COURT FILE NO.: FS-12-73857-00 DATE: 2016 08 18

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

NATHALIE MURRAY Self-represented Applicant

• and -

ROBERT BORTOLON Doug Laframboise, for the Respondent Respondent

HEARD: December 4 and 5, 2014; December 14, 15, 16, 2015; and February 10, 11, 12, 2016

REASONS FOR JUDGMENT

Justice Emery

[1] The trial of this application was halted on two occasions, once for disclosure that had not been made under previous orders, and another time for the applicant, Nathalie Murray, to obtain legal advice.

[2] Nathalie focused her claims against the respondent, Robert Bortolon, for spousal support and for child support. Her claim for that support rested heavily on her request for the court to impute a significant annual income to Robert. Nathalie’s claim for child support also rested on her request for the court to find that Robert stood in the place of a parent to her two sons from a previous marriage.

[3] Robert focused primarily on the transactions related to his companies in which both he and Nathalie were involved in the course of their marriage. Robert’s case relied heavily on their respective assets and liabilities as of the date of separation to calculate the net family property of each party. Although each party claimed an equalization payment from the other, it was Robert’s claim for a significant equalization payment from Nathalie that became the issue.

[4] Each party gave up a right at the beginning of trial that detracted from the remaining claims. Nathalie gave up the right to better disclosure of information about Robert’s three companies, Cavalon Inc., Autometric Auto Body Inc. and Bortolon Holdings Ltd. Robert waived his claim for spousal support.

[5] The fact that each of the parties surrendered those rights echoed throughout the trial but ultimately, each of them was resigned to live with the position she or he had taken.

[6] The trial therefore proceeded on the issues of support claimed by Nathalie, and Robert’s claim for an equalization payment.

[7] For the reasons that follow, the parties are bound to find themselves disappointed by the result of the court’s determination of those claims.

ESSENTIAL BACKGROUND

[8] Nathalie and Robert married on July 4, 2004. They separated with no reasonable prospect of reconciliation on April 30, 2011.

[9] Nathalie made a claim for a divorce order in her application. The divorce order was granted during this trial on February 12, 2016.

[10] Prior to her marriage to Robert, Nathalie was a single mother raising two sons from a previous marriage. The youngest son, Alexander, was born on May 8, 1998 and was therefore six years old when Nathalie and Robert married. His brother, Tyler, was born on April 23, 1996 and was therefore eight years old. Alexander and Tyler are now 18 and 20 years old respectively.

[11] Nathalie describes family life with Robert as a time when they vacationed as a family, and Robert took an interest in the activities of the two boys. Nathalie tendered a cheque written by Robert’s company, Autometric Auto Body Inc. dated April 29, 2009 in the amount of $800 to Bolton Wanderers Soccer Club, where Tyler would play soccer, as evidence of his support of Tyler’s activities. In another exhibit, a photograph of a keychain containing a group photograph of Robert, Nathalie and the two boys on a roller coaster bearing the date September 4, 2004 was marked as an exhibit. Nathalie testified that the keychain was a memento of a family vacation Robert and Nathalie had enjoyed with the boys.

[12] On another occasion, Robert purchased an airline ticket for Tyler to fly out to Vancouver for a school trip. Nathalie points to this expenditure as evidence that Robert treated Tyler like his own child. Robert testified that the airline ticket was purchased with points he had accumulated on a credit card.

[13] Nathalie gave evidence that both of her sons, and in particular Tyler, had grown close to Robert and that both of them regarded Robert as a father figure. Nathalie described how the separation has been difficult for the boys. It is especially difficult for Tyler in particular to accept that Robert is no longer a part of their lives.

[14] Nathalie also makes a claim for spousal support against Robert. Her claim for the quantum of child support and for spousal support she is seeking from Robert is based on her position that the court should impute an income of $250,000 a year to Robert, despite the fact that his declared income for the years during the marriage never exceeded $15,000 a year.

[15] Nathalie relies upon the financial statements and other documents of Robert’s three companies to establish the evidentiary foundation to impute this income. There was no expert called or opinion evidence given about how Robert’s income could be determined from these corporate documents. Nathalie proceeded to trial on the corporate documents available to her without requiring any further disclosure from Robert about those companies.

[16] Robert did not provide business valuations under the order made by Justice Snowie on April 23, 2013. Robryt Regan, the one-time lawyer for Robert, was required to provide documents related to Robert’s corporations pursuant to another order made by Justice Price on September 24, 2013 for the purpose of a “thorough and true valuation” of Cavalon Inc. and Autometric Auto Body Inc. It is for this reason I adjourned this trial on December 5, 2014 to obtain that disclosure. Limited disclosure was provided by Mr. Regan by the time trial resumed in December, 2015.

[17] Nathalie had owned the home at 28 Pavin Crescent in Bolton, Ontario for seven years before her marriage to Robert. The house at 28 Pavin Crescent remained in her name throughout this marriage. She remains to be the sole owner of 28 Pavin Crescent today. That property had a fair market value of $330,000 at the date of marriage on July 4, 2004, and was appraised at $450,000 as of the date the parties separated on April 30, 2011.

