsed the divorce action as “settled” on December 4, 2003.
[23] As certain issues remained outstanding, the case continued in the Superior Court of Justice under Madam Justice Speigel’s management, pending the preparation and execution of a formal separation agreement and a property transfer agreement in respect of the shares. The continuation of the process was arduous and fraught with ongoing conflict, despite the first optimistic court endorsement entry of “settled” on December 3, 2003. The Applicant had also lost confidence in her lawyer by that time.
[24] After over a year of delays, the final document was signed on March 11, 2005. Even then it required an additional cooling off period before it was final, a fact which supports the continuing uncertainty and reluctance on the part of the wife, who testified about feeling overwhelmed by the process at the time.
[25] A Separation Agreement dated December 2004 was executed by the Respondent on December 16, 2004. It was finally signed by the Applicant on March 11, 2005. The Respondent’s counsel at the time witnessed Mr. Derbyshire’s signature. As the Applicant and her lawyer had had a falling out in the interval, her father signed as the witness to her signature. He was also present with her during the final negotiations before Madam Justice Speigel which resulted in two supplementary Minutes of Settlement in the divorce action dated February 11, 2005 and March 11, 2005 respectively.
[26] To sweeten the deal for the Applicant, Mr. Derbyshire readily agreed to pay an additional $110,000, which is reflected in the latter supplementary Minutes. This extra payment was requested by Mr. Deakins on the Applicant’s behalf on account of all her expenses arising from the lengthy process. At trial Ms. Derbyshire expressed her belief in hindsight that her husband was so cooperative in quickly agreeing to this last request, as compared to his earlier combativeness, only because he was in the process of having his businesses sold to go public, which he knew would net him a significant financial return and future benefits to his business. The evidence supports this belief.
[27] It is of note that the Respondent at no time during this final negotiation period disclosed the plans for his business which had been contemplated as of November 2004 and came to fruition shortly after the settlement was finalized. The Respondent’s argumentative excuses for not disclosing such as, it was not a “done deal” and he was “under a shroud of silence”, are rejected. This was a failure to fully disclose and a material misrepresentation of his true financial circumstances at the relevant time.
[28] The Property Transfer Agreement dated December 2004 was signed by the Respondent on December 16, 2004, and by the Applicant on March 11, 2005. The settlement documents comprised of the following:
(a) The Minutes of Settlement dated December 2, 2003; (b) The Property Transfer Agreement dated December, 2004; (c) The Separation Agreement dated December, 2004, separately executed by the Respondent and the Applicant on December 16, 2004 and March 11, 2005 respectively; (d) The Supplementary Minutes of Settlement dated February 11, 2005; and (e) The Supplementary Minutes of Settlement dated March 11, 2005.
[29] The spousal support terms agreed to in the Minutes of Settlement and repeated in the Separation Agreement required the Respondent to pay $15,000 per month spousal support to the Applicant, commencing December 15, 2003, payable on the first day of each month thereafter, fixed and non-variable for a period of five years. The Respondent had sworn on September 25, 2003, that his current income was $49,003.08 per month, which equates to $588,037 per annum.
[30] In actual fact, as has subsequently been determined, the husband’s line 150 income for 2003 was $756,380. In 2004 it was $1,142,012 for the year. Thus, he not only misrepresented his business circumstances, he also misrepresented his income at the time of the finalization of the settlement.
[31] Despite the negotiations extending into March of 2005, Mr. Derbyshire never corrected or disclosed his actual income to his wife during the negotiations. His income after 2004 has been consistently much higher than what the agreement was based on.
[32] In conjunction with the settlement of the trust action, a judgment was issued as ordered by the Honourable Mr. Justice Filer on September 2, 2002. The judgment declares that certain shares in Marathon 1976 held in the Applicant’s name and the interest of title in the property known as Harbour Court were held in trust for the plaintiff in the trust action, Lawrence Deakins.
