Patricia Virc v. Michael Blair, 2016 ONSC 49

Patricia Virc v. Michael Blair, 2016 ONSC 49

CITATION: Virc v. Blair, 2016 ONSC 49

NEWMARKET COURT FILE NO.: FC-30449-01

DATE: 20160531

ONTARIO

SUPERIOR COURT OF JUSTICE

FAMILY COURT

BETWEEN:

Patricia Virc Applicant

– and –

Michael Blair Respondent

Bryan Smith and Sarah Conlin for the Applicant

Respondent, Self-represented

HEARD: May 19, 20, 21, 22, 25, 26, 27, 28, 29, June 1, 2, 3, 4, 12, 15, 16, July 20, 21 and October 23, 2015

REASONS FOR DECISION

JARVIS J.

1On May 31, 2008, Patricia Virc and Michael Blair signed a Separation Agreement. In 2010, Ms. Virc applied to have that Agreement set aside. Mr. Blair successfully moved for summary judgment to dismiss the Application. In a decision released May 14, 2014, the Court of Appeal set aside that judgment and directed a trial to proceed on all issues, except one. This is that trial.

2I have decided that the Separation Agreement must be set aside. Consequently, the parties’ equalization payment and child and spousal support rights must be determined, with appropriate adjustments made to account for intervening financial transactions. Although the parties were divorced on May 10, 2013, they shall be identified as “the wife” and “the husband.”

3For convenience of reference, these Reasons are divided into parts, as follows:

• Part 1: The Agreement
• Part 2: Equalization
• Part 3: Child Support
• Part 4: Spousal Support
• Part 5: Other Claims
• Part 6: Disposition

Part 1 – The Agreement

Personal Background

4The wife met the husband in 1991, when she was 26 years old. After being called to the Ontario Bar, she was hired by a small Toronto litigation firm, primarily engaged in commercial litigation. The husband was a firm client, involved in a number of lawsuits in his personal capacity and through several corporations that he controlled. The primary corporate litigant was Renegade Capital Corporation (“Renegade”), a holding company in which he held a controlling interest as a 60 percent shareholder. His (then) spouse held a 40 percent interest. Renegade’s principal holding was Algonquin Mercantile Corporation (“Algonquin”), a publicly traded company in which Renegade held a 68 percent interest. In turn, Algonquin held investments in two distinct businesses: a 50.1 percent interest in Pharma Rexall Drug Store Ltd. (“Rexall”) and a 100 percent interest in Dominion Citrus & Drugs Ltd. (“Dominion Citrus”), a wholesale distributor and packager of fresh produce. The husband was 46 years old.

5The wife acted as junior counsel on the husband’s files. She was married. The husband had earlier separated from his spouse of 27 years in 1987, but they were not yet divorced and had not settled the financial issues arising from that marriage breakdown. There were two children of that relationship.

6A personal relationship between the wife and husband started in 1992, and by 1993 the parties were cohabiting. The wife had separated from her spouse in July 1992: they resolved all issues arising from that marriage by a Separation Agreement in November 1992. This Agreement had been prepared by a lawyer the spouse had retained – the wife waived independent legal advice.

7In early 1993, the husband applied for a simple divorce from his spouse. In response, she claimed, among other things, an equalization of net family properties and spousal support. Also in that year, the wife in these proceedings left the law firm where she had been employed and began working almost exclusively for the husband, handling his litigation and related corporate affairs. There were many separate legal proceedings, mostly arising out of a hostile takeover of Enfield Corporation Limited (“Enfield”), a (then) Toronto Stock Exchange listed company that he had founded, of which the husband had been President and CEO until 1989. The wife was involved in the husband’s litigation in varying capacities but not, in most cases, as counsel of record.

8The parties married on September 14, 1994. Soon afterwards, their first child (Michael) was born. Later that year, the husband transferred title to his Collingwood condominium to the wife. Two other children followed, another son (Jeffrey) in 1997, and then, in 1999, a daughter (Grace). In 1996, using joint funds from a late 1995 settlement of some of the husband’s litigation claims, the parties purchased and registered in the wife’s name a building lot in Aurora. They designed and built a 7,500 square foot residence on this lot, complete with a swimming pool, tennis court and movie theatre. The family rented a house in Aurora until their new home could be occupied in mid-1998. This residence remained the parties’ matrimonial home until they separated. It is now owned by the husband.

9In late 1999, the outstanding family law proceedings between the husband and his first spouse were settled. There is considerable dispute in this case about the nature and degree of the wife’s involvement in helping the husband in those proceedings, particularly about her knowledge of family law and, more generally, business valuation methodologies and principles.

10Notwithstanding the birth of the parties’ children, the wife continued to practice law until 2001. With the limited exception of some part-time work between April 2004 and March 2006, she did not work outside of the home. She shouldered most of the caregiving responsibilities for the children; the husband was home most evenings and weekends. But he was an involved father. It is a credit to both parties that, very early after their separation, they resolved their parenting issues.

11As their family grew and the husband’s business interests prospered, the parties enjoyed a busy recreational and traveled lifestyle. They were members of a Collingwood area private ski club and enjoyed the use of a chalet owned by one of the husband’s companies. The parties enjoyed many holidays in locations such as Turks & Caicos, Mexico, Aspen and Utah. These were usually with the children, but from time to time the parties travelled alone or with other couples. They spent $100,000 on ballroom dancing lessons. The children attended private school. The husband described the children’s lifestyle as “privileged.” And so it was.

12The husband directed the family’s finances. He deposited funds to a joint bank account that the wife administered, from which she paid household and other expenses. Extraordinary expenses required an advance budget for the husband’s review. The wife did not have a separate bank account of her own. Her RRSP and investment accounts were set up by the husband and he handled all of their transactions.

13But in late 2007, their apparently idyllic marriage unraveled. The wife had become involved with someone from her local gym and the husband discovered the existence of that relationship before Christmas. The parties’ evidence conflicted regarding whether, several years earlier, the husband had given the wife “permission” to pursue a relationship outside of their marriage. In my view, nothing turns on this, because the parties continued their married life as before until the events that precipitated their separation in early 2008.

Separation

14Christmas 2007 was stressful. The parties discussed separation. During the holidays at the Collingwood chalet, the husband was admitted to the local hospital for a stress-related complaint. He was discharged later that day, and soon afterwards consulted a cardiologist in Toronto.

15In January 2008, the parties undertook counselling to evaluate the prospects of salvaging their marriage, to no avail. The wife did not know what to do: as she described the situation, she was unhappy, but the children were happy and the husband did not want the marriage to end. She felt guilty, “frozen”, and reluctant to engage the husband in discussions that could become argumentative because of his medical condition. He thought her affair was continuing. Even so, the husband was impatient for a decision. There was no discussion about therapy after February 2008.

16For the children’s 2008 March Break, the family vacationed in Jackson Hole, Wyoming. Upon their return, the wife moved to Grace’s bedroom. To all outward appearances, the parties continued as a married couple – no final decision about their marriage had been reached. There were good times and bad times. The wife says she felt “pressured”; the husband says he hoped that she would stay in the marriage.

17However, shortly after his discovery of the wife’s affair, the husband engaged the services of the lawyer who had represented him in the litigation with his former spouse. That lawyer drafted and forwarded a pro forma Separation Agreement to the husband in January 2008. It contained no financial terms. The husband emailed the wife a copy of that document. As he said at the time, while the parties were “not contemplating separating…I think it is prudent to deal with the issues of separation now…” The wife did not respond or comment. In all, over the next four-and-a-half months, until the parties signed their final Agreement on May 31, 2008, there were at least three revisions to the original draft, none made with the wife’s knowledge. The husband also commissioned valuations and appraisals of the matrimonial home and the parties’ art collection; he consulted with accountants, retained a chartered business valuator and prepared, with input from his lawyer, various net family property scenarios. The wife was, for the most part, unaware of these activities. She did not retain a lawyer.

18By April 20, 2008, separation was almost certain, but it was not until May 6 or 7, 2008 the parties finally decided. As nothing material depends on which date is chosen, May 7, 2008 shall be the valuation date. It was also around this time, although whether this falls before or after the valuation date is unclear, that the parties discussed the wife’s complaint that she had little independence with respect to the family’s income and assets. The husband recommended that the wife invest in certain income-generating securities that he would select and that she finance their acquisition by a mortgage on the matrimonial home. The income distributions would be sufficient to meet the interest and principal payments due on the mortgage and would allow for a significant monthly reduction on the mortgage principal, thereby, over time, retiring the mortgage and leaving the wife with a fully liquid investment. The interest would be tax deductible. The husband was prepared to consent to a $500,000 mortgage to be registered on title to the matrimonial home and to act as its guarantor. As the husband had managed his former spouse’s portfolio and the wife’s investments, the wife agreed to this plan: a mortgage was taken out, registered on title and the securities recommended by the husband purchased. As will become apparent later in these Reasons, this arrangement is relevant to the issue of the wife’s investment knowledge and the husband’s financial acumen. Suffice to say that in the weeks surrounding the final decision to separate, and while negotiating their separation agreement, these discussions were also taking place.

May 7 to 31, 2008

19In the months after the husband emailed the wife the pro forma Separation Agreement on January 8, 2008, and despite several discussions about separation, the parties did not exchange any further drafts until May 16, 2008. On that date, the husband emailed the wife a more particularized draft. Before then, the husband was regularly in contact with his lawyer, refining the Agreement’s provisions and arranging financial disclosure.

20Between May 16 and May 31, 2008, the parties made several revisions to the May 16 draft. The wife objected to certain provisions (such as the children primarily residing with the husband), which the parties discussed, and the husband sent to his lawyer to revise. At some point between May 17 and 19, the husband gave the wife a Net Family Property statement (“NFP”) he had prepared, as well as certain documents which he said supported the values referenced in that statement. The wife was surprised when she saw that, according to the NFP statement, she owed the husband an equalization payment (“EP”) of almost $954,000. In particular, she was confused by the value of $7,603,685.03 for the husband’s interest in Renegade, because she did not remember that the parties had a lot of money when they married. As she recalled, the husband’s overall financial situation was “volatile.” When she questioned the husband about this, he became agitated and offended that she would challenge his integrity, that (as he said) he was being more than generous to her and, in any event, he had commissioned a valuation for Renegade that would support his numbers.

21Looking at Renegade’s 1994 Financial Statement, the wife saw that the company had slightly in excess of $32,363,466 recorded for its long term investments and that it had $20,258,624 in liabilities, thereby resulting in $12,672,685 shareholders’ equity. Although very upset, the wife did not take the information to a lawyer to review because the husband had considerable experience in valuing businesses and enterprises, the Renegade Statements had been audited, and the husband was confident about the figures in his NFP statement. As the wife testified, she would need to find a “large error” (in fact more than $1,900,000) in the husband’s NFP to negate the payment he claimed she owed. And she trusted him. She felt guilty about breaking up the marriage, she had no job, three children and, she testified, the husband was “relentless” in moving matters forward.

22While the husband disputes the wife’s description of their interactions in dealing with their financial issues, it is clear that tensions inside the matrimonial home progressively escalated after the March Break, with the husband taking the lead in preparing for separation. Before the final Agreement was signed, the husband had reviewed with his business valuator two calculations for the value of Renegade’s principal asset (Algonquin). The $7,603,685.03 value represented by the husband in his NFP statement reflected a “cost” or “book value” approach, was calculated by multiplying Renegade’s shareholders’ equity of $12,672,085 by the husband’s 60 percent interest in the company. Not reflected in the NFP statement was any (market) trading value for Renegade’s $32,363,466 in long term investments in its operating companies. The Notes recorded their trading value as $16,243,860, at a difference of $16,119,606 (the bank indebtedness alone was $17,300,083). The husband did not review Renegade’s 1994 financial statements with the wife.

Signing of Separation Agreement and Schedules

23The final form of the Separation Agreement (“the Agreement”) was signed by the parties on May 31, 2008, in the upstairs office of the matrimonial home. No one else was present so their signatures were not witnessed. Later, the husband’s assistant signed the Agreement as witness for both parties after the husband took it to his office. The Court of Appeal rejected the wife’s challenge to the Agreement for failure to comply with the witnessing requirements of section 55(1) of the Family Law Act.

24No financial statement by either party was ever prepared, sworn or exchanged between them before the Agreement was signed.

25An NFP statement appended to the Agreement indicated that the wife owed the husband an EP of $954,150.88. A component of the calculations was, among other things, the manner in which the wife’s sole ownership of the matrimonial home was represented (i.e. as being jointly owned). The husband claimed a marriage date deduction of $11,012,390.36, the principal component of which was the value of his shares in Renegade, represented as having a book value of $7,603,685.03. There was other property owned by the husband on the marriage date: the value of that property will be addressed later in these Reasons.

26The essential terms of the Separation Agreement were the following:

• the parties would have joint custody of the children;
• the wife was released from her obligation to make a $954,150 equalization payment;
• the wife was to move out of the matrimonial home by September 2008;
• the husband had the right to buy the matrimonial home from the wife for $1,250,000, from which proceeds the wife was to discharge the $500,000 mortgage;
• if requested, Renegade would lend the wife $250,000 towards the purchase of a home;
• the wife was to transfer or permit a redemption of her Renegade shares for $250,000, even though the NFP statement valued them at $368,512.65;
• Renegade would invest $150,000 to $250,000 in a private company the wife was considering incorporating to carry on a business;
• the husband’s annual income was described as amounting to $590,000 and the wife’s annual income, inclusive of support, was described as amounting to $329,000;
• no child support was payable as the children would spend equal time with the parties. This issue was reviewable prior to December 31, 2010, and annually thereafter;
• the husband was to be solely responsible for the children’s special expenses as defined by the Child Support Guidelines. The Agreement listed those expenses, which amounted to $97,760 annually;
• the wife would receive $10,000 monthly spousal support until December 31, 2010;
• Renegade would retain the wife as corporate secretary and general counsel until December 31, 2010 at a rate of compensation of $10,000 monthly;
• The Agreement contained extensive releases dealing with property and spousal support obligations.