[18] In 2007, Robert asked Nathalie to provide financial support for the purchase of land and two buildings at 142 King Street East in Caledon, Ontario. There is a house on one side of that property. On the other side there is a commercial building that could house an automotive shop. Robert intended to purchase 142 King Street East through his company, Cavalon Inc. Another of Robert’s companies, Autometric Auto Body, would operate an automotive business from the commercial building as the operating business.

[19] On April 7 2007, Nathalie wrote a cheque in the amount of $25,000 to ReMax 2000 Realty Inc. on her account at TD Canada Trust as a deposit on 142 King Street East. Although that account has always been in Nathalie’s name, Robert’s name was added to the account as an authorized signatory. Throughout the trial, both parties considered this account to be a joint account between them.

[20] On April 10, 2007, Nathalie wrote another cheque, this time to Cavalon Inc., in the amount of $11,000 on the account at TD Canada Trust.

[21] On August 24, 2007, Nathalie refinanced the mortgage against 28 Pavin Crescent in the amount of $340,000 for a five-year closed term on a 35 year amortization period. Under that new mortgage, she was to pay $1,882.06 each month. From that refinancing, $119,000 was advanced to Robert’s lawyer, Mr. W. Ross Milliken, in trust, toward the purchase of 142 King Street East on August 28, 2007.

[22] 142 King Street East was appraised at $600,000 as of April 30, 2011 by ICI Valuations.

[23] Autometric Auto Body Inc. operated its auto body business from the automotive shop at 142 King Street East commencing in 2007, and operated a business account at Royal Bank of Canada in Toronto.

[24] Autometric Auto Body Inc. ceased doing business on or shortly after the date of separation. Nathalie waived the requirement that Autometric Auto Body Inc. be valued under the order made by Justice Snowie.

[25] The balance of the funds to purchase 142 King Street East was obtained under a first charge to Interbay Funding Corp. in the amount of $468,000. This first charge was granted by Cavalon Inc. on a variable rate of 8.625 percent for the first 12 months of the term, and adjustable thereafter over the 20 year term. This first charge was supported by each Robert and Nathalie as guarantors.

[26] Nathalie acknowledged that in the “brick” of documents she was required to sign for the financing and purchase of 142 King Street East, she signed transfer documents that gave her 50 percent of the shares in Cavalon Inc. She stated that she did not know what she was signing at the time to become a holder of 50 percent of the shares in Cavalon Inc.

[27] In addition to refinancing the matrimonial home and to guarantee each of them gave for the first charge Cavalon Inc. to Interbay Funding Corp., Nathalie and Robert guaranteed a loan Cavalon Inc. obtained from the Business Development Corporation (“BDC”) in the amount of $100,000 for working capital. Nathalie and Robert gave a personal guarantee limited to $80,000 on a joint and several basis in support of that loan.

[28] On December 29, 2007, Cavalon Inc. entered a lease with Luc Morneault to rent the upstairs of the residential building at one end of 142 King Street East at a base rent of $14,400 a year.

[29] Cavalon Inc. is no longer renting the automotive shop at 142 King Street East. After separation, Robert took up residence in the residential building on the property.

[30] During the trial, Robyrt Regan provided the report prepared by the accounting firm Chappell Partners LLP dated January 17, 2014 from his file. This report contained the financial statement prepared for Autometric Auto Body Inc. for the year ending December 31, 2010. This financial statement was prepared by Thomas G. Kitamura, C.A., C.F.P. of Bolton, Ontario, on July 8, 2011, on a Notice to Reader basis, which is the lowest level of scrutiny an accountant may give when preparing the financial report of a corporation. In that financial statement, Autometric reported receiving cash during the year of $13,097, with $22,800 due from a related party and $102,944 due from related companies. In the Statement of Income and Retained Earnings, Autometric reported sales of $336,349 over $314,020 from the previous year, with cost of sales in the amount of $171,271 for a gross profit of $165,078.

[31] Expenses shown amounted to $167,439 for a net loss of $2,361 for the year. The expenses show a management bonus of $10,000 paid, presumably to Robert Bortolon, and no salaries and benefits paid for the year.

[32] In the income/expense journal attached to the report from Chappell Partners LLP, there appears $149,676.29 charged against Code 550 of Uncategorized Expenses, $72,709.45 against Code 551, $35,526.70 against Code 510 in uncategorized expenses. The income/expense journal for the year January 1, 2011 to December 31, 2011 also shows mortgage interest of $50,956.18 paid, $48,264.99 for operating expenses, $59,577.31 for paint material and $24,095.34 for towing charges as four of the largest items expended by Autometric. Unfortunately, no evidence was given about what the various accounting codes represented, or the details for expenses claimed.

ANALYSIS

Support

[33] Nathalie seeks a finding from this court that Robert stood in the place of a parent to her sons Alexander and Tyler during the marriage. I must decide whether Robert stood in the place of a parent to Alexander and Tyler during the marriage to determine whether he is responsible to pay child support.

