COURT FILE NO.: FC-15-109-00 DATE: 20170512 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Angela Paulsen, Applicant AND: Keith Paulsen, Respondent
BEFORE: McDermot J.
COUNSEL: Paul E. Trenker, for the Applicant Hilary Goodman, for the Respondent
HEARD: March 2 and April 24, 2017
ENDORSEMENT
Introduction
[1] Mr. and Ms. Paulsen were married in 1994. They had two children. Their marriage broke down in 2008 and they physically separated in January, 2009, when Ms. Paulsen moved out of the matrimonial home. The home was eventually sold later that year, but both parties acknowledge at the time that they separated, there were more debts than assets; according to Mr. Paulsen’s financial statement, the net proceeds were just over $2,400 and Ms. Paulsen says that it was her recollection that each party netted about $600 from the home and she had to take out a line of credit to pay her portion of the debts.
[2] When Ms. Paulsen moved out of the home, the parties’ two children were aged 9 and 12 years of age. According to Mr. Paulsen, there was an oral agreement struck prior to Ms. Paulsen moving out whereby custody of the children would be shared and Mr. Paulsen would pay for all of the children’s activities. Ms. Paulsen denies that there was any agreement; certainly neither party retained a lawyer and there was no formal domestic contract signed on separation. However, and other than during the first year of separation, Ms. Paulsen acknowledges that her husband paid for all of the children’s expenses, but paid no base child support notwithstanding his acknowledgement that the children lived with her for a greater share of the time than with him.
[3] Ms. Paulsen issued her application on June 15, 2015. She seeks an equalization of property including the parties’ two defined benefit pension plans owned on separation. Ms. Paulsen says that the parties separated in January 2009 and Mr. Paulsen says that the date was Mother’s Day in 2008 (May 11, 2008) but either way the application is out of time. Ms. Paulsen had six years to issue the application pursuant to s. 7(3) (b) of the [Family Law Act][^1] and therefore should have issued process, at the very latest, in January, 2015. At best, her claim was commenced six months beyond the limitation date; at worst 13 months.
[4] Ms. Paulsen now moves to extend the limitation date under s. 2(8) of the FLA. She also asks the court to determine the parties’ date of separation. Both parties have been questioned on their respective affidavits. The parties have agreed that the court may determine the issues raised in the motion without further viva voce testimony, relying solely on their affidavit evidence and the transcripts of the parties’ questioning.
[5] For the reasons set out below, I have made the following findings:
a. The date of separation is September 1, 2008; and
b. The limitation period in this matter shall be extended as requested by the applicant.
Issues
[6] There are two issues raised by the applicant’s motion:
a. What is the date of separation of these parties?
b. Whatever is determined to be the date of separation, should the limitation period for commencement of this property equalization claim be extended under s. 2(8) of the FLA?
[7] Because the date of separation is relevant to the extension of the limitation period, I will address that issue first.
Analysis
Date of Separation
[8] Mr. Paulsen gave very specific evidence as to the date of separation. He deposes that he discovered that his wife was having an affair in March, 2008. The parties went to marriage counselling which was unsuccessful. He says that the parties separated when he asked Ms. Paulsen what he could get her for Mother’s Day in that year, and she responded that he could do nothing to make her happy. He says that the parties thereupon decided to separate on a final basis.
[9] Ms. Paulsen based her date of separation, January, 2009, as that was the date that the parties physically separated when Ms. Paulsen moved from the matrimonial home. When asked during questioning as to whether she chose that date “because [that was] the day you moved out?”, Ms. Paulsen said, “That was when I felt that… we physically separated.” [2] She also said in her September, 2016 affidavit that, between July, 2008 [3] and January, 2009 that she and her husband had continued to “sleep together”, had sexual relations from time to time and had “attended social occasions as husband and wife.” [4] She testified during questioning that she specifically recalled that the respondent had held a 40^th^ birthday party for her at the end of September, 2008.
[10] The applicant does not, however, deny the respondent’s version of the events surrounding Mother’s Day, 2008 in her affidavit. In fact, the applicant seems to be rather ambivalent about the exact date of separation; in submissions Mr. Trenker said that he was content that the date of separation be found to be somewhere between July, 2008 and January, 2009. [5] Mr. Trenker spent almost no time cross-examining Mr. Paulsen about the issue of the date of separation.