[33] As evidenced by the commencement and defence of the trust action, Mr. Derbyshire steadfastly refused to return the interest to his father-in-law or transfer the shares to his wife, as Mr. Deakins requested at the time, despite their consistent course of conduct and clear understanding between them about Mr. Deakins’ beneficial ownership of those assets. The Respondent’s Will after separation, which he signed in 2002, provided that the Marathon 1976 shares and Harbour Court interest in his name would go to his sons if the Applicant did not survive him. This was a material change from the provisions in the two Wills which he executed before the separation in 1988 and 1996, in which those interests were left to Lawrence Deakins if the Applicant did not survive him. On the whole, and despite this litigious maneuvering post-separation by the Respondent, the evidence shows an overall acknowledgement by the Respondent of Mr. Deakins’ beneficial ownership of all those assets, which were always entirely managed, operated, and controlled by Lawrence Deakins.
Circumstances of the Parties
[34] Throughout the years of the parties’ marriage, the wife’s role was to be the primary caregiver of their two sons and to look after the day to day needs of the family and their household. In all respects it was a traditional marriage into which the Applicant embarked at 20 years of age. The Respondent was 23 when they married.
[35] Just before their first child was born in 1976, the Applicant left her employment outside the home. During their marriage she did some work on a casual basis for the husband’s business, Derbyshire Consultants Limited, as needed by her husband over the years. Mr. Derbyshire devoted his main efforts and energy to this business. Derbyshire Consultants Limited paid some income to the Applicant over the years to effect income splitting between the parties for tax purposes.
[36] Before the marriage Ms. Derbyshire had graduated from Sheridan College. She worked during high school and college, and for about 3.5 years after graduating from Sheridan. She also completed two years of an Honours English Program at York University, which she discontinued to raise the children.
[37] Her income after separation, apart from the support paid, between 1999 and 2003 averaged about $2,250 per year. Between 2004 and 2011 it averaged about $8,537 per year.
[38] Before and after the parties separated the wife attempted work as a part-time yoga instructor, which she discontinued after an injury. She also tried selling jewellery and blinds, but earned only negligible income from these endeavours. She has not been employed outside the home throughout most of her adult life and has been entirely dependent on her support from the Respondent.
[39] The parties enjoyed a comfortable lifestyle during the marriage. This included what the Applicant described as high-end vacations. At the time of separation they owned a home in Florida, which the parties had acquired and used during marriage. It was registered in a company name that was held by the wife, and was transferred to her as part of the marital settlement. However, she had to sell that property almost immediately thereafter as she had assumed the $221,000 mortgage to the husband’s company, Derbyshire Consultants Limited, which it held on the property. Ms. Derbyshire did not have sufficient funds from the settlement to carry that mortgage over and above her other expenses.
[40] The evidence indicates that over time the wife’s liquid assets were essentially depleted to cover expenses. These included some delayed and extensive home renovations, considered necessary to bring the property into good and proper repair. Currently the only assets in which she has a undisputed beneficial interest in are this condominium residence, which is shown to have a fair market value of approximately $800,000, and a RRSP worth approximately $672,000 in 2015. It appears that the settlement funds which she invested into non-registered investments are virtually exhausted.
[41] The main area of dispute in regard to the Applicant’s financial circumstances concerns the shares and interest in real property which her father transferred to her and her husband during the marriage. As discussed above, the husband’s shares in these businesses were transferred to her by spousal rollover as part of the overall marital settlement and settlement of the trust action her father had brought against the husband. Ms. Derbyshire has throughout derived no income from these businesses. This was credibly and thoroughly explained by Lawrence Deakins, his operations manager and his accountant, who all testified at the trial. Their evidence about the lack of involvement or receipt in profits by Ms. Derbyshire was not refuted.
[42] Despite Mr. Deakins advancing age, he is still fully involved in the day to day operation of his businesses. The Applicant’s only participation has been to sign various documents from time to time that may be asked of her by Mr. Deakins or his accountant. This is the same arrangement that existed for both parties in relation to Mr. Deakins’ businesses prior to the parties’ separation and settlement of their marital assets. Mr. Deakins’ businesses are of considerable value estimated at a total of approximately $4.5 million, the most valuable portion of which is the operating company, Flex Pack.
[43] The Applicant is now 63. She has not remarried nor does she cohabit. Her only source of support is the support she receives from the Respondent. She last regularly worked full-time outside the home just before the birth of their oldest son in 1976.