[34] The Divorce Act defines a “child of the marriage” in Section 2 as a child in which a person stands in the place of a parent. The decision of the Supreme Court of Canada in Chartier v. Chartier, [1999] 1 S.C.R. 242 provides the most helpful guidance to determine whether there is a parental relationship between the spouse or former spouse and a particular child. Chartier sets out indicia for making that determination that includes, but is not limited to the following criteria:

a) intention (through words and actions) b) actual fact of forming a family (if the person treats the child as a member of his or her family) c) whether that person provides financially for the child (depending on his ability to pay) d) whether the person disciplines the child as a parent e) whether the person represents to the child, the family, the world, either explicitly or implicitly, that he is responsible as a parent to the child; and f) the nature and existence of the child’s relationship with the absent biological parent.

[35] Under Chartier, once a person is found to “stand in the place of a parent” that person cannot unilaterally withdraw from the relationship in order to escape support obligations imposed by the Divorce Act.

[36] The onus of proof that a child for whom support is claimed is a child of the marriage is on the party seeking that child support: Whitton v. Whitton, and Cooper v. Ryan, [2008] W.D.F.L. 5185, 169 ACWS (3d) 820. The evidence of the parties present conflicting evidence to the court about how Robert treated Alexander and Tyler and if he regarded them as a parent would regard a child. Even if Robert paid for a number of expenses for Alexander and Tyler along with Nathalie, the evidence is far from convincing that such payment establishes a parental relationship.

[37] In Chartier, the Supreme Court of Canada held that the breakdown of the parent/child relationship after separation is not a relevant factor in the determination of whether a person stands as a parent to a child for the purposes of awarding corollary relief under the Divorce Act. I only note in passing that there has been virtually no relationship between Robert and the two children since he separated from Nathalie. It would appear that this is mutual, which may suggest that there was no parent and child relationship to begin with. However, I do not consider that absence of contact to be a factor.

[38] There is no evidence from Nathalie on how Alexander and Tyler treated or regarded him as a parent. In particular, I note that Robert has testified that they never called him “Dad.” In view of conflicting evidence on the relationship between Robert and these children, I cannot determine whether Robert stood in the place of a parent to either boy. See Proulx v. Proulx, [2009] O.J. No. 1680.

[39] Nathalie did not call Alexander or Tyler as witnesses at trial. Therefore, the court had only her evidence in support of the claim she is making that Robert had stood in the place of a parent to Alexander and Tyler during the marriage.

[40] Having regard to all of the evidence and the onus on Nathalie to prove that claim, I conclude that Robert did not stand in the place of a parent to either child.

[41] Nathalie also seeks spousal support against Robert. It is well established that the obligation to pay spousal support arises in three distinct ways. Under Bracklow v. Bracklow, [1999] 1 S.C.R. 420, spousal support can be claimed:

1. For compensatory support;
2. For support based on need; and
3. Contractual support.

[42] The purpose for spousal support under the Divorce Act, 1985 was also discussed by the Supreme Court in Moge v. Moge, [1992] 3 S.C.R. 813 to cover the economic consequences for each of the parties of the marriage breakdown.

[43] Nathalie told the court that she was financially stable prior to her marriage to Robert. She testified that she had no debt except for the outstanding balance on the first mortgage against 28 Pavin Crescent in the amount of $92,000.

[44] That financial situation changed during the marriage. Robert is an independent businessman. He introduced Nathalie and the boys to a lifestyle complete with dinners out at restaurants, expensive vacations and other trappings that suggested an affluent household income.

[45] From Nathalie’s own evidence, I make the following findings of fact:

1. Nathalie is self-sufficient and has not sacrificed any career or income opportunity by virtue of the marriage. Therefore, there is no need for compensatory support;
2. Nathalie seeks spousal support in an effort to recapture the lifestyle she enjoyed during the marriage. Nathalie advances no ground for support based on need; and
3. There is no contractual obligation in this case for one party to pay support to the other.

[46] Even if I am wrong in reaching the conclusion that neither Alexander or Tyler were children of the marriage because Robert stood in the place of a parent to one or both of them, or that Nathalie had a claim for spousal support recognized by law, I find that the evidence at trial does not support a finding that Robert earned an income greater than $15,000 in any year since 2010. I make this finding on his Notices of Assessment filed as exhibits, and the evidence given by him at trial.

[47] Nathalie relies on Section 19 of the Federal Child Support Guidelines to impute income to Robert based on the lifestyle of the family during the marriage, and the income of Cavalon Inc., Autometric Auto Body Inc. and Bortolon Holdings Inc. I reach the conclusion that income from one or more of those companies does not generate an annual income to Robert greater than $15,000 on the evidence for the following reasons:

1. Bortolon Holdings Inc. – from the evidence heard at trial, this company holds no assets and conducts no business.
2. Autometric Auto Body Inc. – from the evidence heard at trial, this company ceased operations around the time the parties separated.
3. Cavalon Inc. – the sole assets of Cavalon Inc., being 142 King Street East in Caledon, is subject to the Interbay charge, and may be sold under that charge because Cavalon Inc. is in default. There was no other evidence given at trial about other assets or income currently held or earned by Cavalon Inc.

[48] In Bak v. Dobell, 2007 ONCA 304, the Court of Appeal expressed the view that the trappings of the lifestyle does not equate to be income of a spouse. Instead, a lifestyle provides evidence from which an inference that the spouse has not disclosed income that may be imputed to him or her for the determination of a support claim. Since entitlement to neither child support nor spousal support has been made out, I draw no inferences to impute any greater income to Robert for support purposes. Nathalie may have even funded some of that lifestyle directly from earnings she deposited to the joint account and indirectly through the financing she supported Robert to obtain.

