ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Jennifer sandra turk
Applicant
– and –
Stuart Bernard Turk
Respondent
Harold Niman, Katherine Rajczak and Hayley Cairns, for the Applicant
Heather Hansen, Stephen Grant and Jenna Beaton, for the Respondent
HEARD at Toronto: February 6, 7, 8, 9, 10, 21, 22, 24, 27 & 28, March 1, 2, 3, 6, 7, 8, 10, 14, 15 & 16, April 18 and May 2, 2017
Reasons for judgment
Corrected decision: The text of the original judgment was corrected on December 5, 2017 and the description of the correction is appended to the end of the reasons after the back page.
C. hORKINS J.
overview
1The applicant, Jennifer Turk (“Jennifer”), and the respondent, Stuart Turk (“Stuart”), were married on August 2, 1989. They have two children.
2After almost 19 years of marriage, the parties separated on January 2, 2008. Following a lengthy mediation, Jennifer and Stuart signed a Separation Agreement on April 26, 2010. They were divorced on November 2, 2010.
3In 2014, Jennifer commenced this application to set aside the Separation Agreement. Her primary position is that the Separation Agreement was signed without proper disclosure. She also argues that it was signed under duress.
4If the Separation Agreement is set aside, Jennifer seeks numerous orders equalizing the net family property, imputing income to Stuart and fixing spousal and child support.
5Alternatively, if the entire Separation Agreement is not set aside, Jennifer asks that the child and spousal support provisions of the Separation Agreement be set aside. This relief is based on Jennifer’s position that the child and spousal support provisions of the Separation Agreement do not comply with the objectives of the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.) or the Family Law Act, R.S.O. 1990, c. F.3.
6Jennifer does not seek a variation of the Separation Agreement as alternative relief.1
7Stuart seeks an order dismissing Jennifer’s application. If the Separation Agreement is set aside, Stuart seeks a further equalization payment from Jennifer.
8Stuart seeks to recalculate what he claims he should have paid for child and spousal support since January 2013 and seeks an adjustment going forward. Additionally, he requests that the court impute $20,000 of income to Jennifer. Stuart argues that he has overpaid child and spousal support since 2013 and that Jennifer owes him $333,624. He also asks the court to terminate spousal support as of December 31, 2021. Stuart seeks this relief if the Separation Agreement is set aside. If it is not set aside then he seeks the same relief through a variation of child and spousal support under s. 5 of the Separation Agreement retroactive to January 2013.2
9The key parts of the Separation Agreement provide that:
Stuart pays Jennifer $10,000 a month for child and spousal support combined on an after tax basis. The Separation Agreement does not specify what part of the $10,000 is for child support and spousal support.
Stuart pays all of the children’s s. 7 expenses.
Until the $10,000 support payment is varied by an amending agreement, court order or arbitration award, Stuart must continue to pay the support specified in the Separation Agreement.
Jennifer owes Stuart an equalization payment of $181,578. Stuart agrees to defer receipt of payment until the earlier of the first anniversary of the Separation Agreement or sale of the matrimonial home on Old Orchard Grove.
The support amount is non-variable until January 1, 2013, after which either party may seek a variation if there is a material change in circumstances, foreseeable or unforeseeable.
If a variation of spousal support is granted, there are two limitations on a variation. First, Jennifer’s entitlement to spousal support shall never exceed $11,000 gross a month, with cost of living adjustments. Second, until January 1, 2015, Jennifer will receive spousal support of at least $5,500 gross a month.
A variation of child support on or after January 1, 2013, will be determined according to the child support guidelines except that for Sydney, Stuart will guarantee a minimum monthly amount of $2,500 (aside from special and extraordinary expenses) if Sydney lives with Jennifer at least 40% of the time.
10As I will explain, Jennifer has not proven a basis to set aside the Separation Agreement. Stuart did fail to comply with his disclosure obligations. His non-disclosure occurred during the negotiations of the Separation Agreement and continued during this application and trial. However, the fact of non-disclosure alone does not lead to setting aside the Separation Agreement. The non-disclosure must be significant and, in this case, it was not. Jennifer has also failed to prove that she signed the Separation Agreement under duress. Lastly, her request to only set aside the child and spousal support provisions of the Separation Agreement is denied. The support amounts are in compliance with the objectives of the Divorce Act.
11The decision not to set aside the Separation Agreement leaves Stuart’s request to vary the support. With the exception of terminating child support, Stuart’s request is denied because he has not proven that a material change in circumstances has occurred since the Separation Agreement was signed.
12The litigation between the parties was lengthy and bitter. Each party attacked the credibility of the other. Stuart argues that Jennifer’s evidence was self-serving and unbalanced. Jennifer argues that Stuart was evasive, arrogant and dismissive of the court process. She says that Stuart lied about his financial circumstances. As will be apparent in these reasons, much of this criticism is justified.
13Many days of trial time were consumed by complicated issues concerning the valuation of Stuart’s interest in the Turk family companies. Most of these companies own numerous pieces of commercial real estate. These complicated issues were relevant if the Separation Agreement was set aside.
14Since I have decided not to set aside the Separation Agreement, I will not address the Turk family company issues in depth. However, I will identify the issues and briefly deal with them for two reasons. First, to provide context for the mediation process and second, to demonstrate that Stuart’s unreasonable conduct contributed to the length and expense of the trial. In particular, during the trial, Stuart continued his pattern of non-disclosure and provided unreliable valuations of his interests in the various Turk companies. These valuations were unreliable because a certified real estate appraiser never valued the numerous properties that the Turk companies own. I will elaborate on this conduct later in these reasons.
overview of the facts
15The facts as I find them are set in these reasons. Where there is an issue of credibility that requires consideration, I will deal with it.
16During the trial, Stuart’s father (Harry Turk) and siblings (Esther Lebovic and Jonah Turk) testified. To provide clarity, I will refer to the parties and the members of the Turk family by first name.
Before Separation
17Stuart and Jennifer met in 1987, shortly after finishing high school. They were engaged in December 1988 when Stuart was 20 years old and Jennifer was 19 years old.
18Neither party pursued any post-secondary education. After high school, Stuart started working in the family business. The business was called S.E.J. Holdings Limited (“SEJ”). SEJ was named after Stuart and his two older siblings, Esther and Jonah. Harry started the business in 1976 and gave Stuart, Esther and Jonah each a common share in the company. SEJ bought real estate, built commercial buildings on the property and rented the buildings.
19While Stuart was working at SEJ, he earned about $2,000 a week. It was his job to attend SEJ construction sites and manage projects that were underway. On occasion, Jennifer attended the construction sites with Stuart. She also worked in the SEJ office as a temporary assistant for a brief period of time and had some retail sales jobs.
20Stuart’s family did not support his decision to marry Jennifer. Harry thought that Stuart and Jennifer were too young to be married. He told his son to sign a Marriage Contract and referred Stuart to the family lawyer.
21At Harry’s request, Stuart and Jennifer signed a Marriage Contract dated December 15, 1988 (“1988 Marriage Contract”). Under Article 4 of the 1988 Marriage Contract, the parties waived their claims for equalization of net family property.
22Jennifer recalls reading the 1988 Marriage Contract before she signed it. She had a lawyer when she signed the 1988 Marriage Contract. Jennifer cannot recall if she asked her lawyer any questions about the content of the 1988 Marriage Contract.
23A schedule attached to the 1988 Marriage Contract listed Stuart and Jennifer’s assets. The value of Stuart’s assets totalled $10,286,000. The largest asset was Stuart’s share in SEJ, with a value stated to be $10M.
24The next significant asset on the schedule was Stuart’s ownership of The Cellular Connection Ltd. (“Cellular Connection”) valued at $200,000. Stuart started Cellular Connection in 1988. He is the sole shareholder of this company. In 1988, the value of Cellular Connection was an interest in a property that Stuart owned with his father and cousins.
25The value of Jennifer’s assets listed in the 1988 Marriage Contract totalled $26,000. This consisted of jewellery, coins and clothing that Stuart had purchased. Neither party had any debts.
26Jennifer had a general understanding of SEJ and Stuart’s share interest in this company. She knew that SEJ was one of Harry’s companies and that it was named after Stuart and his siblings. She also knew that SEJ owned commercial real estate and collected rent from tenants. Jennifer was aware that SEJ was valued at $10M in the 1988 Marriage Contract.
27As a result of friction with Stuart’s family about their decision to marry, Stuart and Jennifer cancelled the wedding plans, eloped and married on August 2, 1989.
28In December 1989, Stuart stopped working in the Turk family business and became estranged from his family for several years.
29On November 12, 1990, Stuart and Jennifer signed a second Marriage Contract (“1990 Marriage Contract”), revoking the 1988 Marriage Contract. Stuart and Jennifer agreed to have “their affairs and property … governed by the law of Ontario”.
30The 1990 Marriage Contract attached a schedule of assets and liabilities. The value of Stuart’s shares in Cellular Connection had increased to $350,000. The increase was attributable to assets that Stuart had accumulated in Cellular Connection. Although Stuart still owned his SEJ share, it was not listed as one of his assets in the 1990 Marriage Contract.
31After Stuart became estranged from his family, he worked at building Cellular Connection. In 1990, Stuart began selling mounting brackets to hold a cell phone in a car. Initially, Stuart ran the business from home. Jennifer worked with Stuart and helped to package the mounts and parts for sale. The business was very successful. By 1992, Stuart and Jennifer could not manage it without help. Stuart rented space and hired employees. Jennifer tried working in sales, but was not successful.
32After 1992, Jennifer had minimal involvement in Cellular Connection. She never upgraded her education or considered working outside the home. This is not surprising because it suited Stuart’s entrepreneurial life to have his wife stay at home. He was content that Jennifer stay at home. For the rest of their married life, Jennifer was a homemaker. Their first child, Jordan, was born in 1994. Their daughter, Sydney, was born in 1998.
33In 1993, Stuart’s family started to reach out to see how he was doing. After Jordan’s birth in June 1994, Stuart reconnected with his family and repaired their relationship. However, he never returned to work for any of the Turk family companies.
34After the family was reunited, Harry gave Stuart $360,000 to buy a new home and started to give Stuart regular sums of money. Initially, Harry gave Stuart around $5,000 a month. In 2000, this monthly amount increased to $10,000 and by the time of separation Harry was giving Stuart $15,000 a month. In 2010, after the Separation Agreement was signed, Harry increased the monthly amount to $20,000 to help Stuart pay his expenses. Harry did not pay this money to Stuart directly. He paid the monthly amounts to Cellular Connection and Stuart received the money from his company.
35During the marriage, Stuart had another business called On-The-Go Healthcare that operated as On-The-Go Technologies. It was a large computer re-seller in Canada. On-The-Go later became Metro One Development. There was also a subsidiary of On-The-Go called International Mount (all of these companies became Metro One and are collectively referred to as “Metro One”).
36Metro One was a publically traded company with Stuart owning about 31%. During the marriage, this business was very successful. However, in the summer of 2007, Metro One ran into problems with its primary lender and, by late 2007, Metro One had failed. It ceased operating in the first few weeks of 2008 due to funding problems.
37From 1999 to 2001, Stuart’s income came from Cellular Connection. Income from Metro One was limited in 2001 and started to pick up in 2003. Income from Metro One peaked in 2007.
38During the marriage, Stuart looked after the family finances and paid all of the bills. Jennifer wrote cheques on the joint bank account. She never went to the bank and had no access to online banking or the credit card and bank account statements that were delivered to Stuart.
39They lived a life style that involved excessive spending. Before Metro One failed, money was readily available. Stuart regularly bought Jennifer many expensive pieces of jewellery. They owned a condominium in Miami. For several years they travelled to Miami, New York and other destinations by private plane. Jennifer enjoyed visits to Canyon Ranch, Blue Jays World Series tickets and membership at a private sports club. She bought clothes and purses at expensive stores with no limit on her spending.
40Even when Stuart’s financial difficulties arose in 2007, Stuart and Jennifer continued to spend money with minimal restraint. Their son’s bar mitzvah, held in September 2007, was extravagant. Jennifer planned the event with a budget of $150,000. When Stuart became involved, the costs had increased to almost $350,000. He tried to cancel some of the commitments, but the event’s final cost was approximately $250,000. Harry gave Stuart about $100,000 to help fund the event. Around the time of the bar mitzvah, Stuart bought Jennifer an expensive diamond bracelet. In November 2007, Stuart and Jennifer travelled to New York City and rented two suites of rooms.
41During the trial, Stuart was critical of Jennifer’s spending. Jennifer was and is financially naive and irresponsible about spending. The blame for this behaviour does not rest solely with Jennifer. Throughout the marriage, Stuart fueled and enabled Jennifer’s spending habits. Stuart never expected Jennifer to assume control for the family’s daily financial decisions. He took care of all of the family banking. Stuart never encouraged or helped Jennifer to acquire basic financial planning skills. He never expected her to create a budget and follow it. When they separated, Jennifer was not equipped to manage her own finances. While Jennifer could have learned how to manage her finances and restrain her spending, this did not happen.
The Turk Companies
42To provide context for the mediation, the Separation Agreement and Stuart’s non-disclosure, it is helpful to provide an overview of the Turk companies.
SEJ, 771 Ontario Limited and 1112396 Ontario Limited
43Harry was born in Poland and came to Canada in 1949, after the war. After high school, he opened a furniture store with his brother and eventually expanded the business to multiple stores.
44In 1976, Harry decided to start a construction/real estate business that he called SEJ. SEJ was in the business of owning real estate. Over the years, SEJ purchased numerous pieces of commercial real estate that it used to generate rental income. Around the same time that SEJ was created, Harry incorporated another company called 771037 Ontario Limited (“771”). SEJ borrowed money from 771 to fund the expansion of the real estate business. Until 1995, SEJ and 771 were the two companies that Harry used to run his business.
45On January 1, 1995, SEJ was amalgamated with 771. The new amalgamated company was called 1112396 Ontario Limited (“396”) and it became the company that Harry used to run his commercial real estate business.
46On the date of marriage, SEJ directly held six commercial properties and had a joint venture interest in four other commercial properties. Three of these directly held properties and two of the joint venture properties were owned by 396 on the date of separation.
Shares in SEJ and 396 and the Estate Freeze
47The share ownership of SEJ was divided. Harry owned all of the preferred shares and Jonah, Esther and Stuart each owned a common share. Harry had full control of SEJ and 771.
48While documents showing the actual issuance of the common shares in SEJ to Esther, Jonah and Stuart in the 1970s were not produced, it is clear from other documents and the SEJ Record Book that the shares were issued. I accept Harry’s evidence that he gifted the shares to Stuart and his siblings.
49Before the amalgamation of SEJ and 771, the common shares that Stuart, Esther and Jonah held were returned to Harry. Harry required control of the shares to carry out the amalgamation.
50Stuart testified that he gave his SEJ share back to his father. The evidence about this gift is disputed. While I accept that there are some problems with the evidence, I accept as a fact that Stuart did gift his SEJ share to Harry.
51The evidence shows that Harry as the controlling shareholder directed the return of the common shares, so that SEJ could be amalgamated with 771. As he firmly stated, he made all of the business decisions for SEJ and no one else was involved.
52Harry explained that SEJ did well, until the recession when SEJ ran into financial trouble and “we were losing money left and right”. SEJ had long term mortgages with high interest rates and the rents on the SEJ owned buildings were low. SEJ borrowed money from 771 to pay loans. Harry sold some of the properties and tried to survive.
53SEJ never went bankrupt and the 1993 and 1994 financial statements for the company do not reveal the depth of the financial crisis that Harry described during his testimony. That does not mean that the mortgage problem did not exist. I accept that because of the high rates owed on the mortgages, Harry had a financial reason to create a survival plan. First, Harry obtained the three common shares in SEJ from his children and then he amalgamated SEJ with 771 to create 396.
54Written agreements that Esther and Jonah had previously signed, allowed Harry to seek return of their SEJ shares. As shareholders, Jonah and Esther signed a Loan Agreement, a Guarantee Agreement and a Share Pledge Agreement on December 15, 1988. SEJ was borrowing money from 771. The agreements dealt with the loans. Esther and Jonah signed a guarantee and pledged their common shares in SEJ as collateral security for the loans. It was agreed that if SEJ defaulted on the loans, 771 could put them on notice that it was electing to retain the two common shares that had been pledged.
55In February 1992, SEJ owed 771 $1,833,602 inclusive of interest. Harry, as president of 771, demanded repayment by February, 18, 1992. On March 6, 1992, the loans to SEJ remained unpaid and 771 elected to retain Esther and Jonah’s pledged shares in 396.
56This was all orchestrated by Harry who controlled SEJ and 771. Harry needed control of all SEJ shares and so he directed the steps that made this happen. Esther and Jonah knew very little about what happened to SEJ and their single shares.