[44] The Respondent is now 65 years of age. He has remarried and his new spouse is employed. His assent in his business career during and after the marriage has been impressive and uninterrupted. Soon after graduating from high school he worked in a municipal assessment office for about five years. During that time he obtained accreditation from Queen’s University and completed a program at Seneca College. After working for various employers, including a brief stint at the Ministry of Municipal Affairs, he began his own municipal consulting company in 1980, namely Derbyshire Consultants Limited.
[45] On June 1, 2001, Derbyshire Consultants Limited and Viceroy Property Tax Consultants Ltd. merged and became Derbyshire Viceroy Consultants Limited. This information was disclosed to the Applicant and her lawyer, along with the inaccurate income disclosure referenced above, and is the basis on which the settlement was based.
[46] What was not disclosed by the Respondent when he signed the Separation Agreement on December 16, 2004, which appears to have been prepared by his lawyer in 2004, was that as of November 2004 he had been in talks which would, within months, lead to a merger of Derbyshire Viceroy Consultants Limited with two other existing enterprises, namely Altus Group and Helyar & Associates. These three companies merged in May 2005 to form Altus Group Limited.
[47] The initial public offering (IPO) of the shares of Altus Group Limited, which included a detailed prospectus, was made on or about May 19, 2005. This was just over two months after the Final Supplementary Minutes of Settlement were signed on March 11, 2005.
[48] As a result of this transaction, the shares of Altus Group Limited became publically traded on the Toronto Stock Exchange. Also as a result of the merger and public offering, the Respondent’s means and income increased substantially immediately following. His income for 2005 was $1,150,447 per annum, much higher than what he had disclosed on his financial statements as his income for purposes of the application and negotiations, which was $588,037.
[49] Mr. Derbyshire’s title at Altus Group Limited is Global President, Realty Tax. The operations are worldwide with much activity in the U.S.
[50] Mr. Derbyshire’s net worth in 2003 on his financial statements sworn for the divorce action is shown to have been $1,468,053. In 2010 it is shown as $3,723,675. On his most recent financial statements sworn on April 27, 2015, he shows a net worth of $4,675,180, which does not include the value of the Derbyshire Investment Trust which he estimated in his cross-examination as being approximately $1,500,000. Mr. Derbyshire has complete control over the trust assets in this investment trust as its sole trustee. He is also one of the beneficiaries of the trust with discretion to make distributions as the trustee.
[51] The Respondent remarried in 2006. He and his current wife jointly own a home which was shown on his 2015 statement as having a value of approximately $2.5 million. In the interval following separation, he has purchased two separate Florida homes, the first of which was sold. Their current vacation home is located in an upscale area of southwest Florida.
Positions of the Parties Summarized
Applicant’s Position
[52] The Applicant asks for a support order of $30,000 per monthly pursuant to section 15.2 of the Divorce Act. She submits this is below the Spousal Support Advisory Guidelines (SSAG) amounts referable to the husband’s average income over the years. She notes an average of about $1,223,088 between 2004 and 2011, and about $1,130,300 from 2009 to 2011, and assumes the nominal income which she earned during that period. She acknowledges the Respondent has regularly paid $15,000 per month pursuant to the Separation Agreement.
[53] The Separation Agreement permits variation of the $15,000 quantum originally agreed. The Applicant submits there has been a material change from what was disclosed at the time, as is evident from the significant increase in the husband’s income and means. The Agreement fixed the amount for five years without variation. The wife submits the five years were up in December 2008 from when the Minutes of Settlement were signed. Both parties originally and mistakenly assumed it was five years from March 2005, which is the date the Applicant used in commencing her application five years later.
[54] The Applicant relies on the factors listed in section 15.2(4) for spousal support, including the length of time the parties cohabited and each of their functions during the marriage, as a result of which the wife became totally dependent. The husband has been her sole source of support on account of the family’s traditional structure; she gave up all opportunities for an income-earning career to look after the family’s needs while the Respondent was able to advance his income earning potential free of the daily familial duties. She submits the Agreement recognizes this in its term providing for support and further that the five year variation potential anticipated material changes in circumstances allowing for the quantum to be changed accordingly.
[55] Contrary to the Respondent’s argument that she should live on income from her father’s business, to which she holds legal title in shares, the Applicant indicates these assets beneficially belong to her father on the presumption of resulting trust. Her father’s assets were placed in her name with no consideration from her in return. She submits the Respondent has not rebutted this presumption and points to evidence of the history of these assets. Both during and after their marriage these have been and continue to be entirely controlled by and for the benefit of her father.