27Although the husband acknowledged receiving independent legal advice from the lawyer whose name appeared in the initial draft of the Agreement, no “Certificate of Independent Legal Advice” was attached, nor was there a signed “Waiver of Independent Legal Advice” from the wife. Paragraph 13.7 of the Agreement identified her as a lawyer and that she waived advice.

28There were six attachments to the Agreement. These were identified in an index (“Attachment to Separation Agreement dated May 31, 2008”) following the parties’ signatures, and comprised the following:

1. Schedule A: Transactions between Michael, Patricia and Renegade Capital Corporation.
2. Net Family Property statement of Michael dated May 31, 2008.
3. Renegade Capital Corporation Liquidation Value Analysis.
4. Retainer Agreement between Renegade Capital Corporation and Patricia dated May 31, 2008.
5. Subscription Agreement between Renegade Capital Corporation and Patricia dated May 31, 2008.
6. Loan Agreement between Renegade Capital Corporation and Patricia dated May 31, 2008.

29The attachments and the documents referenced in paragraph 9.1 of the Agreement comprised the parties’ disclosure relating to their Separation Agreement.

June 2008 to Litigation

30The Separation Agreement provided that the wife would vacate the matrimonial home before September 1, 2008, after which the husband would have its exclusive possession. On or shortly after June 11, 2008, the husband left a copy of a Report from Capital Canada Limited on the wife’s home office desk. Capital Canada is an investment banking firm providing evaluative and related financial services to corporations and private persons. Around this time too, the husband gave the wife a binder that contained backup for his NFP statement. Most of that backup was known to the wife before the Agreement was signed, and included copies of appraisals of the matrimonial home, jewelry and art, as well as some bank account statements. Included in the binder was a “Capital Canada Algonquin 1994 Valuation” Report dated June 11, 2008.

31The husband also paid $250,000 to the wife for her shares in Renegade.

32In third party correspondence, the wife described the husband’s conduct towards her shortly before and after she left the matrimonial home as “gracious”, and that he was “handling everything graciously.”

33On July 1, 2008, the wife moved to a nearby three bedroom, rented condominium, less than one-third of the size of the matrimonial home. The children spent most of their time with her, because their father was working. She undertook a number of vocationally-related business courses at various institutions toward the end of that summer and extending into early 2009. Some were only a few days in duration, others longer. These involved management accounting, corporate governance, corporate insolvency and a “Reconnect” course for professional women re-entering the workforce, in which (among other things) students were taught how to read Financial Statements. One of the courses dealt with cost accounting, cost reporting and mark-to-market analysis.

34But in late April 2009, and in the several weeks following, a number of things happened:

(a) Renegade terminated the wife’s retainer effective April 30, 2009 after she had found full-time employment, and, according to the Notice signed by the husband on behalf of Renegade, she had performed none of the duties contemplated by her retainer;

(b) the wife sought a review of the child support arrangements in the Agreement due to the difference in parental lifestyles that the children, especially Grace, were experiencing; and

(c) “the penny dropped.” In an email to the husband dated June 7, 2009, the wife requested the husband’s explanation why it was “appropriate to value Renegade at its book value for the purpose of valuing [his date of marriage assets] but at its liquidation value at the end of the marriage. This is not an accusation. It is just a question.”

35The husband’s response was not reassuring:

With respect to the Family Property Statement at the time it was prepared I had no better information regarding the 1994 value of Renegade than its book value. The most significant asset was its holding of what was then a control block of shares of Algonquin Mercantile Corporation (now Automodular Corporation). I did commission a valuation of Algonquin Mercantile Corporation as of the date of our marriage and provided it to you on its receipt very shortly after our separation agreement was signed. I believe the liquidation value was appropriate as of the date of our separation in that none of the holdings comprised control positions and all securities held were listed and trading.” (Emphasis added)

36The wife says that the highlighted response was untrue.

37The husband refused to make any changes to the child support or to any other terms of the Separation Agreement.

38The wife retained counsel shortly afterwards, and after unsuccessful efforts to resolve their outstanding issues, the wife commenced these proceedings.

Credibility

39Each party challenged the other’s credibility. The husband challenged the reliability of the wife’s evidence surrounding the circumstances that led to the negotiation and signing of the Agreement, and she challenged his testimony as opportunistic but often logically incredible and untruthful.

40In Christakos v. De Caires, 2016 ONSC 702, at para. 10, Nicholson J. adopted MacDonald J.’s following outline in Re Novak Estate, 2008 NSSC 283, 269 N.S.R. (3d) 84:

There are many tools for assessing credibility:

a) The ability to consider inconsistencies and weaknesses in the witness’s evidence, which includes internal inconsistencies, prior inconsistent statements, inconsistencies between the witness’ testimony and the testimony of other witnesses.

b) The ability to review independent evidence that confirms or contradicts the witness’ testimony.

c) The ability to assess whether the witness’ testimony is plausible or, as stated by the British Columbia Court of Appeal in Faryna v. Chorny, 1951 252 (BC CA), 1951 CarswellBC 133, it is “in harmony with the preponderance of probabilities which a practical [and] informed person would readily recognize as reasonable in that place and in those conditions”, but in doing so I am required not to rely on false or frail assumptions about human behaviour.

d) It is possible to rely upon the demeanour of the witness, including their sincerity and use of language, but it should be done with caution (R. v. Mah, 2002 NSCA 99 [at paras.] 70-75).

e) Special consideration must be given to the testimony of witnesses who are parties to proceedings; it is important to consider the motive that witnesses may have to fabricate evidence. R. v. J.H. 2005 253 (ON CA), [2005] O.J. No. 39 (OCA) [at paras.] 51-56).

There is no principle of law that requires a trier of fact to believe or disbelieve a witness’s testimony in its entirety. On the contrary, a trier may believe none, part or all of a witness’s evidence, and may attach different weight to different parts of a witness’s evidence (See R. v. D.R. [1966] 2 S.C.R. 291 at [para.] 93 and R. v. J.H. supra). [Emphasis in original.]

41Which party’s evidence is to be preferred on a balance of probabilities, in whole or in part, and accorded the appropriate weight? This inquiry involves a consideration of inconsistencies in the parties’ pleadings, their evidence at questioning and trial, their trial demeanour when testifying in-chief and during cross-examination, the consistency of their evidence with other trial evidence and, viewed overall, whether their evidence impresses the court as credible.

Wife’s Credibility

42The husband challenged the wife’s credibility in several respects, the most important being her understanding of principles relating to family law, corporate Financial Statements, business valuation theory, her knowledge of the husband’s business interests arising from the parties’ cohabitation and her involvement in Renegade as a shareholder.

(a) Family Law

43Despite swearing an affidavit in August 26, 2011 that she had never studied or practiced family law, the wife later admitted that she had in fact taken an elective course in family law at law school. In 1992, she represented herself when she and her former spouse settled their modest financial affairs by a separation agreement that listed their assets and debts. There was nothing complicated about those affairs.

44More significantly, according to the husband, the wife assisted in the litigation with his former spouse by obtaining in 1997 the Law Society of Upper Canada (“LSUC”) Bar Admission course materials, as well as researching trust issues and case law. She helped him prepare his Conference materials and provided to the husband a Settlement Agreement template. Whether she helped the husband draft or revise the final form of that agreement is disputed. What is important is that nowhere in any of the evidence dealing with the wife’s family law knowledge or experience was there any suggestion that any of the assistance that the wife provided dealt with understanding corporate Financial Statements or business valuation theories. She provided (the husband admitted) “pretty general and broad assistance across a wide range of things.”

(b) Financial Statement/Business Valuation

45The wife studied economics as an undergraduate, and in 2001, obtained an LLM in securities law. In the course of her practice, she acted for Renegade and other clients in matters involving contractual and commercial disputes. The husband asserts that these cases necessitated some degree of familiarity with concepts of share value, and certainly business valuation theories.

46For example:

(a) in Blair v. Consolidated Enfield Corp, 1993 8658 (ON CA), 15 O.R. (3d) 783, the issue before the Court of Appeal was director indemnity rights relating to a costs award. The husband represented himself successfully, in terms of the outcome, and the wife was identified as his agent. However, nothing in the report of that case, or in the evidence before this court about that case, indicated that business valuation issues were involved;

(b) an appeal of the Court of Appeal’s decision to the Supreme Court of Canada by Consolidated Enfield Corp. was unsuccessful: Consolidated Enfield Corp. v. Blair, 1995 76 (SCC), [1995] 4 S.C.R. 5. The wife was noted as representing her husband. No valuation issues were involved;

(c) a third party claim by the husband against a prominent Canadian law firm that acted for him in a 1993 action by Federal Pioneer Limited (“Federal”), brought against the husband and several others. Federal claimed damages in excess of $53,000,000 for breach of the provisions of the Pension Benefits Act, S.O. 1997, c. 35. Federal and Enfield had combined their pension plans shortly before the events that resulted in Enfield’s hostile takeover and the termination of the husband as its President and Chief Executive Officer. The husband’s third party claim against the law firm that had been struck out, but on appeal, the Court of Appeal allowed the husband to proceed, in part: Federal Pioneer Limited v. Blair et al, (C26496) released May 22, 1998. The wife was noted as counsel for the husband. The husband’s November 1993 Statement of Defence, counterclaim and cross-claim showed him representing himself. Nothing in the pleadings, in the Court of Appeal’s endorsement or the evidence before this court, dealt with business valuation theories or methodologies: rather it was the quantification of damages arising from the loss of market value of publicly traded shares; and

(d) in 2005/2006, the wife briefly resumed her legal career to help a friend in commercial proceedings involving a coffee shop (“Zavida”). The husband provided an expert report on damages. This report discussed two valuation methodologies (price to sales ratio and asset replacement cost) and it is clear from the work dockets made by the wife that she reviewed that report and later reviewed and discussed with the husband the other party’s expert report. While the case settled before trial preparation began, the evidence in this trial went no further than the wife recognizing that Zavida needed expert evidence, that she relied upon the husband’s expertise and that there had been discussions between the parties about the reports.

47What is clear from these examples and the parties’ evidence is that even though the wife demonstrated a skillset reasonably commensurate with a person of her legal background, in my view, that did not extend to the level or degree of valuation knowledge that the husband wishes to have imputed to her and for which she relied upon him for assistance and guidance.

(c) Knowledge of Husband’s Business Affairs

48There is no doubt that the parties discussed Renegade’s business affairs during their married cohabitation. In addition, between 1994 and 2007, the Notes to Renegade’s audited Financial Statements disclosed the difference, if any, between the book value and trading value of the company’s long term investments. The wife was a shareholder of Renegade from 2000 until June 2008.

49The husband argued that by distancing herself from a more nuanced understanding of how the Statements reflected Renegade’s value, the wife’s evidence was unreliable. At trial, the husband testified that the wife would have gleaned knowledge of Renegade’s value from the parties’ marriage and her involvement in the litigation with his former spouse.

Q. You seem to suggest that as a result of being married to you and you going through litigation with Nancy Blair, or not even being married to her, but going through Nancy Blair that Ms Virc somehow gleaned knowledge of the value of Renegade. That’s what you’d like this court to believe?

A. Yes.

(d) Reliability

50The husband made similar assertions about the reliability of the wife’s testimony on matters not involving her actual knowledge of the veracity of his financial representations to her. These included how long he wore a cardiac monitor (in early 2008), accessing public securities filings, and when she became aware that the husband was “putting his affairs in order” (in mid-to-late April 2008). None of these challenges, whether viewed individually or cumulatively, left the court with the impression that she was not honestly endeavouring to tell the truth.

Husband’s Credibility

51The wife challenged the husband’s credibility along a broad spectrum. Her first challenge related to his tactically evasive and opportunistic answers and litigation strategies, such as making evidence tampering complaints to the Law Society of Upper Canada about the wife and her counsel, which were withdrawn at the start of trial. She further impugns his inconsistent or contradictory pleadings and testimony, pointing to inconsistencies as between his questioning and trial evidence, and as between his evidence and pleadings in this proceeding and the earlier family law proceedings involving his former spouse. She also points to his unconvincing explanations about his failure to cooperate with an expert review of computer records in his possession before trial, which was ordered by Nelson J. on April 14, 2015, and his explanation for why he declined to call the author of the June 2008 Capital Canada Report as an expert witness. This list is not exhaustive.

(a) Pleadings

52Excepting his financial statements (which will be addressed immediately below), there were several inconsistencies between the husband’s pleadings and his questioning and trial evidence. For example, he initially alleged an earlier separation date than the one he later acknowledged, the partial effect of which was to suggest a longer period of negotiation of the Separation Agreement. He attributed responsibility for this to his lawyer as a litigation strategy (“… [the] positions she was suggesting that I take… [were not] what I was telling her to take…). Elsewhere, he testified that after discovering his wife’s affair and discussing it with her, he told her that he could “live with it”, but subsequently started, then withdrew, a divorce application alleging her adultery. In these proceedings, he delivered an Answer that, among other things, alleged that the wife was not entitled to spousal support because her adultery amounted to a gross repudiation of the marriage.