57Esther was asked what she understood had happened to SEJ. She stated “SEJ got amalgamated with [771].” Her father told her that they were amalgamating two companies to create 396. Esther does not know what happened to her share in SEJ at the time of this amalgamation.
58Jonah recalls that SEJ was created and his father gave each child an equal share in SEJ. He was asked if he knew what happened to his share in SEJ. He answered “I really don’t have any idea.”
59Unlike his siblings, there is no evidence that Stuart signed a Loan Agreement or a Guarantee Agreement. As a result, Harry could not rely on such agreements to obtain Stuart’s SEJ share.
60The only copy of Stuart’s SEJ share certificate is one that is stamped “CANCELLED” with no cancellation date. This cancelled share certificate states that on December 1, 1987 the share that had been held in trust was transferred to Stuart with no conditions
61When asked what happened to Stuart’s share in SEJ, Harry testified that Stuart gave it back to him in 1992. Harry said that "in 1992 I told Stuart the same thing; if he wants to give up his share, he'll be free of SEJ, if I go broke, he'll go broke with me.” So he said "ok, here's the share, I want no part of it.”
62To document the transfer of Stuart’s SEJ share to Harry, a Deed of Gift was signed on February 1, 1994. Stuart did not reveal the existence of the 1994 Deed of Gift until April 2016, when it appeared as a document on the scope of review section of Mr. Martindale’s expert report (Mr. Martindale is the expert Stuart retained). Stuart had never previously produced the 1994 Deed of Gift. During his cross-examination, he revealed that he found the original 1994 Deed of Gift in a desk drawer. He brought the original to court and produced it during his cross-examination. This is an example of Stuart’s disregard for his disclosure obligations.
63After Harry was shown the 1994 Deed of Gift, he testified that it was in 1994 (and not 1992) that he spoke to Stuart about giving him the SEJ share. Harry recalls that “a deed of gift was drawn by Howard Alpert, if my memory is correct”. He recalls that he and Stuart signed the Deed of Gift in 1994. Harry’s signature was witnessed by Howard Alpert. Harry cannot recall where he was when the deed was signed.
64Stuart testified that he signed the 1994 Deed of Gift in 1994. He recalls the year because this is when he started speaking to his parents again. He first said that he signed the deed at his father’s home, but in cross-examination said he could not recall where he was at the time. The only copy of the 1994 Deed of Gift that Stuart kept was the one without his signature witnessed.
65I recognize that Harry first said that Stuart returned the SEJ share in 1992 and when shown the Deed of Gift, he recalled it was signed in 1994. I accept that he was mistaken in thinking that it was in 1992. It had to be signed in 1994 because Stuart and Harry were estranged until 1994 and did not speak to each other during the period of estrangement.
66The SEJ shares that Stuart, Esther and Jonah gave to Harry were not valued on the date of return.
67After Harry received Stuart’s SEJ share, he owned one of the three common shares and the other two were owned by 771 that he controlled. On January 1, 1995, Harry amalgamated SEJ and 771 to create 396. After this amalgamation, Harry explained that he had more money to pay the company debts.
68After the SEJ share was returned to Harry, Stuart did not own any shares in the Turk companies until 1998.
69Many of the real estate properties that SEJ owned were transferred to 396 and continued to be owned by 396 on the date of separation.
70In October 1998, an internal estate freeze of the value of the special and common shares of 396 was done. As part of this estate freeze, Harry gifted to Stuart, Esther and Jonah, each a one third interest in 396.
71Stuart and Harry signed a Deed of Gift dated October 30, 1998 that documented the transfer of a common share in 396 to Stuart. The fact that Harry gifted the 396 share to Stuart is well documented. I accept this as fact.
72On the date of separation, Stuart still owned his share in 396. Stuart’s interest in SEJ, 396 and the estate freeze were disclosed during the mediation and prior to signing the Separation Agreement. I now turn to review Stuart’s interest in the two Turk companies that he did not disclose.
954 and TMG
73On the date of separation, Stuart had an interest in two other companies that Harry incorporated: 157954 Ontario Ltd. (“954”) and Turk Management Group Inc. (“TMG”). Stuart did not disclose his interest in 954 and TMG during the mediation.
74In 2003, Harry decided to go back into the business of constructing his own buildings. Harry wanted to protect 396 from the risk of this new venture. As a result, he incorporated 954 on July 8, 2003, for the purpose of running the construction business. 954 owns two commercial buildings: 125 Chrysler Drive and 800-806 Southdown Road.
75The corporate records confirm that when 954 was incorporated, Stuart, Esther and Jonah were appointed directors. Harry was the president, Jonah was the vice-president and Esther was the secretary/treasurer. Stuart, Jonah and Esther were each issued a common share and a preference share was issued to Harry and his wife.
76On November 14, 2005, TMG was incorporated. On the recommendation of his accountant, Stephen Rosenberg, Harry decided to create TMG to take advantage of the lower small business tax rate. Harry uses TMG to pay Jonah who works full time at 396.
77The TMG corporate record book confirms that there are three common shareholders: Jonah, Esther and Stuart. They were appointed directors and officers and each was issued 100 common shares. Stuart was appointed vice-president. On incorporation, Stuart and his siblings signed numerous documents including a consent to act as a director and various directors’ resolutions.
78With the benefit of this factual review, I will now deal with the date of separation and the mediation that led to the Separation Agreement.
date of separation
79It is clear from the evidence that the marriage was in turmoil through 2007. The evidence reveals a deterioration of the relationship through the fall of 2007 that ended in a separation on January 2, 2008, after the family holiday in Miami.
80During this proceeding and through the trial, Stuart took the position that they separated on November 5, 2007. Jennifer always maintained that they separated on January 2, 2008. Stuart agreed in the mediation process to accept Jennifer’s date of separation. He then unreasonably decided to dispute the date of separation during this litigation, with no chance of succeeding on this point.
81The parties started the mediation with Jaret Moldaver in October 2008. This mediation process and the Separation Agreement reveal that Stuart accepted January 2, 2008 as the date of separation. For example, in a letter dated July 15, 2009 that Mr. Moldaver sent to the parties he stated, “you have asked me to confirm in writing information that I have received from the two of you that your separation occurred during the first week of January, 2008. That is confirmed." In addition, all of the bank account statements, necessary for identifying date of separation values, were “printed” as of January 3, 2009 and provided to Mr. Moldaver.
82Further, section 1.2 of the Separation Agreement that the parties signed, states that they “separated in January 2008”.
83During cross-examination, Stuart agreed that he read the Separation Agreement carefully before signing it and conceded that the reference to the separation date of January 2008 in the Agreement is “true”.
84Given these facts, Stuart’s decision to dispute the January 2, 2008 date of separation was wholly unreasonable. There was no justification for this decision. His evidence that he felt that the marriage was over in November 2007 is not a justification.
85Stuart’s decision to dispute the date of separation caused unnecessary expense in the litigation. It required the parties to testify about the date of separation and the valuation experts had to deal with two dates of separation.
86I find as a fact that the date of separation was January 2, 2008. While the various orders that I will make do not depend on this finding of fact, it is a relevant finding. It is an example of Stuart’s unreasonable conduct in this litigation that caused unnecessary expense.
The Mediation
87In the fall of 2008, the parties agreed to mediate their differences. They hired Jaret Moldaver to act as mediator. He was recommended by the Turk family lawyer. Jennifer felt comfortable working with Mr. Moldaver.
88The mediation process started in October 2008 and concluded in April 2010, when Stuart and Jennifer signed the Separation Agreement.
89In November 2008, Jennifer retained a lawyer, Melanie Kraft. Ms. Kraft’s role was to consult with Jennifer during the mediation process and provide her with independent legal advice when the parties reached an agreement. Stuart retained Rose Muscolino.
90It was Ms. Kraft’s practice to record what Jennifer told her during telephone calls and meetings. With the benefit of her notes to file, Ms. Kraft provided a reliable review of her meetings and telephone discussions with Jennifer. In contrast, Jennifer’s evidence about the mediation process was frequently false, evasive and unreliable.
91It is Jennifer’s evidence that Stuart “unilaterally dictated” the equalization payment in the Separation Agreement, “without any financial disclosure”. She asserts that Stuart called the shots and controlled the process. This is simply incorrect. The facts that I will review show that the final equalization payment was the result of negotiations and compromises between the parties that took place over the course of many months. While Stuart did not disclose his interest in TMG and 954, he did provide financial disclosure of his other interests and income.
92Frequently during her evidence, Jennifer claimed a lack of knowledge or understanding about what transpired during the mediation process. For example, she stated that she knew “nothing” about Stuart’s businesses and did not know his income during the marriage and during the mediation. I reject this evidence. Jennifer had a general appreciation of Stuart’s businesses and the money he received from his family. She knew that the businesses did well for several years and was aware that Stuart had financial problems that started in late 2007 and continued through the mediation.
93During cross-examination, Jennifer was evasive and often refused to answer questions in a straight forward manner. When Jennifer was questioned about entries in Ms. Kraft’s notes, she frequently refused to concede that basic information was accurate and/or that she was the source of the information in the note. These were notes of meetings that Ms. Kraft had with Jennifer. It is obvious from the notes that Ms. Kraft was recording what Jennifer told her. Jennifer often agreed that the note said what it said, but would not concede that she was the source of the information recorded.
94Where the evidence of Jennifer and Ms. Kraft differs, I prefer the evidence of Ms. Kraft and accept it as fact. I now turn to the specific evidence about the mediation.
95During the mediation process, there were numerous meetings with Mr. Moldaver. Stuart and Jennifer had six joint meetings with Mr. Moldaver and there were three single party meetings. Jennifer told Ms. Kraft that she felt “comfortable” with Mr. Moldaver.
96Ms. Kraft met with Jennifer on 12 occasions, including one meeting with Mr. Moldaver. In addition to meeting with Jennifer in person, Ms. Kraft’s dockets confirm that she spoke to Jennifer by telephone at least five times. Ms. Kraft also spoke to Mr. Moldaver by telephone nine times, corresponded with Stuart’s counsel nine times and exchanged 14 letters with Mr. Moldaver.
97As Ms. Kraft explained, the pace of the negotiations was “fairly ordinary”. I accept that the process was not rushed and Jennifer had ample time to consider her position as the negotiations progressed.
98Jennifer’s first meeting with Ms. Kraft was on November 5, 2008. During the meeting, Jennifer told Ms. Kraft that she and Stuart had agreed to share the time with the children equally and this arrangement was working well. The notes of this meeting record information about Jennifer and Stuart’s financial circumstances. Ms. Kraft learned that Jennifer and Stuart had an extravagant lifestyle that involved a home in Miami, travel on private planes, visits to Canyon Ranch and World Series tickets to see the Blue Jays. Jennifer described Stuart as a generous person.
99Jennifer briefly told Ms. Kraft about Stuart’s companies and the financial problems that had developed. Ms. Kraft learned that Stuart’s financial portfolio was depleted. While Stuart once operated a large company with many employees, his business was no longer doing well and he had one employee left. He had companies that were not doing well or were in receivership. During the marriage, Jennifer was used to receiving $2,000 a month in cash from Stuart to meet her daily needs. Stuart had recently decreased the amount to $1,500. Jennifer told Ms. Kraft that Stuart came from a wealthy family that subsidized their expensive lifestyle. Stuart received $180,000 a year from Harry.
100Jennifer also told Ms. Kraft that $550,000 was owed on a line of credit secured against the matrimonial home on Old Orchard Blvd. The home was in Jennifer’s name and Stuart wanted to take out a further line of credit for $400,000. Ms. Kraft told Jennifer that it was important that no further debt be incurred. Specifically, Ms. Kraft advised Jennifer that she should not agree to the further line of credit, unless Stuart agreed to assume responsibility for the debt.
101Jennifer gave Ms. Kraft estimates for the value of the Miami jointly owned condominium, the matrimonial home, the home that Stuart built on Sultana Avenue for himself after separation and some savings. Ms. Kraft discussed the equalization process and did a rough calculation based on Jennifer’s information. They also discussed child and spousal support.
102The fact that parenting issues were sorted out was, as Ms. Kraft explained, “atypical”. This was an indication to Ms. Kraft that Jennifer and Stuart could work well together and it was not a high conflict situation.
103The process that the parties used to negotiate the Separation Agreement was unusual. The mediator and not counsel managed the disclosure process. Mr. Moldaver was responsible for gathering disclosure from the parties and Ms. Kraft relied on him to do so.
104The parties and Ms. Kraft signed a “Closed Mediation Agreement”. Clause 12 dealt with disclosure obligations and stated that the parties “agree to provide the mediator with full financial and any other disclosure that may be required including but not limited to current financial statements, tax returns and any other disclosure that the Mediator determines is necessary to the process”.
105Ms. Kraft offered to help Jennifer prepare a financial statement but Jennifer did not accept this help. The parties did not exchange sworn financial statements during the mediation. As Ms. Kraft explained, this process was “inconsistent” with her practice and with the general practice in family law. From a financial point of view, Ms. Kraft stated that this was not a “simple case”.
106On February 23, 2009, Ms. Kraft and Jennifer met with Mr. Moldaver. This meeting took place before Mr. Moldaver met Stuart and his accountant Mr. Rosenberg on March 19, 2009 to obtain disclosure. During the February 23 meeting, they discussed a process for obtaining disclosure from Stuart. Ms. Kraft recorded that Mr. Moldaver would meet alone with Stuart and maybe his accountant and that Jennifer gave Mr. Moldaver permission to proceed without her.
107Jennifer was questioned about the February 23 meeting and asked to agree that she talked to Mr. Moldaver and Ms. Kraft about obtaining disclosure from Stuart. It was pointed out to Jennifer that after the February 23 meeting, Mr. Moldaver met with Stuart and his accountant and a disclosure brief was produced with a letter from Mr. Moldaver. There is no dispute that this meeting took place between Stuart, his accountant and Mr. Moldaver. However, Jennifer repeatedly refused to agree that “getting disclosure from Stuart” was discussed during the February 23 meeting.
108During the February 23 meeting, financial issues were discussed. They talked about the Marriage Contracts and the Turk Companies. There was a basic discussion about equalization and Ms. Kraft’s rough calculation that Jennifer owed Stuart $320,000. Ms. Kraft recorded “Jennifer – Stuart gets 180K a year”. While it is clear from Ms. Kraft’s notes and her evidence that financial issues were discussed, Jennifer would not admit this obvious point.
109On March 19, 2009, Mr. Moldaver met with Stuart and Mr. Rosenberg. Jennifer and Ms. Kraft did not attend the meeting. The purpose of this meeting was to review Stuart’s documents and obtain information about his financial interests and income. Jennifer consented to this meeting taking place in her absence.
110After the meeting, Mr. Moldaver sent a letter dated April 21, 2009 to the parties and Ms. Kraft (“Moldaver letter”). The Moldaver letter reviewed Stuart’s disclosure and the information that Mr. Moldaver received at the meeting.
111The Moldaver letter enclosed the following documents: the 1988 and 1990 Marriage Contracts, the parties’ Notices of Assessment for 2005 - 2007, property tax documents for the matrimonial home on Old Orchard Grove and Stuart’s new home on Sultana Ave., an insurance document listing values for jewellery, numerous personal banking statements, a date of separation bank account statement for Stuart’s companies (The International Mount Company, Cellular Connection, On the Go Technologies, and Ablebrook Development), documentation regarding Metro One for July 31, 2007 and 2008, Cellular Connection financial statement for year ending May 31, 2008, SEJ’s financial statement as at December 31, 1993 and documents dealing with the 396 internal estate freeze including the deeds of gift dated October 30, 1998 documenting Harry’s gift of a share in 396 to Stuart and his siblings.
112Ms. Kraft learned from the Moldaver letter and attached disclosure that on the date of marriage, Stuart had an interest in SEJ that was valued at roughly $10M and his ownership of Cellular Connection was worth $200,000. These values were recorded in the 1988 Marriage Contract.
113Ms. Kraft also learned that financial problems caused SEJ to be amalgamated with 771 on January 1, 1995 and a new company called 396 was formed. The Moldaver letter described the financial problems and what happened to address the problems:
[SEJ] was then running a deficit in terms of its book value, with major liabilities due to heavy borrowing, with low rents and locked in mortgage rates at 11% for 20 years. The company was losing money and the company was being pressured by creditors .… There was apparently some concern with respect to pending law suits and a real risk of "losing everything". Mr. Rosenberg advised that by the “end of fiscal 1993, the company was not worth even close to the $30,000,000 ($10,000,000.00 worth of shares for each child) that it was worth in 1989 … [Harry] had no choice but to take over the company at his own risk to service the properties. Mr. Rosenberg’s advice was that the shares were relinquished by the children for no consideration.
Following the amalgamation, some of the properties were sold and others were retained. Losses were ultimately used by [Harry].