[11] However, Mr. Paulsen also does not deny the evidence of the applicant that the parties had sexual relations up to the end of 2008. He also does not deny the evidence of the applicant that they attended social functions together. He was not questioned about the 40^th^ birthday party that the applicant says he put on for her.
[12] The “valuation date”, which is the date of separation relevant in this matter, is defined in the FLA as being the “date the spouses separate and there is no reasonable prospect that they will resume cohabitation”: s. 4(1).
[13] It is trite that parties can live separate and apart under the same roof and the fact that Ms. Paulsen did not move out until January, 2009 is not determinative, on its own, of the date of separation. It is also clear that continued sexual relations and attending of social functions together, as deposed to by the applicant, are also indicia of the parties continued cohabitation: see Tokaji v. Tokaji, 2016 ONSC 7993 at para. 18. If those indicia are used, whatever was discussed between the parties, the date of separation would lie sometime late in 2008 as suggested by Ms. Paulsen.
[14] Apart from these indicia, however, if the court can find an unequivocal act by one of the parties which shows an intent to separate with no going back, the court can find that to be the date of separation: see Taylor v. Taylor, [1999] O.J. No. 5310 (S.C.J.). Separation is a question of fact, and a clear event that indicates the parties’ separation with no possibility of reconciliation can determine exactly when the parties were intent upon living apart. That is particularly important where the evidence of continued cohabitation and marriage breakdown is either contradictory, or untested by the parties in the litigation process.
[15] Both parties in this case agree that they told their children that they were separating during the month prior to the commencement of school in September, 2008. Mr. Paulsen said they told the children of the separation about two weeks prior to school starting and Ms. Paulsen said they told the children of this just before school started.
[16] It is also common ground that these are parties who love their children. When they took the step of telling their children that they were separating, there was clearly no prospect of reconciliation because it goes against common sense for these parents to tell their children of the separation if they still thought reconciliation possible. If they had thought that the marriage was capable of salvation, that type of disclosure could only be harmful to the children for obvious reasons. Because of this, I find this disclosure to the children of the separation to be a clear and unequivocal act of separation with no possibility of reconciliation.
[17] In light of the conflicting evidence of these parties, this pre-school disclosure to the children is the one piece of evidence that is common between the parties as to when they actually separated without a possibility of reconciliation.
[18] I therefore find that the parties’ date of separation to be September 1, 2008.
Limitation Period
[19] Even using the September 1, 2008 date as a date of separation, the applicant is well out of time to have issued her claim for equalization. The claim was issued in June, 2015, meaning that she issued process about 10 months after the expiry of the six-year limitation period.
[20] The applicant seeks to extend the limitation period under s. 2(8) of the FLA. That section allows for the extension of a limitation period under that statute if the applicant can prove, on the balance of probabilities, three things:
a. there are apparent grounds for relief;
b. relief is unavailable because of delay that has been incurred in good faith; and
c. no person will suffer substantial prejudice by reason of the delay.
[21] Counsel for the respondent conceded during argument that there are apparent grounds for relief; the first part of the test is therefore made out. Argument concentrated on whether the applicant has satisfied the court of (b) and (c) above.
Was the applicant’s delay incurred in good faith?
[22] The applicant says that any delay in issuing process was incurred in good faith. She said that she was unaware of the fact that pensions were property or that she had a claim for equalization as against the respondent’s pension. Her evidence is that she thought that the property had been “equalized” when the home was sold and each party took their share of debt; she says that they each ended up with a portion of debt and about $600 from the net proceeds of the home. She deposes that she only discovered that the pension was divisible property when she went to see Mr. Trenker about getting a divorce on May 21, 2015. Once she found this out, she issued her application almost immediately.