(b) Inconsistent Financial Statements

53There were material discrepancies and omissions as between the husband’s financial statement sworn in the proceedings with his former spouse and the financial statement sworn in these proceedings. The effect of these was to minimize the husband’s net family property in the former, but maximize the deductible value of his marriage date assets in the latter, for almost the same period in time. These differences were not insubstantial, and in each case, the differences financially advantaged the husband. For example:

(a) the husband swore a financial statement on February 1, 1994 in the legal proceedings started by his former spouse. This date was seven-and-a-half months before the marriage date in this case. He stated that he was a defendant in various proceedings in which damages were being claimed against him and others in excess of $200,000,000. No litigation receivable was noted. None of the claims had been settled when the husband and wife married. In this case, the husband claimed litigation receivables exceeding $1,500,000 as a deduction on the marriage date. No reference was made in his financial statements sworn in this proceeding to any of the 1994 outstanding claims for damages, none of which had been resolved before the parties married;

(b) nowhere in the two financial statements sworn in the litigation with his former spouse did the husband disclose the existence of a 1994 statement date receivable of $145,000 for an unpaid car benefit allegedly due to him from Renegade. While that may be inconsequential with respect to a 1999 financial statement he swore in those proceedings, he did not disclose the existence of that asset to his former spouse in his 1994 financial statement, even though he testified in this case that the obligation arose in 1992. Moreover, he did not refer to any such marriage date receivable in these proceedings (in which he swore seven financial statements) until the statement sworn January 7, 2015 – four-and-a-half years after these proceedings began and shortly before the start of this trial. The two long form (i.e. 13.1) statements sworn before January 7, 2015 made no reference to this deduction; and

(c) alleged debts owing on the valuation date for an automobile lease obligation, matrimonial home and chalet utility expenses, realty taxes and insurance were added to the three Form 13.1 financial statements sworn in the six months preceding trial. None of these alleged debts were claimed in the two financial statements sworn in the earlier part of these proceedings before the husband’s summary judgment motion.

54It would not be appropriate, in my view, to attribute these and other financial inconsistencies to the husband’s self-represented status in these proceedings, not only because of his demonstrable financial acuity but also because in the earlier proceedings with his former spouse, he was either periodically represented by, or consulted with, counsel. In many respects, the inconsistencies appear opportunistic, or simply irreconcilable. Support for this latter observation may also be found when dealing with the inconsistent litigation positions taken by the husband in these proceedings and the proceedings with his former spouse.

(c) Inconsistent Testimony

55On April 14, 2015, shortly before this trial began, Nelson J. made an Order permitting the wife to have transcribed the examinations of the husband and his former spouse in their earlier family law proceedings settled in 1999. The husband had objected to that Order being made and, at the outset of this trial, sought among other things, an adjournment in order to schedule a hearing date for his motion seeking leave to appeal Nelson J.’s Order. That motion was denied.

56As already noted, the husband and his previous spouse separated in November 1988. In late March 1993, the husband petitioned the court for a divorce. His former spouse delivered an Answer and advanced claims involving equalization of net family properties, spousal support (retroactive and prospective) and related relief. No issues were raised with respect to custody or child support, as it seems that satisfactory arrangements had been made. Each party filed sworn financial statements as required: the husband’s statement, sworn February 1, 1994, was commissioned by the wife.

57In pre-trial questioning and documentary disclosure in those proceedings, it is evident that Renegade’s value in 1993 and 1994 was a significant issue. Both the wife and husband testified that the husband was very concerned that, given the imbalance of shareholdings in Renegade as between the husband and his former spouse (60/40) on the breakdown of that marriage, the husband could potentially have owed to his former spouse an equalization payment consisting of one-half of the difference in value of those shareholdings as of their 1988 valuation date. This was important because, as the husband contended in that litigation, Renegade’s value had significantly declined after the 1988 valuation date, to the point where its assets were insufficient to cover its indebtedness. It is not unreasonable to infer, as the wife suggested at trial, that the transfer of title to the Collingwood condominium shortly after the parties married should be viewed in a creditor protection context, in light of the husband’s then existing significant litigation exposure.

58To avoid paying his former spouse an equalization payment that would have taken the difference in value of the Renegade shares each owned into account and which potentially could have been calculated as of the 1988 valuation date, the husband advanced a number of defences. One such defence involved the imposition of a resulting or reverse constructive trust. Both the husband and wife in this case testified that the genesis for this defence was the 1996 LSUC Bar Admission Course notes that the wife had obtained in 1997.

59The husband was initially represented by a lawyer in the proceedings with his former spouse, then represented himself. He maintained that he was neither worth as much as his spouse alleged nor, in any event, did he have the means to pay. Renegade was virtually worthless. This position was reflected in his questioning of his former spouse on April 24, 1998, and his own questioning in that case. He prepared a “Renegade Equity Value” schedule that showed a negative equity value of ($3,446,801), adjusted for a mark-to-market value of the company’s long term investments for the fiscal year ending December 31, 1994. In this case, the husband testified that he routinely did this kind of value analysis with respect to Renegade, and that he would not have put propositions to his former spouse in questioning her that were misleading or untrue. The earlier fiscal year was recorded as having an adjusted negative equity value of ($4,265,982).

60Presumably to lend credence to his representations to his former spouse about the value of Renegade, the husband had the company’s accountant prepare an estimated wind-up value for Renegade as at October 15, 1993, based on its audited December 31, 1993 Financial Statements. The accountant’s memorandum to the husband dated June 24, 1998 calculated a wind-up value as of October 15, 1993 that would have resulted in no monies being available for distribution to shareholders, the company’s bankers being owed in excess of $2,925,000, another $2,861,000 owed for accounts payable, as well as the balance of the shareholder’s loan from the husband to the company and the lawsuit settlement.

61Shortly afterwards, in a letter dated July 13, 1998 addressed to his former spouse’s lawyer, the husband maintained he was virtually insolvent:

I would have thought that discoveries might have prompted Nancy [the husband’s former spouse] to reconsider her offer to settle. It is obvious that Nancy brought her claim in 1993 when my net worth was negative and her claim impossible to satisfy. She knows her claim and her offer to settle remain beyond my means to satisfy. There is no point in negotiating a quantum of settlement that I cannot pay.

62An updated financial statement sworn by the husband in those proceedings on March 31, 1999 represented that the value of his 60 percent interest in Renegade had decreased to $2,261,000 as of that date.

63In an undated Pre-Trial Conference memorandum filed by the husband in the spring of 1999, the husband described in some detail Renegade’s precarious financial status as of October 1993, relevant excerpts of which stated as follows:

“To protect Renegade from insolvency, the husband transferred his Algonquin compensation to Renegade (by having Renegade bill Algonquin for a management fee rather than taking a salary from Algonquin) for the period from 1991 to 1996. Renegade received a total of $1,012,150 from the husband during this period…

The husband sustained himself in this period by liquidating personal assets and by obtaining the consent of Renegade’s bankers to Renegade’s repayment of a portion of the interest free loan owed to him by Renegade. The husband received these repayments free of tax. Between 1991 and 1996, Renegade repaid $994,975 of the husband’s loan…

In 1992, the husband was concerned about the financial stress the litigation and declining value of Renegade’s assets put on him. Although the wife had not brought any claim for equalization, on July 19, 1992, the husband proposed and signed a general security agreement with the wife providing her security of $1 million for the final settlement of any additional equalization. At that time, the husband was subject to claims brought by Enfield and others amounting to $180 million alleged damages…

The wife brought this action on October 15, 1993. On that date, liquidation of Renegade’s assets would have been insufficient to meet its debts and the owners of Renegade would have received nothing. Debt over $5 million would have remained unpaid had Renegade been liquidated at that time. There is no dispute that the husband was incapable of paying the equalization amount claimed by the wife at the time that she brought her claim…” (Emphasis added)

64Elsewhere in the memorandum, the husband referenced the post-separation decline in the value of Renegade, its possible insolvency and his various efforts to maintain its liquidity.

65For all intents and purposes, Renegade was insolvent. This precarious position in the two to three years before the date of the parties’ marriage was evidenced by Renegade’s relationship with its bankers.

66In 1990, the husband had arranged a $25,000,000 revolving term credit facility with a chartered bank, and had pledged Renegade’s shares in Algonquin as part of the required collateral security. In November 1992, the husband required the Bank’s consent to a payment to the husband by Renegade of $300,000, without prejudice to the Bank’s security (that is the background to the reference quoted above about the partial repayment of the husband’s interest free loan by Renegade). In August 1993, in a letter to the husband, the Bank noted that Renegade had been continually in breach of its borrowing covenant since shortly after the credit facility had been set up. The problem was that what Renegade had borrowed, and was continuing to borrow, “exceeded the lending value of certain readily realizable securities held by the Bank as collateral security.”

67It merits comment that while the husband’s memorandum is not sworn, it nonetheless provides insight into his representations to both his former spouse and the court about Renegade’s value in October 1993, less than a year before his marriage to the wife. This is consistent with the husband’s explanation for why, in the previous year, he had arranged for a General Security Agreement (“GSA”) in the former spouse’s favour. He acknowledged his reasons at trial:

QUESTION: …could you tell me in your own words now for this record, what was the reason that was done? Just a very truncated version though.

ANSWER: I think at that point in time I recognized that Renegade was deeply under water and may not survive and that there had been judgments against me that I was appealing or otherwise contesting, that I ultimately didn’t successfully contest, but anyway, at that point in time were in the process of being executed, and that I wanted to sure that Mrs. Blair had a fair shot at her pre-existing claim or some security for her claim against whatever personal assets I had that weren’t going to be victimized by the assault done against me.

68It is impossible, in my view, to reconcile the husband’s contradictory evidence in this case, that the value of his interest in Renegade on the marriage date was $7,603,685.03, with his evidence and representations in the earlier case that Renegade had an adjusted negative equity value in excess of ($3,000,000). In my view the husband has tailored “his evidence to suit his needs in each particular proceeding”: R. v. Nedelcu (2007), 2007 9887 (ON SC), 41 C.P.C. (6th) 357 (Ont. S.C.) as referred to in Juman v. Doucette, 2008 SCC 8, [2008] 1 S.C.R. 157 at para. 41.

(d) Improbable Evidence

69In his same day response to the wife’s June 7, 2009 email, which, among other things, requested from the husband an explanation of why Renegade was valued at its book value on the marriage date, the husband stated that he “had no better information regarding the 1994 value of Renegade than its book value.” The wife says this was untrue.

70In cross-examination, the husband admitted that he considered himself an expert in business valuation matters, that he had a lot of experience reviewing Financial Statements, that he prepared reports for third parties and that he was quite capable of explaining complex financial calculations and information to people. That expertise was demonstrated at trial by the husband’s cross-examination of the wife’s expert. His email response must also be viewed contextually in light of the various complicated legal proceedings in which he was embroiled for so many years after 1989, in which he was mostly successful, and in light of the observations made by Garton J. in the husband’s successful appeal of his conviction for breach of fiduciary duty, that the husband “had a reputation in the investment community as an astute investor.”

71The husband testified in questioning and at trial that a mark-to-market calculation, which was a good indicator of net worth in a company, was easy to do: it was something that he routinely did with respect to Renegade, and that while he did such analysis in the proceedings with his former spouse, he did not do it when negotiating the Separation Agreement in this case.

72The wife sought to impeach the husband’s credibility about whether he had, in fact, made such a calculation, so as to demonstrate its possible inconsistency with what he had represented to her. At the Trial Management Conference on April 14, 2015, Nelson J. ordered, among other things, that the hard drive of the husband’s computer, then in the possession of the lawyer with whom the husband had been consulting, be made available for a computer expert (Richard Morochove) retained by the wife to review and index. That did not happen.

73The wife’s counsel copied the husband with what Mr. Morochove required, and that involved a copy of the hard drive being made. The husband refused. He disagreed with the expert, and while he suggested an alternative that would not involve a copy being made, it is clear that significantly more time and expense (to the wife) would be involved. The husband did not, in my view, act reasonably in facilitating the expert’s review, as ordered by Nelson J.

74Given the husband’s background and admitted expertise in financial matters, his response in June 2009 that he had no better information about the 1994 value of Renegade than its book value was disingenuous at best. His failure to more helpfully facilitate compliance with Nelson J.’s Order does not dispel the court’s concern about the husband’s credibility on this point.

75It is difficult to reconcile the husband’s position in these proceedings that the wife should have known that Renegade’s long term investments were noted in its Financial Statements as being worth significantly less than their book value with his June 2009 email to the wife, particularly in light of his interactions beforehand with Capital Canada and his failure to be more cooperative with the computer hard drive review. The wife suggested too, not without some reason, that the husband was someone who could quite easily have done the math in his head. I agree.

(e) Retooling his Case

76The wife has also suggested that as a result of the Court of Appeal Ruling that overturned the summary judgment in this case, the husband realized that he needed to “re-tool” his case, and so he concocted a conflict of interest to rationalize not calling as a witness the author of the 2008 Capital Canada Report (Glenn Bowman).

