Court File and Parties

CITATION: Tanenbaum v. Tanenbaum, 2017 ONSC 7512 COURT FILE NO.: FS-17-417974 DATE: 2017-12-18

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Peter Tanenbaum, Applicant AND: Ruth Tanenbaum, Respondent

BEFORE: C. Horkins J.

COUNSEL: John Syrtash, for the Applicant Jaret Moldaver, for the Respondent

HEARD at Toronto: December 12, 2017

ENDORSEMENT

Introduction

[1] The applicant Peter Tanenbaum (the husband) and the respondent Ruth Tanenbaum (the wife) were married on February 24, 2008.

[2] The parties executed a Marriage Contract on February 15, 2008. The Marriage Contract treats the parties as separate in terms of property, with the exception of the matrimonial home and its contents. The Marriage Contract also includes some restrictions on the wife’s entitlement to spousal support.

[3] This was a second marriage for both parties. There are no children of this marriage. The parties separated on January 11, 2017.

[4] The main relief that the husband seeks on his motion is an order that $1M be paid to him from the net proceeds of the sale of the matrimonial home. The matrimonial home was sold on March 21, 2017 for $4,825,000. The wife states that the husband’s request for the net proceeds has already been decided in the consent order of Myers J dated July 17, 2017. As a result, she states that his motion should be dismissed.

[5] The wife brought a motion for spousal support and it was settled.

The Marriage Contract

[6] When the Marriage Contract was signed, the parties were living in separate residences. The Marriage Contract stated where the parties would live and how they would pay for a new home. They agreed to live in the wife’s home at 43 Shelbourne Avenue in Toronto until their new home was constructed. The husband had purchased a property at 236 Hillhurst Boulevard (“Hillhurst”) where their new home was being built. When it was finished, they moved into Hillhurst and this became the matrimonial home.

[7] The Marriage Contract set out how the Hillhurst home was funded. The husband bought the lot and obtained a construction loan from HSBC with a maximum limit of $1,120,000. Title to the matrimonial home was registered in his name alone.

[8] The husband’s financial statement sworn December 10, 2007, about two months before the parties signed the Marriage Contract, indicated that the husband had two lines of credit with HSBC registered against the matrimonial home in the amount of $52,000 and $53,000.

[9] The Marriage Contract recorded the wife’s intention to sell her Shelbourne property and provide $1M from the proceeds to her husband that he would "apply against the HSBC loan". The Marriage Contract noted that, in consideration of this payment, the husband would transfer title of the matrimonial home into the both of the parties' names as tenants in common, in equal shares.

[10] The Shelbourne property was sold for an amount less than expected. The wife provided her husband with $600,000 from the net sale proceeds and paid the additional $400,000.00 from monies she held in her Scotia McLeod accounts.

[11] As required by the Marriage Contract, the husband transferred title of the matrimonial home into both of the parties’ names as tenants in common, in equal shares.

[12] The husband now disputes that the wife paid the additional $400,000. Records from Scotia McLeod in 2008, to prove that the wife withdrew this money to pay her husband, are no longer available. However, there is evidence that the wife had this money in her Scotia McLeod account before the Marriage Contract was signed. The parties exchanged sworn financial statements prior to signing the Marriage Contract. In the wife’s sworn financial statement dated January 28, 2008, she listed these Scotia McLeod funds.

[13] Paragraph 7.7 of the Marriage Contract states:

If marriage breakdown occurs while both parties are alive, then either party shall have the right to cause a sale of the matrimonial home and the net proceeds shall be divided equally between them, subject to paragraph 7.4

[Emphasis added.]

[14] Paragraph 7.4 deals with a situation where the husband predeceases the wife and there is no marriage breakdown. In this case, the wife is given an additional interest in the matrimonial home equal to $1M.

[15] At the outset of this application, there was a dispute about the words “subject to paragraph 7.4” that appear at the end of para. 7.7. Initially, the wife argued that the inclusion of these words meant that she also received the additional $1M interest under para. 7.7.