Equalization

[49] The other claim, which is of greater concern to Nathalie, is the equalization claim Robert is making, including any trust claims Robert advanced at trial against the house at 18 Pavin Crescent.

[50] The legislative scheme for the calculation of net family property of each spouse on a marital breakdown is set out in Sections 4 and 5 of the Family Law Act. In order to determine the value of assets attributable to each spouse, Section 10(1) of the Family Law Act authorizes the court to determine issues of ownership and title between spouses in assets. That way, the court can determine if the value for a particular asset or an interest in that asset is properly claimed or placed in the net family property column of one spouse over the other.

[51] I propose to consider certain assets owned by each spouse and any interest in that asset claimed by the other spouse to perform this function. I will then consider any debts or liabilities owing by that particular spouse on the date of separation. Whether Robert is found to have a proprietary interest in the matrimonial home, or if Nathalie holds shares in Cavalon Inc., will be pivotal determinations, as will be the allocation of contingent liabilities for the purpose of calculating net family property.

Value of Nathalie’s Property on Date of Separation

Matrimonial Home at 28 Pavin Crescent

[52] Nathalie brought the matrimonial home at 28 Pavin Crescent into the marriage. She was the registered owner on title to that property before the marriage, during the time the parties lived there as a married couple, and since the date of separation.

[53] The matrimonial home has been appraised as of the date of separation at $450,000. Robert makes a claim against the matrimonial home on one of two bases. First, Robert states that as 28 Pavin Crescent was the matrimonial home and any conveyance or encumbrance registered against it would require his consent under Section 21 of the Family Law Act, he holds a property interest as an owner. Alternatively, Robert argues that he invested $50,000 of labour and materials to improve the home, raising a constructive trust interest. Robert makes these claims in addition to his claim for an equalization payment against Nathalie.

[54] The court must determine the ownership and the respective interests in property held by each party to calculate the net family property before an order for an equalization payment under Section 5 of the Family Law Act is made. In Martin v. Sansome, 2014 ONCA 14, the Court of Appeal applied the rule in Rawluk v. Rawluk, [1990] 1 S.C.R. 70, that before property can be equalized under the Family Law Act, a court must first determine the “net family property” of each spouse, and to determine all questions of title. This determination is wide enough to include the disposition of entitlement to constructive trust arising from unjust enrichment.

[55] In Martin v. Sansome, 2014 ONCA 14, the court reiterated the observation made in McNamee v. McNamee, 2011 ONCA 533 that “in the vast majority of cases, any unjust enrichment that arises as the result of a marriage will be fully addressed through the operation of the equalization provisions under the Family Law Act.”

[56] Robert does not, and has never held title to 28 Pavin Crescent. There was nothing in the evidence given at trial that he was ever shown as a registered owner on title, or that he was otherwise granted a proprietary interest. For Robert to succeed in claiming a proprietary interest in 28 Pavin Crescent, he must establish an interest through other means.

[57] Robert must establish a trust claim of some nature in 28 Pavin Crescent to establish an ownership interest. Robert is entitled to make a claim under Section 14 of the Family Law Act that allows for the presumption of a resulting trust. However, I find that the evidence in this case does not support any claim for a resulting trust. This evidence follows the legal principles articulated by the Court of Appeal in Korman v. Korman, 2015 ONCA 578 but with the opposite result: Nathalie owns the matrimonial home entirely as the evidence rebuts the statutory presumption of a resulting trust operating in Robert’s favour.

[58] I do not give any weight to Robert’s argument that as a spouse having a right of possession to 28 Pavin Crescent as the matrimonial home, he somehow acquired a property interest in that property.

[59] Under Section 19, both spouses have an equal right to possession of the matrimonial home under Section 19(1) of the Family Law Act. The right to possession does not convey a property interest in the matrimonial home. Section 19(2) expressly provides that, where only one of the spouses has an interest in a matrimonial home, the other spouse’s right of possession is personal as against the first spouse. The right to possession is not an interest in property or a claim against title to the property itself, nor does Section 19 contain any language that provides for the creation or transmission of a right or interest in the property. The legislation further provides under Section 19(2)(b) that the right to possession terminates when the spouses cease to be spouses, unless a separation agreement or court order provides otherwise.

[60] Similarly, Section 21(1) of the Family Law Act provides that no spouse shall dispose of or encumber an interest in a matrimonial home unless the other spouse joins in the instrument or consents to the transaction. This provision clearly recognises that the consent of the other spouse is required for the disposal or encumbrance of an interest in the matrimonial home. However, this statutory safeguard does not create or transmit an ownership interest in a matrimonial home owned by one spouse that the other spouse could not otherwise assert. In my view, the Act implies that where the first spouse does not have a property interest in that matrimonial home, consent is required so that the right of possession in the matrimonial home under Section 19 of the Family Law Act is not jeopardized without his or her involvement.