77Prior to the summary judgment motion, the husband testified that he intended to rely on the Capital Canada Report with respect to the 1994 value of Renegade’s interest in Algonquin. The husband had provided Mr. Bowman, a principal of Capital Canada, with the information that he (the husband) thought was relevant, and reviewed a draft Report. Except for advising Mr. Bowman of an error, the husband made no attempt to influence the choice of valuation methodology. That Report, dealing with the value of Algonquin, did not express any opinion about the value of Renegade’s interest in the company, or the value of the husband’s interest in Renegade. It is noteworthy that there is no evidence that in the almost four-and-a-half years between the parties’ separation and the hearing of the husband’s summary judgment motion in early October 2012, did the husband correct or disavow the Capital Canada Report or raise any issue about some kind of disqualifying conflict of interest. He affirmed at his questioning in 2011 that he intended to rely on the Report at trial.

78The Court of Appeal observed that the motion judge had commented that the husband had substantially overvalued his date of marriage assets, in particular, the value of his business interests on the marriage date. After the Court of Appeal decision, the husband decided not to rely on the Capital Canada Report. He explained that he made this decision because, at some unspecified point in time after the 2008 report, Capital Canada had been engaged to value Automodular (the successor to Algonquin, the name being changed in 2001) for purposes unrelated to the litigation with the wife. In the husband’s view this could call Mr. Bowman’s independence as a witness into question. It is notable that at no time after the Court of Appeal decision was this court ever presented with this issue to determine.

79At trial, the husband proposed to qualify as an expert witness a former employee of Capital Canada (Gino Cozza) to value only his date of marriage stock options. Mr. Cozza had made his calculations while employed by Capital Canada, but under the guidance and direction of Mr. Bowman. Mr. Cozza had also worked on the business valuation report. In light of the husband’s concern about there being a conflict of interest involving Capital Canada, the incongruity of the husband proposing to call Mr. Cozza as an expert witness and not Mr. Bowman, both Capital Canada representatives at the relevant periods, was never satisfactorily explained.

80Lastly, the husband sought to tender expert valuation evidence from a different witness (Professor Douglas Cummings), retained after the Court of Appeal decision, but whose proposed evidence, if admitted, would have dealt only with a subsidiary of Algonquin (i.e., “Dominion Citrus”), not Renegade. The court was to do the math, with the husband’s guidance.

Conclusions on Credibility

81Overall, I find the wife’s evidence more consistent and probable than the husband’s evidence. She was unshaken in her evidence about the circumstances surrounding the lead-up to the signing of the Separation Agreement. Her testimony was clear and consistent, and she fairly conceded those suggestions made to her by the husband about matters where she was uncertain or where he was likely more knowledgeable. Compared to the husband, inconsistencies in her evidence were of lesser significance to the issues in these proceedings.

82Conversely, the husband’s evidence struck me as situationally opportunistic (as with the examples of his pleadings), often inconsistent and unconvincing (such as his selective, allegedly conflicted, retainer of Capital Canada), particularly where the greatest risks to his financial interests were most apparent. His representations about Renegade’s value to his former spouse and, much later in 2008, to his wife in two separate proceedings spanning a seven month period in 1994 cannot be reconciled. In my view, the husband was tailoring his evidence.

83Accordingly, on a balance of probabilities, I prefer the evidence of the wife to that of the husband where their evidence conflicts.

Analysis and Discussion

84Considerable deference is due to a domestic contract, which includes a Separation Agreement. In Rosen v. Rosen, 1994 2769 (ON CA),18 O.R. (3d) 641,the court explained the rationale for this principle, at p. 644:

I start with the proposition that it is desirable that the parties should settle their own affairs if possible. I think that they are more likely to accept their own solution to their problem than one imposed upon them. A more pedestrian reason for encouraging parties to settle their own affairs is that the courts may simply be incapable of dealing with the ever-increasing mass of matrimonial disputes.

It is, I think, obvious that the settlement of matrimonial disputes can only be encouraged if the parties can expect that the terms of such settlement will be binding and will be recognized by the courts. In my respectful view, as a general rule in the determination of what is fit and just, courts should enforce the agreement arrived at between the parties.

85The test to set aside part, or all, of a domestic contract is found in section 56 (4) of the Family Law Act. This provides as follows:

A court may, on application, set aside a domestic contract or a provision in it,

(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;

(b) if a party did not understand the nature or consequences of the domestic contract; or

(c) otherwise in accordance with the law of contract.

86In LeVan v. LeVan, 2008 ONCA 388, 90 O.R. (3d) 1, the court dealt with a challenge to a marriage contract involving section 56 (4) of the Act:

50Section 56 (4) of the FLA was designed to address and codify prior concerns maintained by courts that both parties fully understood their rights under the law when contracting with their spouses.¹ It has been characterized as the “judicial oversight” provision of marriage agreements: Hartshorne v. Hartshorne, 2004 SCC 22, [2004] 1 S.C.R. 550, [2004] S.C.J. No. 20, at para. 14. The provision is of such significance that, in accordance with s. 56 (7), it cannot be waived by the parties.

51The analysis undertaken under s. 56 (4) is essentially comprised of a two-part process: Demchuk v. Demchuk, 1986 6295 (ON SC), [1986] O.J. No. 1500, 1 R.F.L. (3d) 176 (H.C.J.). First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement. This approach was adopted and applied by the trial judge in this case.

87The two stage analysis required is, therefore:

(1) Can the party seeking to set aside the agreement demonstrate that one or more of the section 56 (4) circumstances are engaged?

(2) If so, is it appropriate for the court to exercise its discretion to set aside the agreement?

88Ms. Virc bears the onus of persuading the court that one or more of the subsections of section 56 (4) apply and, if so, that the court should exercise its discretion to set aside all or part of the Separation Agreement.

(a) Failure to Disclose Significant Assets, Debts or other Liabilities – Section 56 (4) (a)

89Timely and meaningful disclosure is “the most basic obligation in family law”: Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6. Parties in family law cases have an immediate, ongoing and positive duty to disclose not merely the existence of significant assets, debts or other liabilities, but also their extent and, just as importantly, their value. This was noted soon after the Family Law Act was proclaimed.

90In Demchuk v. Demchuk (1986), 1986 6295 (ON SC), 1 R.F.L. (3d) 176 (H.C.J.), Clarke J. presciently observed, at p. 189:

In my view, s. 56 (4) broadens the common law basis for attacking the validity of a domestic contract. More specifically, non-disclosure, whether consensual or innocent, falls within the ambit of s. 56 (4) (a) and s. 56 (7).

Moreover, these sections preclude any opting out or waiver of complete disclosure even though one party may be content with the disclosure made. It follows that the legislation modifies existing case law that held that if the complaining party did not utilize all methods available to compel discovery, that party could not subsequently complain that disclosure was not made.

The new Act imposes a positive duty on both parties to disclose. If the purpose of disclosure is not to be frustrated, disclosure must perforce embrace not merely the existence of significant assets but also their extent or value. The speedy and equitable resolution of domestic disputes mandates that this information be completely and accurately disclosed. [Emphasis added.]

91Financial non-disclosure haunts family law. Echoes of Clarke J.’s observations about the importance of meaningful financial disclosure may be found, 30 years later, in Fielding v. Fielding, 2015 ONCA 901, 129 O.R. (3d) 65:

Failure to abide by this fundamental principle [to disclose financial information] impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled (para. 64).

92The more fulsome the disclosure, the more likely it is that a domestic contract will withstand challenge. Some general principles inform the analysis of this subsection:

(a) a party has an immediate obligation to disclose significant assets, debts or other liabilities existing when a domestic contract is made. This obligation will vary according to the type of contract involved. In the case of a Separation Agreement, that will include disclosure of assets, debts and other liabilities as of the marriage date;

(b) the value of the asset, debt or liability must be disclosed: Demchuk and LeVan;

(c) failure to disclose a significant asset includes the making of a material misrepresentation about its value: Quinn v. Epstein Cole LLP, 2007 45714 (ON SC), 87 O.R. (3d) 184, aff’d 2008 ONCA 662, 92 O.R. (3d) 1;

(d) the significance of an asset, debt or other liability is assessed by measuring its value against the value and extent of its owner’s net worth: Demchuk; Murray v. Murray, 2003 64299 (ON SC), 40 R.F.L. (5th) 244; Rempel v. Smith, 2010 ONSC 6740, 98 R.F.L. (6th) 473; Quinn;

(e) inaccurate, misleading or false financial disclosure may, not necessarily will, render a domestic contract vulnerable to judicial intervention – that will depend on the circumstances of each case: Rick v. Brandsema, 2009 SCC 10, [2009] S.C.R. 295;

(f) a party cannot rely on disclosure shortcomings to set aside a domestic contract if the party signed the contract aware of them: Butty v. Butty, 2009 ONCA 852, 99 O.R. (3d) 228; and

(g) a party cannot resile from the consequences of a decision to waive more robust financial disclosure unless that party can demonstrate that the other party’s disclosure was inaccurate, misleading or false: Quinn.

93This list is not, of course, exhaustive. Informational asymmetry as a result of innocent or deliberate non-disclosure compromises the bargaining process on which the integrity of a domestic contract depends. As noted in Brandsema:

An agreement based on full and honest disclosure is an agreement that, prima facie, is based on the informed consent of both parties. It is, as a result, an agreement that courts are more likely to respect. Where, on the other hand, an agreement is based on misinformation, it cannot be said to be a true bargain which is entitled to judicial deference (para. 48).

Imposing a duty on separating spouses to provide full and honest disclosure of all assets, therefore, helps ensure that each spouse is able to assess the extent to which his or her bargain is consistent with the equitable goals in modern matrimonial legislation, as well as the extent to which he or she may be genuinely prepared to deviate from them (para. 49).

94The evidence in this case is that the husband never alerted the wife to the fact that the book value of Renegade’s investments significantly exceeded their market value. At best, the husband’s evidence is that he did nothing to prevent the wife from testing the veracity of his representation of the company’s value. That, in my view, is not a sufficient discharge of his duty. In the circumstances of this case, especially given the husband’s valuation expertise and the wife’s deference to that expertise, it was incumbent on him to do more than stand by silently and leave it for the wife to verify the accuracy of his representation.

95Not all cases will impose such a positive obligation. That, of course, will depend on the facts of each case. But the husband in this case was uniquely qualified. He knew that the book value of Renegade’s long term investments was significantly different from their market value. He said nothing. This is precisely the kind of informational asymmetry noted in Brandsema, and is why, in my view, the husband failed to fully and honestly comply with the duty imposed on him by s. 56 (4) (a).

(b) Failure to Understand the Nature and Consequences of the Separation Agreement – Section 56 (4) (b)

96This ground is inapplicable in this case. The wife admitted before trial that she understood the nature and consequences of the May 31, 2008 agreement.

(c) Otherwise in Accordance with the Law of Contract – Section 56 (4) (c)

97In Ward v. Ward, 2011 ONCA 178, 104 O.R. (3d) 401, the Court of Appeal did not disagree that section 56 (4) (c) permitted a court to set aside a domestic contract on grounds such as duress, unconscionability, uncertainty, undue influence, mistake and misrepresentation.

98Although pleaded, there was insufficient evidence of duress. In Rolland v. Tevendale, 2015 ONSC 3226, 62 R.F.L. (7th) 371, Smith J. summarized the law as follows:

61Duress involves coercion of the will of one party or directing pressure to one party so they have no realistic alternative but to submit to the party (see Berdette v. Berdette (1991), 81 D.L.R. (4) 194 at para. 22 (Ont. C.A.)). Equity recognizes a wider concept of duress including coercion, intimidation or the application of illegitimate pressure.

99The wife testified that she was physically affected by and emotionally fragile as a result of the breakdown of the marriage, and particularly vulnerable during the weeks leading up to the signing of the Separation Agreement. But, as observed by the Supreme Court in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 at para. 82, emotional stress associated with a separation or divorce “should not be taken as giving rise to a presumption that parties in such circumstances are incapable of assenting to a binding agreement”, and to quote the motions judge in this case, the wife’s description of her condition “is not an unusual constellation of experiences for a person undergoing a separation or divorce”. I agree. The evidence in this case falls short of demonstrating the kind of domineering, manipulative and coercive conduct as described in Rolland.

100The wife also alleged that the Agreement was unconscionable in that it was negotiated under impeachable circumstances. These included her emotional state, the absence of independent legal advice and the short duration of the negotiations. In Rolland, Smith J. adopted the summary of the law on the issue of unconscionability as stated by Blishen J. in Toscano v. Toscano, 2015 ONSC 487,57 R.F.L. (7th) 234:

63Although in her Application Ms. Toscano argued that the consequences of the marriage contract were unconscionable, in general the doctrine of unconscionability with respect to domestic contracts focuses on whether or not there were unconscionable circumstances surrounding the formation of the contract. It is the circumstances at the time of the drafting and signing of the contract which must be examined, not the results, under this criterion. There is an exception for a spousal support waiver which can be set aside if it results in unconscionable circumstances, pursuant to s. 33 (4) of the FLA.

64Matrimonial negotiations occur in a unique environment and therefore unconscionability in the matrimonial context is not equivalent to unconscionability in a commercial context (Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295, at para. 43 [Brandsema]). The question to be asked is whether there were “any circumstances of oppression, pressure, or other vulnerabilities, and if one party’s exploitation of such vulnerabilities during the negotiation process resulted in a separation agreement that deviated substantially from the legislation” (ibid, at para. 44).