114Ms. Kraft knew that Stuart had relinquished his share in SEJ to Harry for no consideration. She also learned that in October 1998 an estate freeze was done and at this point Harry gifted Stuart, Esther and Jonah each a share in 396.
115Ms. Kraft learned that the preference shares in 396 issued to Harry in 1998 had a redemption value of $5.789M. Ms. Kraft testified that this meant something to her “because it demonstrated to me that a company [SEJ] that had a value of $30 million in 1988, at the time of the marriage contract, by the – by 1998, was now worth 5.7 – roughly $5.7 million.” Much of the real estate that SEJ had owned was owned by 396 after the amalgamation and continued to be owned by 396 on the date of separation. It is clear that Ms. Kraft was observing that the value of this real estate had dropped.
116Of course, Ms. Kraft’s observations were based on the information that Stuart provided at the mediation because no further investigation was pursued. There was no disclosure concerning the value of 396 on the date of separation. Obviously, this was because Ms. Kraft was satisfied that the transfer of the 396 share to Stuart was a gift and therefore excluded from Stuart’s net family property under s. 4(2) of the Family Law Act.
117Ms. Kraft reviewed the estate freeze documents and confirmed that they were “in order”. The freeze had occurred during the marriage. She explained that it was not as if the freeze had occurred shortly before the separation, for some improper purpose. The gifting of the 396 share was documented. The Moldaver letter enclosed Harry’s signed deed of gift and Stuart’s signed “Acceptance”.
118The disclosure also confirmed that Stuart’s business had dried up and he was “not doing well”. Stuart’s income was the gratuitous $180,000 payment that Harry paid to Cellular Connection and Metro One was defunct.
119Ms. Kraft reviewed the Moldaver letter and disclosure with Jennifer. She explained that she had several meetings with Jennifer in June 2009 when “they talked quite a bit about the contents of the disclosure”. Ms. Kraft did not ask for any additional disclosure from Stuart. She had no reason to question the reliability of what was set out in the Moldaver letter.
120Jennifer’s evidence about the disclosure in the Mr. Moldaver letter was not always consistent. She recalls receiving the Moldaver letter and going through the disclosure in a meeting with Stuart and Mr. Moldaver. She testified that she did not remember talking to Ms. Kraft about the disclosure and yet a few questions later, Jennifer answered that she remembered Ms. Kraft telling her about the estate freeze, which was part of the disclosure. She testified that she did not know about the estate freeze until the mediation and did not understand what it was.
121While Jennifer may not have fully understood the legal details of an estate freeze, I am satisfied that Ms. Kraft explained the effect of the estate freeze to Jennifer; the fact that the 396 shares were gifted to Stuart and would therefore be excluded from his net family property.
122Jennifer was very aware of Stuart’s businesses. She knew before the mediation that “SEJ was no longer and it became a numbered company”. She had “heard [this] along the way” from Stuart.
123Around May 2010, Jennifer and Ms. Kraft received either Stuart’s Notice of Assessment or a partial income tax return for 2008. Together with the documents attached to the Moldaver letter, this was all of the documentary disclosure that Stuart provided during the mediation. Stuart never provided valuations of the interest he held in the various companies for any point in time.
124Ms. Kraft explained the equalization of net family property to Jennifer. She told Jennifer that if a spouse, such as Stuart, was worth more on the date of marriage than the date of separation, then the net family property of that spouse would be deemed zero.
125During the mediation process, Stuart produced two Net Family Property (“NFP”) statements. Both NFP statements required Jennifer to pay Stuart an equalization payment. Ms. Kraft reviewed these NFP statements with Jennifer.
126The first NFP statement required Jennifer to pay Stuart $371,578.47. After many mediation sessions the parties agreed on a second and final NFP statement (“final NFP statement”) that required Jennifer to pay Stuart an equalization payment of $181,578.46. Jennifer’s equalization payment decreased because Stuart agreed to assume 100% of the value of the Florida condominium. These were the only NFP statements produced during the mediation.
127Although Ms. Kraft explained the equalization process to Jennifer, she did not conduct her own analysis of the equalization because the mediator was in charge of disclosure. Ms. Kraft stated that she had no reason to question the reliability of what she learned from Mr. Moldaver.
128Stuart’s share interest in SEJ and 396 and the value of that interest were not recorded in the two NFP statements produced during the mediation. As a result, there was no date of marriage deduction for the value of Stuart’s SEJ share. There was also no inclusion of the value of Stuart’s shares in 396 and no corresponding exclusion of his 396 shares under s. 4(2) of the Family Law Act. In effect, the total absence of Stuart’s 396 shares in the NFP statements meant that he received the benefit of the date of separation exclusion. Since I have found that Harry gifted the 396 share to Stuart, it is correct to exclude it from Stuart’s net family property.
129Stuart’s two NFP statements did not trigger a significant legal issue that arose during the trial. If the Separation Agreement was set aside, Stuart was claiming a date of marriage deduction for the value of his SEJ share and a s. 4(2) gift exclusion for the 396 share. As noted, many of the real estate properties owned by SEJ were transferred to 396 after the amalgamation and continued to be owned by 396 on the date of separation. Jennifer argued that one cannot claim a deduction and then an exclusion for what is in large part the same asset. This legal issue never arose during the mediation. Since I am not setting the Separation Agreement aside, it is not necessary to decide the issue.
130The final NFP statement assigned a “nil” value to Stuart’s interest in Metro One and Cellular Connection.
131Stuart had a 31% interest in Metro One, a publicly traded company. Previously it was known as On-the-Go. In the summer of 2007, Metro One experienced problems with its primary lender. The problems led to the financial demise of Metro One and, by early 2008, it ceased to operate. This is why Stuart assigned a “nil” value to his interest in Metro One in the two NFP statements.
132The Cellular Connection financial statement for May 31, 2008 that was produced during the mediation revealed Stuart’s shareholder advances to the company. In 2007, the advance was $949,266 and, in 2009, it was $857,916. Stuart had loaned this money to Cellular Connection over the years. He transferred the money to Metro One to fund his line of credit in that business.
133In summary, Stuart made compromises that led to the equalization payment in the final NFP statement. He did not include a date of marriage deduction for his interest in SEJ, Cellular Connection or a condominium that he owned. There was no value assigned to Jennifer’s significant jewellery collection that she kept. The full value of the jointly owned Florida condominium was attributed to Stuart. Stuart included the value of his home on Sultana Avenue that he bought after the date of separation. Stuart did not include all of the loans from his father (these loans were not documented).
134Ms. Kraft explained that the majority of the mediation related discussions focused on support issues. Dealing with the issue of Stuart’s income, Ms. Kraft understood that Jennifer and Stuart were financially dependent on the money Stuart received from his parents. As a result, the parties approached Stuart’s income and the issue of support on a needs basis. They worked with an average of Stuart’s previous three years of income.
135Ms. Kraft was aware that Stuart’s businesses had dried up and he was not doing well. Stuart was still receiving the gratuitous $180,000 a year that Harry paid to Stuart through Cellular Connection.
136Stuart testified that the agreement to pay Jennifer $10,000 net a month was not connected to his income. He would utilize whatever he needed (tax advantages, savings and loans) to make this monthly payment.
137The parties settled on an income of $421,000 for support purposes and an agreement to pay Jennifer $10,000 a month net. This was to cover child and spousal support. Ms. Kraft explained how she approached the quantum of child and spousal support and why she supported the agreement as follows:
A. … So, essentially, Stuart was agreeing to pay support on an income of $421,000. That particular figure, I gather, was chosen because it was the three-year average of his income.
A. And, and on an income of $421,000 gross, the guidelines show a figure of $5,136 a month for the children. Again, not taking into account that they were actually living with their father 50 percent ....
Q. Not taking the shared parenting arrangement?
A. Right. And that spousal support that would give Ms. Turk 50 percent of the net disposable income, that's what the reference to NDI is, is $8000 a month. So that if Mrs. Turk received $5136 a month in net child support and $8000 a month in gross spousal support, she would net $11,065 a month.
Q. Did that seem reasonable or unreasonable to you?
A. It seemed reasonable at the time, because if you look at the next line, his reported income was actually only $180,000 and on that level of income, to get Ms. Turk 50 percent of the net disposable income the spousal support would be $3000 a month, and the child support would be $2340 a month, netting her $5394 a month.
A. My sense was that if we could structure a deal that would give Jennifer $10,000 net a month she was way ahead of the game, because if she wasn't able to structure a deal and she would've litigated the case, there would've been no guarantee that she would ever receive support based on an income figure of $420,000.
138Stuart was also willing to pay 100% of the children’s significant s.7 expenses (school tuition, summer camp fees, private club fees, fees to drive children to school, synagogue fees, tutor fees, sporting equipment and uninsured dental and medical fees).
139On August 4, 2009, Jennifer spoke to Ms. Kraft by telephone. At this point, Jennifer was dating a fellow in the United States and was travelling to see him frequently. Stuart accommodated the trips and was flexible about their shared parenting schedule. Jennifer was considering living with her boyfriend in Toronto. She was concerned that her support would be reduced if they cohabited. While they never cohabited, the possible plan drove Jennifer’s request to fix the support amount for five years.
140During the August 4, 2009 telephone call, Ms. Kraft also discussed the first NFP statement that required Jennifer to pay Stuart about $371,000. Jennifer told Ms. Kraft that she could not afford to pay this money.
141Jennifer’s demands ultimately led to Stuart’s agreement to reduce the equalization payment to $181,578 and defer the payment until the matrimonial home was sold. This was accomplished by attributing 100% of the value of the Florida condo to Stuart. Stuart also agreed to pay Jennifer’s car lease until it expired.
142During a September 14, 2009 telephone call with Jennifer, Ms. Kraft reviewed the $10,000 net support payment that Stuart was prepared to pay. Jennifer confirmed that the amount was agreeable, but continued to insist that Stuart pay for extras (i.e. her car, gas, club and synagogue fees).
143Jennifer’s demand that Stuart pay the extra expenses was agreed to and reflected in sections 5.5 and 5.6 of the Separation Agreement as follows:
5.5 Stuart will continue to pay for Jennifer's current car lease and vehicle insurance and gas until the expiry of her current lease in or about August 14, 2010. Coverage of these expenses will be deemed not to be third party payments of spousal support. If, for any reason, Jennifer becomes liable to pay income tax as a result of these benefits, then Stuart will reimburse her for the related liability.
5.6 Stuart may from time to time make further gratuitous payments to Jennifer and/or he may pay some further expenses on behalf of Jennifer and the children. No such payments will give rise to a continued obligation to do so on the basis of the prior payments alone.
[Emphasis added.]
144The negotiations continued in the fall of 2009. Stuart’s lawyer, Ms. Muscolino, sent Ms. Kraft a three page letter dated September 28, 2009 that covered many issues. Ms. Kraft discussed this letter with Jennifer during a conference call on October 5, 2009. During this call, Jennifer requested a further mediation session without the lawyers present. The parties returned to mediation and Ms. Kraft did not hear further from Jennifer that year.
145In late January 2010, Mr. Moldaver circulated a draft Separation Agreement to the parties and counsel. Ms. Kraft learned that there had been several mediation sessions leading up to the draft Separation Agreement that incorporated what the parties had agreed to in principle.
146Ms. Kraft met with Jennifer on February 1, 2010 to review the draft Separation Agreement. It seemed to Ms. Kraft that the parties were still working fairly well together, although Jennifer was concerned about a clause in the draft Separation Agreement that allowed a review of support.
147The draft Separation Agreement included a provision that either party could seek a variation of the support on or after January 1, 2013. The draft revealed a floor and ceiling for the quantum of support, if support was varied. Jennifer was concerned that the variation could take place in three years and she had been asking for five years. However, Ms. Kraft understood that this is what the parties had agreed to at the last mediation session. Jennifer was confused and concerned about this review clause. Ms. Kraft agreed to speak to Mr. Moldaver about the clause.
148Ms. Kraft also learned during her meeting with Jennifer that since their last contact, Jennifer had bought a lot on Robbie Avenue where Stuart was building a house for her. They discussed the funding of this project. Section 8.2 of the Separation Agreement reflects the agreement concerning the Robbie property as follows:
8.2 Stuart has purchased the property known as 12 Robbie Avenue, Toronto, Ontario, with a scheduled closing of February 25 2010. Stuart intends to build a home on this property to be transferred to Jennifer upon completion. Prior to a divorce, Stuart will transfer this property to Jennifer on the condition that Jennifer pays to Stuart, at the time of the transfer, his costs of the land and the construction.
149On February 11, 2010, Ms. Kraft spoke to Mr. Moldaver and relayed Jennifer’s concerns about the proposed floor and ceiling for support. While Stuart was agreeable with setting the ceiling for support at $11,000, there was a disagreement concerning the floor for support and the date when a review would be allowed.
150Ms. Kraft wanted the Separation Agreement to include a floor for any support variation. She explained the basis of this advice as follows:
I wanted there to be a floor because my concern was that with, with a payor, who has a low reported income, as I knew Mr. Turk had, I wanted to be guaranteed that there was going to be a floor so that she would have some comfort and security knowing her worst case scenario in a few years. …
151By February 16, 2010, the dispute about the floor on a support variation was resolved. Mr. Moldaver circulated a revised draft Separation Agreement on February 18, 2010. The floor for spousal support was set at $5,000 until January 1, 2015.
152Ms. Kraft reviewed the new draft Separation Agreement and sent a letter to Jennifer on February 18, 2010 explaining that “Stuart’s obligation to pay spousal support will never exceed $11,000 gross with cost of living adjustments and that until 2015 you will receive at least $5,000 a month gross for spousal support.” Addressing child support, she told Jennifer that if there was a variation of child support after January 1, 2013, there was a guaranteed minimum base of $2,500.
153On March 25, 2010, Ms. Kraft spoke to Jennifer. While previously Jennifer had been interested in moving forward to finalize the settlement, she started to become concerned that she would not have enough money to meet her expenses. Ms. Kraft observed that Jennifer was tired, emotional and uncomfortable. Ms. Kraft explained to Jennifer the worst case scenario going forward. Specifically, after the children were grown up she “would only get spousal support and on her worst day, it would be $5000 a month, which would only net her $3926 a month.”
154Jennifer remained concerned that she would not have enough money to pay her expenses. She wanted Stuart to continue giving her Blue Jays tickets and to pay for her car lease, gas, private club fees, cell phone and synagogue dues.
155Ms. Kraft was alert to Jennifer’s concern, but she balanced this concern with the circumstances. She explained “what more can [you] get in a situation where we have a payor who has a reported income that's quite low and he's willing to be paying on support at a level much higher than what his reported income is.”
156Immediately after the March 25 meeting, Ms. Kraft called Mr. Moldaver and left him a message. She told Mr. Moldaver that based on the worst case scenario ($2,500 for child support and $5,000 for spousal support) Jennifer was “very frightened of not having enough money”. Ms. Kraft was aiming to increase the spousal support floor.
157Ms. Kraft and Stuart’s counsel had further discussions. As a result, Stuart agreed to a minimum of $5,500 gross for spousal support, if support was varied. The discussions led to sections 5.7 to 5.9 of the Separation Agreement as follows:
5.7 The child support and spousal support arrangements in this Agreement will be nonvariable until January 1, 2013, under any circumstances whatsoever.
5.8 On or after January 1, 2013, either party may seek a variation of the child support and/or spousal support amounts if there is a material change of circumstances since the making of this Agreement, whether the change was foreseen or unforseen or foreseeable or unforeseeable. However, in the event of a variation: 1) Jennifer's entitlement to spousal support and Stuart's obligation to pay spousal support will never exceed the monthly sum of $11,000.00 gross, with cost of living adjustments based on the consumer price index for items [in] Toronto with a base year of 2010; and 2) until January 1, 2015, Jennifer will receive at least the gross monthly sum of $5 500 for spousal support. If there is a variation of child support on or after January 1, 2013, child support will be determined in accordance with the Guidelines, except that Stuart will guaranty a minimum base rate monthly payment to Jennifer for Sydney provided that Sydney resides with Jennifer for at least 40% of the time in the amount of $2,500.00, irrespective of special and extraordinary expenses and until January 1, 2015.The parties will mediate any disputes in terms of the support issues with Jaret Moldaver before resorting to arbitration or a court application.
5.9 Until this Agreement is varied, the spousal support amounts will increase commencing on January 1, 2013, and on each January 1, thereafter, in accordance with the consumer price index for all items Toronto, with a base year of January I, 2010.
[Emphasis added.]
158On April 22, 2010, Jennifer called Ms. Kraft once again expressing that she was uncomfortable with the deal and scared. Jennifer had received the final version of the Separation Agreement and she wanted to know if she could push the variation date from 2013 to 2014 or 2015. At this point, Stuart had a girlfriend (that he later married). Jennifer was worried that the girlfriend might push Stuart not to pay her.