[16] Both parties had counsel when the Marriage Contract was negotiated and signed. After obtaining evidence from counsel it was agreed that these words should be deleted. The husband claims that this is relevant to his motion for release of $1M from the sale proceeds. I will address this below.

Relevant Background

[17] The matrimonial home was sold privately on March 21, 2017 for $4,825,000. There were two HSBC debts that were paid from the proceeds: $1,103,609.64 and $782,230.24.

[18] The husband commenced this application on June 19, 2017, and immediately brought a motion returnable on June 29, 2017 before a case conference was held (“June notice of motion”).

[19] The husband’s June notice of motion sought an order that a series of small payments be made from the net sale proceeds of the matrimonial home and that the remaining amount be equally divided and paid to the parties. The small payments included in the June notice of motion are as follows:

• Payment of a $25,000 referral fee for the sale.
• Payment of a loan from Mr. Gibli. The wife had borrowed $100,000 from Mr. Gibli, for the down payment on her condominium. She agreed to repay the monies, with an additional $5,000, by June 30, 2017. The husband guaranteed the loan.
• The husband claimed that the wife owed him $5,000 that was his share of the sale of the matrimonial home contents.
• The husband claimed repayment of $5,000 that he loaned the wife to make the deposit on her condominium and a $10,000 loan pursuant to a promissory note.

[20] The June notice of motion also requested an order “rectifying paragraph 7.7 of the Marriage Contract” to delete the words “subject to paragraph 7.4”.

[21] The husband’s motion was in part settled. A consent order was issued (Paisley J order dated June 29, 2017) allowing two payments from the sale proceeds. First, without prejudice to either party the amount of $105,000 was released from the sale proceeds to pay the loan from Mr. Gibli. This left the issue of allocation: should the wife or husband be allocated responsibility for this amount? Second, the $25,000 referral fee was paid. The order adjourned the rest of the husband’s motion to July 18 and allowed the wife to bring a cross-motion at the same time.

[22] On July 7, 2017, the wife filed her Answer and advanced her own claims. The Answer explains the basis for the wife’s position that no monies should be paid to the husband from the net sale proceeds. First, she relied on the reference in para. 7.7 of the Marriage Contract to the additional $1M interest. Second, in paras. 30 – 37 of the Answer, the wife alleges that the husband did not comply with the Marriage Contract. Based on the evidence that she had available at that time, she alleged that the husband did not use her $1M contribution to pay down the construction loan that had a maximum limit of $1,120,000. If the husband had complied with the Marriage Contract, then the balance on the debt when the home was completed would have been $120,000. Instead, the HSBC debt that was secured against the matrimonial home when it was sold totalled $1,885,839.88.

[23] The wife states that she should not be responsible for this $1,885,839.88 debt. The wife seeks declarations; that she is entitled to $2,400,000 from the proceeds of the matrimonial home sale; that the husband is responsible for all of the encumbrances registered on title at closing. Alternatively, she says the husband holds his share of the proceeds in trust for her and claims a constructive/resulting trust. If the Marriage Contract is set aside, the wife seeks equalization of property.

[24] When the matrimonial home was sold, the wife agreed that the HSBC debt had to be paid from the sale proceeds without prejudice to her position in this application that the husband should bear sole responsibility for this debt.

[25] Before the return of the husband’s June notice of motion, the wife filed her own notice of motion dated July 10, 2017 (wife’s July notice of motion).

[26] In the July notice of motion, the wife seeks an order that $1M of the sale proceeds be released to her and that the husband’s June notice of motion be dismissed. The wife’s affidavit explains why she should receive $1M and why no sale proceeds should be released to the husband. First, the wife relies on the now deleted words in para. 7.7 of the Marriage Contract. Second, she explains that under the Marriage Contract any encumbrances on title after the matrimonial home was built should not have exceeded $120,000.