65Examples of inequality in bargaining may include one party being intellectually weaker by reason of a disease of the mind, economically weaker or situationally weaker. Vulnerability may also arise due to a special relationship of trust and confidence (see Norberg v. Wynrib, 1992 65 (SCC), [1992] 2 S.C.R. 226, at para. 33). However, the “mere presence of vulnerabilities will not, in and of itself, justify the court’s intervention. The degree of professional assistance received by the parties will often overcome any systemic imbalances between the parties” (Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, at para. 82, [Miglin]).

66In Rosen v. Rosen (1994), 1994 2769 (ON CA), 3 R.F.L. (4th) 267 at para. 12 (Ont. C.A.), the Ontario Court of Appeal states the question to be answered in determining unconscionability is whether there was inequality between the parties, or a preying of one upon the other, that placed an onus on the stronger party to act with scrupulous care for the welfare and interests of the vulnerable. At para. 13 the Court notes it is: “not the ability of one party to make a better bargain that counts. Seldom are contracting parties equal. It is the taking advantage of that ability to prey upon the other party that produces the unconscionability”. [Emphasis added.]

101In Toscano, the court held that, notwithstanding the wife’s allegations that she was so distraught by the parties’ separation that she was forced to take medical stress leave and that the husband “preyed” on her, the evidence viewed in its totality did not show a power imbalance between the spouses. The wife in that case was described as intelligent and interested in moving forward with the separation—not unlike the wife in this case. In Mundinger v. Mundinger, 1968 250 (ON CA), [1969] 1 O.R. 606 and Kelly v. Kelly, 2004 4328 (ON CA), 72 O.R. (3d) 108, both cases upon which the wife relies, there was compelling medical evidence of “dominance and control” (Mundinger) and mental illness (Kelly), neither of which were factors in this case.

102The distinctive feature of all these cases, as noted in Toscano, is a power imbalance that impacts a party’s ability to understand and freely assent to a legally binding agreement. This should not be confused with signing an agreement in stressful circumstances where there has been financial misrepresentation. In my view, the evidence in this case is insufficient to establish unconscionable circumstances when the agreement was signed.

103Uncertainty, undue influence and mistake were not pleaded by the wife, and so need not be considered: the focus of her case was misrepresentation by the husband of the marriage date value of his interest in Renegade.

104As explained by the Court of Appeal in Dougherty v. Dougherty, 2008 ONCA 302, 89 O.R. (3d) 760 at para. 13:

…[I]n contract law, a misrepresentation must be material in the sense that a reasonable person would consider it relevant to the decision to enter the agreement in question. In addition, the material misrepresentation must have constituted an inducement to enter the agreement upon which the party relied.

105The husband’s representation that the value of his interest in Renegade on the marriage date was $7,603,685 materially impacted the calculation of his net family property, and resulted in the wife being led to believe that she owed him a $954,000 equalization payment. The husband was prepared to waive this payment. There can be no doubt, in my view, that this waiver was a major, if not the motivating, inducement to the wife agreeing to the financial terms of the Separation Agreement.

106In allowing the wife’s appeal from the summary judgment, the Court of Appeal observed:

68It is one thing to disclose assets and liabilities and their values believing the disclosure to be true. It is quite another to deliberately misrepresent the values of assets and liabilities knowing them to be untrue. The law does not entitle a liar to succeed just because the recipient of the falsehoods had not ferreted them out. [Emphasis added.]

107It is noteworthy that neither the motions judge nor the Court of Appeal expressed any opinion whether the husband had deliberately misrepresented the marriage date value of his interest in Renegade.

108Relying on Cheshire & Fifoot,² the Court of Appeal held that to set aside a domestic contract based on misrepresentation:

…[A] clear finding of actual knowledge of the misrepresentation is required … a mere suspicion of lack of veracity does not absolve a fraudster of responsibility (para. 69).

109As already noted, the wife has the prima facie onus of demonstrating that the husband misrepresented the value of his marriage date interest in Renegade. However, once a prima facie case of erroneous or false financial disclosure has been made out, the onus shifts to the disclosing party to establish that the recipient actually knew about the falsehood. At para. 57 of its Reasons, the Court of Appeal, again referring to Cheshire & Fifoot, emphasized that the disclosing party, in this case the husband, must prove that the wife had

“…actual and complete knowledge of the true facts-actual, not constructive, complete, not fragmentary. The onus is on the defendant to prove that the plaintiff had unequivocal notice of the truth. [Emphasis added by the court.]

110So, too, say the authors of Chitty on Contracts,³

The burden of proving that the plaintiff had actual knowledge of the truth, and therefore was not deceived by the misrepresentation, lies on the defendant…it is no defence…that the representee might have discovered its falsity by the exercise of reasonable care…

111In my view, the wife has led sufficient evidence to call into question the veracity of the husband’s representation about the value of his marriage date interest in Renegade. The issue then is determining whether the husband has satisfied the onus of proving the wife’s actual knowledge, the extent (or materiality) of his allegedly defective disclosure and the degree to which that disclosure, if defective, was deliberate.

Actual Knowledge of Misrepresentation of the Wife

112Nowhere in the husband’s evidence does he assert that the wife actually knew that he had overvalued his marriage date interest in Renegade when the parties signed their Agreement. This is what he said:

Q. I’m going to suggest to you Mr. Blair, that you have no knowledge of what Ms Blair knew then at the time the negotiation was being conducted with respect to the agreement, that you have no knowledge with respect to what she did or did not know about how financial statements reflected value in terms of assets, long term assets, or whether they were being carried at cost or not?

A. I disagree with that.

Q. I’d like you to take a look at your transcript, please. T2. I am going to take you to question 1086 on page 274.

QUESTION 1086: Did you explain that to Ms Virc?

ANSWER: Explain what?

QUESTION: That definition and what the value was being shown for long term investments; did you tell her that?

ANSWER: No, we didn’t discuss that.

QUESTION: Would she understand that; do you know?

ANSWER: You would have to ask her what she understands, not me.

Were you asked those questions and did you give those answers?

A. Yes, I did.

Q. You seem to suggest that as a result of being married to you and you going through litigation with Nancy Blair, or not even being married to her, but going through Nancy Blair that Ms Virc somehow gleaned knowledge of the value of Renegade. That’s what you’d like this court to believe?

A. Yes.

Extent of Defective Disclosure

113As is clear from the foregoing, the husband’s representations about the value of his marriage date interest in Renegade were material. They significantly impact the determination of which party must make the equalization payment due in these proceedings, and the amount thereof.

Was the Defective Disclosure Deliberate?

114This question is best answered by assessing the following evidence, much of which has already been mentioned in these Reasons:

(a) the husband was regarded in the investment community as an astute investor. The motion judge described him as “an experienced and sophisticated businessman”, a characterization with which the Court of Appeal did not disagree. After observing him in court and the ease with which he dealt with complicated financial issues, I concur;

(b) in the summary judgment proceedings, the husband claimed substantial experience valuing businesses and enterprises. In these proceedings, as already noted, he acknowledged that he considered himself an expert in business valuations, and that he was quite capable of explaining complex financial calculations and information to people. These skills were evident at trial;

(c) in the legal proceedings with his former spouse, the husband prepared financial calculations for the value of Renegade. In these proceedings, he acknowledged that he would not have deceptively presented these calculations to his former spouse. However, they are materially different from the value he represented in his NFP statement to the wife in this case;

(d) shortly before the parties separated, the husband retained Capital Canada to value his marriage and valuation date interests in Renegade. He provided Capital Canada with the valuation information he thought would be needed, and a week before the Separation Agreement was signed, he prepared and sent to the valuator tangible net worth calculations for Algonquin. When he received the valuation report, none of the values recorded in it surprised him, although he was surprised about the absence of any mention of a control premium;

(e) the representations about the depressed value of their interests in Renegade made to his former spouse in their litigation, reduced the husband’s EP exposure in that case. Conversely, the representations made to the wife in this case about Renegade’s value when they married suggested a different value, more than $6,000,000 higher, at almost the same point in time. This latter representation increased his marriage date net worth, dramatically reducing the value of his net family property and, it follows, his equalization payment exposure. These representations were made in different legal proceedings, but in terms of content, proximate in time to each other. They cannot be reconciled. Each was financially advantageous to the husband;

(f) the wife’s efforts to obtain hard drives from the husband’s computer pursuant to the Order of Nelson J. made April 14, 2015 were unsuccessful, due to the husband’s lack of co-operation. That request was purposed to ascertain what calculations the husband had made about Renegade’s value before the Separation Agreement was signed. The husband did not, in my view, comply with Nelson J.’s Order; and

(g) a mark-to-market analysis of the value of long term investments in a company’s Financial Statements, the husband admitted, is easy to do and one which he regularly did, although he said he did none in this case. Given his expertise and attention to detail, especially in matters affecting his financial interests, the husband’s disclaimer is not credible.

115In my view, given this evidence and my assessment of the husband’s credibility, the representations he made to the wife were deliberate. He was financially motivated to maximize the value of his marriage date deductions in order to reduce his net family property and to use the resultant EP calculation as leverage in the parties’ negotiations.

Has the Wife Satisfied Section 56 (4) of the Family Law Act?

116The husband knew that the wife respected and deferred to his expertise in business valuations. She relied on his investment advice to mortgage the matrimonial home to acquire securities in a tax-efficient manner, favourable to her. His waiver of her payment of an EP of $954,000 was, notwithstanding the other financial terms of the Separation Agreement, a material inducement.

117Taking into account all of the foregoing, I conclude that the husband failed to comply with sections 56 (4) (a) and (c) of the Family Law Act. I accept the wife’s evidence that she did not know that the husband overvalued his marriage date interest in Renegade when the Separation Agreement was signed. His disclosure was materially defective and deliberate.

Exercise of Discretion

118Once one of the statutory pre-conditions under section 56 (4) has been met, the court must still decide whether to exercise its discretion to set aside or affirm a domestic contract. There is no exhaustive set of factors guiding the court’s discretion, but the following have been consistently considered, as first identified in Demchuk:

(a) whether there had been concealment of the asset or material misrepresentation;

(b) whether there had been duress, or unconscionable circumstances;

(c) whether the petitioning party neglected to pursue full legal disclosures;

(d) whether he/she moved expeditiously to have the agreement set aside;

(e) whether he/she received substantial benefits under the agreement;

(f) whether the other party had fulfilled his/her obligations under the agreement; and

(g) whether the non-disclosure was a material inducement to the aggrieved party entering into the agreement.

119There has been, as already concluded, material misrepresentation which induced the wife to sign the Separation Agreement.

120In the exchange of emails on June 9, 2009, a little over a year after the parties signed their Separation Agreement and when the wife was seeking, among other things, a review of the agreement’s child support provisions, the wife said that she had accepted the agreement’s equalization and support terms as a “compromise.” She indicated that the husband’s NFP statement was simply a disclosure document and that she “did not analyze it or cross examine on it or otherwise test its assumptions or validity. I did not accept your equalization as correct. I just decided that I was so overcome with grief and guilt to fight about it…”

121The husband pointed to this as an admission by the wife that she did not rely on the NFP statement. I disagree. Viewed in the context of what that statement indicated was a $954,150.88 EP owed to the husband, his skillset and the fact that, as the wife testified, she would need to find a very significant discrepancy in the husband’s figures (over $1,900,000) to negate any EP, I view this statement as an affirmation of her general deference to the husband’s financial abilities. Her experience during the 16 years of their cohabitation was that the husband had mostly prevailed in the many lawsuits in which he and the companies he was involved with had been engaged, many of which were prolonged and expensive cases. I do not view the wife’s email as evidence that she neglected to pursue financial disclosure, so much as evidence that she relied on the general probity of the husband’s disclosure and was reluctant in the circumstances to challenge him.

122In Danylkiw v. Danylkiw, 2003 2283 (ON SC), 37 R.F.L. (5th) 43, a case in which a Separation Agreement was challenged in circumstances where the husband’s income had been misrepresented, Pepall J. (as she then was) made the following observation about a party’s failure to pursue full legal disclosure:

The suggestion that Mrs. Danylkiw should be deprived of a remedy because she could have pursued further disclosure from Mr. Danylkiw through court action is no answer to a claim for misrepresentation. Brans v. Brans (1997), 1997 1234 (ON CA), 28 R.F.L. (4th) 114 (Ont. C.A.) and Clayton v. Clayton (1998), 1998 14840 (ON SC), 38 R.F.L. (4th) 320 (Ont. Gen. Div.) are inapplicable. These cases involved non-disclosure simpliciter, not misrepresentation. Lastly, through his consistent silence, Mr. Danylkiw failed to correct the misrepresentation made thereby implying its accuracy (para. 73).

123The wife in these proceedings testified that she did not know the value of the husband’s marriage date interest in Renegade, and that given the husband’s expertise in financial matters, she had no reason to doubt him. I have no reason to doubt her. The husband’s silence that the book value he recorded for his interest in Renegade significantly varied from its market value when the parties married is little different, in my view, from Mr. Danylkiw’s silence.

124That the wife deferred to the husband’s financial expertise is also evident from the fact that soon after taking vocational upgrading courses, she raised with him the issue of why different methodologies had been used when valuing his marriage and valuation date interests in Renegade. Shortly after their unproductive email exchanges, she retained counsel. No adverse inference can be drawn, either, from the wife’s attempts to resolve outstanding issues between the parties before she felt compelled to start these proceedings in May 2010.