159Jennifer told Ms. Kraft that she was going to call Mr. Moldaver to see if he could get Stuart to move the variation date to 2015. Ms. Kraft testified this was typical of Jennifer’s actions. If Jennifer had a complaint, she voiced it to Mr. Moldaver or Stuart directly and tried to get what she wanted.
160At this point, Ms. Kraft believed that nothing further could be achieved. She explained that “we had pushed as far as we could go”. Since Stuart was financially dependent on his parents, Ms. Kraft felt that the Separation Agreement provided Jennifer with a “very generous support arrangement”. There were no further changes to the Separation Agreement and it was signed on April 26, 2010.
161Many of Ms. Kraft’s discussions with Jennifer dealt with “reality checking”. Ms. Kraft explained that Jennifer “had led a very high lifestyle when she was married to her husband and I wanted her to understand that she might not be able to continue to lead the same kind of lifestyle upon separation”.
162Ms. Kraft believed that the Separation Agreement was a “good deal” for Jennifer. Ms. Kraft had good reason for this opinion, as she explained in the following testimony:
Q. And from a matter of legal analysis, were you persuaded or not that this was a, I guess, as good as you were gonna be able to get in these negotiations?
A. I believed that, in these circumstances, where you had a family that was being financially supported by grandparents, that this was a very generous support arrangement for Mrs. Turk. It was guaranteeing her a net amount for a fixed period of time and it was giving her a sense of what she could expect in a few years to come. It was giving her, on top of that, a car with a car lease and gas being paid on top of the 10,000 net. It was giving her uninsured medical and dental expenses, which, by the way, were very important to her because she had a condition which required injections of, at a very significant cost to her, that were covered under Stuart's health plan. And she was also getting one hundred percent of the Section 7 expenses being paid for, which were quite significant. So I did feel that it was a good deal for Jennifer and, on the support side.
163Jennifer’s evidence about the independent legal advice that Ms. Kraft provided was evasive and inconsistent. She testified that while she recalled reviewing the Separation Agreement with Mr. Moldaver, she could not recall reviewing it with Ms. Kraft. However, Jennifer also stated that she “sat down and reviewed” the draft separation agreements with Ms. Kraft and that Ms. Kraft went through and explained the final Separation Agreement before it was signed. When Jennifer was cross-examined about the certificate of independent legal advice, she agreed that she “completely understood the nature and effect of the agreement”.
164I find as a fact that Ms. Kraft provided Jennifer with independent legal advice and Jennifer then signed the Separation Agreement on April 26, 2010. As the Certificate of Independent Legal Advice states, Ms. Kraft “fully explained to [Jennifer] the nature and effect of the Agreement. Jennifer Turk acknowledged that she completely understood the nature and effect of the Agreement … and confirmed that she was entering into the Agreement of her own volition without any fear, threats, compulsion or influence by Stuart Turk or any other person.”
165The evidence of Ms. Kraft, which I accept as fact, reveals that Jennifer was an active participant in the mediation process and that she understood the terms of the Separation Agreement that she signed.
AFter the mediation
166After separation, Stuart and Jennifer cooperated in their parenting of the children until 2013 when the children started to spend less time with Jennifer. The impact of this is considered later in these reasons (see Variation of Child Support).
167Until they signed the Separation Agreement in 2010, Stuart maintained the financial status quo. He paid all of the household bills and, if there was extra cash, he continued to buy Jennifer gifts and give her baseball tickets.
168After the Separation Agreement was signed, the parties complied with the agreement. Stuart paid what the Separation Agreement required. In addition to the $10,000 monthly net support, Stuart paid Jennifer’s car lease, insurance and gas until the lease expired in August 2010. He also made numerous other gratuitous payments as contemplated in sections 5.5 and 5.6 of the Separation Agreement. These sections state:
5.5 Stuart will continue to pay for Jennifer's current car lease and vehicle insurance and gas until the expiry of her current lease in or about August 14, 2010. Coverage of these expenses will be deemed not to be third party payments of spousal support. If, for any reason, Jennifer becomes liable to pay income tax as a result of these benefits, then Stuart will reimburse her for the related liability.
5.6 Stuart may from time to time make further gratuitous payments to Jennifer and/or he may pay some further expenses on behalf of Jennifer and the children. No such payments will give rise to a continued obligation to do so on the basis of the prior payments alone.
[Emphasis in original]
169Jennifer’s car lease expired in August 2010. She wanted to lease another Range Rover and Stuart assisted her and paid the $10,000 deposit for the lease. He leased the car through Cellular Connection to take advantage of loyalty discounts that were available. Before committing to the lease, Stuart asked Jennifer what lease payment she wanted to make each month. They settled on a monthly payment of $1,000. Stuart told her that he would be deducting a total of $1,500 a month from the $10,000 support payment. The deduction covered $1,000 for the car lease, $400 for car insurance and $100 for her cell bill from the monthly support.
170Jennifer’s evidence about the new lease and the $1,500 deduction from support is consistent with Stuart’s. There is no evidence that Jennifer disagreed with Stuart’s decision to take the $1,500 deduction from the $10,000 monthly support.
171In fact, Jennifer’s cell phone expenses and car insurance exceeded what Stuart allowed in the $1,500 deduction. Until early 2014, he paid these extra amounts, totalling $14,220.37, through Cellular Connection.
172Stuart also continued to give Jennifer cash, jewellery, a Chanel purse and Blue Jays tickets. For a period of time, he paid for Jennifer’s vacation flights, maintained her medical and dental insurance, paid her synagogue dues and private club fees.
173These are the gratuitous payments contemplated in s. 5.6 of the Separation Agreement. Stuart has no right to seek reimbursement for the gratuitous payments and Jennifer has no right to demand that they continue.
174For several years after the Separation Agreement was signed, Stuart continued to manage Jennifer’s finances. He had access to her bank account and paid her bills online. Stuart and Jonah encouraged Jennifer to take an active role and start managing her own finances, but this did not happen.
175Jennifer remains unemployed. She has not pursued any courses or attempted to upgrade her education in any way. The steps Jennifer has taken to try and earn some income have been minimal and unsuccessful. Jennifer attended a commercial audition for ET Canada, but was not hired. Jennifer and a friend decided to start a skin care business. At best, this was just an idea. Her friend backed out before they even had a business plan and Jennifer decided it was not something she could do on her own.
176Jennifer testified that she has sold much of her jewellery and depleted her savings to survive. She continues to spend money without a budget. She has sold jewellery to buy expensive designer clothes and purses at Holt Renfrew and elsewhere.
177In January 2013, Stuart reduced the $10,000 net support again. He took the position that child support was no longer owed for Jordan and unilaterally reduced his payment by $1,500. The $10,000 payment was now reduced to $7,000. (The termination of child support for Jordan is addressed later in these reasons under Stuart’s Variation Request).
178Section 5.9 of the Separation Agreement requires the monthly support to be increased every January in accordance with the Consumer Price Index. There is no evidence that Stuart complied with this section.
179Since the Separation Agreement was signed, Stuart has not actually earned income. Harry pays Cellular Connection the monthly sum of $20,000 and Stuart uses this money to pay his expenses. Stuart reports this money as income on his income tax return. In effect, Harry is paying Stuart for doing nothing. Stuart and his children also receive a steady stream of generous monetary gifts from Harry.
180Stuart’s efforts to earn income since separation have been unsuccessful. His attempt to earn income as a residential developer failed. He bought various homes that he renovated and sold. To purchase and renovate each property, Stuart relied on loans from Harry. These loans are documented, and mortgages were secured against the properties. Harry was paid back when Stuart sold each property. The projects did not generate profit. Stuart is currently living in the last home that he renovated, an expensive home in central Toronto.
181The rest of the money that Stuart and his family received from Harry was gifted. I reject the evidence of both Stuart and Harry that the money was loaned. The evidence is not credible. All of Harry’s children have received sums of money from him to support their privileged lifestyles. There is no evidence that Harry has ever demanded repayment of the money before or after separation. While Stuart argues that he is expected to repay these funds to his father, he continues to live in a way that demonstrates his expectation that his gifted income will remain high. This is despite his apparent failure as a residential developer and no apparent source of income other than what Harry gifts to him.
182During his testimony, and after probing cross-examination, Stuart revealed that he has an entrepreneurial venture that he had not previously disclosed. At first, Stuart described the venture as the development of an application that was in its “infancy” and nine months into development. The application is a tool for separated/divorced parents to track custodial arrangements and support issues. Stuart testified that it is "a database that would compete with Our Family Wizard”.
183Stuart changed the name of Ablebrook Development (one of his companies) to Two Hands, the name of the application he is developing. Stuart filed three financial statements in the year before the trial and never disclosed Two Hands. He testified that the Cellular Connection owns the application.
184During cross-examination, counsel confronted Stuart with information they had found on the internet after Stuart revealed the Two Hands application during his testimony. While Stuart said that the application is in it “infancy”, his evidence on cross-examination shows that this is not credible. There is a US public company called Two Hands that issued a public statement on December 12, 2016, announcing its co-parenting application that was under development and expected to launch in the first quarter of 2017. When confronted with this public statement, Stuart agreed that his application is being tested. He is fully aware of the American company and the public statement. Stuart’s company, Cellular Connection, owns the licencing rights to the application and hopes to licence the application to the American company. Clearly, Stuart was not telling the truth when he said the application was in its “infancy”.
185There is no evidence that Stuart, through Cellular Connection, has earned any income from this application, but this may well change when the application is licenced.
186This cross-examination was pursued by Jennifer’s counsel because Jennifer was seeking to set the Separation Agreement aside and secure a higher support payment from Stuart. While Jennifer’s request to set the Separation Agreement aside is denied, this evidence is still important because it is another example of Stuart’s failure to comply with his disclosure obligations.
should the Separation Agreement be set aside?
187Jennifer’s primary ground for setting the Separation Agreement aside is Stuart’s failure to disclose the following assets:
His interest in TMG, 954 and 396.
The value of his shareholder loan.
Capital income that he earned in 2009 from the sale of Spongetech shares. Grossed up for tax purposes this is the equivalent of approximately $960,000.
188Jennifer also relies on the fact that Stuart’s assets were not professionally valued.
189Lastly, she also argues that the Separation Agreement should be set aside because she signed it under duress.
190If the entire Separation Agreement is not set aside, Jennifer asks that the child support and spousal support provisions be set aside. She argues that the quantum for child and spousal support does not substantially or even remotely comply with the objectives of the Divorce Act or the Family Law Act (in this case it is the Divorce Act that applies). As well, she says that the quantum of support was set without full and complete disclosure of Stuart’s income or financial circumstances.
The Legal Framework
191The starting point is s. 56 (4) of the Family Law Act that sets out when a court may set aside all or part of a domestic contract 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.
[Emphasis added.]
192The significance of the non-disclosure is not viewed in a vacuum. It is assessed by measuring the value of the asset against a party’s disclosed net assets (see Dochuk v. Dochuk, 1999 CanLII 14971 (ON SC), [1999] O.J. No. 363 at para 16; Quinn v. Epstein Cole (2007), 2007 CanLII 45714 (ON SC), 87 O.R. (3d) 184 at para 47.) In Currey v. Currey, 2002 CanLII 49561 (ON SC), [2002] O.J. No. 5943 at para 17, the court stated that “the term significant must refer and be measured in the context of the entire relationship between the parties.” Further, as the court stated in Bruni v. Bruni, 2010 ONSC 6568 at para. 102, the significance “should not be considered in isolation of all of the surrounding circumstances”.
193The application of s. 56(4) involves a two-stage analysis (LeVan v. LeVan, 2008 ONCA 388 at para. 51; Virc v. Blair, 2014 ONCA 392 at para. 52):
(i) Can the party seeking to set aside the agreement demonstrate that one or more of the s. 56(4) circumstances is engaged?
(ii) If so, is it appropriate for the court to exercise its discretion to set aside the agreement?
194The onus is on Jennifer, the party seeking to set aside the separation agreement, to prove that one or more of the subsections of s. 56(4) apply and if so that the court should exercise its discretion to set aside all or part of the Separation Agreement (see Dougherty v. Dougherty, 2008 ONCA 302).
195If s. 56(4) applies, then the court must decide if it is appropriate to exercise its discretion to set aside the agreement. At this stage of the analysis, the following factors should be taken into account:
(i) whether there had been concealment of the asset or material misrepresentation;
(ii) whether there had been duress, or unconscionable circumstances;
(iii) whether the petitioning party neglected to pursue full legal disclosure;
(iv) whether he/she moved expeditiously to have the agreement set aside;
(v) whether he/she received substantial benefits under the agreement;
(vi) whether the other party had fulfilled his/her obligations under the agreement.
196It is clear that Stuart failed to disclose assets during the mediation process. The issue is not whether there was a failure to disclosure, but whether the non-disclosure was “significant” as required under s. 56(4)(a) of the Family Law Act. As I will explain, the non-disclosure was not significant and Jennifer’s request to set aside the Separation Agreement fails at this point of the analysis.
197Jennifer’s alternative relief also fails. There is no basis for finding that the support does not comply with the objectives of the Divorce Act.
Stuart’s non-disclosure
No valuation of Stuart’s interest in 396
198Stuart’s interest in 396 was disclosed together with estate freeze documents. The Moldaver letter provided this disclosure. Ms. Kraft satisfied herself that the estate freeze was legitimate and I have found as a fact that Harry gifted the 396 share to Stuart. As a result, the fact that 396 was not valued and included in Stuart’s final NFP statement is irrelevant. Furthermore, this was a process that Jennifer agreed to with the benefit of legal advice.
Non-Disclosure of 954 and TMG
199Stuart’s position on whether he disclosed his interest in 954 and TMG varied. When Stuart testified he said that he did not disclose his interest in 954 and TMG because he did not know that he had an interest in these companies, when he signed the Separation Agreement. In closing submissions, Stuart conceded that he failed to “specifically” disclose his interest in 954 and TMG during the mediation. Having made this concession, Stuart nevertheless argues that Mr. Rosenberg disclosed his interest in these companies to Mr. Moldaver.
200As I will explain below, the evidence of Stuart and Mr. Rosenberg is not credible. I find that Stuart failed to disclose his interest in 954 and TMG.
954 and TMG Corporate Records
201As noted, Harry incorporated 954 on July 8, 2003, for the purpose of running the construction business. The company owns two buildings: 125 Chrysler Drive and 800-806 Southdown Road.
202The corporate records confirm that when 954 was incorporated, Stuart, Esther and Jonah were appointed directors. Harry was the president, Jonah was the vice-president and Esther was the secretary/treasurer. Stuart, Jonah and Esther were each issued a common share and a preferred share was issued to Harry and his wife, Pnina.
203On July 8, 2003, Stuart and the other family members signed and dated several documents set out below. In particular, Stuart signed documents confirming his appointment as a director, receipt of one common share and giving Harry and Pnina full and complete discretion and power to manage the business. The documents signed are set out as follows:
By-law No. 1 dealing with the “conduct of the business” was passed by the directors and they all signed and dated a consent.
Consent to By-law No 1 in his role as a shareholder of the company.
Consent to the resolution of the board of directors confirming the issuance of shares and the appointment of the directors.
Subscription for Common Shares confirming his receipt of the common share.
Two copies of a Special Resolution stating that 954 would have four directors.
Resolution of the Shareholders confirming his consent to By-laws Numbers 1 and 2.
Consent to Act as Director.
Resolution of the Shareholders appointing Rosenberg Smith as the company accountant and exempting the requirement that an auditor be appointed.
Resolution of the Board of Directors dealing with 954’s banking and authorizing the officers of 954 to sign documents that the bank requires.
Resolution of the Shareholders titled “Agreement Among Shareholders” giving Harry and Pnina full and complete discretion and power to manage the business.
204Almost three years later, on June 1, 2006, Stuart and the other directors signed two resolutions for 954. One resolution authorized the purchase of 800-806 Southdown Road and a second resolution authorized a $1.5M charge against 800-806 Southdown Road.
205Harry incorporated TMG on November 14, 2005. TMG was created to utilize the small business tax. Jonah’s salary is paid from TMG to secure a lower tax rate. Stuart, Jonah and Esther are common shareholders of TMG.
206On November 14, 2005, Stuart and the other Turk family members signed and dated the documents set out below. In particular, Stuart signed documents confirming his appointment as a director and his receipt of 100 common shares. The documents signed are set out as follows:
By- law No. 1 relating to the transaction of the business and affairs of TMG. Stuart signed the by-law as a shareholder and again as a director.
Director’s Resolutions appointing officers of TMG (Stuart was appointed Vice-President) and allotment of shares (Stuart received 100 common shares).
Subscription for the allotment of his shares.
Shareholders’ Resolutions confirming the number and identity of the directors, appointment of the accountant (Rosenberg Smith) and waiving the audit. Stuart signed a consent to this resolution.
Consent to act as a Director.