[56] The Applicant also submits that although she was late to give notice of her claim after the five year freeze before variation ended, the court should go back to 2008 which is five years after the Minutes of Settlement, on account of the blameworthy conducted of the husband who misrepresented his financial circumstances when the agreements were signed. The Applicant challenges the assertion by the husband regarding the confidentiality obligation as regards to the pending public offering. She points to the fact that the deemed undertaking rule would have protected the Respondent if he had properly disclosed what was happening with his business at the material time.
Respondent’s Position
[57] The Respondent’s initial position is that the court ought not deviate from the spousal support agreement as the Applicant has not met the two part test in Miglin v. Miglin, 2003 SCC 24, 2003 S.C.C. 24. He submits the circumstances under which the agreement was negotiated and executed, in which both parties were represented by counsel, were neither oppressive nor unfair, and the fact the Applicant does not seek to set aside the agreement confirms it was entered into in an unimpeachable manner. He submits the Minutes by which the spousal support was agreed to were signed well before the merger and IPO deal was contemplated and that factor should have no bearing on the circumstances of the agreement. He points to the term in the agreement that all financial questions had been answered, and the fact that the wife did not seek to utilize the benefit of the cooling-off period as evidence that the circumstances under which the agreement was signed were entirely fair. The Respondent also points to the confidentiality obligation between his corporate partners during the lead-up to the IPO as a reason for his non-disclosure about the circumstances when the agreement was finalized in March 2005.
[58] On the second prong of the Miglin test, the Respondent submits the current circumstances have not changed beyond what was contemplated at the time of the agreement and he states the wife was well aware of fluctuations in his agreement when she agreed on the spousal support settlement terms.
[59] The husband’s alternative position is that should the court find a basis on which to change the amount of support which had been agreed to and make a spousal support order pursuant to 15.2 of the Divorce Act, support should be terminated and no support ordered. He submits there is no compensatory aspect to the support for the wife and that she has made no efforts to become self-supporting in the meantime, during which she received significant support in the amount of $15,000 per month pursuant to the agreement.
[60] The husband also submits the wife’s means include access to income from her father’s corporate assets. He argues the wife ought to have income imputed to her on account of the title she holds in respect of her father’s businesses. He states she has an obligation to access income from Mr. Deakins’ businesses and has the power to declare dividends to herself.
[61] The Respondent further argues the judgment in the trust action which declares that the Applicant holds her father’s business interests in trust only refers to “certain” shares without specificity, and therefore it does not apply to all of the assets that were transferred into her name. The Respondent further challenges the trust based on the tax advantages obtained by the Applicant when she took a capital gains exemption on the assets in about 1994 to 1995 and also when she accepted his spousal rollover of his shares when he settled the trust action with her father, thereby eliminating any tax consequences to the transfer.
Analysis
Entitlement to Spousal Support
[62] Section 15.2(1) of the Divorce Act permits the court to make an order of spousal support. Subsection (4) specifies the factors the court must consider in making such an order, namely, “the condition, means, needs and other circumstances of each spouse, including (a) the length of time the spouses cohabitated; (b) the functions performed by each spousal during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse”.
[63] Of the four stated objectives of such an order in subsection (6), three are relevant here, namely that “it should (a) recognize any economic advantages or disadvantages of the spouses arising from the marriage or its breakdown; . . . (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage, and (d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time”.
[64] As noted in the above recitation of the circumstances of the parties, they cohabited as husband and wife in a traditional spousal relationship of an income-earning husband, and stay at home wife for a period of about 26 years. This makes it a long term marriage. The Applicant was entitled to spousal support upon the marriage breakdown, which was recognized by the parties in 2003 when the parties entered into Minutes of Settlement providing for support of $15,000 per month to be paid by the Respondent, which they incorporated into a separation agreement finalized in March 2005.
[65] Ms. Derbyshire was at the time, and is currently, financially dependent on the Respondent. Her role was primary caregiver of the children and manager of the household during the many years of cohabitation. To fulfill this role she abandoned her plans for further education and future employment, which over the years has led to significant economic disadvantage for her upon the marriage breakdown, which continues to this day. Given the absence of work experience, up to date training in the work force during such an extended period, her age and consequent dependency at the time of the marriage breakdown, it is not reasonable to expect her to have become economically self-sufficient. Her effort at yoga instruction, which ended due to an injury, provided very minimal income which, even if continued, would not have led to financial independence.