[61] It is an undisputed fact that Nathalie had acquired, and had paid down the mortgage registered against 28 Pavin Crescent herself before the date of marriage. There was no gratuitous transfer of property or an interest in property from Robert to Nathalie, or a joint contribution by the two spouses to acquire the property, title of which was held in the name of only one of them. There was no evidence of a “common intention” for Nathalie to hold title to 28 Pavin Crescent in trust for both Robert and herself to form a resulting trust. Even if there was, Justice Cromwell stated in Kerr v. Baranow, [2011] 1 S.C.R. 269, at paragraph 29, that the concept of a resulting trust arising solely from the common intention of the parties no longer has a useful role to play in resolving property and financial disputes in domestic cases.

[62] Robert is really claiming a proprietary interest in 28 Pavin Crescent because of his evidence that he improved that property through his labour and materials by $50,000. I have two difficulties with this evidence. First, I prefer the evidence of Nathalie that the mortgage and expenses for 28 Pavin Crescent were paid for through income she earned before and after the refinancing in April 2007, even though that income flowed through the joint account. Second, Robert did not provide any evidence of a detailed or cogent nature about the time and labour he invested, or the materials he purchased to improve 28 Pavin Crescent.

[63] Robert testified that he borrowed money from his brother to purchase the construction material used to improve 28 Pavin Crescent. Robert further testified that he has repaid some of that money to his brother. However, he has provided no evidence of either borrowing from his brother to improve the property, or repayment of those funds in whole or in part. I accept the evidence Nathalie gave in reply that if Robert is to stand by the evidence that his income never exceeded $15,000 a year, he did not have the ability to purchase construction materials himself, or to repay his brother a significant amount for those materials. I therefore find that Robert has not proven the factual foundation necessary to establish that Nathalie has been unjustly enriched at his expense.

[64] Even if I were to find that Nathalie has been unjustly enriched, and that Robert has suffered a corresponding deprivation for no juristic reason, the law requires that I first consider giving Robert a monetary award to compensate him appropriately before considering a constructive trust remedy. Since I have found that Robert has not proven his claim for unjust enrichment, he has failed to establish any entitlement to a monetary award, let alone a claim to an interest in the property by way of a constructive trust.

[65] I therefore conclude that Nathalie is the sole owner of 28 Pavin Crescent, and that its appraised value on the date of separation forms part of her net family property.

Furniture

[66] Nathalie claims that she owns half of the furniture located in 28 Pavin Crescent. Robert did not contest the existence of this furniture, or its value. Therefore, the value she attributes to her interest in the furniture in the amount of $10,000 forms part of her net family property.

RRSP Standard Life

[67] It is not disputed that Nathalie had an RRSP at Standard Life having a value of $30,091. Therefore, this forms part of her net family property.

RPP Standard Life

[68] It is not disputed that Nathalie had an RPP at Standard Life in the amount of $55,504. It is not known if this RPP is the pension plan she held through her employment. Robert did not make a claim against or introduce evidence of any other pension available to Nathalie. As it is undisputed, the value of this pension plan forms part of her net family property.

Chequing Account (50 Percent)

[69] Nathalie held a joint chequing account with Robert having a balance of $82 in it as of the date of separation. Therefore, the $41 in that account forms part of her net family property.

Chequing Account - RBC

[70] Nathalie had a balance of $1,637 in her RBC chequing account, which forms part of her net family property.

Savings Account - RBC

[71] Nathalie had a balance of $941 in her savings account at RBC, which forms part of her net family property.

Shares in Cavalon Inc.

[72] Nathalie testified that if she signed corporate documents to become an owner in Cavalon Inc. when the financing was arranged to purchase 142 King Street East in 2007, she signed those documents as part of the “brick of documents” Robert had her sign.

[73] There was no independent evidence given that Nathalie subscribed for shares in Cavalon Inc., or that she paid any subscription fee for those shares. Her evidence suggested that if she did sign documents to become a shareholder of Cavalon Inc., she did so to provide the lender with comfort that she was an owner to support her guarantee of the charge for $468,000.

[74] I find as a fact that Robert took liberties to transfer shares to Nathalie in order to shift corporate responsibilities. The letter from Mr. Regan dated September 28, 2007, to confirm the transfer of 500 of “your 1000 common shares” to Nathalie on August 24, 2007 was written to Robert as president of Cavalon Inc., and not to Nathalie.

[75] I further find that Robert exercised sole control over Cavalon Inc. both in a business sense and as a matter of corporate governance. He called no meetings to conduct corporate business and gave Nathalie no voice or opportunity to exercise her rights at a shareholders meeting as though she were a bona fide shareholder in Cavalon Inc.

[76] I therefore find that if Nathalie was issued a share certificate for 50 percent of Cavalon Inc. in 2007, she took those shares in trust for Robert. It is my conclusion that Nathalie did not subscribe to those shares, and never was a beneficial owner. Nathalie has already funded Robert by incurring significant debt to purchase assets for, and to operate Cavalon Inc. Nathalie should not have to bear the imposition of shares that will inflate her net family property artificially. To allow this imposition would be to enable Robert to extract another financial toll from Nathalie beyond the debt this marriage has left her to pay.

Value of All Debts and Liabilities of Nathalie on Date of Separation

Charge Against 28 Pavin Crescent

[77] The evidence shows that the outstanding balance on the charge against title to 28 Pavin Crescent that Nathalie arranged in 2007, and that Nathalie has serviced from her income was $335,000 as of the date of separation.