[23] The respondent suggests that the applicant has acted in bad faith. He says that the applicant had telephoned him sometime in the spring of 2009, before the matrimonial home sold, and she told him during that conversation that “You keep your pension, I’ll keep mine.” He says that the applicant’s real motivation lies in his new relationship and the fact that his partner is well off. In fact, Mr. Paulsen suggests that he suspects that the application was only issued when the applicant discovered from a neighbour that his girlfriend had sold her home for more than a million dollars.
[24] The respondent also says that the applicant’s ignorance of the nature of the pension as property is facile, and does not establish good faith. Ms. Goodman suggests that the applicant had a duty to inquire as to the nature of the pension, and her failure to do so establishes a lack of good faith: see Busch v. Amos, [1994] O.J. No. 2975 (S.C.J.) where Salhany J. suggested that a party cannot establish good faith by stating that he or she “was ignorant of their rights.” Salhany J. states at para. 8 of the report that the moving party has to establish that there was “no reason to make inquiries about [pension] rights” and further suggests that there is a duty to consult with counsel on a timely basis to make those inquiries. He said that the lack of funds to pay a lawyer is no excuse considering the ability to obtain legal aid to pay for a lawyer.
[25] In the present case, it appears to me that neither party understood the nature of their respective pensions as divisible property arising out of separation. The applicant deposed that she did not understand the pension to be property. The respondent confirms that he had a similar understanding; in fact, when questioned on his affidavit, he was asked whether he presently understands his pension to be property or whether he understood it to be capable of valuation; to both questions, he answered unequivocally “no”. [6] It appears that neither party understood the pension to be property; Mr. Paulsen appears to still have had no understanding of pension rights at the time of his questioning on April 5, 2017.
[26] In light of the fact that neither party appears to have understood the ability to equalize their respective pensions, I have to question whether there was a positive duty of inquiry by Ms. Paulsen as to whether the pension was property capable of equalization. I can do no better than to adopt the words of Mendes da Costa U.F.C.J. in Hart v. Hart (1990), 27 R.F.L. (3d) 419 (Ont. U.F.C.) (and adopted with approval by M. Rosenberg J.A. in El Faky v. Tohamy, [2010] O.J. No. 4165 (C.A.) at para. 34):
I believe, to establish "good faith", it must be shown that the moving party acted honestly and with no ulterior motive. It does not seem to me that the legislature, anticipating the general newsworthy nature of the family property provisions of the Act, intended that a mere failure to make enquiries should necessarily negate "good faith", provided that the absence of enquiry does not constitute wilful blindness or does not otherwise, in all the circumstances, fall below community expectations. As I have stated, my assessment of the evidence is that the wife was ignorant of her rights under the Act, and I believe that her state of mind was one of blameless ignorance. I am satisfied that the delay in issue was delay incurred in good faith within the meaning of s. 2(8)(b).
[27] Considering the fact that neither the husband nor the wife appear to have had (or indeed still have) an understanding of the nature of the pension as being property, I believe that Ms. Paulsen was similarly in “blameless ignorance” of the issue of the equalization of pension, and that she had no positive duty to seek legal advice as suggested in Busch. And as is well known, unlike the situation when Busch was decided in 1994, legal aid is no longer easily obtained, especially for property issues, and Ms. Paulsen, based upon her disclosed income, would most likely have not qualified for legal aid. Her statement that she did not have funds to pay for a lawyer prior to retaining Mr. Trenker [7] has greater weight today than it did when Salhany J. decided Busch in 1994.
[28] Finally, if neither party believed their pension plans to be property, why would they have had the telephone call about pension division that the respondent suggests took place in 2009? If neither party thought that their pensions were subject to equalization, then it would make no sense for either party to suggest that “you keep your pension and I’ll keep mine.” If that statement was made, it was made without an understanding of the legal consequences of such a statement, and it does not, in my mind, raise an implication of bad faith or duty of inquiry in the present case.
[29] Mr. Paulsen suggests that bad faith on the part of the applicant is established by his evidence that the applicant only brought these equalization proceedings when she discovered that his girlfriend had sold her residence for a million dollars. He says that the respondent’s attitude changed after he began his new relationship, and says there are texts that prove this, although they have since been deleted. If Ms. Paulsen commenced proceedings because of the husband’s new relationship, this would not establish that the delay was not incurred in good faith; it would only establish that the equalization proceedings may have been commenced because of ulterior motive or bad faith. That does not displace the fact that the delay, itself, was in good faith as permitted by s. 2(8)(b).