[66] The evidence establishes the Applicant’s entitlement to ongoing spousal support. It is not correct, as argued by the husband, to say there is no compensatory aspect to her entitlement. Due to the roles assumed by each in this traditional marriage the wife gave up her career efforts to provide childcare and household duties, which enabled and contributed to the husband’s opportunity to advance in his career, free of domestic responsibility.
[67] The Respondent benefited from having a supportive wife on the home front during the marriage. The division of family responsibilities allowed him time and energy to pursue a successful and highly remunerative business and career. As a result he continues to enjoy a significant economic advantage. The seeds and foundation of his financial success today were sown and nourished during the marriage years, and the Applicant’s role in that outcome is deserving of recognition and compensation.
[68] The circumstance of the Applicant’s father’s business holdings being registered in her name, which the Respondent now advances as a reason to deny a spousal support order and terminate his obligation, is one which existed at the time of the parties’ original settlement in 2003, as finalized in March 2005. The shares in Mr. Deakins’ businesses and investments are not a source of income to the Applicant now any more than they were when the parties were married, or when they separated. The presumption of resulting trust in respect of Mr. Deakins’ businesses and investments was affirmed by the parties by the declaratory judgment in the trust action in 2005.
[69] A resulting trust arises by operation of law. When a parent gratuitously transfers property to an adult child, the law presumes the child holds the property on a resulting trust for the parent Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at para. 36, 41; and Foley v. McIntyre, 2015 ONCA 382, 125 O.R.(3d) 721 at para. 26. The presumption exists from an equity perspective because equity presumes bargains, not gifts Pecore, at paras. 24-26; Foley, at para. 26.
[70] In Kerr v. Baranow, 2011 SCC 10, [2011] S.C.R. 269 at paras. 43-44, the Supreme Court of Canada confirmed the view expressed in Pecore that where there is a gratuitous transfer, the actual intention of the transferor is the governing consideration. In a gratuitous transfer between parent and adult child, the burden of rebutting the presumption is on the child, who must produce evidence to establish, on a balance of probabilities, that the transferor intended a gift at the time of the transfer Pecore, at para 43. In cases where a spouse of a transferee wishes to establish a beneficial interest in the transfer, the onus is on that spouse to establish a beneficial interest in the gratuitous transfer Paddock v. Paddock, 2009 ONCA 264, [2009] O.J. No. 1258 at para. 20.
[71] To rebut the presumption it must be shown that the transferor intended to transfer the beneficial interest to the transferee Pecore, at para. 41. The intention is a question of fact to be determined on the whole of the evidence Schwartz v. Schwartz, 2012 ONCA 239 at para. 43. Evidence of intention may include such factors as the relevant conduct of the transferor and transferee Lazier v. MacKey, 2012 ONSC 3812 at para. 64, and control and use of the transferred property after transfer Pecore, at paras 62-66.
[72] In the case at bar no evidence was produced by the Respondent to support a finding that the transfers from Mr. Deakins were a gift, either to the Respondent and Applicant when they were together, or subsequently to the Applicant. The ancillary facts the Respondent raises to challenge the trust, such as the tax advantages utilized, or the fact that there was an earlier trustee of these shares, do not change the ultimate conclusion of intention at the time of the transfer on the part of Lawrence Deakins. The transfers were never intended by him to be a gift. The Respondent’s and Applicant’s conduct throughout the marriage in respect of these assets, and Mr. Deakins’ exclusive use and control of these assets, support no other conclusion.
[73] The Applicant has no beneficial interest in the father’s assets, despite the title which she holds for him on a resulting trust. By the same conclusion, she has no right to declare dividends or claim profits from these assets, and no income is imputed to her from her father’s businesses in respect of her support claim in this application.
Quantum of Spousal Support
[74] The Respondent submits the Supreme Court of Canada authority of Miglin (supra) applies. He argues the circumstances of negotiating and executing the spousal support agreement were neither oppressive nor flawed, and the quantum payable is not substantively unfair, either as at the time of the agreement or this application. He submits that if entitlement is found, as it has been, the quantum of $15,000 per month for spousal support as agreed in the Minutes of Settlement and confirmed in the Separation Agreement should continue.