Notional Tax on RRSP (20 percent)

[78] Nathalie is entitled to a deduction of 20 percent for the tax she would pay on her RRSP on the date of separation for disposition expense. She is therefore entitled to a deduction of $6,000.

BDC – Personal Guarantee

[79] Cavalon Inc. defaulted on the loan made by BDC in 2007 during the marriage. The litigation to collect on the personal guarantees of Robert and Nathalie was outstanding on the date of separation. Nathalie’s exposure under the personal guarantee given to BDC was 80 percent of the $100,000 loan, which grew to $81,982, with interest after default.

[80] After separation, BDC brought a motion for summary judgment. Justice Hainey of this court found Cavalon Inc. liable for the full amount of the loan, and found Nathalie liable for $81,982 under her personal guarantee.

[81] The law relating to the attribution of a value for a debt or liability under Section 4 of the Family Law Act for the purpose of calculating net family property was reviewed by the Court of Appeal at length in Greenglass v. Greenglass, 2010 ONCA 675. At issue in Greenglass were the costs of litigation that the husband had incurred when he encountered business litigation with others prior to separation. Justice Epstein, after acknowledging the difficulty with valuing assets and liabilities, stated that contingent liabilities are to be taken into account as long as they are reasonably foreseeable. Justice Epstein stated at paragraphs 26 and 27 as follows:

[26] In the jurisprudence that has developed under this section, the difficulty in valuing assets and liabilities, particularly contingent liabilities, is often noted. What is clear, however, is that contingent liabilities are to be taken into account as long as they are reasonably foreseeable. See Leslie v. Leslie (1987), 9 R.F.L. (3d) 82 (Ont. H.C.); Nicol v. Nicol (1989), 21 R.F.L. (3d) 236 (Ont. H.C.); Crutchfield v. Crutchfield (1987), 10 R.F.L. (3d) 247 (Ont. H.C.); and Drysdale v. Drysdale (1994), 9 R.F.L. (4th) 20 (Ont. U.F.C.J.).

[27] In determining the present value of a contingent liability, courts have looked at what was reasonably foreseeable on the valuation date: Johnston v. Johnston, [1998] O.J. No. 5495 (Gen. Div.), at para. 59, aff’d on other grounds , leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 234. In Drysdale, at paras. 14-17, Beckett J. noted that where courts have found no or a very low risk that a guarantee would be called at the valuation date, the value of the contingent liability has been determined to be nil. However, in Drysdale it was found that there was a real possibility that the guarantee would be called upon, though the amount could not be predicted with any certainty. Finding it unrealistic to value the liability at either zero or the full amount of $200,000, Beckett J. valued the liability at 50 percent of the amount in question: see also Salamon v. Salamon, [1997] O.J. No. 852 (S.C.J.). This approach was approved by this Court in Cade v. Rotstein (2002), 181 O.A.C. 226 (C.A.).

[82] Justice Hainey in the BDC action delivered his endorsement at BDC v. Cavalon Inc. et al., 2011 ONSC 7080 on November 23, 2011. Nathalie had defended the claim made by BDC under the guarantee essentially on the basis of a non est factum defence. Justice Hainey found there to be no issue requiring a trial with respect to that defence, and granted judgment in the following terms:

[28] Accordingly, I find there is no issue requiring a trial in respect of Ms. Murray’s defence of non est factum and for the reasons outlined above I find that the plaintiff is entitled to summary judgment against her in the amount of $81,982.70 pursuant to the Guarantee dated April 30, 2007. The plaintiff is awarded summary judgment against Nathaly Murray in the amount of $81,982.70 plus pre-judgment interest.

[83] I find that Nathalie is entitled to claim the full amount of the principal judgment against her of $81,982.70 to claim as a liability because summary judgment followed closely after the date of separation. This contingent liability was reduced to a real liability during the same year Nathalie separated from Robert. That liability was not only reasonably foreseeable when the parties separated, it was imminent. I make this finding in view of Justice Hainey’s conclusion that there was no issue in the BDC claim against Nathalie that required a trial.

BDC – Costs Under Judgment

[84] Justice Hainey also awarded costs to BDC of $40,000 against Nathalie. These costs were awarded on a substantial indemnity basis fixed in the amount of $40,000 inclusive of disbursements and HST. Since the hearing of the motion occurred approximately seven months after the date of separation, an unknown portion of those costs had not yet been incurred. I find that Nathalie is entitled to claim $20,000 as a contingent liability on the valuation date against her net family property.

Promissory Note to Nathalie’s Parents

[85] Nathalie introduced a document known as a “subordination agreement” signed by Robert and herself on June 27, 2004 in favour of Nathalie’s parents. The subordination agreement revealed that her parents had provided Nathalie with funds in the amount of $100,000 “to be used to secure and maintain the property of the marital community located at 28 Pavin Crescent” in Bolton.

[86] The subordination agreement then provided as follows:

The principals (Nathalie and Robert) have discussed and agreed to the following provision:

Upon the sale of the property referred to herein, the principals agree to subordinate revenues realized from the sale of that property to “the Murrays” necessary to satisfy the $100,000.

This agreement is intended to protect “the Murrays” and ensure their compensation and recovery of the $100,000 previously provided.