[27] The wife requested that $1M of the sale proceeds be released to her because she needed this amount of money to close on her purchase of her condominium.

[28] On July 17, 2017 the parties attended a case conference before Myers J. The husband’s motion and the wife’s motion were scheduled to be heard the following day. At this case conference, the parties agreed to a consent order (“Myers J order”) as follows:

a. $1,000,000.00 would be disbursed to the wife from the net sale proceeds;

b. $1,000,000.00 would be disbursed to the husband from the net sale proceeds, “concurrent with HSBC Bank of Canada issuing a letter of credit securing the payment of the $1,000,000.00” in accordance with any Order of the Court;

c. The “balance of the relief” sought by the parties would be adjourned to a long motion date on November 28, 2017;

d. Questioning would be held in accordance with the terms set out within Schedule “A” to the Order; and

e. Costs of the appearance on July 17, 2017, would be reserved to the Judge hearing the motion.

[29] After the Myers J order was issued, the $1M was released to the wife. Questioning was not held because of scheduling conflicts.

[30] The $1M was not paid to the husband because he did not obtain a letter of credit from HSBC. This was a condition that he consented to in the Myers J order. On July 19, 2017, Mr. Moldaver sent a letter to Mr. Syrtash. In this letter, Mr. Moldaver states: “Further to our conversation, I confirm that your client is unable to obtain a letter of credit.” Aside from this line in Mr. Moldaver’s letter, there is no evidence to explain why the husband did not comply with the condition in the Myers J order that he had consented to.

[31] On August 17, 2017, the wife brought a motion for spousal support. This motion was recently settled and this court signed an order for spousal support on consent.

[32] As noted, paragraph 3 of the Myers J order adjourned the “balance of the relief” requested in the husband’s June notice of motion and the wife’s motion to November 28, 2017. It is important to specify what the balance of relief included.

[33] The balance of relief in the wife’s July notice of motion was a request that the husband’s balance of relief be dismissed and that she be granted substantial indemnity costs of his motion.

[34] The balance of relief in the husband’s June notice of motion was:

(i) An order that the wife pay the husband $5,000 representing his share of the sale of the matrimonial home contents.

(ii) An order that the wife pay the husband $10,000 pursuant to a promissory note.

(iii) An order that the wife pay the husband, $5,000 that he loaned her for the deposit on her condominium

(iv) An order that the amounts in (i) to (iii) be paid to the husband from the wife’s share of the matrimonial home net sale proceeds.

(v) An order rectifying the Marriage Contract to delete the words in paragraph 7.7 (this was agreed to before the motion returned to court).

(vi) Costs

[35] Before the return of the motion on November 28, the parties agreed to delete the disputed words in para 7.7 of the Marriage Contract. As a result, the wife no longer argues that these words entitle her to receive an additional $1M share of the matrimonial home proceeds.

[36] When the balance of the requested relief returned to court on November 28, the parties had filed further affidavit evidence.

[37] I adjourned the motions to December 12, 2017 and ordered the parties to file factums clearly identifying the remaining issues in dispute. The wife filed a further affidavit prior to the hearing. Neither party objected to the other filing additional affidavits.

Analysis - The balance of the relief

The $1M request

[38] The husband argues that the balance of relief before this court includes his request to have $1M released to him and have responsibility for the $105,000 loan allocated. I will explain why neither forms part of the balance of relief on this motion.

[39] When the balance of the relief was finally heard on December 12, the husband took the position that it was open to him to reargue his request to have $1M released to him from the net sale proceeds.

[40] The husband submits that the condition in the Myers J order that requires him to obtain a HSBC letter of credit before release of $1M to him, is no longer required because the parties have now agreed to delete the words in para. 7.7.

[41] The husband submits that he was only required to post a letter of credit as a condition of receiving $1M because the wife was arguing that the now deleted words in paragraph 7.7 entitled her to an additional $1M interest in the matrimonial home. Since these words have been deleted, he says he is entitled to an order removing the letter of credit condition and directing that he receive the $1M. As explained below, I reject the husband’s characterization of the Myers J consent order.