125As for benefits received, most of their value, such as the wife being paid both for her interest in the matrimonial home in June 2010 and the balance of the Renegade retainer at that year’s end, was effected at a time when issues relating to the Separation Agreement were outstanding, and the husband (through Renegade) was non-compliant with the Retainer Agreement. The agreement made in late June 2010, regarding the matrimonial home (as will be discussed later in these Reasons), specifically noted that it was being signed without prejudice to the parties’ litigation and equalization claims. No child support was being paid to the wife.

126Fairness of the Separation Agreement is also an appropriate consideration. In LeVan, the Court of Appeal observed that:

60 …Although there is nothing in the governing legislation that suggests that fairness is a consideration in deciding whether or not to set aside a marriage contract, I do not see why fairness is not an appropriate consideration in the exercise of the court’s discretion in the second stage of the s. 56 (4) (a) analysis. In my view, once a judge has found one of statutory preconditions to exist, he or she should be entitled to consider the fairness of the contract together with other factors in the exercise of his or her discretion. It seems to me that a judge would be more inclined to set aside a clearly unfair contract than one that treated the parties fairly.

127In my view, the Separation Agreement was unfair to the wife. She was induced to sign an agreement that presumptively and, as analyzed later in these Reasons, substantially misstated the parties’ net family properties, to her financial prejudice. The Agreement also devalued her spousal support entitlement.

128The husband’s non-compliance with the obligations imposed by sections 56 (4) (a) and (c) of the Act, and the parties’ evidence about their Separation Agreement, when viewed contextually, lead to no other conclusion than that the Agreement should be, and is hereby, set aside.

Part 2 – Equalization

(a) Valuation Date Assets

129The wife claimed that in the event that the Agreement was set aside, the husband owed her an equalization payment of $599,045, the value of her interest in the matrimonial home registered in her name on the valuation date and a greater amount for the Renegade shares that she transferred to the husband than she was paid. The agreed value of the matrimonial home was $2,200,000. Less the $1,250,000 paid to the wife in June 2010 on a without prejudice basis, the difference is $950,000. Together with an additional payment for the wife’s Renegade shares of $231,840, the aggregate value of these claims is $1,780,885.

130The husband claimed that if the Agreement was set aside, the wife owed him an equalization payment of $1,009,699.57, principally discounting the evidence of the wife’s expert (Peter Weinstein), relying on auditor’s evidence at hand in 1994 and his belief that the worth of his Renegade shares was supported by third party financing discussions in 1993. Relying on Fitzpatrick v. Fitzpatrick, 2004 13318 (ON SC), 3 R.F.L. (6th) 325, the husband argued that, while he was an interested party, his views should not be ignored:

398. [A spouse’s] own bona fide belief in the value of his shares given the spouses skill and experience in that end of the business, including the fact that the spouse’s partners relied on his expertise, cannot be ignored. Not only is[the spouse’s] opinion almost that of a professional expert witness, it may represent a “fair” value in the context of the Family Law Act where the object of the exercise is to fairly share matrimonial property.

131The irony of the husband’s reliance on Fitzpatrick at trial, in light of his representations to his former spouse in the proceedings between them from 1993 to 1999, and his pre-Court of Appeal (in this case) evidence that he intended to rely on the Capital Canada Report at this trial, is not lost on the court.

132Each of the disputed asset or liability values will be discussed, as those would be found in the standard long form 13.1 Financial Statement. Schedule “A” to these Reasons will identify those values upon which the parties agree, and those which the court allowed, varied or denied.

Land - Matrimonial Home

133Title to the matrimonial home at 11 Alm Court, Aurora, was registered in the wife’s name. It was encumbered by the $500,000 mortgage earlier referenced in these Reasons. Before the parties agreed to separate, the husband arranged for its appraisal, which valued it at $2,200,000. This was known when the Separation Agreement was signed. Paragraph 10 of the Agreement specifically dealt with that property as follows:

10.1 Patricia has title to the matrimonial home. Patricia and Michael agree that each owns 50% of the marital home, and, if requested by Michael, Patricia will consent to Michael’s 50% interest in the home being reflected in title.

10.2 Patricia agrees not to sell the matrimonial home until January 1, 2011.

10.3 Michael shall have a right of first refusal to purchase Patricia’s interest in the matrimonial home.

10.4 Michael shall be permitted to purchase the matrimonial home as set out in Schedule A. Michael will pay the cost of the preparation and registration of the transfer.

10.5 Michael will have exclusive possession of the matrimonial home upon Patricia vacating the matrimonial home, and in any event commencing September 1, 2008.

134Paragraph 10.4 referred to a Schedule A. Paragraphs 2 to 4 and 8 of that Schedule made provision for the property’s future disposition, whether as between the parties or to a third party:

2. While Patricia has title to 11 Alm Court, Patricia and Michael agree that each has a 50% interest in 11 Alm Court. Michael to retain the contents of 11 Alm Court unless otherwise agreed, and to have the option until December 31, 2010 to buy Patricia’s 50% of 11 Alm Court for $1,250,000 to be satisfied by:

a. Assumption of the balance of the outstanding Candian Imperial Bank of Commerce mortgage on property, if any; and,

b. Cash or other consideration acceptable to Patricia for the balance.

3. If Michael does not buy 11 Alm in accordance with foregoing, Patricia to have option to buy Michael’s 50% of 11 Alm for $950,000.

4. If neither Michael nor Patricia exercise their options as aforesaid to purchase the respective interest in 11 Alm Court by December 31, 2010, either party can require the property to be sold, with the proceeds allocated as follows;

a. First, to repay any mortgage balance owing CIBC

b. Second, to repay any balance on a loan between Renegade and Patricia then outstanding

c. Third, to Patricia such that the total used to pay Patricia and repay any mortgage or loan balances described above totals $1,250,000; and

d. Any residue to Michael

8. Patricia to make all mortgage payments of CIBC mortgage on 11 Alm until the property is sold to Michael or to anyone else. In the event Patricia fails to meet a mortgage payment or payments and Michael makes payment on her behalf, the option price at which Michael can purchase 11 Alm Court will be adjusted by the amount of such payment or payments.

135The husband’s NFP statement attached to the Agreement identified the residence as owned equally by the parties, with a $1,100,000 value being recorded in each of their respective columns.

136After the wife left the matrimonial home in late June 2008, the husband had exclusive occupation and paid all of its expenses thereafter, save and except for the mortgage, which was the wife’s responsibility. In June 2010, after the wife started this Application, the parties agreed that the husband would purchase the wife’s interest, and they signed another Agreement effective June 24, 2010. That Agreement made specific reference to the outstanding legal proceedings and stipulated that it was made without prejudice to the parties’ positions as to the Separation Agreement. The parties agreed that the husband would pay the wife $1,250,000 “being approximately 50% of the value of the home” and, from that amount, the wife would pay the outstanding registered encumbrances, which at that time comprised the balance of the 2008 mortgage. The parties also agreed that what the wife was paid would be taken into account in the resolution of their family law property issues, including “the equalization of net family property and the proper payment for the purchase and sale of any property as part of the parties’ family law matter.”

137In these proceedings, the wife claims that if the Separation Agreement is set aside, then the provisions of the Family Law Act apply to the calculation of each party’s net family property. As often observed, the Family Law Act is, in essence, debtor/creditor legislation: the fact of marriage confers no in rem interest in the other spouse’s property. Accordingly, the wife claims that the entire appraised value for the matrimonial home should form part of her net family property.

138In his Amended Answer, the husband claimed that the wife held her interest in the matrimonial home on the basis of a 50 percent resulting trust in his favour. As earlier noted, the evidence is that substantially all of the funds used to purchase the lot and, over time, build the home, came from the 1995 settlement of the husband’s pre-marriage litigation.

139In Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, one of the issues before the Court of Appeal was whether the wife, who was registered as sole owner of the matrimonial home, held any part of that interest in favour of the husband as beneficial owner. That appeal was heard before the start of this case, and its decision was not released until after the evidence was concluded. Dealing with the interplay between the Act and trust principles involving title to property ownership, the court focused on the proper application of section 14 of the Act, and the evidence needed to rebut the presumption of resulting trust.

140Section 14 of the Act provides as follows:

14. The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that,

(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a).

141Whether the husband intended to gift his interest in the matrimonial home was a critical issue at trial in Korman. On appeal, that issue evolved into the sufficiency of evidence necessary to displace the presumption of resulting trust. As the court observed, section 14 must first be considered where issues of title or ownership entitlements are raised, and those must be decided before spousal net family properties are determined:

25For married spouses, the Act provides a comprehensive scheme for resolving financial issues following marriage breakdown. Section 10 (1) of the Act authorizes a court to determine questions of title between spouses. This includes considering whether legal title actually reflects beneficial ownership. As indicated by this court in Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, at para. 47, citing Rawluk v. Rawluk, 1990 152 (SCC), [1990] 1 S.C.R. 70, “[b]efore property can be equalized under the [Act], a court must first determine the “net family property” of each spouse. This exercise requires first that all question of title be settled.” In other words, property entitlements must be determined before they can be equalized.

26Section 14 of the Act affirms the presumption of a resulting trust in determining questions of ownership between spouses in the context of gratuitous property transfers. Where the presumption is invoked, the party resisting the imposition of a resulting trust is required to disprove the presumption that his or her spouse is the beneficial owner of an interest in the disputed property.

27In Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 16-19, the Supreme Court confirmed that a traditional resulting trust may arise in the domestic context where, as here, there has been financial contribution to the initial acquisition of a property and a subsequent gratuitous transfer of title to the property. In these circumstances, the actual intention of the transferor is the governing consideration. See also Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, at paras. 43-44; Schwartz v. Schwartz, 2012 ONCA 239, 290 O.A.C. 30, at paras. 41-42. Further, the intention of the transferor to make a voluntary and gratuitous transfer is an essential ingredient of a legal valid gift: see McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 24.

142The issue, then, is whether the husband had clear intention to make a gift of his interest in the home. As Karakatsanis J. (as she then was) said in Nussbaum v. Nussbaum, 2004 23086 (ON SC), (2004), 9 R.F.L. (6th), the “intent to gift defeats the presumption of resulting trust” (para. 32).

143When testifying as to why title to the matrimonial home was registered in the wife’s name, the husband stated that “she came into the marriage with little in the way of her own assets and I thought it was a good thing to have her own substantial assets in her own name.” This reason (despite the wife’s suggestion that the transfer had a creditor-protection basis) was not dissimilar to the stated intent behind the husband’s transfer of the Collingwood condominium to the wife in December 1994, shortly after the parties married. He (then) “thought it useful for her to have a feeling of having some property in her own name and that was the primary reason.” Proceeds from the condominium sale in 2000 were used to partially fund the husband’s 1999 settlement with his former spouse.

144In Korman, while the operation of section 14 does not appear to have been argued at trial, and the parties’ evidence on the issue of ownership was “quite muddled”, the wife was unable to rebut the presumption, because she couldn’t prove any bargain between the parties that satisfactorily explained why title to the matrimonial home had been transferred to her. Conversely, in Costa v. Costa, 2016 ONSC 907, the wife was able to rebut the presumption by pointing to evidence that a bargain had been made by the parties and that valuable consideration was received by the husband. Both of these cases demonstrate that where the presumption is raised, it is incumbent on the parties to focus their evidence on donative intent relating to the acquisition of title, and where that intent is unclear, to flesh out all of the circumstances surrounding the decision and consequences associated with that transaction. The onus of leading satisfactory rebuttal evidence rests squarely on the titled owner.

145In Korman and Costa, the transfers involved completed residences. In this case, the evidence is that title was taken to a vacant lot and registered in the wife’s name. Their matrimonial home was subsequently built on that lot. Section 14 was pleaded and there is a satisfactory evidentiary record to assess whether the wife successfully rebutted the presumption. It is my view that she did not, for the following reasons:

(a) the parties turned their mind to the issue of ownership of the matrimonial home in paragraph 10.1 and Schedule A of their Separation Agreement, acknowledging that, despite title being registered in the wife’s name, its ownership would be treated as equal for all purposes. They did this for no other asset;

(b) while the lot was purchased in the wife’s name with funds that mostly, if not entirely, originated with the husband, substantially more funds, were later advanced by the husband to complete the construction. The parties were invited to address the issue of ownership in their closing submissions, and the wife was unable to point to any evidence that would rebut the presumption’s operation to these after-advanced funds;

(c) the wife consistently in her pleadings and testimony referred to her “share” of the equity in the matrimonial home (paragraph 10 of her Application, later amended in October 2012 to refer to her “interest” in the property); in her affidavit sworn April 26, 2011, before her Application was amended, she swore that “[the husband] paid me for my portion of the matrimonial home” (paragraph 22); at trial “I was to leave the house…and he didn’t have to pay me my equity [in it] until the end of December 2010” (May 21, 2015). The wife’s evidence as to her “equity” in the home was repeated on May 22, 2015; and

(d) as already noted, the husband’s reason for purchasing the lot in the wife’s name was not unlike the reason for transferring title to the Collingwood condominium shortly after the parties married. In 2000, a portion of that property’s sale proceeds were used to fund the husband’s 1999 settlement with his former spouse.

146Apart from simply defaulting to the legislative scheme for asset allocation by ownership, the wife’s evidence was not, in my view, sufficient to rebut the presumption of resulting trust, especially when viewed in the broader context of the parties’ actions, pleadings and testimony. Therefore, on the valuation date, the husband was beneficially entitled to a one-half interest in the matrimonial home, the total value of which was appraised as being $2,200,000, such that $1,100,000 is to be recorded as part of each party’s net family property.