[87] The funds from Nathalie’s parents were paid in advance of the date of marriage on July 1, 2004. Those funds were more in the nature of a gift than a loan. The nature of the gift is defined by the elements discussed by the Court of Appeal in McNamee v. McNamee, 2011 ONCA 533, and require:

1. An intention to make a gift on the part of the donor without consideration or the expectation of remuneration;
2. An acceptance of the gift by the donee; and,
3. A sufficient act of delivery or transfer of the property to complete the transaction.

[88] Nathalie did not call either of her parents to testify with respect to the intent behind the $100,000 payment, or the document that Nathalie signed with Robert. More fundamentally, the amount is only payable under the “subordination agreement” to Nathalie’s parents upon the sale of the property. 28 Pavin Crescent has never been sold, and therefore the amount owing under the subordination agreement is not due and owing.

[89] This is a situation very much like that found in Poole v. Poole. In that case, Justice Heeney made the following insightful comments about the reason a contingent liability such as a promissory note or, in this case, a subordination agreement, should be viewed critically having regard to the nature of the instrument:

[35] Conceptually, there is no reason why the same approach should not apply where the spouse is the promissor, as opposed to the holder of the note. The value of a debt (using “value” in a negative sense) is directly related to the probability that the debt will be enforced against the promissor. Even though a debt may have a specified face value, if the evidence indicates that it is unlikely that the promissor will ever be called upon to pay the debt, the value of the debt should be discounted to reflect that reality.

[36] There is a compelling reason for taking this good hard look at the reality of the situation. A debt constitutes a credit in the equalization calculation, and reduces the net family property of the spouse claiming the debt. This has a direct impact on the equalization payment due, by either reducing the amount that party has to pay to the other (if he has the higher net family property), or increasing the amount that he will receive (if his net family property is lower). Fairness dictates that he should not receive a credit for a debt, with the financial benefits that flow from that credit, if he will never be called upon to pay the debt.

[37] This approach was taken by Aston J. in Salamon v. Salamon, [1997] O.J. No. 852 (S.C.J.). In that case, the husband claimed two debts to his parents totalling $12,000. The debts were evidenced by promissory notes, payable without interest. His father testified that he intended to get the money back “before I die”, but had not yet made a demand for payment. Aston J. concluded on the evidence that it was very possible that the loans will in fact be forgiven and never repaid. Accordingly, he treated the loans as a contingent liability, and discounted them by 50% to reflect that they may never have to be repaid, or may not be repaid for many years to come.

[90] Justice Heeney held in Poole that as the probability the husband would ever have to repay this debt to his parents was extremely low, he found it difficult to say that there was no possibility whatsoever that it would ever occur. Accordingly, Justice Heeney discounted that promissory note to 10 percent of its face value for equalization purposes.

[91] I cannot even ascribe a 10 percent value to the subordination agreement as a contingent liability to Nathalie or to Robert because of the language used in the document that provided the money would be payable upon the sale of the property. I therefore give zero value to the subordination agreement as a contingent liability.

Interbay Guarantee

[92] Nathalie also signed a personal guarantee on the charge granted by Cavalon Inc. to Interbay for the $468,000 charge in 2007. I was told during the trial that Cavalon Inc. has defaulted on the charge, which means that Interbay may call upon the guarantees. Those guarantees may have to respond if the property is sold for less than the amount necessary to pay the combined total of the principal balance, all interest that has accrued or accrues on that charge, and enforcement costs.

[93] This contingent liability is less than reasonably foreseeable, and can be distinguished from the guarantee Nathalie gave to BDC. Having regard to the appraised value of the property at $600,000 and the face value of the charge at $468,000, I put the contingent liability under the guarantees given by each Nathalie and Robert at 20 percent of $468,000. I exercise my discretion under Section 4 to set the contingent liability of this guarantee at 20 percent because enforcement against either party is less of a probability than the costs in Greenglass, yet more than a possibility that the promissory note would be called upon in Poole. Robert has failed to satisfy the court that the security is sufficient to meet any greater amount owing under the covenants of the charge. Therefore, Nathalie is entitled to claim $93,600 as a contingent liability as of the valuation date.

Value of Nathalie’s Property on Date of Marriage

[94] Other than 28 Pavin Crescent, Nathalie had an RRSP and RPP with a combined value of $35,474 on the date of marriage. Therefore, she is entitled to claim this amount as her assets on the date of marriage.

Value of Nathalie’s Debts and Liabilities on Date of Marriage

[95] Other than the $92,000 balance owing on the charge against 28 Pavin Crescent which was solely incurred for the purpose of acquiring that property, Nathalie had a line of credit at TD Canada Trust having a value of $80,000 on the date of marriage.

[96] Therefore, on the date of marriage, other than her ownership of 28 Pavin Crescent and the charge with the $92,000 balance owing on the property, Nathalie had a net worth of -$41,526 on the date of marriage.

Nathalie’s Net Family Property

[97] Nathalie therefore had net family property on the date of separation as follows:

Value of Nathalie’s assets on date of separation: $548,214 Value of Nathalie’s debts and liabilities on date of separation: $536,582 Value of Nathalie’s assets on date of marriage: $ 35,474 Value of Nathalie’s debts and liabilities on date of marriage: ($80,000) = 0 Nathalie’s net family property, total: $ 11,632

Value of Robert’s Assets on Date of Separation

Furniture

[98] On the evidence, Robert owned the business furniture at 142 King Street East in Caledon, having a value of $10,000, which forms part of his net family property.