Director’s Resolution dealing with financial year end and banking.
Stuart’s Evidence is Not Credible
207Stuart testified that he did not become aware of his interest in 954 and TMG until 2014, when Mr. Rosenberg told him he had an interest in these companies. As explained below, this explanation is not credible.
208In August 2013, pursuant to the Separation Agreement, Stuart initiated a review of the support payments. In December 2013, the parties attended a second mediation with Mr. Moldaver to review the support. Ms. Kraft and Wayne Rudson, Jennifer’s expert, also attended. The mediation failed and in March 2014, Jennifer commenced this application.
209Stuart had prepared a financial statement for the 2013 mediation. He testified that after the mediation failed “I took the financial statement to Mr. Rosenberg to see if I had any exposure or risk that I may not have disclosed something”.
210During this meeting, Mr. Rosenberg asked him why 954 and TMG were not on the financial statement. Stuart testified that “after I calmed down, I had Mr. Rosenberg write a letter explaining my interest”. Mr. Rosenberg wrote a letter to Ms. Hansen dated April 26, 2014 setting out the history of the two companies and Stuart’s interest as a shareholder.
211When Stuart was cross-examined about 954 and TMG, he repeated that he did not know about 954 and TMG before his meeting with Mr. Rosenberg. The following answers reveal that Stuart’s evidence is internally inconsistent.
212First Stuart was adamant that he did not know about 954 and TMG in 2008 or in 2013. He then conceded that he signed the incorporation documents, but that was the extent of his knowledge and he signed no further documents:
Q. ….You left out 954 and TMG, correct?
A. I did not leave them out, I did not know about them at the time.
Q. Well, you didn't know about them in 2008 either, apparently, right?
A. That's correct.
Q. That can't possibly be true.
A. That is your opinion, sir. That is definitely true and, yes, I signed the incorporation documents my father gave me but I did not know at the time.
Q. Okay. Well, you may be anticipating my question, so the first question I said is that it can't possibly be true and you're saying that's just my opinion. Your commentary about yes, you signed the incorporation documents, is that the extent of what you did? You signed the incorporation documents?
A. That is the extent of my knowledge of those companies.
Q. Okay. And you never signed any other documents.
A. Not to my recollection.
213In fact, Stuart did sign further documents for 954 on June 1, 2006 when he authorized the purchase of 800-806 Southdown Road and a $1.5Mcharge against this property. When cross-examined he agreed that authorizing a $1.5M charge against the property was “pretty significant”.
214Stuart then agreed that he signed the June 2006 documents, but testified that he forgot about them. He then changed his evidence and stated that he did not become aware of the June 2006 documents until the litigation was underway:
Q. But you forgot about the fact you had done this in 2006.
A. A hundred percent, yes.
Q. Okay. But, in fact, you did.
A. It is my signature, yes.
Q. … You're aware of that property?
A. I am in this litigation, yes.
Q. So you've become aware of it during the course of the litigation.
A. That's correct.
215The internal inconsistency in Stuart’s evidence is also apparent in his attempt to explain how he could sign all of these corporate documents and yet say he did not know about his interest in 954 and TMG until he met with Mr. Rosenberg in 2014.
216Stuart admits that he signed the corporate documents:
A. … I've never said I didn't sign the documents. I just don't recall.
A. I would have signed this page on that date, correct.
A. Yes, I would have signed that page, too.
217Having said that he did not recall signing the documents, Stuart testified that he signed the documents, but did not read them:
Q. And you knew that you were consenting to act as a director, right?
A. I signed it, yes.
Q. All right. That would be the answer to the question did you sign it? You knew that you were acting as a director when you signed it.
A. Not particularly, no.
Q. Oh, so you didn't bother reading it.
A. These documents, no, I didn't. I signed them all, yes.
Q. But you didn't read them.
A. No.
218If Stuart has no recollection of signing the documents, then surely he cannot say that he did not read them at the time of signing.
219In summary, Stuart’s evidence is either that he has no recollection of signing the 954 or TMG corporate documents or he signed them and never read what he signed. Either way his evidence cannot be trusted.
220Stuart’s evidence that he signed the 954 and TMG corporate documents without reading them is unbelievable. Stuart is an experienced entrepreneur. He built Cellular Connections into a profitable company and took a company public. A person with this type of business knowledge is not going to forget that he signed on as a director, that he was issued shares and/or authorized the purchase of a property and a $1.5M charge on that property.
221Furthermore, Stuart’s evidence that he “forgot” is not convincing. The Separation Agreement negotiations started in the fall of 2008 and the 954 and TMG documents were signed in 2003, 2005 and 2006. Stuart testified that he remembered signing the deed of gift that delivered his share in SEJ to his father in February 1994. He also remembered being given his share in SEJ after the estate freeze in 1998. It is highly suspicious that Stuart was able to remember events that happened in 1994 and 1998, but says he has no recollection of the more recent events in 2003, 2005 and 2006.
222One might be tempted to fault the unusual mediation process that the parties followed in the mediation. For example, the parties never exchanged sworn financial statements. For some litigants the act of completing this important document and swearing it to be true will cause them to be more careful about making full disclosure. Not so with Stuart. While a sworn financial statement was not provided, Stuart signed the Closed Mediation Agreement that required him to provide the mediator with full financial disclosure. He ought to have spoken with Mr. Rosenberg at that point in time to make sure that he was complying with this agreement.
223It is possible that Stuart consciously and deliberately concealed his interest in 954 and TMG when the Separation Agreement was being negotiated. When I consider the totality of his non-disclosure conduct, I prefer a different characterization of Stuart’s behaviour that is just as serious. Stuart does not care if he is complying with his disclosure obligation. He has made this clear through his repeated non-compliance with this important obligation. He is dismissive of the documentary disclosure process and the Family Law Rules. His chronic non-compliance reveals incomplete sworn financial statements and a failure to follow court orders.
224Simply put, Stuart remembers what is beneficial to his position in this litigation.
Mr. Rosenberg’s Evidence
225I have found that Stuart did not disclose his interest in TMG and 954. Before leaving this area of evidence, I will consider Mr. Rosenberg’s evidence and explain why it does not assist Stuart.
226Mr. Rosenberg has been the accountant for the Turk group of companies since 1992. Stuart argues that Mr. Rosenberg disclosed his interest in 954 and TMG when they met with Mr. Moldaver on March 19, 2009. The purpose of this meeting was to review documents that Stuart had produced and provide the mediator with information about his financial interests and income. The meeting with Mr. Moldaver was held at Mr. Rosenberg’s office and lasted 2.5 to 3 hours.
227During the meeting, they talked about the amalgamation of SEJ and 771, the creation of 396 and the estate freeze. Mr. Rosenberg answered questions about the estate freeze documents that he provided.
228Mr. Rosenberg testified that he told Mr. Moldaver that “there was also a couple of other small entitles. One was tax related and the other one was a small holding company”. Although Mr. Rosenberg did not mention the names of the two companies, Stuart claims that this was disclosure of his interest in 954 and TMG to Mr. Moldaver. I reject this argument. Mr. Rosenberg’s evidence is not reliable for several reasons.
229After the meeting, Mr. Moldaver sent a letter to the parties and counsel summarizing his meeting with Mr. Rosenberg and the disclosure he obtained. Mr. Moldaver’s letter does not mention 954 and TMG or any unnamed companies that Stuart had an interest in.
230Mr. Moldaver had an obligation to fully report all information to Jennifer and her counsel, since they did not attend the meeting. There is no evidence that Mr. Moldaver requested documents about Stuart’s interest in 954 and TMG. Since Mr. Moldaver was responsible for managing the disclosure process, I would expect at a minimum that his letter would refer to Stuart’s interest in these companies, if Mr. Rosenberg had revealed this interest.
231Mr. Rosenberg’s evidence that he did disclose the two companies at the March 2009 meeting is inconsistent with what happened in 2014.
232On March 11, 2014, Jennifer commenced this Application seeking to set aside the Separation Agreement because Stuart had not made full financial disclosure before it was signed.
233In April 2014, Stuart asked Mr. Rosenberg to look at his financial statement to make sure it was accurate. According to Stuart, Mr. Rosenberg told him that the financial statement did not include his interest in 954 and TMG. Stuart testified that he had to calm down upon learning about his interest in 954 and TMG. Obviously, this does not make sense. If the companies had been disclosed in the March 2009 meeting, why was Stuart so upset? He would have no reason to be upset had Mr. Rosenberg told Mr. Moldaver about the companies.
234Stuart asked Mr. Rosenberg to write a letter to his counsel explaining his interest in 954 and TMG. In his letter dated April 21, 2014, Mr. Rosenberg describes 954 and TMG and Stuart’s interest in these companies. This letter makes no reference to having previously disclosed Stuart’s interest in the companies during the March 2009 meeting.
235Given Jennifer’s Application alleging non-disclosure, one would expect Mr. Rosenberg to include in his letter reference to the alleged earlier disclosure of 954 and TMG, if it had happened. The letter was silent. Instead, Mr. Rosenberg revealed for the first time, during his testimony at trial, that he disclosed Stuart’s interest in 954 and TMG in March 2009. I find this late revelation unbelievable.
236Mr. Rosenberg has no notes of the March 2009 meeting and yet he claims to recall this disclosure several years later. It is highly suspicious that Mr. Rosenberg was able to recall this apparent disclosure eight years later during the trial. The suspicion is heightened given that Stuart and Mr. Rosenberg are friends.
237During the trial, and before Mr. Rosenberg testified, he went to Stuart’s house to have some corporate documents signed. While there he visited with Stuart and his family. Mr. Rosenberg did not have to be present to have routine documents signed. While Mr. Rosenberg says that he did not discuss this litigation with Stuart, there is no one to verify the truth of this evidence. Mr. Rosenberg’s decision to meet with Stuart before he testified is concerning.
238In summary, Mr. Rosenberg’s evidence on this issue is unreliable and I attach no weight to it.
The Non-Disclosure is Not Significant
239I find that Stuart’s interest in 954 and TMG is not significant. My reasons are set out below.
The Mr. Martindale Issue
240Before explaining the basis for this finding, it is necessary to address the issue of whether any weight can be attached to the evidence of Stuart’s expert, Ron Martindale.
241Mr. Martindale is a chartered professional accountant and chartered business valuator. He valued Stuart’s interests in the various companies as of the date of marriage and the date of separation (SEJ and Cellular Connection on the date of marriage and TMG, 396, 954, Metro One, Cellular Connection and Cellular Connection Manufacturers on the date of separation). SEJ, 396 and 954 are companies that owned (or own) real estate.
242Mr. Martindale undertook all of these valuations because Jennifer was seeking to set the Separation Agreement aside and then equalize the NFP. Stuart was also seeking to equalize the NFP. I have decided not to set the Separation Agreement aside. Therefore, I do not have to deal with Mr. Martindale’s extensive opinion evidence (covering all of the Turk companies) for the purpose of equalizing the NFP.
243I do have to consider Mr. Martindale’s valuation of TMG and 954 in the context of deciding if the non-disclosure is significant.
244It was Stuart’s obligation to have his assets valued and he retained Mr. Martindale. The opinion evidence of Mr. Martindale was very controversial during the trial. It is important to briefly address the legal issue of whether it is open to the court to attach zero weight to Mr. Martindale’s opinion evidence.
245It is Jennifer’s position that I should attach no weight to Mr. Martindale’s evidence for the following reasons:
Mr. Martindale is not a certified real estate appraiser and he did not retain such an expert to value the underlying real estate. Instead, he valued the real estate without this expertise. This is relevant to 954 that owns real estate. TMG does not own any real estate.
In the absence of real estate appraisals, Mr. Martindale created a methodology for valuing the real estate that was severely flawed.
Mr. Martindale’s impartiality was compromised because he was significantly influenced by Stuart.
246Stuart argues that if the court accepts any of these points that it should go to the weight that is attached to Mr. Martindale’s evidence. He argues that there is no authority that allows the court to attach zero weight to Mr. Martindale evidence.
247The failure to obtain a real estate appraisal only relates to 954 as TMG did not own real estate. As I will explain, Mr. Martindale’s opinion is but one factor to consider in assessing if the non-disclosure is significant.
248Turning to the issue of weight, Stuart’s counsel argues that since Jennifer accepted Mr. Martindale as an expert, it is not open to the court to attach zero weight to his evidence. I disagree. The facts confirm that when Mr. Martindale valued Stuart’s interest in the companies that owned real estate, this was outside his area of expertise.
249Mr. Martindale explained that when he is asked to value a share that a person owns in a company that is a “straight real estate” company such as SEJ, 396 and 954, the “preferred method and [Mr. Martindale’s] preferred method is to get a real estate appraisal”. He explained that real estate appraisers are the experts in valuation of real property and “they are the most qualified” to provide an opinion.
250There was no evidence that real estate appraisals of the properties could not be obtained. There was hearsay evidence from one real estate appraiser who gave a quote to do the work and then refused the retainer because it was a family dispute. There was hearsay evidence that a second real estate appraiser was prepared to accept the retainer. Apparently, it was decided that Mr. Martindale could produce a more reliable opinion than a real estate appraiser. No evidence was offered to back this up.
251A certified real estate appraiser should have been retained to opine on the fair market value of the various properties. Instead, Mr. Martindale, who is not a certified real estate appraiser, identified five methods to value the properties and ranked each according to reliability. For each piece of real estate Mr. Martindale chose the method that best applied to that real estate. This depended on the information that he had available to him concerning the real estate in question.
252Mr. Martindale explained that the first method is the most accurate and the other sources follow in order of declining accuracy:
Obtaining comparable transactions ("Transaction method")
Obtaining real estate appraisals of the property in issue
Obtaining property tax bills which may list the fair market value of het property
Assessing mortgage payable balances of land and building as a percentage of fair market value
Obtaining the net book value or cost base of land and building ("Cost method")
253During cross-examination, Mr. Martindale was questioned about why he ranked comparable transactions ahead of real estate appraisals. He agreed that a certified real estate appraisal is the preferred method and conceded that he had listed them in “reverse order”. Mr. Martindale also agreed that a certified real estate appraiser uses comparable transactions (if available) to value a property.
254There would have to be a compelling reason, supported with evidence, to justify creating the methodologies and proceeding without a real estate appraiser. None was provided.
255On numerous occasions during the trial, the court expressed concern with the lack of opinion evidence from a real estate appraiser and the absence of evidence to explain why a certified real estate appraiser was not testifying. The risk that no weight would be attached to Mr. Martindale’s opinion was made very clear to the parties and counsel during the trial.
256The court is the gatekeeper of evidence. Where, as in this case, the problem with the expert evidence is revealed to the court during the trial, the court must assess the evidence and decide what weight, if any, to attach to the evidence. This includes attaching zero weight to any opinion that was offered without a real estate appraiser. The court’s hands are not tied just because counsel on both sides chose to consent to the expert’s qualifications. Mr. Martindale was qualified as an accountant and business valuator. He was not qualified as a certified real estate appraiser.
257I have serious concerns about Mr. Martindale’s valuation of Stuart’s interests in SEJ and 396 and the decision to embark on this process without a certified real estate appraiser. However, it is not necessary for me to review this in more detail as I have not set the Separation Agreement aside and do not have to equalize the NFP. As a result, I do not have to value Stuart’s interest in the Turk companies (SEJ and 396) that owned or own numerous pieces of real estate. If I had set the Separation Agreement aside, I would have attached no weight to the valuations relating to SEJ and 396.
258Simply put, when the expert states that the “preferred method” of valuing a share interest in a “straight real estate” company such as SEJ, 396 and 954, is to get a real estate appraisal because “they are the most qualified” to provide an opinion, a real estate appraiser must be retained. It is not an option to proceed without the best and most reliable expert evidence.
259Stuart was responsible for having his interests in the Turk companies properly valued. He did not comply with this important obligation. Instead, he instructed his expert to prepare reports that relied on methodologies that were not reliable. There was no evidence to explain why this unusual and unnecessary approach was required. As a result, almost six days of trial time were spent on Stuart’s expert’s evidence most of which had zero value.
260I will now explain why Stuart’s non-disclosure in TMG and 954 is not significant.
TMG
261The nature and purpose of TMG is important. Stuart does not receive any money from TMG. Although Stuart and his siblings are the only shareholders, they do not, in practice, control TMG. Harry controls TMG and all financial decisions for this company. Stuart and his siblings have never exercised any control.
262Unlike the other Turk companies, TMG does not own real estate. As Esther simply stated, TMG is “not a company that does anything”. It was set up solely to try and lower taxes that 396 pays. To carry this out, TMG earns management fees from 396. Harry controls 396. The money that TMG receives from 396 is solely at Harry’s discretion.
263Jonah is TMG’s sole employee and TMG pays him for his management service. If TMG did not exist, 396 would pay Jonah’s salary. On occasion, some of the money from 396 is loaned to one of the other Turk companies. TMG has no other purpose and would not exist, but for providing this tax advantage.