General Household Items and Vehicles

147The parties disputed the values of five categories of items, one of which (Works of Art) they resolved at trial. The other four are discussed below.

(a) Household Goods and Furniture

148It is not uncommon that when spouses separate, one will seek to have attributed to the other a value for household goods and furniture that more reflects the cost of replacement than their, significantly lesser, used market value. Often this is done to minimize or reduce the net family property exposure of the spouse who, intentionally or not, is not in possession of that property. Typically, spouses will agree to divide the items in specie and leave out of the equalization calculation any reference to value, or they will simply estimate values and include those in their net family property. Excepting antiques or heirlooms, expert evidence valuing used furniture is rare. However, where value is disputed, evidence must still be tendered.

149In this case, there is no question that the husband retained almost the entirety of the household contents. In crafting the NFP statement attached to the Separation Agreement, he input a $216,400 value, and allocated that equally to each party. At trial, as in three of his most recent financial statements, he claimed that the value he retained was $184,378 and that the wife took $32,022 (totalling $216,400). It was the wife’s evidence that she took nothing of value. For example, she states that their sons’ bedroom furniture, which the husband attributed to her, he gave to her brother after the parties separated. She did retain some china: I reject the husband’s effort to monetize family photographs. I accept the wife’s evidence.

(b) Ford Freestyle

150On the valuation date, the wife owned a 2006 Ford Freestyle automobile, which had been purchased in 2005 for about $45,000, and which she traded in late October 2009, about 17 months after the parties separated, to acquire another. She was credited with $12,000. At trial, she attributed $16,150 to its value on the valuation date. The husband contends that the value should be $24,900.

151The wife testified that she relied on information about used automobile values published by the Canadian Red Book. This commonly used guide provides suggested retail sales prices and wholesale and retail automobile values by year, make and model. For May 2008, the retail value for the Ford Freestyle was $18,450 and the average wholesale value was $16,150. The wife used the latter figure.

152The husband performed his own calculations and valued the automobile on a straight-line depreciation over a period of five years, suggesting that the automobile would have depreciated by the same amount over each of the five years of its ownership. Unlike the wife, he was unable to point to any third party source as a reference to support either his choice of methodology or the value he proposed.

153In my view, the wife’s $16,150 wholesale value for the valuation date is reasonable. If $12,000 was the best price she could get for the trade-in, that suggests a far greater rate of depreciation than the husband’s approach and reflects a more common sense in-house transaction value. It would defy logic that an automobile dealer would acquire a used car at its suggested retail value.

(c) Wife’s Jewelry

154Anne Neumann is a jewelry appraiser. She was tendered as an expert witness by the wife to testify about the value of the wife’s jewelry on the valuation date. The wife contended at trial that value was, in the aggregate, $43,000. The husband disagreed, arguing that $163,007, representing the original, or replacement, cost should be attributed.

155The husband did not challenge Ms. Neumann’s qualifications. She has worked in the gem and jewelry business since the late 1970s as an appraiser, and is the owner of Harold Weinstein Ltd., an independent gemmological laboratory specializing in the appraisal of fine jewelry and gemstones. She has been an accredited member of the American Gem Society (“AGS”) since she became a retail jeweler in the 1970s, and, among other industry associations, a member of the Canadian Jewelers Association (“CJA”), an organization to which jewelry retailers, manufacturers and other members of the jewelry trade in Canada belong. She was certified by the AGS as an ICGA (Independent Certified Gemologist Appraiser) in the early 1990s and is also a Certified Appraisal Professional recognized by the CJA. This latter designation is awarded to professional appraisers who have successfully passed written examinations and achieved a certain level of expertise in the field. Ms. Neumann’s clients have included the Royal Canadian Mounted Police, Ontario Provincial Police, Toronto Police Services, Canada Customs, insurance companies as well as members of the public. Overall she estimated that she has done about 250,000 appraisals. She has testified in court before and been qualified as an expert witness. In this case, she was qualified as an expert in the field of jewelry and gem appraisal.

156Ms. Neumann testified that there are three appraisal categories:

(a) Highest – Insurance Value. This is based on purchase or replacement cost;

(b) Middle – Fair Market Value. This is what a person might sell for, who was in no particular hurry to sell; and

(c) Lowest – Cash Disposable, or Probate Value. This is often used for estate purposes or in situations where the owner needs cash.

157Commonly seen television or other media advertisements for immediate cash for gemstones and other items of jewelry, Ms. Neumann testified, would fit in the lowest category, where the range of value was about seven to ten percent of the insurance value. In valuing the wife’s jewelry, Ms. Neumann used the middle, or fair market value, category.

158Each item of the wife’s jewelry was individually inspected and its attributes noted and photographed. Value was assessed by examining a piece’s setting and taking measurements and grading. It was Ms. Neumann’s opinion that the aggregate value of the wife’s jewelry was $43,000. Although she had performed her appraisal in July 2012, it was her view that there would have been little change from 2008.

159Ms. Neumann’s testimony was not shaken in cross-examination. But, after her testimony, the husband objected to her evidence on the basis that no report compliant with Family Law Rule 23 (23) had been served on him until late April 2015, shortly before the start of trial. The report otherwise complied with the requirements of Family Law Rule 23 (25) dealing with, for example, expert qualifications and the like.

160The husband’s request to strike, or otherwise ignore, Ms. Neumann’s evidence was denied. Family Law Rule 23 (27) allows the court to permit a party not compliant with Rule 23 (23) to call an expert witness. In my view, the time for the husband to have made his objection was at the time Ms. Neumann was being tendered as a witness, and not after her qualifications had been acknowledged by the husband, accepted by the court and her testimony had concluded. Moreover, the wife had disclosed the existence of Mr. Neumann’ s appraisal and the $43,000 value for her jewelry in a financial statement sworn December 19, 2014, six months before the start of trial (although not, as he argued, her report). No expert rebuttal evidence was tendered by the husband.

161I am satisfied that the value of the wife’s jewelry on the valuation date was $43,000.

(d) Clothing/Shoes

162The husband claimed that over a period of eight years, the wife had acquired an extensive wardrobe of designer clothing, which he itemized as costing $118,300, and in respect to which he allocated 50 percent of that value to the wife, or $59,150. The wife included no value, pointing out that some of that wardrobe was eight years old on separation.

163It is noteworthy that when the husband prepared the NFP statement that accompanied the Separation Agreement, not only was there no reference to the value of the wife’s wardrobe, but in none of his financial statements in these proceedings did the husband acknowledge any value for his wardrobe.

164There was no evidence tendered, apart from the husband’s records about the cost and retailer, to establish whether the wardrobe items purchased by the wife could be described as “designer”, and no evidence of consignment or resale value. The husband had every opportunity before trial to test the wife’s position that her used clothing had no significant value, but did not. I am not prepared on this evidentiary record to attribute any value to the wife’s clothing as claimed by the husband.

Business Interests – Renegade

165Peter Weinstein was retained by the wife to provide her with an estimate of the fair market value of the husband’s business interests as at the marriage and valuation dates, and an opinion regarding the husband’s income for support purposes for the years 2011-2013. Two Reports were prepared: the first (dated September 25, 2012) dealt with the husband’s business interests, and the second (dated December 8, 2014) dealt with the husband’s qualifying income for support purposes. The husband challenged Mr. Weinstein’s qualifications.

166Mr. Weinstein is a partner in Stern Cohen Valuations Inc., a firm specializing in business valuation and litigation support. He obtained an MBA in 1993, a chartered accountant designation in 1995 and later, in 2000, designation as a chartered business valuator. In 2002, he earned a specialist certification in investigative and forensic accounting. Since 1998, his practice has involved valuing a wide range of companies, from those having little value to others worth over $500,000,000. He has written, lectured and participated as a panelist in business valuation, investigative and forensic accounting topics, and has been qualified as an expert in both the Ontario Superior Court of Justice and, before that, the Ontario Court of Justice (General Division). His services have also involved attending trials, case conferences and pre-trial examinations to assist counsel.

167The husband’s challenges to Mr. Weinstein’s qualifications focused less on his background and duty of impartiality than on the scope of the investigation undertaken, and the sources of information upon which Mr. Weinstein relied. These, in my view, related more to the weight to be accorded to Mr. Weinstein’s evidence, than to his qualifications as an expert. Mr. Weinstein was accepted as an expert qualified to provide opinion evidence on the fair market value of the husband’s interest in Renegade on the marriage and valuation dates, and the husband’s income.

168Mr. Weinstein valued the husband’s 55.6 percent interest in Renegade on the valuation date as being worth $3,700,005: the husband valued his interest at $2,898,817. Renegade’s largest assets were its (approximate) 9.6 percent shareholding of Automodular, an 11.2 percent shareholding in Dominion Citrus Income Fund, and 180,000 units of an income trust. In addition, the company owned four residential properties, several bank accounts and marketable securities.

169The principal difference in the parties’ positions was the discount rate to be applied for contingent tax liabilities associated with the husband’s Renegade shares.

170Mr. Weinstein calculated the notional tax payable should Renegade’s assets be distributed to the husband, then reduced that amount by 50 percent to account for uncertainty of timing and tax planning opportunities. The husband’s position was that no tax exposure discount should apply, that “the appropriate treatment was to apply taxation at the prevailing rates than to discount them by some notional amount.” As the husband explained his rationale, he had nominal liquid assets and had taken on financial commitments to the wife and children that involved, for example, the right to purchase the wife’s interest in the matrimonial home (ultimately $1,250,000 in June 2010), five years of (approximately) $97,710 annually for children’s expenses ($488,800) and about two-and-a-half years of spousal support ($300,000).

171I am not prepared to accept that the value of the husband’s shares on the valuation date should be discounted by the then prevailing tax rate. There was no evidence that when the parties separated the husband had any intention to sell any of his Renegade shares. He had alternatives available to him other than disposing of his shares, such as mortgage refinancing or partial funding by a (possibly tax adjusted) RRSP rollover, if and when before December 31, 2010 he chose, for example, to purchase the wife’s interest in the matrimonial home. There was no evidence that since then the husband had sold any Renegade shares for the rationale he advanced. Additionally, a capitalized support obligation is not, in my view, a relevant factor when considering a contingent tax liability pertaining to property. Taking into account the principles set out in Sengmueller v. Sengmueller, 1994 8711 (ON CA), 17 O.R. (3rd) 208 (see paras. 195 to 197 below) and the absence of evidence from the husband that Mr. Weinstein misapplied the tax rate he chose, I accept Mr. Weinstein’s evidence that the value of the husband’s interest in Renegade on the valuation date was $3,700,005.

Money Owed to the Husband

172Two issues arose under this category.

Loan to John Blair

173John Blair is the husband’s son from his first marriage. The husband testified that when John was attending university, the husband purchased a condominium where John later resided, and, after graduating, John acquired its title from his father. As part of the purchase price, John gave his father a promissory note for $38,000. The husband claims that on the valuation date, John had repaid $20,000, thereby reducing his indebtedness to $18,000: this was the amount recorded in the husband’s NFP statement. The wife claims that, at least until trial, the husband had failed to provide any credible evidence of repayment.

174With the wife’s consent, the husband tendered affidavit evidence from John Blair, the contents of which did not deal with the impugned balance of the loan. The husband did testify, however, that three $5,000 transfers into his personal chequing account, one in March 2006 and two in early May 2008, represented payments from John. A possible fourth payment of $5,000 could not be identified in the records produced by the husband.

175Mindful of my view about the husband’s overall credibility where the dispute involves his financial interests, and notwithstanding the absence of any reference in John Blair’s affidavit to this loan or its repayment in whole or in part (the affidavit dealt with his involvement in Renegade after the wife and husband separated), I am only prepared to accept the husband’s evidence that John repaid his father $10,000 by the valuation date. This is, at best, a compromise position reflecting the absence of any challenge by the wife to the husband’s value in May 2008 and the husband’s failure to provide better corroborating evidence. The outstanding balance owing to the husband will be $28,000 (see Re Novak Estate, about the trier of fact’s discretion to accept none, part or all of the witness’s evidence).

CRA

176The wife claims that the husband should have included as money owed to him a receivable representing an income tax refund of $3,552. For the reasons set out below dealing with each party’s claims to a deduction for their income tax liability on the valuation date, this claim is denied.

(b) Debts and Other Liabilities on the Valuation Date

177A spouse’s “net family property” is defined in Part 1 of the Family Law Act, section 4 (1) and includes the value of a spouse’s property (as also defined in that section) owned on the valuation date after deducting, apart from other assets owned on the marriage date, “the spouse’s debts and other liabilities.” Pursuant to section 4 (1.1) liabilities are defined to include applicable contingent tax liabilities.

178Section 4 (3) provides as follows:

(3) The onus of proving a deduction under the definition of “net family property” or an exclusion under subsection (2) is on the person claiming it.

179Both parties challenged the other’s debts and contingent tax liabilities on the valuation date.

Volvo Lease ($19,900)

180The husband claimed a deduction for the balance of his lease obligations for a Volvo automobile that he operated on the valuation date. There was no evidence that the lease was not in good standing. In my view, future lease payments are not debts claimable as deductions in calculating a spouse’s net family property: Naidoo v. Naidoo, 2004 34415 (ON SC), 2 R.F.L. (6th) 362.