Cavalon Inc.

[99] On Robert’s net family property statement dated December 3, 2014 at the start of the trial, Robert claimed the value of 142 King Street in Bolton at a value of $600,000. In all other respects, I have allocated actual values and liabilities for assets. Here, neither party has introduced a valuation of the Cavalon Inc. shares. I can only work with the information I have as evidence before me. The approach I have taken to put a value on those shares was therefore the appraised value of $600,000 for 142 King Street East, as the underlying asset held by Cavalon Inc., less the face amount of $468,000 for the Interbay charge to arrive at a difference of $132,000 for the shares.

[100] Since title to 142 King Street was held by Cavalon Inc., I have had no difficulty in finding as a fact that Robert owned the shares of Cavalon Inc. Cavalon Inc. in turn holds title to 142 King Street, an asset that Robert claimed directly in his net family property statement. I therefore give Robert $132,000 as the value of his shares in Cavalon Inc.

Value of Robert’s Debts on Date of Separation

Charge Against Matrimonial Home

[101] Even though Robert signed his consent to the charge in the amount of $340,000 in 2007 against 28 Pavin Crescent, he cannot claim a share of that indebtedness. That charge is Nathalie’s indebtedness as the registered owner of the property.

BDC – Personal Guarantee

[102] Under Justice Hainey’s decision, Robert was found liable on November 23, 2011 in the amount of $81,982.70, plus pre-judgment interest. Robert is entitled to claim this debt against his net family property.

BDC – Costs Under Judgment

[103] Justice Hainey found it appropriate to award costs against Cavalon Inc. and Robert in the amount of $88,830, inclusive of disbursements and HST. Robert is the sole director of Cavalon Inc. and those costs are found against both himself and Cavalon Inc. Cavalon Inc. may be called upon to pay those costs if sufficient resources are available. I am only attributing $44,415 being one half of that costs award for Robert to claim as a contingent liability against his net family property for the same reasons I accepted that half the costs awarded against Nathalie should be considered a contingent liability.

Interbay Loan

[104] For the same reasons I gave for attributing 20 percent of the face amount of the Interbay charge against 142 King Street to Nathalie as a contingent liability under her guarantee, I allow Robert the same deduction in the amount of $93,600 against his net family property.

Value of Robert’s Property on Date of Marriage

[105] According to the evidence, Robert had $17,000 in general household items and vehicles on the date of marriage. According to his net family property statement, he had no debts and other liabilities as of that date.

Conclusion on Robert’s Net Family Property

Value of Robert’s assets on date of separation: $142,000 Value of Robert’s debts and liabilities on date of separation: $219,997 Value of Robert’s assets on date of marriage: $ 17,000 Value of Robert’s debts and liabilities on date of marriage: Ø Robert’s net family property, total: Ø

Conclusion

[106] Upon a review of the evidence and the application of the applicable principles to determine the value of assets, debts and liabilities of each party on the date of separation and on the date of marriage, I summarize those calculations on the following grid:

Valuation Date (VD) Total Value of Assets on VD NATHALIE ROBERT ASSETS Matrimonial Home 450,000 Bank accounts and savings, RRSP accounts securities and pension 88,214 Other 10,000 10,000 132,000 Value of Property Owned on VD 548,214 Total Value of Debts & Liabilities on VD Total: Value of Debts & Liabilities 536,582 219,997 Net value of Property Owned on VD 11,632 (77,997) Date of Marriage (DM) net Value of property & Debts on DM Assets 35,474 Value of Property Owned on DM 35,474 17,000 Total Value of Debts and Liabilities on DM Debts & other liabilities Total: Value of Debts & Liabilities 80,000 Excluded Property Net value of Property Owned on DM 0 17,000

TOTALS VD & DM Net Value of Property Owned on the VD 11,632 Ø Net Value of Property Owned on the DM Ø 17,000 NET FAMILY PROPERTY 11,632 Ø

[107] In the final result, Nathalie shall pay an equalization payment to Robert in the amount of $5,816. Any claim Robert has made for a proprietary interest in 28 Pavin Crescent is dismissed. Each of the parties is left to pay their respective debts, subject to what credits they may be entitled to receive for payments made by one or the other under the BDC judgment.

[108] The claim made by Nathalie for Robert to pay child support for Alexander and Tyler is dismissed.

[109] The claims made by Nathalie and Robert against each other for spousal support are each dismissed.

Costs

[110] Since I would obviously have no knowledge of any offers to settle the parties may have exchanged, I encourage the parties to settle the issue of costs between them. If no agreement can be reached, any party claiming costs shall have until September 2, 2016 to provide written submissions on any costs claimed. The other party shall then have until September 19, 2016 to file written submissions in response. No reply submissions may be filed without leave. All written submissions shall consist of no more than two pages, not including a bill of costs, and may be filed by fax to my judicial assistant, Mr. Christopher Charles, at 905-456-4834 in Brampton.

Justice M.G. Emery Released: August 18, 2016