[30] In any event, the respondent has not established that the property disposition was, in fact, a factor in the commencement of these equalization proceedings. The applicant deposed that she was not aware until a year after commencement of the proceedings of the disposition of the respondent’s girlfriend’s home. [8] And the respondent himself was unsure as to the actual date of disposition of the property: he testified that the property may have been sold in either November, 2014 or in November, 2015 and he agreed that it may have been sold in November, 2015, well after this application was issued. [9]
[31] For all of these reasons, I find that the delay in issuance of the application was in good faith, and that the applicant acted promptly upon determining that she had a right to equalization of the parties’ pensions upon separation.
Substantial Prejudice
[32] The final part of the provision permitting the extension of the FLA limitation period requires the party seeking relief to prove that there is no substantial prejudice to any party if the limitation period is extended.
[33] Although the onus is on the applicant to prove no substantial prejudice, the evidence regarding prejudice to the respondent lies entirely in that party’s hands. Although the applicant deposes that she does not believe that there is prejudice to the respondent, [10] she would have no knowledge of the respondent’s financial situation since separation, as she has been separated from the respondent for more than six years, and other than a number of communications about child support or the children, the parties have had little to do with one another. The only way to establish lack of prejudice to a responding party to this type of motion is an examination of the “best foot forward” evidence provided by the respondent on the motion along with cross examination or questioning of the respondent.
[34] The respondent deposes that there is prejudice to him. He says that he has no savings because, “I have relied solely on my pension for my retirement income.” [11] He says that he would have “made different decisions since separation.” [12]
[35] There is some controversy about the type of prejudice that the drafters of s. 2(8)(c) were referring to when they drafted the section. Certainly, any extension of a limitation period will result in some prejudice to the responding party as it would result in the respondent having to make an equalization payment at this late date; this certainly cannot have been the type of prejudice referred to by the section as it begs the question as to why a limitation period might be extended. This would appear to be the reason for the word “substantial” in the section: see Hart v. Hart, supra and Ferguson v. Ferguson, [2007] O.J. No. 390 (S.C.J.) at para. 19.
[36] Salhany J. in Busch disagrees with Mendes da Costa J.’s suggestion in Hart that “different plans with respect to retirement” are not encompassed within the definition of “substantial prejudice” in the section. Salhany J. says that “a spouse who arranges his financial affairs following separation or divorce upon the assumption that matters between him and a former spouse are resolved, is entitled to rely on the limitation period in the Family Law Act.” [para. 11]. He was satisfied of substantial prejudice in that case, where the husband had used the funds realized from the sale of the home to buy another home, and would probably now have to sell that home to pay the equalization payment resulting from the division of his pension. As well, the respondent in that case had been paying child support throughout and was under “severe financial constraints because of layoffs in the past two years.” [para. 9].
[37] I agree with Salhany J. that, where the respondent has suffered severe or significant prejudice as a result of the delay, s. 2(8)(c) is engaged, and the limitation period should not be extended. However, there must be some specific evidence of prejudice to the respondent for the subsection to be applicable: for example, as stated by Tulloch J. in Ferguson [at para. 19], there must be evidence of “irreversible financial decisions that may have been made by the respondent based on any assumptions he may have had with regard to the pension.”