264Stuart’s expert, Mr. Martindale, valued Stuart’s interest in TMG using Stuart’s date of separation, November 5, 2007. He based this value on TMG’s financial statement for the year ending December 31, 2007. This is two days before Jennifer’s date of separation of January 2, 2008.
265Based on this financial statement, Mr. Martindale explained that TMG had net assets at year-end of $471,258. The only asset that TMG held was cash. Using Stuart’s date of separation (November 5, 2007), he pro-rated the year end net assets and arrived at a fair market value of $410,000.
266While Mr. Martindale did not adjust the valuation to reflect the January 2, 2008 date of separation, I accept for the purpose of this issue that the value of TMG on January 2, 2008 was $471,258. The difference between the two valuation dates is minimal and no other evidence was provided. Stuart has a 1/3 pro rata common share interest in TMG. Stuart’s one third share is either $136,705 or $157,086 (depending on the date of separation that is used).
267Mr. Martindale applied a 17.5% minority discount to arrive at a valuation of $110,000 (or $129,596 if the discount is applied to $157,086).
268One cannot simply rely on this valuation to assess whether the non-disclosure of Stuart’s interest is significant. Context is important. Stuart never received any money from TMG. TMG was always controlled by Harry. He controlled the flow of money and could have stopped the transfer of money from 396 to TMG at any time. On the facts as set out, I see no basis for finding that the non-disclosure was significant. This conclusion is supported by my additional analysis later in these reasons (see section titled Non-Disclosure Cannot be Measured Against Stuart’s Net Assets).
269Lastly, there is no basis to conclude that Mr. Martindale’s impartiality was compromised. There is no evidence that he was significantly influenced by Stuart in his valuation of TMG. The valuation was taken primarily from the financial statement. Furthermore, even if I were to reject Mr. Martindale’s valuation, the other facts clearly support my finding that Stuart’s interest in TMG is not significant.
954
270954 owns two commercial properties: 125 Chrysler Drive and 800-806 Southdown Road. On the date of separation, there was a commercial building that was rented on the Chrysler property. The Southdown property was purchased in November 2006 and was vacant property on the date of separation.
271954 borrowed money from 396 to finance the purchase of the properties and construction on the land. Interest was not charged on the inter-company loans from 396 to 954. In 2007, 954 held nominal retained earnings and had recently stopped losing money.
272954 is managed by Harry or whomever he designates. No one other than Harry has ever managed 954. He controls 954 and all financial decisions relating to this company. He alone makes all of the decisions for this company. The 954 shareholders, including Stuart, signed a resolution which permits the preferred shareholders (Harry and Pnina Turk) to remove all of the value of the company. This prevents non-controlling shareholders such as Stuart from being able to access any of the value in the business. 954 has never had a payroll. Stuart has never received any monies from 954 nor has he ever been an officer of 954.
273The totality of these facts and, in particular, the corporate resolution described above lead me to find that Stuart’s interest in 954 is not significant. This conclusion is supported by my additional analysis (see section Non-Disclosure Cannot be Measured Against Stuart’s Net Assets).
274I reach this conclusion without relying on the opinion evidence of Mr. Martindale. If I were to consider his opinion evidence, I would attach no weight to it. Mr. Martindale calculated the fair market value of the common shares in 954 at $445,000. He did this, as mentioned above, without obtaining an appraisal of the real estate from a certified real estate appraiser. As an aside, I reject the argument that Mr. Martindale’s impartiality was compromised when assessing 954. The evidence does not support such a finding.
275For the undeveloped Southdown property, Mr. Martindale assumed that the November 2006 purchase price of the property fairly reflected the fair market value of the property a year later. As I have explained, a certified real estate appraiser should have been retained to provide this opinion.
276For the Chrysler Drive property, Mr. Martindale used the valuation of the Assessment Review Board of Ontario. 954 (i.e. Harry) challenged the 2006 assessment for taxation and the Board reduced the valuation from $5,215,000 to $4,963,000. This is not a reliable substitute for a certified real estate appraisal. Valuation of a property for taxation purposes is not evidence of the fair market value of a property at a specific point in time (see 1066360 Ontario Ltd. v. Ravells, 2010 ONSC 3605 at para. 10; 1005139 Ontario Ltd. v. Abraham, 2012 ONSC 3133 at para. 54).
277Mr. Martindale then assessed Stuart’s share interest at nil because of the corporate resolution that allowed Harry and his wife to remove all value from the company. Alternatively, he looked at the share redemption price for the shares and calculated Stuart’s interest at $148,621 or $83,000 if a minority discount is allowed.
278Assuming a real estate appraiser was unavailable (and this was never proven), acceptance of Mr. Martindale’s opinion would not change the outcome. I remain of the view that the non-disclosure was not significant. The totality of the facts support this conclusion.
Shareholder Loan
279Jennifer argues that Stuart did not disclose his shareholder loan that was owed to him from Cellular Connection. This was money that Stuart loaned Cellular Connection. Cellular Connection then loaned the money to Metro One.
280The Cellular Connection shareholder loan ledger shows that as of December 21, 2007, the loan was valued at $767,166.21. With an adjustment for a currency conversion, the total was $838,666. The shareholder loan was reduced over time and by May 31, 2010, the loan value was $143,188.65.
281During the mediation, the shareholder loan was not listed in the two NFPs under Part 7(f), titled “Money Owed To You”. However, the shareholder loan was disclosed to Jennifer. The brief of disclosure that Stuart gave Mr. Moldaver during the March 19, 2009 meeting included the May 31, 2008 Cellular Connection financial statement. The liability of the shareholder loan is recorded in this financial statement. In 2007, it was $949,266 and in 2008 it was $857,916. This financial statement was included in the package of disclosure that was delivered to Jennifer and Ms. Kraft.
282There is no evidence that Jennifer or Ms. Kraft asked for further information about the shareholder loan or that it was ever discussed between the parties in any way. There is also no evidence that explains why it was not recorded on either of the NFPs.
283While I find that the shareholder loan was disclosed, the documentation that Stuart produced did not reveal the payments made on the loan after the date of separation through to May 31, 2010.
284While I accept that the loan payments were not disclosed, the amount was not significant given the facts as they existed when the Separation Agreement was negotiated and signed.
285The parties did not approach the negotiation of support from an income based approach. At the time of the Separation Agreement, Stuart had no source of income beyond the money he received from his father through Cellular Connection. He could not make the agreed upon support payments and all of the extra gift payments to Jennifer without using the pre-tax paid money of the shareholder’s loan.
286As Ms. Kraft explained, Stuart’s business had dried up and not doing well. His source of income was a gratuitous payment of $180,000 to Cellular Connection and other money gifts from Harry. Ms. Kraft believed that with the support deal Jennifer was “way ahead of the game” because there was no guarantee support would be based on an income of $420,000, if the parties litigated the dispute.
Sale of Spongetech Shares
287Jennifer argues that Stuart did not disclose money earned from the sale of shares in a penny stock called Spongetech.
288Cellular Connection had an investment in Metro One that was reported in the company’s financial statements. In 2007, it was valued at $188,419. It increased to $1M in 2008, dropped to $520,698 in 2009 and was zero in 2010. The 2008 financial statement was part of the disclosure package that Mr. Moldaver sent to Jennifer and Ms. Kraft.
289During cross-examination, Stuart was questioned about why the investment went from $1M to zero. During this questioning Stuart revealed that after separation, Cellular Connection sold penny stock called Spongetech and made $480,000. This was a tax-free gain and equivalent to $980,000.
290Stuart never revealed this gain during the mediation process. He explained that he offset the gain against a loss. I appreciate that the gain from the penny stock was not revealed during the mediation. This is yet another example of Stuart’s failure to comply with his obligation to make full disclosure. I have no evidence to document that the gain was or was not offset against a loss. Even if it was not, I am not convinced that this non-disclosure is “significant”. It was a one-time gain in a struggling company. Stuart had agreed to pay support on an income he did not earn. If this gain had been revealed, I do not accept that it would have changed the outcome. At best, it would be viewed as money available to pay the support. For these reasons, the non-disclosure is not significant.
Non-Disclosure Cannot be Measured Against Stuart’s Net Assets
291The parties agreed to an unusual mediation process and were represented by counsel. They did not approach documentary disclosure and the equalization of property in a typical way. They did not exchange sworn financial statements and did not properly complete NFP statements.
292Measuring the significance of the non-disclosure against the disclosed net assets is impractical on the facts of this case. The NFP statements were not prepared following the Family Law Act. If anything, they served as a spreadsheet as the parties negotiated.
293Stuart never valued his interest in the corporate assets and there is no evidence that he was asked to do so. However, Ms. Kraft was satisfied about two significant points. First, Stuart’s share in the main Turk company, 396, was a gift and therefore excluded. This was Stuart’s most valuable asset. Second, Stuart was not earning income.
294This is not a case where the court can input the value of the non-disclosed asset into what was otherwise a complete NFP and assess the significance of the impact on the equalization payment. This is because too many monetary compromises were made during mediation. For example, Stuart did not include a date of marriage value for Cellular Connection, his share in SEJ or the condominium that he owned. The value of Jennifer’s extensive jewellery collection was not included as one of her assets. She testified that it was worth “over $300,000 for sure” and the full retail was $400,000. Stuart may have insisted on including the $175,000 of loans from Harry that he used to start Metro One. While proof of these loans would have been a problem, they nevertheless were not included.
295The introduction of another asset, debt and/or deduction could have negatively interfered with other parts of the agreement. For example, Stuart agreed to a ceiling on spousal support until 2015 and a floor for child support. He agreed to pay 100% of the s. 7 expenses, did not insist on a salary being imputed to Jennifer and continued the gratuitous payments to Jennifer after the Separation Agreement.
296At trial (if the Separation Agreement had been set aside), Stuart claimed a date of marriage deduction for his share interest in SEJ and an exclusion for his gifted 396 share. Some of the real estate that SEJ owned on the date of marriage was transferred to 396 and owned by 396 on the date of separation. Jennifer argued that it would be unfair to allow what was in essence “double counting”. While I am not deciding if such double counting is permissible in law, Stuart argued that this is permitted based on Reisman v. Reisman, 2014 ONCA 109 at paras 44-54. The Separation Agreement avoided the double counting issue that Stuart claimed during the trial.
297In summary, I find that the non-disclosed assets were not significant and Jennifer has failed to prove that s. 56(4)(a) is engaged.
298While I have found that the non-disclosure was not “significant”, it is important to note that Stuart’s disregard for his disclosure obligations in this litigation continued despite court orders that were issued against him. On three occasions, the court identified his non-compliance (see Turk v. Turk, 2014 ONSC 4490; Turk v. Turk, 2015 ONSC 3165; Turk v. Turk, 2015 ONSC 5845). Stuart’s conduct created an atmosphere of distrust and unnecessarily contributed to the cost of this litigation.
Duress
299Jennifer says that she signed the Separation Agreement under duress.
Legal Framework
300Duress is described in Toscano v. Toscano, 2015 ONSC 487 at para. 72 as follows:
Duress involves a 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), 1991 CanLII 7061 (ON CA), 81 D.L.R. (4th) 194 at para. 22 (Ont. C.A.)). Equity recognizes a wider concept of duress including coercion, intimidation or the application of illegitimate pressure.
301Further, “there can be no duress without evidence of an attempt by one party to dominate the will of the other at the time of the execution of the contract." (Ludmer v. Ludmer, 2013 ONSC 784 at para. 53)
302To prove duress, Jennifer must show that she was compelled to enter into the Separation Agreement out of fear of actual or threatened harm of some kind. There must be something more than stress associated with a breakdown in the marriage. There must be credible evidence demonstrating that she was subject to intimidation or illegitimate pressure to sign the agreement (see Ludmer at para 53).
303When the party alleging duress received independent legal advice and had a meaningful opportunity to review the domestic contract, courts are less likely to make a finding of duress (see Balsmeier v. Balsmeier, 2016 ONSC 950 at paras 121-122, 153; Ludmer at paras 55-58).
Analysis – No Duress
304I reject Jennifer’s claim that she signed the Separation Agreement under duress. The evidence simply does not rise to this level as explained below.
305The mediation took place over an 18 month period. The process was not rushed. Jennifer participated in the mediation and felt comfortable with the mediator. The parties did not have a high conflict dispute. Jennifer described Stuart as a generous person. They cooperated and settled parenting issues early. There was no history of addiction, mental health issues or criminal charges during the marriage. Stuart basically maintained the financial status quo during the mediation.
306As I have already explained, Jennifer had extensive contact with Ms. Kraft and the mediator. The process gave Jennifer ample time to seek advice from Ms. Kraft, consider her position and understand the issues that arose.
307There is no evidence that Jennifer lacked the "free mind" to make her own decisions. Ms. Kraft offered to assist Jennifer with preparation of a financial statement, but Jennifer declined. Jennifer was actively involved and engaged in the negotiation process. I have set out many examples of her involvement and persistence in seeking changes that she wanted from Stuart.
308I acknowledge that Jennifer expressed concerns to Ms. Kraft during the mediation process. However, these concerns do not support her claim that the Separation Agreement was signed under duress.
309There are various notes in Ms. Kraft’s file that record Jennifer’s concerns. For example, on February 23, 2009, when Ms. Kraft and Jennifer met with Mr. Moldaver, Ms. Kraft’s note records Jennifer’s concern with Stuart’s comment: “don’t push me or my family or nothing will be there … you’ll alienate them and there will be no more $ flowing to her”. Jennifer was worried that if she rocked the boat there was a risk that she getting nothing and she was afraid. While Jennifer argues that Stuart pressured and threatened her, I reject this characterization. It is a fact that Stuart was struggling financially. Metro One had failed and the family depended on the money that Harry provided.
310Ms. Kraft felt that “we had pushed as far as we could go and because it was a family that was supported by grandparents, Jennifer was receiving a very generous support arrangement”. Ms. Kraft told Jennifer that Stuart “was paying more than he was obliged to pay”. I accept that this is an accurate characterization of the support agreement.
311As the parties got close to the end of the mediation, Jennifer was worried and concerned about her financial security. I accept Ms. Kraft’s evidence that such concerns are common for a recipient spouse, especially as the end of the negotiations approach and the finality of the situation sinks in. Ms. Kraft stated:
Well, once again, Ms. Turk was definitely expressing concerns. As I said earlier, it's not uncommon as agreements are coming to finalization that the recipient feels pressure and some financial concerns, but she understood what the deal was and I felt that she was going to do as she had been doing throughout the entire file, going back to Jaret [Moldaver], or going to Stuart directly to get more and to get what she wants. That was the pattern of the file.
312Ms. Kraft had many conversations with Jennifer about her financial reality. As Ms. Kraft stated, “Ms. Turk had led a very high lifestyle when she was married to her husband and I wanted her to understand that she might not be able to continue to lead the same kind of lifestyle upon separation.” Her work with Jennifer involved a lot of “reality checking”.
313I appreciate that Jennifer was never in charge of family finances during the marriage and that her spending was for the most part uncontrolled. It is understandable that she would be concerned as they reached the end of the mediation. However, Jennifer had to assume responsibility for her financial future. Despite all of Ms. Kraft’s “reality checking” work, there is no evidence that Jennifer acknowledged responsibility for her financial future. Stuart continued to do all of her banking. Their son tried to help her prepare a budget on one occasion and this was a failure. Jennifer remains financially naive. She continues to spend without any apparent control. I attribute much of the concern that Jennifer voiced during the mediation to her own failure to become financially responsible.
314Finally, when the Separation Agreement was signed, Ms. Kraft signed a Certificate of Independent Legal Advice, confirming that Jennifer was signing the Agreement "of her own volition without any fear, threats, compulsion or influence by Stuart Turk or any other person." Jennifer understood the nature and effect of the agreement.
315In summary, while I accept that Jennifer was concerned and anxious about her future, such evidence is not sufficient to prove duress.
The child and spousal support is not set aside
316I have concluded that there is no basis to set aside the entire Separation Agreement. This leaves Jennifer’s request that the child and spousal support part of the Separation Agreement be set aside. It is her position that it does not substantially or even remotely comply with the objectives of the Divorce Act or the Family Law Act. The parties were divorced in 2010 and, as a result, the Divorce Act applies. Under either Act the answer is the same.
317I refuse to set aside the support part of the Separation Agreement. My reasons follow.
318The objectives of a spousal support order are set out in s. 15.2(6) of the Divorce Act:
(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
319The facts that I rely on have already been discussed in these reasons. The following is a summary of the key facts that support my decision.
320As of 2008, Stuart’s businesses had failed and they never recovered before the signing of the Separation Agreement. Stuart’s only steady source of funds was the gratuitous money that Harry paid to Cellular Connection.