[42] I recognize that the disputed words in paragraph 7.7 have now been deleted and therefore the wife’s argument that these words entitle her to an extra $1M share of the proceeds is no longer an issue. However, the Answer clearly states that the wife is also attacking the Marriage Contract and seeks to set it aside because she pleads that the husband breached the terms of the Marriage Contract. She has also advanced a claim that the husband holds his share of the matrimonial home sale proceeds in trust for the wife because she was the sole or majority contributor to the cost of acquisition. The husband obviously knew that the wife was advancing these claims against him when he consented to the Myers J order.

[43] At the case conference before Myers J, the parties were represented by counsel. They signed Minutes of Settlement that were dated and witnessed. There is no reference in the Minutes of Settlement or the order to the husband’s argument that the condition was agreed to solely because of the words in paragraph 7.7. As well, there are no letters, emails or any communications between counsel or the parties that would suggest in any way that the condition served this sole purpose. Frankly, it would be surprising to learn that this was the case. If the wife needed a letter of credit for the paragraph 7.7 issue, then surely she needed a letter of credit to protect her right to the proceeds based on her trust claims and the claim that the Marriage Contract should be set aside.

[44] The husband argues that the wife’s attack on the Marriage Contract is spurious and there is no evidence to support such claims. I disagree. While the wife’s evidence is not entirely clear, this problem flows from the husband’s failure to make full disclosure. Further, even if the wife’s claims are spurious as alleged, then they were spurious when the husband signed the Minutes of Settlement and agreed to the consent Myers J order.

[45] The husband is in effect seeking to reargue what he consented to in the Myers J order. This is not allowed. The “balance of the relief” outstanding at the time of the Myers J order does not include an opportunity to reopen and argue what the husband agreed to on consent.

[46] The evidence that is available raises many questions and concerns about what the husband did with the wife’s $1M contribution, why the home was so encumbered at separation and whether the husband followed the Marriage Contract.

[47] The wife’s evidence as set out in her November 21, 2017 affidavit best explains her concerns. This affidavit also details the disclosure that she has requested that has not been provided. This affidavit reviews evidence that suggests the husband did not follow the Marriage Contract and apply the wife’s $1M contribution to the matrimonial home. The affidavit explains that if the Marriage Contract was followed, there would have been a maximum debt registered against the matrimonial home of about $280,000. Instead the encumbrances on the matrimonial home when it was sold totaled almost $1.9M. Finally, the affidavit raises many questions about whether the husband made any contribution to the cost of acquiring and building the matrimonial home. The wife intends to bring a motion to amend her Answer to plead that the husband misrepresented the financial circumstances about the matrimonial home when she signed the Marriage Contract. She also intends to plead the tort of conversion to address her belief that he misused her $1M contribution.

[48] Finally, the wife also argues that the husband is, in effect, trying to vary the consent Myers J order without a motion to vary. The Myers order is a temporary order. The husband has not brought a motion to vary, although one might say that this is what he is trying to do. There is nothing in the evidence before me that would support a variation if the husband had brought such a motion. The law is clear that variations of temporary orders are not encouraged. This is clearly started in Oxley v Oxley, 2010 ONSC 1609 at paras 25-26:

25 Temporary orders for support, as the name suggests, are not final orders. They were formerly known as "interim orders", referencing the fact that they were intended to cover the interim period between the commencement of proceedings and trial. The Family Law Rules now use the term "temporary" to underscore the notion that they are not intended to be long term solutions. They are by their nature imperfect solutions. They are based on limited and typically untested information. They are meant to provide "a reasonably acceptable solution to a difficult problem until trial": see Chaitas v. Christopoulos, 2004 CanLII 66352 (ON SC), [2004] O.J. No. 907 (S.C.J.) per Sachs J.