[75] The facts, as found above, negate the Respondent’s claim that the negotiations and execution of the agreement were not flawed and terms not substantively unfair in the circumstances. There was, in my view, a deliberate effort on the part of the Respondent to get the deal finalized without the Applicant discovering his pending potential significant increase in income and financial circumstances as a result of the expected merger and IPO in relation to his business. The Respondent also failed to accurately disclose his income at the time of the final execution of the Separation Agreement, thereby further breaching his duty of on-going disclosure while the parties were continuing to negotiate. These facts, as particularized above, would be grounds to override the agreement on spousal support were the Miglin test to apply.
[76] This agreement, however, specifically provides for variation in the quantum of support. It states: “Either party may move to vary the amount of spousal support after December 1, 2008.” The parties agreed there would be a five year period following execution of the Minutes of Settlement in December, 2003, within which no change would occur, and thereafter left the agreement open to variation. The Applicant’s claim to increase spousal support is consistent with what the parties agreed and there is no need to override the agreement.
[77] The four objectives of a spousal support order as stated in subsection 15.2(6), and referenced above, take into account both the provision of compensation when the roles during the marital relationship served to increase the earning power of one spouse at the expense of the other, and the relief of financial need experienced by a spouse after the relationship has ended.
[78] The Spousal Support Advisory Guidelines (SSAG) provide a framework of ranges within which the court may set the quantum. They are advisory only, but the courts are directed by the Ontario Court of Appeal in Fisher v. Fisher, 2008 ONCA 11, at para 103, to provide reasons for deviation outside the suggested range.
[79] When the parties agreed on $15,000 per month, $180,000 per year, for spousal support it was based on the husband’s financial statement in which he swore his income was $588,037 per annum. His income was, in fact, substantially higher at the time and has continued at a much higher range since then.
[80] The Applicant, on the other hand, has had no significant increase in her income. Her circumstances of financial need continue. There has been over the years, and continues to be, no reasonable or practicable prospect for her to become financially self-sufficient given her age, lack of work experience and education in any current field.
[81] The Applicant provided expert evidence to assess the incomes of the parties, which was not refuted by any competing expert evidence from the Respondent. It is acknowledged Mr. Derbyshire’s income does fluctuate from year to year. It is therefore appropriate to use an average as was done by the expert in his assessment. Mr. Derbyshire also has control over receipt of discretionary income as one of three beneficiaries and the sole trustee of the Derbyshire Investment Trust.
[82] The income analysis provides several scenarios regarding the income of the parties. Attributing one-third of the Trust’s income to the Respondent, the average income shown for him from 2004 to 2011 is calculated to be approximately $1,223,088, including income available from the Derbyshire Investment Trust. Taking a three year average from 2009 to 2011 it is approximately $1,130,300. His income averages in subsequent years are relatively consistent with the averages provided in the income analysis report.
[83] The income analysis provided by the Applicant also considered a scenario whereby notional income arising from the Applicant’s legal title to her father’s business is imputed to the wife for purposes of fixing the spousal support quantum. In that scenario the Respondent’s potential income from the Derbyshire Investment Trust is imputed to the husband. In that calculation the $30,000 per month spousal support requested falls between the SSAG mid and low amounts recommended for spousal support. The Respondent acknowledged the fact that the income on which the $15,000 per month was based in December, 2003, was one-half, or less than one-half, of the income he earned throughout the years since then, except for the anomalous years of 2002 and 2006.
[84] Taking into account all of the circumstances of the parties, including the agreement of the parties on spousal support in 2003, and the fluctuating aspect of the Respondent’s income, as well as the objectives of a spousal support order in relation to the facts which are reviewed above, the quantum of spousal support is set at $25,000 per month. The payment of this spousal support is adjusted as a lump sum net amount due to the retroactive nature of the award.
[85] This amount is less than the SSAG recommendations in the calculation of the various scenarios using income averages over the years. It is, in my view, appropriate in this case to deviate from the SSAG for several reasons. The very high income of the Respondent greatly exceeds $350,000 per annum. The significant jump in the Respondent’s income on which the quantum is based, occurred several years after the parties’ separation, thereby reducing the weight to be given to the compensatory aspect of support, when considered within the Respondent’s income earning history. Also, the Applicant has been free of child care responsibilities during the time period at issue, which eliminates the existence of any potential detrimental financial consequences arising from such responsibilities. The Respondent raises the implication of his potential retirement in the future which, though not imminent, is also a fair consideration for quantum in the circumstances.