Matrimonial Home Property Taxes ($9,058)

181The husband claimed a deduction for realty taxes owing on the matrimonial home on the valuation date. The wife testified that no taxes were owed as of that date. Referencing the parties’ joint chequing account for 2008 from which they paid the realty taxes, the wife identified two installment payments made before May 31, 2008. These payments totalled about 50 percent of the annual tax. The next installment was paid by the husband on or about July 18, 2008, after the wife had left the home.

182As the husband enjoyed exclusive possession of the matrimonial home after July 1, 2008, it is my view that he should be responsible for its operating costs, effective that date. Neither in his cross-examination of the wife nor in his testimony, was the husband able to discredit the wife’s evidence about how realty taxes were charged to the matrimonial home or how and in what amounts they had historically been paid. He has not met the onus of proving this debt on the valuation date.

Canada Revenue Agency ($19,801-Wife: $8,749 – Husband)

183Each party claimed that on the valuation date, they were indebted to Canada Revenue Agency, and the other not indebted. The wife claimed that she owed $19,801 and the husband claimed he owed $8,749. In each case, these debts arose as a result of the tax impact of the spousal support paid in 2008 after the Separation Agreement was signed.

184Paragraphs 7.1 (a) and (b) of the Separation Agreement provided as follows:

(a) Michael will pay Patricia $10,000 per month for the period commencing the first day of the first month after Patricia leaves the matrimonial home and ends December 31, 2010. Patricia will continue to receive health and other benefits coverage under Michael’s Group Benefits Plan as an executive of Automodular Corporation for so long as the parties are separated and not divorced. Michael will consent to a court order extending Patricia’s coverage under such plan, if any, following divorce.

(b) Michael and Patricia and Renegade Capital Corporation will enter into the transactions as set out in Schedule A to this Agreement.

185Schedule A to the Agreement included a Retainer Agreement between the wife and Renegade, paragraph 2 of which stated:

2. Renegade shall pay Virc a monthly retainer of $10,000 plus GST for the foregoing services, and shall pay Virc monthly for any out of pocket expenses incurred by Virc in carrying out the duties of General Counsel and Corporate Secretary.

186In the wife’s 2008 Income Tax Return, most of her taxable income comprised a monthly Renegade retainer effective June 1, 2008 (about $70,000) and spousal support effective July 1, 2008 (about $60,000). She testified that, together with some additional net investment income and related investment and professional expenses, her tax liability totalled $47,523.15. The amount of $19,801, claimed as a deduction, related to the first five months of 2008, and was calculated as 5/12th of her tax liability.

187As for the husband’s claim to an $8,749 deduction, the evidence is that he paid a tax installment of $8,749 on March 17, 2008 and another installment in the same amount on June 13, 2008. It is this latter amount which he claims as a deduction. The wife claims that, after taking into account the tax deductible spousal support paid from and after July 1, 2008, the husband “over-installed” for 2008, and instead of a claimable deduction, he was owed a tax refund of $3,552.30.

188I am unable to accept either party’s position. In the wife’s case, as of the valuation date, nothing was owing by her on account of income tax, except possibly relating to some modest investment income, about which there was no evidence quantifying what tax, if any, would have been payable. The income giving rise to virtually all of her tax liability was earned (i.e. from Renegade) and paid (i.e. spousal support) after May 31, 2008. In the husband’s case, he was not obliged to make a June 2008 installment payment if, beforehand, he had chosen to consider, or estimate, his 2008 tax liability after taking into account spousal support to be paid. This observation applies to the wife’s argument about the tax refund she claims that the husband was owed.

189The determination of a party’s net family property should not, as a general rule, be affected by facts arising after the valuation date that trigger entitlement to a deduction or an obligation to include: Cosentino v. Cosentino, 2015 ONSC 271, 55 R.F.L. (7th) 117; Giguere v. Giguere, 2003 64335 (ON SC), 46 R.F.L. (5th) 184; Menage v. Hedges (1987), 1987 5234 (ON SC), 8 R.F.L. (3rd) 225 (Ont. U.F.C.). Accordingly, each party’s claim to a deduction for income tax owed on the valuation date is denied.

Property Insurance ($3,376)

190On July 18, 2008, the husband paid matrimonial home and contents insurance of $3,376. The parties dispute whether this is a proper deduction. The wife testified that this debt, not unlike the realty taxes for the matrimonial home, is paid in advance, not in arrears. Apart from having the wife confirm that the parties’ home was insured, the husband did not otherwise challenge her evidence on this point, and did not directly testify about it.

191In light of the fact that, as of July 1, 2008, the husband occupied the matrimonial home with substantially all of its contents, and the parties had expressly turned their minds in paragraph 10.6 of their Separation Agreement to the allocation of responsibility for its operating costs (the wife to pay the mortgage and the husband “all household expenses, including…property taxes, insurance…”), the husband’s claim to this deduction is denied.

RRSP Disposition Costs

192On the valuation date, each party owned a Registered Retirement Savings Plan (“RRSP”), the wife’s having a pre-tax value of $183,344 and the husband’s $779,759. While both parties agree that a discount for contingent tax liability should apply, they could not agree on the rate applicable to the other’s RRSP as of the marriage and valuation dates (the wife did not own an RRSP on the marriage date). Neither party tendered any independent evidence about an appropriate discount rate.

193When the parties separated, the wife was 43 years of age and the husband was 63 years of age. In 2008, the age at which a taxpayer could contribute to their own RRSP before being required to convert it to a Registered Retirement Income Fund (“RRIF”) was 71. Before trial, the parties had agreed to apply a 39.4 percent notional tax discount to the value of the husband’s pension. Despite their difference in ages, the wife claimed the same rate as the husband.

194Not uncommonly, where parties cannot agree on notional RRSP disposition costs, the difference in pre-tax values will be equalized separately from the equalization calculation otherwise applicable by means of a tax-free rollover with (possibly) some tax adjustment to reflect that an EP is a net-of-tax payment. Where though, as in this case, there is no such agreement, the issue becomes one of evidence as to expected time of disposition, sufficient to make a present value calculation of each party’s RRSP notional disposition costs.

195This issue was squarely before the Court of Appeal in Sengmueller. One of the issues before the court was whether, and if so, how and under what circumstances, estimated taxes should be considered when valuing an asset for equalization determination purposes.

196In the view of McKinlay J.A.:

…[I]t is…appropriate to take such costs into account in determining net family property under the Family Law Act if there is satisfactory evidence of a likely disposition date and if it is clear that such costs will be inevitable when the owner disposes of the assets or is deemed to have disposed of them. In my view, for the purposes of determining net family property, any asset is worth (in money terms) only the amount which can be obtained on its realization, regardless of whether the accounting is done as a reduction in the value of the asset, or as deduction of a liability: the result is the same. While these costs are not liabilities in the balance sheet sense of the word, they are amounts which the owner will be obliged to satisfy at the time of disposition, and hence, are ultimate liabilities inextricably attached to the assets themselves…(p. 213).

R.R.S.P.s, in particular, are taxable in full, regardless of the time of realization, whether they are cashed in total, or taken by way of annuity (p. 215).

197Finally, McKinlay J.A. gleaned three rules to apply in all cases:

(1) Apply the overriding principle of fairness, i.e., that costs of disposition as well as benefits should be shared equally.

(2) Deal with each case on its own facts, considering the nature of the assets involved, evidence as to the probable timing of their disposition, and the probable tax and other costs of disposition at that time, discounted as of valuation day.

(3) Deduct disposition costs before arriving at the equalization payment, except in the situation where “it is not clear when, if ever” there will be a realization of the property (pp. 216-217).

198Sengmueller was more recently followed in Buttar v. Buttar, 2013 ONCA 517, 116 O.R. (3d) 481. There is, however, no consistency in how courts have approached this issue when dealing with RRSPs. One authority’s review of the case law has observed that:

…[I]n cases where the deduction is allowed, the rate of deduction varies anywhere from 15 per cent to 30 per cent. No one percentage rate appears to be more common than another in the case law…

Moreover:

Courts have adopted various approaches to deal with the lack of evidence in these cases. In some cases, the Court will allow a deduction in the absence of any evidence and will simply insert a percentage without further discussion. In other cases, a deduction may be allowed but at a reduced rate. However, in some cases the Court disallows the deduction altogether due to lack of evidence. Courts have considered hindsight evidence of post-separation tax rates and actual costs of disposition incurred when RRSPs were sold after separation but before trial.⁴

199In this case, the wife was about the same age when the parties separated as was the husband when they married, and the husband, on the valuation date, considerably closer to the mandatory RRSP/RRIF conversion date. The wife had no RRSPs on the marriage date, whereas the agreed pre-tax value for the husband’s RRSPs then was $281,909. In my view, it would not be unreasonable to apply a 25 percent notional tax discount to the value of the husband’s RRSPs on the marriage date and to the wife’s RRSPs on the valuation date.

200As for the discount to be applied to the value of the husband’s RRSPs on the valuation date, since the parties agreed to accept a 39.4 percent contingent tax discount to the value of the husband’s pension, and there was no better evidence about this led at trial, it is my view that rate should be applied to the value of the husband’s RRSPs on the valuation date. Therefore, the following contingent tax deductions shall be applied:

(a) based on the value of the husband’s $281,909 RRSP on the date of marriage, a deduction of 25 percent in the amount of $70,477;

(b) based on the value of the wife’s $183,344 RRSP on the valuation date, a deduction of 25 percent in the amount of $45,836; and

(c) based on the value of the husband’s $779,759 RRSP on the valuation date, a deduction of 39.4 percent in the amount of $307,225.

(c) Property, Debts and other Liabilities on the Date of Marriage

201The definition of “net family property” in Part 1, section 4 of the Family Law Act allows a spouse to claim a deduction, in addition to debts and other liabilities on the valuation date, for:

(b) the value of property, other than a matrimonial home, that the

spouse owned on the date of the marriage, after deducting the

spouse’s debts and other liabilities, calculated as of the date of the

marriage.

202As with valuation date debts and other liabilities, the onus of proving a marriage date deduction is on the party claiming it pursuant to section 4 (3) of the Act.

203In this case the parties agreed on the values for the general household items and vehicles, Works of Art, the values for the husband’s securities and bank accounts, a Collingwood Ski Club debenture, and the wife’s debts brought to their marriage. All other values were disputed.

Land

204In 1988, the husband bought a condominium (Ruperts Landing) in Collingwood for $700,000. A boat mooring cost an additional $12,000. In 1992, the property was appraised as being worth $675,000. This is also the value recorded in a Date of Statement column in the husband’s February 1, 1994 financial statement sworn in the litigation with his former spouse, and which the wife in this commissioned. The property was unencumbered.

205Slightly over three months after the parties married, the husband transferred title to the wife in mid-December 1994. It was eventually sold for $410,000 in 2000, and part of its net proceeds used, as already noted, to fund the husband’s 1999 settlement with his former spouse.

206When the parties married, there were pre-existing issues with respect to a leaky roof (the condominium was a top floor unit) and badly-fitting windows and doors. Several months after title was transferred to the wife, negotiations between the parties and condominium management involving repairs broke down and led to the parties starting an action against the corporation. The wife drafted the claim. This action was later settled and the parties were allowed to make repairs, but at their own expense, the eventual cost for which was $114,000.

207The parties dispute the deductible value for the husband’s interest in the condominium when they married. He contends that it should be $675,000 and she argues it should be assigned either no value or $296,000, representing the 2000 sale proceeds, less the $114,000 repair costs. No appraisal of the property as of the marriage date was apparently commissioned by the husband nor, in the circumstances described, does it seem likely that any kind of reliable appraisal after so many years could have been obtained. There was also no evidence of prevailing local market or housing conditions in 1994 or the degree to which those may have changed between 1994 and 2000.

208As noted by Kiteley J. in Shaw v. Shaw, 2003 64335 (ON SC), [2002] O.J. No. 2782 (S.C.) “[t]he calculation of net family property is not a science. It is not predicated on precision to the penny.” While there was no expert evidence about the condominium’s value in 1994, and the 1992 appraisal was never tendered in evidence, the parties had agreed that it was appraised in 1992 for $675,000. It is not unreasonable that a valuation involving an inspection by a properly qualified appraiser would have taken into account the property’s condition in September 1994 and that, as it was in fact eventually the case, there would have been realty commission expenses incurred on any disposition. An estimate must be made: Lampron v. Lampron, 2003 64342 (ON SC), 50 R.F.L. (5th) 98; additional reasons at 2004 CarswellOnt 2517 (S.C.J.); aff’d, 2005 CanLII 788 (ON CA), 12 R.F.L. (6th) 391.

209It seems to me that, in the absence of better evidence, the deductible value of the condominium should be the $675,000 appraised value recorded in 1992 as reflected in the husband’s 1994 financial statement, less the $114,000 cost of repairs and less an equivalent notional adjustment for realty commissions plus GST. Accordingly that value is $531,000 calculated as follows:

(a) $675,000;

(b) less the sum of $114,000 for cost of repairs; and

(c) less the sum of $30,013 (rounded to $$30,000) for five percent realty commission rate on the sum of (a) less (b) plus seven percent GST.

TD Account Balance ($7,388.16)

210When they married, the parties owned a joint chequing account that had a balance of $7,388.16. The husband testified that as only he had contributed to that account (although, as the wife testified, she owned no bank accounts in her name alone), only he should be entitled to claim its full balance as a deduction.

211Section 4 (2) (b) of the Act, as referenced earlier in these Reasons