321The $10,000 support payment was net to Jennifer and Stuart paid all of the taxes. This was based on an income of $421,000 that was a three year average of Stuart’s income. This was an income that Stuart was no longer earning after they separated.
322The $10,000 payment was not divided between child and spousal support. Stuart paid 100% of the s. 7 expenses and did not demand a reduction in the child support to reflect that the children spent equal time with both parents.
323At Jennifer’s request, there was a floor and ceiling to the support payments and an agreement that there be no variation request until 2013.
324The Separation Agreement did not impose a time limit on spousal support, it did not require Jennifer to find employment and income was not imputed to her.
325Ms. Kraft reasoned that Jennifer was “way ahead of the game” with $10,000 net a month. As Ms. Kraft explained, there was no guarantee that if she litigated the support that she would receive this amount.
326In summary, based on the facts, the support part of the Separation Agreement complied with the objectives of the Divorce Act. There is no basis to set the child and/or spousal support agreement aside.
Stuart’s Variation request
327Stuart’s request to vary the Separation Agreement is extensive. He seeks the following variations:
Variations for January 1, 2013 – December 31, 2016
An order imputing $20,000 of income to Jennifer for the years 2013 through 2016.
An order fixing his income each year (the yearly amounts vary and are far less than the $420,000 used during mediation).
An order fixing s. 7 expenses at $40,000 for each year.
An order that Jennifer contribute her proportionate share to s. 7 expenses.
Based on the above, an order that Stuart has overpaid child and spousal support by $292,444.
Based on the above, an order that Stuart has overpaid s. 7 expenses by $41,180.
An order that Jennifer owes Stuart a total of $333,624 for past child and spousal support and s. 7 expenses.
An order that $333,624 be set off against Stuart’s future spousal support obligations to Jennifer.
Variations from January 1, 2017 forward
An order that spousal support shall terminate permanently on December 31, 2021.
An order imputing income of $30,000 to Jennifer each year when spousal support is owed.
An order that Stuart pay Jennifer monthly spousal support of $4,758. This is based on an average income for Stuart of $284,400 and an imputed income of $30,000 for Jennifer.
An order that the spousal support shall be taxable to Jennifer and tax deductible to Stuart.
An order that s. 7 expenses be fixed at $40,000 per year and that Jennifer pay Stuart $923 a month as her proportionate share.
An order that no guideline child support is payable by either party as of January 1, 2017.
An order that Stuart shall maintain life insurance to secure his spousal support obligation to Jennifer until December 31, 2021. Stuart shall name Jennifer as the beneficiary of a policy with a face value of not less than $500,000.
An order that Stuart shall maintain life insurance with a face value of not less than $500,000 and name both children as beneficiaries. The policy shall be maintained until the children have completed their post-secondary education or both have withdrawn from parental control.
328The starting point for deciding Stuart’s variation request is the Separation Agreement. Section 5.7 states that “child support and spousal support arrangements in this Agreement will be nonvariable until January 1, 2013, under any circumstances whatsoever.”
329After January 1, 2013, s. 5.8 allows a variation request and states:
On or after January 1, 2013, either party may seek a variation of the child support and/or spousal support amounts if there is a material change of circumstances since the making of this Agreement, whether the change was foreseen or unforeseen or foreseeable or unforeseeable.
[Emphasis added.]
330Stuart initiated his variation request under the Separation Agreement in the summer of 2013. The parties returned to mediation with Mr. Moldaver as required in the Separation Agreement. The mediation failed and Jennifer commenced this application.
331As stipulated in the Separation Agreement, there can be no variation unless a material change in circumstances is proven. A material change is a change that is “substantial”. It is a change that “has some degree of continuity, and not merely be a temporary set of circumstances” (Greene v. Greene, 2017 ONSC 3007 at para. 77; L.M.P. v. L.S., 2011 SCC 64 at para 35).
332As explained below, there is a material change in circumstances that justifies terminating child support. As of April 30, 2013, Jordan was 18 years old and no longer living with either parent. Since September 1, 2016, Sydney has been attending McGill. She is 18 years old and lives with Stuart when she is home. These are material changes that justify termination of child support.
333Termination of child support is not a basis to grant the rest of the extensive variation that Stuart requests. Termination of child support typically prompts the recipient of spousal support to seek a variation of the spousal support amount, since there is obviously more money available to pay that support.
The Material Change that Stuart Relies On
334What is the material change that Stuart relies on? I ask this question because Stuart does not mention a material change in his written closing submissions to support his extensive request for variations.
335During oral argument, Stuart’s counsel stated that if the Separation Agreement was not set aside, then “under the [Separation Agreement] the parties contemplated a review”. When I asked counsel to identify the material change that Stuart relies on, counsel stated that the material change was the change in the residential arrangement for the children.
336Stuart’s evidence about why he requested the variation was different. He testified that the reason he asked for a variation was Jennifer’s decision to cash in her second RRSP in February or March 2013. Stuart describes this as the “main” reason. In fact, this is the only reason he identified during his testimony. His evidence is as follows:
Q. Okay. So, why did you request the review in 2013?
A. The main reason was Jennifer just cashed her RSP, her second RSP.
Q. When did she cash her second RRSP?
A. In February or March of 2013.
Q. And, why did that lead you to the conclusion there needed to be a review?
A. Because the original, when we originally started with reducing Jordan’s support, she said, or it was agree – I felt it was agreed that she would try and work on a budget, try to get her spending in control. And then, she went and started cashing the RSP and spending the money again. So, I felt I needed to do the review.
Q. And, when you say, “cashing her RRSP and spending the money,” how do you know that that’s what was happening?
A. I had access to the accounts.
337Stuart testified that the agreement to work on a budget was made in the summer of 2012 when he met Jennifer in a parking lot, to talk about ending child support for Jordan. I accept that in 2012, Stuart and Jennifer likely talked about her spending and the need for a budget, since Jennifer’s spending was a long standing problem. Stuart says that he spoke to a family counsellor about trying to get Jennifer to prepare a budget. There is no evidence about what happened after this discussion.
338The fact that Jennifer cashed her RRSP is not a material change in circumstances. It is the continuation of Jennifer’s financial naiveté and irresponsibility that was fully apparent to Stuart during the marriage, while they negotiated the Separation Agreement and every year since the agreement was signed.
339Not only did Stuart continue to have access to Jennifer’s bank accounts after the Separation Agreement was signed, but he also continued to access Jennifer’s bank accounts on line and pay her bills with some help from Jordan. Stuart was fully aware of the deterioration of Jennifer’s financial circumstances. The blame for the deterioration of Jennifer’s financial circumstances must rest in part with Stuart.
340Stuart’s own words confirm the depth of Jennifer’s spending problem as it existed during the marriage. In a letter to Jennifer dated July 6, 2007, he pleaded with Jennifer: “I need you to hear me, I'm pleading for you to understand that we can't continue down this path as it will lead to the annihilation of our family.” He told Jennifer “you have continued to overspend us into oblivion”. He expressed his lack of trust in Jennifer “that you won’t spend us into the poor house”.
341With clear knowledge of Jennifer’s spending problem, his lack of trust in Jennifer’s ability to control spending and no hope for a solution, Stuart signed the Separation Agreement. This Separation Agreement imposed no budget on Jennifer, placed no expectations on her to manage her money and gave her fair support that was not time limited.
342If one were to assume that the cashing of the RRSP is a material change, it would be inherently wrong and unfair to allow Stuart to rely on it for his variation request. He helped to create the problem. He enabled the spending. At a minimum, he stood by and did nothing while he had full knowledge of her financial naiveté and irresponsibility and deteriorating finances. Stuart cannot help create the so-called change and then seek to rely on it for a variation that benefits himself and further disadvantages Jennifer. Such a result would be grossly unjust.
343Stuart never explained how Jennifer’s decision to cash in her RRSP was a material change in circumstances. In fact, during closing submissions, it was never argued that this was a material change. The only material change that Stuart’s counsel relied on in closing submissions was the change in the children’s residence.
344There is no basis on the facts or law to allow Stuart to use the termination of child support as a material change to justify a decrease in what he pays for spousal support (retroactively and going forward) and to set a future termination date for spousal support.
345Stuart has approached his request for a variation as if it is a right, regardless of whether a material change in circumstances exists. This is not what s. 5.8 of the Separation Agreement provides. It is worth repeating s. 5.8 as follows:
5.8 On or after January 1, 2013, either party may seek a variation of the child support and/or spousal support amounts if there is a material change of circumstances since the making of this Agreement, whether the change was foreseen or unforseen or foreseeable or unforeseeable. However, in the event of a variation: 1) Jennifer's entitlement to spousal support and Stuart's obligation to pay spousal support will never exceed the monthly sum of $11,000.00 gross, with cost of living adjustments based on the consumer price index for items Toronto with a base year of 2010; and 2) until January 1, 2015, Jennifer will receive at least the gross monthly sum of $5,500 for spousal support. If there is a variation of child support on or after January 1, 2013, child support will be determined in accordance with the Guidelines, except that Stuart will guaranty a minimum base rate monthly payment to Jennifer for Sydney provided that Sydney resides with Jennifer for at least 40% of the time in the amount of $2,500.00, irrespective of special and extraordinary expenses and until January 1, 2015.The parties will mediate any disputes in terms of the support issues with Jaret Moldaver before resorting to arbitration or a court application.
[Emphasis added.]
346One variation that Stuart requests is that s. 7 expenses be shared between the parties proportionately. This request is premised on Stuart’s position that pursuant to the Separation Agreement, he was only responsible for 100% of the s. 7 expenses until January 2015. This is incorrect. There is no provision in the Separation Agreement that terminates Stuart’s obligation to pay 100% of the s. 7 expenses as of January 1, 2015. The reference to the date of January 1, 2015 speaks to the minimum table support that Stuart agreed to for Sydney, “irrespective of special and extraordinary expenses”.
347While I accept that there is a material change in circumstances that supports a termination of child support, Stuart cannot use this specific material change to seek the numerous variations that are set above (i.e. imputation of income to Jennifer, lowering his income, decreasing the amount of spousal support, requiring Jennifer to contribute to s. 7 expenses, terminating spousal support on December 31, 2021 and seeking reimbursement of an alleged overpayment of support).
348In effect, Stuart is seeking to rewrite the Separation Agreement without complying with section 5.8 and the clear requirement that he must prove a material change in circumstances to support the requested variations.
349When the Separation Agreement was signed, Jennifer was unemployed and had not worked outside the home for many years. She had a high school education and minimal work experience. None of this has changed. Instead, Jennifer’s financial position is worse than it was when the Separation Agreement was signed. Jennifer’s debts have increased and her savings have diminished.
350There is nothing in the Separation Agreement to indicate that Jennifer was expected to upgrade her education, live according to a budget and/or try to work. There is no evidence that Stuart ever proposed such terms during the mediation.
351Stuart agreed to pay $10,000 net without any suggestion of a termination date for spousal support or an expectation that Jennifer look for a job.
352If Stuart expected Jennifer to try and become self-sufficient, he could have insisted that this be included as a term in the Separation Agreement, but he did not do so. He could have requested a review of the spousal support that was not tied to a material change. He did not do so. Instead, Stuart continued to do Jennifer’s banking, pay her bills and feed her money and gifts even after the Separation Agreement was signed. He made no real effort to help her become financially responsible. Having allowed her to live married life with no financial skills or responsibility, he obviously knew that she was going to have trouble adapting to living alone and managing money.
353In these circumstances, he knew full well that her need for spousal support would be ongoing. In my view, this is why the Separation Agreement has no termination date for spousal support, does not include a review clause for spousal support that is not tied to a material change and expresses no requirement that Jennifer work.
354Stuart was unemployed when he signed the Separation Agreement. He was dependant on the money his father gave him. This has not changed. In addition to the money that Harry continues to pay monthly to Cellular Connection, Stuart receives a significant stream of monetary gifts from Harry. Some he chooses to call loans that are not documented as such. Living off this regular stream of monetary gifts from Harry, Stuart has been able to lease expensive cars and purchase and renovate a large home in central Toronto where he lives with his new wife and family.
355Stuart’s entrepreneurial efforts since the Separation Agreement have produced very minimal income. When Stuart signed the Separation Agreement and agreed to pay $10,000 in support to Jennifer, he was not earning any income and this remains the case. There has been no material change in his financial circumstances to support his variation requests.
356Stuart vigorously opposed Jennifer’s request to set aside the Separation Agreement and he succeeded. He is now stuck with the Separation Agreement that he fought to protect. Absent a proven material change in circumstances, there can be no variation of the Separation Agreement. The only exception is the termination of child support that I will now consider.
Variation of Child Support
357Stuart seeks to vary child support for Jordan and Sydney. He seeks an order terminating child support for Jordan, effective April 30, 2013 and an order terminating child support for Sydney, effective January 1, 2015.
358As I will explain, I accept that child support for Jordan should be terminated effective April 30, 2013. I agree that child support for Sydney should be terminated, but I do not accept Stuart’s proposed termination date.
359Stuart seeks reimbursement of child support that he paid after the termination dates. He argues that in 2012, Jennifer agreed to a termination date of child support for Jordan.
360This variation request raises the following issues:
(1) Did Jennifer agree to terminate child support for Jordan?
(2) What part of the $10,000 net support payment was child support?
(3) Should Jennifer be required to repay Stuart the child support he paid for the children after the termination dates?
Jordan
The Termination Date
361On June 23, 2012, Jordan was 18 years old. At this point, a dispute arose between Stuart and Jennifer about payment of child support for Jordan. Jordan was still attending full time school. He finished high school in June 2013, and started Ryerson University in the fall of that year.
362At the end of April 2013, Jordan moved into a home on Walmer Road in Toronto that Stuart had built. Jordan lived in the Walmer Road home on his own until 2015 when Harry bought Jordan a condominium.
363The fact that Jordan turned 18 was not a material change in circumstances because he was still attending school and living with his parents. However, a material change in circumstances did occur a few months later when Jordan moved to the Walmer Road home. Jordan’s living arrangements permanently changed at the end of April 2013, when Jordan stopped living with his mother. At this point, he was an adult and free to decide where he lived. Sadly, Jennifer and Jordan no longer have a relationship and do not speak. Jordan did not testify and there is no reliable evidence about what happened between Jordan and his mother.
364Jennifer argues that Stuart engineered Jordan’s departure from her home and, but for this, he would still be living with Jennifer 50% of the time. As a result, she states that she should not be required to refund Stuart any overpayment of guideline child support for Jordan. There is insufficient evidence about the reason for Jordan’s decision to live on his own. I decline to make the finding of fact that Stuart engineered Jordan’s departure from her home. Jordan was 18 and free to make his own decisions as he did.
365In summary, the facts support the termination of child support for Jordan effective April 30, 2013. What follows from this decision is not straightforward.
No Agreement to Terminate Jordan’s Child Support
366As I will explain, Jennifer did not agree to Stuart’s request to terminate Jordan’s child support. Stuart did not comply with the Separation Agreement. Instead, he engaged in self-help. He allocated $1,500 of the $10,000 for Jordan’s child support and reduced the monthly payment by $1,500 (Stuart had already reduced the $10,000 to $8,500 when they agreed he would pay the car lease insurance and cell directly).
367Stuart’s decision to engage in self-help and ignore the Separation Agreement is relevant to whether Jennifer should be required to reimburse what he paid after the termination date (see D.B.S. v. S.R.G., 2006 SCC 37 (“DBS”)). His conduct is reviewed below.
368On May 20, 2015, McWatt J ordered Stuart to continue paying Jennifer the $10,000 support payment under the Separation Agreement (see Turk v. Turk, 2015 ONSC 3165). He complied with this order. At the time of the motion, Stuart had also terminated child support for Sydney as of January 2015 because he maintained that Sydney lived primarily with him. Once again, this was done without Jennifer’s agreement. McWatt J ordered Stuart to pay Jennifer $63,150 in arrears of support, on a without prejudice basis, for the children (representing what was not paid after his unilateral decisions to terminate child support). Stuart has complied with this order.
369Stuart testified that he understood there would be a reduction of the $10,000 support payment, simply because Jordan turned 18 years old. As a result, Stuart expected that the change would be made as of January 1, 2013, the date when a variation request is allowed under the Separation Agreement. This is not what the Separation Agreement provides and is further evidence of Stuart’s attitude that he has a right to a change without following the Separation Agreement.
370During the summer of 2012, Stuart says that Jennifer called him while they were both out driving. Both parties testified that they met in a parking lot on Brooke Avenue and discussed child support for Jordan. Stuart testified that he thought they agreed support would be reduced as of January 2013 to reflect that Jordan was 18 years old. Jennifer says that Stuart threatened her and pulled the support. She was very upset when Stuart told her he was not going to pay child support for Jordan.