Commencement of the Spousal Support Order
[86] The Applicant relies on the provision in the parties’ agreement allowing variation of support after five years from December, 2003. She asks that the date of commencement be fixed on that basis. She submits first that the delay in giving notice of her claim was due to a mutual misunderstanding that the five year freeze period ended five years after the Separation Agreement was signed, and not from the original agreement made by Minutes of Settlement. She further advances the argument that the setting the date of commencement from the end of the freeze period is an appropriate result and fair consequence of the Respondent’s lack of honest and full disclosure of his income and financial circumstances in relation to his business interests at the time the settlement was finalized.
[87] The Respondent seeks to have the support order not commence until June 22, 2010, which is the date on which he received notice of this claim. He submits the Applicant did not plead blameworthy conduct as a ground for any earlier commencement date. He further submits support should be entirely terminated due to the Applicant’s blameworthy conduct in relation to a delay in disclosing the value of her father’s business assets during the litigation. It is noted, however, that termination of spousal support was never pleaded by the Respondent, and not even mentioned until the end of trial, which makes this argument spurious and entirely without merit.
[88] The facts, as noted above, do support a finding of blameworthy conduct of non-disclosure and misrepresentation on the part of the Respondent at the time the parties finalized their spousal support agreement. Mr. Derbyshire also misrepresented his income when the Minutes were signed. It is not an excuse, as the Respondent submits, that the Applicant did not ask for copies of his tax returns or that she did not ask for more. He had a continuing duty to disclose.
[89] The Applicant in her evidence made it clear she would not have agreed to the support offered had she known of the actual financial circumstances of the Respondent. Her agreement on an amount of support with a five year freeze, which was based on restricted information and a significantly lower than actual income of the Respondent, was to her financial detriment.
[90] The Respondent’s argument about a shroud of secrecy regarding his pending merger and IPO deal is not supported on the evidence. The common deemed undertaking rule in litigation would have alleviated any concern had such alleged secrecy been shown to exist. The Respondent’s evidence that there was still great uncertainty about the merger/IPO occurring when they signed the agreement is also not credible, given the timing and detail of the prospectus and public offering. In addition, the Respondent’s own preparations for the anticipated receipt of substantial funds as a result of this merger and IPO, by setting up the Derbyshire Investment Trust on March 7, 2005, was before the Separation Agreement had been executed by the Applicant. Mr. Derbyshire had a clear obligation to disclose the significantly changed financial circumstances and breached this obligation in order to achieve a better than fair deal for himself on the separation.
[91] This blameworthy conduct on Mr. Derbyshire’s part was pleaded by the Applicant to support her claim to set aside the agreement, which claim was withdrawn without a withdrawal of the facts in support. The facts pleaded also relate to the execution of the agreement circumstances. There is no prejudice to the Respondent in regard to this claim as this was a live issue throughout the trial. The Respondent had every opportunity to address it in his evidence and in the cross-examination of the Applicant and her witnesses. It is in all the circumstances fair and reasonable that the support order be for spousal support commencing January 1, 2009.
Order
[92] It is therefore ordered that there be a net lump sum spousal support order representing support from January 1, 2009 to December 1, 2015, in the amount of $490,000, which gives credit for the $15,000 per month periodic support already paid.
[93] Periodic spousal support is set at $25,000 per month commencing January 1, 2016. The periodic support ordered is subject to variation in the event of a material change in circumstances. The spousal support term in paragraph 5.1 of the parties’ Separation Agreement dated December, 2004, is set aside. All other terms of the Separation Agreement, including the provision of medical and dental benefits stated therein shall continue in full force and effect. Prejudgment interest is ordered in accordance with the Courts of Justice Act, commencing on December 22, 2010.
[94] If the parties are unable to agree on the disposition of costs, written submissions shall be delivered by the Applicant by no later than August 19, 2016, by the Respondent by September 14, 2016, and reply by September 28, 2016.
[95] Judgment accordingly.