[38] That evidence is lacking in the present case. The respondent acknowledged during questioning that, other than making up a formal separation agreement at separation, he would not necessarily have done things differently. The failure to make a timely claim has made little difference to him financially. He testified during questioning that “he may have done things differently. I may have invested, I don’t know” [13] However, he could not establish that he would have had extra funds to invest had he done things differently, and when asked, “what you’re saying is that you may have conducted yourself differently but you don’t know how”, his answer was an unequivocal “Correct.” [14]
[39] Although not specifically stated, the respondent appears to suggest that he might not have made the child support arrangements that he did had he had to make an equalization payment in respect of his pension. After separation, he says that the parties agreed that he would not pay child support but would pay all of the children’s special expenses. He stuck to this agreement notwithstanding persistent offers by the applicant to pay her proportionate share. [15] However, his answer on questioning on this issue was somewhat confusing; he says that he “may have split the cost differently, I don’t know.” [16]
[40] In any event, it was difficult to quantify prejudice: he says that his special expenses that he bore alone included hockey expenses that could be up to $14,000 per year. He agrees that that the children often lived with Ms. Paulsen more than they lived with him; [17] therefore, had Ms. Paulsen paid her share of the s. 7 expenses, the respondent may therefore have had to also pay base guideline child support. However, it was difficult to determine what he would have paid, as he refused to answer questions about what his income was in 2010 onward on the basis of relevancy. [18] If his income is irrelevant to the extension of the limitation period, then the child support he may have paid or actually paid is then presumably also irrelevant to the issue of prejudice.
[41] There was specific evidence of prejudice in Busch which is lacking in present case. The respondent has really not provided any specificity as to any prejudice which might be suffered by him were the limitation period extended. Unlike the situation in Busch, Mr. Paulsen will not now have to make a cash payment in respect of his pension as the legislation now permits a division at source of the parties’ two pensions. Neither Mr. nor Ms. Paulson received cash from the matrimonial home which would have been invested for retirement or other purposes. Unlike Busch, Mr. Paulsen did not pay guideline child support and his job is not in jeopardy. In fact, Mr. Paulsen did not demonstrate that the issue of child support worked an unfairness on him; from the applicant’s perspective, the respondent should have paid more towards the expenses of the children and received an easy ride throughout the last 7 years.
[42] There was no argument that evidence is not available today to prove equalization of assets. And although the parties divided the assets unfairly in the respondent’s view (he says that he assumed the penalty on the mortgage and more debt than did the applicant), that inequity was not explained in any detail either in the material or in argument. In any event, any excess debt assumed by the respondent would today be taken into account in quantifying any equalization payment to be made by the respondent.
[43] I therefore find that there is no substantial prejudice to the extension of the limitation period for about 11 months as requested by the applicant.
[44] There shall therefore be an order to go that the limitation period be extended under s. 2(8) of the FLA.
Order
[45] There shall therefore be an order to go as follows:
a. The date of separation is found to be September 1, 2008.
b. The limitation period applicable to the applicant’s equalization claim under s. 7(3) (b) of the Family Law Act shall be extended to June 15, 2015, being the date that the application was issued in this matter.
[46] The parties may make submissions as to costs, the applicant first and then the respondent, on a ten-day turnaround. Costs submissions to be no more than three pages in length not including offers to settle and bills of costs relied upon.
McDERMOT J.
Date: May 12, 2017
[^1]: R.S.O. 1990 c. F.3 [2] Transcript of Questioning of Angela Paulsen, p. 13, q. 42 [3] This was the husband’s date of separation in his Answer and Financial Statement. It was only in his affidavit that he raised Mother’s Day of that year as the date of separation. [4] Affidavit of Angela Paulsen sworn September 18, 2016, para. 4. [5] See the applicant’s factum, para. 26 and 28. [6] Transcript of Questioning of Keith Paulsen, pp. 32-33, qq. 142 and 143. [7] Transcript of Questioning of Angela Paulsen, p. 18, q. 70 [8] Applicant’s affidavit sworn February 17, 2017 at para. 7; Transcript of Questioning of Angela Paulsen, p. 51, q. 213 [9] Transcript of Questioning of Keith Paulsen, pp. 36-37, q. 162. [10] The applicant deposes that she was not paid child support by the respondent notwithstanding the children residing with her for greater periods of time than with the respondent. She says that the arrangement was advantageous to the respondent and improvident for herself. [11] Affidavit of the respondent sworn February 10 2017, para. 25. [12] Ibid., para. 27 [13] Transcript of Questioning of Keith Paulsen, p. 39, q. 174. [14] Ibid., pp. 39-40, q. 178 [15] Perhaps with the hope of obtaining guideline child support. [16] Ibid., p. 40, q. 179 [17] Ibid., p. 17, q. 68 [18] Ibid., pp. 8-9