371After this discussion in the parking lot, there was no communication between the parties. Stuart did not confirm the agreement he thought had been reached and Jennifer did not confirm her disagreement. There were no emails, texts or letters between the parties. Neither party sought legal advice until 2013.
372The Separation Agreement provides in s. 5.13 that until the $10,000 support amount is “adjusted by an amending agreement, court order or arbitration award Stuart will continue to pay the support”.
373The Separation Agreement does not state that an amending agreement must be in writing. That said, the absence of anything in writing to document the agreement is a factor to consider.
374I do not accept Stuart’s evidence that an agreement was reached in the parking lot in 2012 to end child support for Jordan. I accept that the parties discussed Stuart’s plan to reduce child support, but the evidence does not support a finding of fact that there was an “amending agreement” as required by the Separation Agreement.
375Stuart argues that Jennifer never confirmed her disagreement in writing and as a result he fairly assumed that she agreed. I reject this characterization of the evidence. I accept that Jennifer was very upset when Stuart told her he was going to reduce the $10,000 payment. Her reaction is not surprising since her debt was increasing and she was not controlling her spending. Since Jennifer was very upset, one would expect Stuart to have sent an email confirming what he thought was an agreement.
376Until January 1, 2013, Stuart continued to pay the support without a reduction of child support for Jordan. In this circumstance, it is not surprising that Jennifer never confirmed her disagreement in writing. The money continued to be paid without a further reduction for the rest of the year.
377Jennifer’s approach to life after separation was to continue spending as she had done in the past. Rather than think about the elimination of child support for Jordan and continue to discuss it with Stuart, Jennifer essentially buried her head in the sand as she did when it came to financial responsibility.
378Effective January 1, 2013, Stuart reduced the $10,000 support payment by a further $1,500 leaving Jennifer with $7,000 a month. Stuart believed that 30% of the $10,000 payment was for child support and this was the basis for his decision to reduce the child support for Jordan by $1,500.
379The Separation Agreement does not delineate how much of the $10,000 is child support versus spousal support. An “amending agreement” would require the parties to agree on this but it was never discussed when Stuart told Jennifer in 2012 that he was going to end child support for Jordan. Stuart unilaterally assumed that 30% of the total support was paid as child support and used this assumption when he reduced the support by $1,500.
380Stuart relies on a letter dated September 28, 2009 that his counsel, Rose Muscolino, sent to Ms. Kraft during the mediation. In this letter, Ms. Muscolino states as follows:
At the mediation session with Mr. Moldaver on July 3, 2009, Stuart advises that he clearly stated that the net payment of $10,000 per month to Jennifer was an “all in” amount for child and spousal support and it was to be categorized in the most tax advantageous manner for Stuart. After further discussions with Stuart, he is of the view that the support it [sic] should be apportioned as follows: 70% for spousal support and 30% for child support.
[Emphasis added]
381This was a three page letter from Ms. Muscolino that covered many other issues. Ms. Muscolino did not testify at trial. When Ms. Kraft received this letter she sent it to Jennifer and they had a conference call on October 5, 2009. There is no evidence that they talked about the 70/30% split. Instead, Jennifer told Ms. Kraft that she wanted to go back to mediation without the lawyers present.
382The parties went back to mediation with Mr. Moldaver and the Separation Agreement was finalized in January 2010. The Separation Agreement does not specify what part of the $10,000 payment is child support. Sections 5.1 and 5.2 state:
5.1 Commencing January 1, 2010, and on the first day of each month thereafter, Stuart will pay to Jennifer, as child support and as spousal support combined, the monthly amount of $10,000.00 net. The intention being that Jennifer will have $10,000.00 per month of support on an after tax basis.
5.2 The parties will co-operate to apportion the support (between child support and spousal support) on a year by year basis in a tax effective manner. The parties will co-operate to execute, on a yearly basis and by no later than March 1, a separation agreement, which agreement will properly set out the payments of spousal support paid by Stuart and received by Jennifer for the preceding taxation year.
383Stuart testified that he did not know that Jennifer disagreed with the termination of child support for Jordan until a few months later, when they returned to mediation.
384Stuart testified that he triggered the return to mediation in August 2013. When asked why he did so he stated that “[t]he main reason was Jennifer just cashed her RSP, her second RSP” in “February or March of 2013”. This led Stuart to conclude that a review was needed. He testified as follows:
Q. And, why did that lead you to the conclusion there needed to be a review?
A. Because the original, when we originally started with reducing Jordan’s support, she said, or it was agree – I felt it was agreed that she would try and work on a budget, try to get her spending in control. And then, she went and started cashing the RSP and spending the money again. So, I felt I needed to do the review.
385Stuart’s evidence that they were going back to mediation to get Jennifer’s spending under control makes no sense. The mediation was not designed to provide financial counselling and there is nothing in the Separation Agreement that suggests this purpose.
386Based on the facts that I have reviewed, I find that Stuart triggered the review because he knew that he did not have an “amending agreement” to change the support payment and the Separation Agreement required the parties to mediate disputes about support before resorting to arbitration or the court.
387In summary, Stuart did not initially comply with s. 5.13. He did not have a court order or arbitration award. The discussion in the parking lot was not an “amending agreement”. Stuart engaged in self-help and reduced the support payment by $1,500. He was later ordered on May 20, 2015 by McWatt J. to pay the full $10,000 pending court order and has done so.
388Given the above facts, I terminate guideline child support for Jordan as of April 30, 2013.
Sydney
389Jennifer and Stuart generally followed the equal time parenting schedule. On occasion when Jennifer travelled, the schedule changed. There were also points in time when one child spent more time with one parent than the other. These types of changes are to be expected and do not justify a variation of child support.
390It is Stuart’s evidence that, in 2013, he noticed that equal parenting time for Sydney started to change as she spent more time at Stuart’s home. Sydney was 15 years old. In 2014, Stuart started to track the time that Sydney spent with each parent on a computer program. The charts that he prepared show that in 2014, 2015 and 2016 Sydney spent increasing amounts of time with her father: 65% in 2014, 67% in 2015 and 69% in 2016.
391There are two time frames to be considered: before and after Sydney starts McGill University.
392Prior to attending McGill, I accept that Sydney did not spend equal time with her parents from 2014 onwards.
393While Stuart and Jennifer agreed to equal parenting time, Stuart did not actively support this agreement. He allowed a change in parenting to occur and then terminated child support for Sydney without complying with the Separation Agreement. If there was some compelling reason why it was in Sydney’s best interests to spend more time with Stuart, then Stuart should have sought a change in child support through an amending agreement, arbitration award or court order.
394Stuart should have supported Jennifer and the equal sharing agreement. Each parent had an obligation to follow the parenting schedule and take all reasonable steps to make sure that Sydney did as well. In this case, Stuart simply watched Jennifer’s time with Sydney slowly decrease. He did not enforce the schedule by requiring Sydney to respect Jennifer’s time. Stuart lived on a street close to Sydney’s high school and it appears that Sydney simply found it more convenient to stay at Stuart’s home.
395I refuse to terminate child support for Sydney in these circumstances.
396I now turn to the period commencing September 1, 2016.
397In the fall of 2016, Sydney was 18 years old and started university at McGill in Montreal. When she returns to Toronto, she now lives with her father. While she continues to have contact with her mother, her primary residence, when not at McGill, is with her father. Stuart pays all of Sydney’s university and living expenses. Like Jordan, Sydney at the age of 18 has chosen not to live with her mother and is entitled to make this decision.
398Based on these facts, there is no longer any basis for requiring Stuart to pay Jennifer child support for Sydney. I terminate child support for Sydney effective September 1, 2016.
S. 7 Expenses – Jordan and Sydney
399Section 5.4 of the Separation Agreement provides that “Stuart will pay for all of the children's special and extraordinary expenses without contribution from Jennifer.” Stuart requests that Jennifer pay her share of the expenses.
400This request is denied. As I have explained above, there has been no material change in circumstances to support Stuart’s request to impute an income to Jennifer that might lead to a proportionate sharing of the s. 7 expenses. Stuart agreed to pay 100% of significant s. 7 expenses and there is no reason to vary that obligation.
Adjustment to the $10,000 support payment
401I have decided that guideline child support should end on April 30, 2013 for Jordan and on September 1, 2016 for Sydney.
402Stuart has continued to pay the $10,000 support payment since McWatt J’s order. He seeks reimbursement of the child support he has paid since termination. His calculation is not useful because it is based on assumptions and child support termination dates that I have rejected. Stuart assumed that the court would impute $20,000 of income to Jennifer and that 30% of the $10,000 payment was for child support.
403Stuart’s request to vary spousal support has been denied. Although I have terminated child support, Stuart still owes Jennifer spousal support. The termination of child support and the continuing obligation to pay spousal support raises the following four questions:
(1) What part of the $10,000 support payment should be allocated to child support?
(2) What did Stuart pay for child support after each termination date?
(3) Is Stuart entitled to seek reimbursement from Jennifer for the child support paid after termination? This requires consideration of the factors in DBS.
(4) After each termination date for child support what does Stuart owe for spousal support? The parties must follow s. 5.8 of the Separation Agreement, which states that “in the event of a variation … spousal support will never exceed the monthly sum of $11,000.00 gross with cost of living adjustments”.
404It is helpful to review the relevant sections of the Separation Agreement:
5.1 Commencing January 1, 2010, and on the first day of each month thereafter, Stuart will pay to Jennifer, as child support and as spousal support combined, the monthly amount of $10,000.00 net. The intention being that Jennifer will have $10,000.00 per month of support on an after tax basis.
5.2 The parties will co-operate to apportion the support (between child support and spousal support on a year by year basis in a tax effective manner. The parties will co-operate to execute, on a yearly basis and by no later than March 1, a separation agreement, which agreement will properly set out the payments of spousal support paid by Stuart and received by Jennifer for the preceding taxation year.
5.3 Stuart will be responsible for paying any income tax liability that Jennifer incurs as a result of the support paid and received (on the basis of the support being the last dollars in) and he will promptly make such payment to Jennifer upon a review of her draft income tax return for the preceding taxation year. Jennifer will provide Stuart with her Notice of Assessments once received.
5.8 On or after January 1, 2013, either party may seek a variation of the child support and/or spousal support amounts if there is a material change of circumstances since the making of this Agreement, whether the change was foreseen or unforeseen or foreseeable or unforeseeable. However, in the event of a variation: 1) Jennifer's entitlement to spousal support and Stuart's obligation to pay spousal support will never exceed the monthly sum of $11,000.00 gross, with cost of living adjustments based on the consumer price index
405Stuart’s evidence that 30% of the $10,000 support payment was allocated to child support is not supported by the Separation Agreement. As explained above, the idea was proposed in a letter from Ms. Muscolino, Stuart’s lawyer, dated September 28, 2009. There is no evidence that it was ever discussed.
406There is however, some evidence from Ms. Kraft. Prior to Ms. Muscolino’s letter Ms. Kraft attended a meeting on July 3, 2009 with Jennifer, Stuart and Mr. Moldaver. Ms. Kraft testified about this meeting. Stuart wanted to pay support on an income of $421,000. Ms. Kraft explained that if $5,136 net a month was received for child support, this left “$8000 a month in gross spousal support, she would net $11,065 a month.”
407Section 5.2 requires Stuart and Jennifer to co-operate and execute, “on a yearly basis and by no later than March 1, a separation agreement, which agreement will properly set out the payments of spousal support paid by Stuart and received by Jennifer for the preceding taxation year”. If the parties executed a yearly agreement, the agreements were not produced during the trial.
408Under s. 5.3, Stuart is responsible for paying any income tax liability that Jennifer incurs as a result of the support paid and received.
409I have reviewed the parties’ income tax returns to see if they reveal how the parties treated the $10,000. In 2010, Jennifer declared $30,000 in support payments. It is not known if Stuart claimed a deduction that year because his full income tax return for 2010 was not produced. In 2011, Jennifer did not declare any support income and Stuart did not claim a deduction. In 2011, Jennifer declared income of $37,612 that she withdrew from her RRSP. No support income was declared and Stuart claimed no deduction. In 2012, Jennifer declared $30,000 in support payments and Stuart claimed a deduction for the same amount. In 2013, Jennifer did not declare any support income and Stuart did not claim a deduction. In 2013, Jennifer declared $41,698 that she withdrew from her RRSP. In 2014, Jennifer declared $36,000 of support income and Stuart claimed a deduction for the same amount. In 2015, Jennifer claimed $30,000 in support income and Stuart claimed a deduction for the same amount.
410In summary, the income tax returns show that the amount allocated to spousal support varied and was never close to 70% of the total support. In 2010, 2012 and 2015, Jennifer declared $30,000 which is 25% of the total $120,000 yearly support payment. In 2014, Jennifer declared $36,000 which was 30% of the total support payment. In 2011 and 2013, 0% was allocated to spousal support.
411The closing submissions do not address the above four questions that arise from the termination of child support that I have now ordered. The parties should be given an opportunity to consider the questions. They are urged to reach a resolution. If this is not possible, I will require their submissions on how to proceed. I have made the necessary orders below.
conclusion
412In summary, I make the following orders:
The applicant’s request to declare the April 26, 2010 Separation Agreement null and void is dismissed.
The applicant’s request to set aside the April 26, 2010 Separation Agreement is dismissed.
The applicant’s alternative request to set aside the child and spousal support provisions of the April 26, 2010 Separation Agreement is dismissed.
The respondent’s request to vary the April 26, 2010 Separation Agreement is dismissed except for the termination of child support.
Child support for Jordan is terminated effective April 30, 2013.
Child support for Sydney is terminated effective September 1, 2016.
The parties shall have until January 15, 2018 to agree on the following:
(a) How is the $10,000 amount support in the Separation Agreement divided between child support and spousal support?
(b) What amount did the respondent pay for child support for Jordan after the termination date of April 30, 2013?
(c) What amount did the respondent pay for child support for Sydney after the termination date of September 1, 2016?
(d) Should the applicant be required to reimburse the respondent for the amounts in 12(b) and (c)?
(e) After each termination date for the child support what does the respondent owe the applicant for spousal support going forward?
If the parties reach an agreement on 12 (a) through (e) above, they shall advise the court in writing. If an agreement is not reached, the parties shall provide submissions on how to proceed so that these issues can be decided by the court. The parties shall comply no later than January 26, 2018.
If either party is seeking costs, they shall agree on a schedule for exchange of written submissions and file them with the court by January 26, 2018. The submissions shall address entitlement and quantum. If the parties do not reach an agreement on 12 (a) through (e) above, costs submissions shall be provided after these issues are decided by the court.
___________________________ C. Horkins J.
Released: November 28, 2017
CITATION: Turk v. Turk, 2017 ONSC 6889
COURT FILE NO.: FS-14-19285
DATE: 20171128
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jennifer sandra turk
Applicant
– and –
Stuart Bernard Turk
Respondent
REASONS FOR JUDGMENT
C. Horkins J.
Released: November 28, 2017
CITATION: Turk v. Turk, 2017 ONSC 6889
COURT FILE NO.: FS-14-19285
DATE: 20171128
An appended explanation to Reasons of Judgment dated November 28, 2017
Corrections made on December 5, 2017: The numbering of the orders made in paragraph 412 started at 6. and ended at 14. This is corrected so that the orders start at 1. and end at 9. This is the only correction made to the reasons. The corrected paragraph reads as follows:
412In summary, I make the following orders:
The applicant’s request to declare the April 26, 2010 Separation Agreement null and void is dismissed.
The applicant’s request to set aside the April 26, 2010 Separation Agreement is dismissed.
The applicant’s alternative request to set aside the child and spousal support provisions of the April 26, 2010 Separation Agreement is dismissed.
The respondent’s request to vary the April 26, 2010 Separation Agreement is dismissed except for the termination of child support.
Child support for Jordan is terminated effective April 30, 2013.
Child support for Sydney is terminated effective September 1, 2016.
The parties shall have until January 15, 2018 to agree on the following:
(a) How is the $10,000 amount support in the Separation Agreement divided between child support and spousal support?
(b) What amount did the respondent pay for child support for Jordan after the termination date of April 30, 2013?
(c) What amount did the respondent pay for child support for Sydney after the termination date of September 1, 2016?
(d) Should the applicant be required to reimburse the respondent for the amounts in 12(b) and (c)?
(e) After each termination date for the child support what does the respondent owe the applicant for spousal support going forward?
If the parties reach an agreement on 12 (a) through (e) above, they shall advise the court in writing. If an agreement is not reached, the parties shall provide submissions on how to proceed so that these issues can be decided by the court. The parties shall comply no later than January 26, 2018.
If either party is seeking costs, they shall agree on a schedule for exchange of written submissions and file them with the court by January 26, 2018. The submissions shall address entitlement and quantum. If the parties do not reach an agreement on 12 (a) through (e) above, costs submissions shall be provided after these issues are decided by the court.
Release date of the corrected reasons: December 5, 2017