26 Variations of temporary orders are not encouraged. They should not become the focus of the parties' litigation: Cutaia-Mahler v. Mahler, 2001 CanLII 28138 (ON SC), [2001] O.J. No. 3473, 2001 CarswellOnt 3054 (S.C.J.) per Benotto J.. There is, therefore, a heavy onus on a party who seeks to vary a temporary order - essentially replacing one imperfect solution with another imperfect solution - pending trial: Boissy v. Boissy, [2008] O.J. No. 2783, 2008 CarswellOnt 4253 (S.C.J.) per Shaw J.. A substantial change in circumstances is typically necessary before a variation to a temporary order will be granted: Biddle v. Biddle, [2005] O.J. No. 737 (S.C.J.) per Blishen J..

[49] In summary, the husband’s motion for release of $1M was decided on consent as reflected in the Myers J order. There was no justification for the husband bringing this issue back before the court.

The $105,000 payment is not part of the balance of relief

[50] The issue of the $105,000 payment to Mr. Gilbi was dealt with on consent in the order of Paisley J dated June 29, 2017. The money was released from the net sale proceeds to pay the loan from Mr. Gilbi on a without prejudice basis. Specifically, the parties have the right to argue that responsibility for the money should be allocated to the other. It was not agreed that the allocation issue would be decided on the return of the motion. This remaining issue should be determined at trial.

[51] The husband’s delay in dealing with payment of the loan caused the wife to incur legal expenses after which he finally agreed to have the loan repaid from the net proceeds without prejudice to deciding later how the monies would be characterized. Given the dispute about who is entitled to the remaining net proceeds, the characterization issue should be decided at trial with the benefit of full evidence.

The Balance of the Relief

[52] The balance of the relief consists of relatively minor matters.

[53] The husband seeks an order directing that the wife pay him $5K from the sale of the matrimonial home contents. This is an issue that must be decided at trial if not settled in advance. The evidence is conflicting. The wife states that they agreed to a division of the contents in the presence of a lawyer. The wife then sold her contents for $10K. The husband denies that they had an agreement and he seeks his 50% share of the sale proceeds.

[54] The husband seeks payment of $5K that he loaned the wife to make a down payment on her condominium. The wife does not dispute that the husband loaned her this money. She states that this debt should be offset against the husband’s obligations to her as determined at trial. Of note, spousal support was not agreed to until shortly before the hearing of this motion and the husband likely owes past spousal support. I accept the wife’s argument that this issue should be decided at trial.

[55] The husband loaned the wife $10,000 pursuant to a promissory note dated May 26, 2017. The wife needed this money to pay occupancy costs when she moved into the condominium. She states that the husband pressured and intimidated her into signing the promissory note. Like the $5K loan, the $10K loan is arguably spousal support. It is premature to be ordering repayment of a loan before the husband’s obligations to the wife are quantified at trial.

[56] In summary, the balance of the relief in the husband’s June notice of motion is dismissed.

Costs

[57] Rule 24 of Family Law Rules, O. Reg. 114/99 deals with costs. Rule 24(1) states that the successful party is presumed entitled to costs. The wife was successful on the motions and the husband was not. The wife is entitled to costs.

[58] Rule 24(11) of Family Law Rules states that in setting the amount of costs the court shall consider the following factors:

(11) A person setting the amount of costs shall consider;

(a) the importance, complexity or difficulty of the issues;

(b) the reasonableness or unreasonableness of each party's behaviour in the case;

(c) the lawyer's rates;

(d) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;

(e) expenses properly paid or payable; and

(f) any other relevant matter.

[59] In addition to considering the factors set out in Rule 24.(11), the court must take into account the principles articulated in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). The overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant. In deciding what is fair and reasonable, "the expectation of the parties concerning the quantum of a costs award is a relevant factor" (at para. 38).

[60] Finally, as the court stated in Serra v. Serra, 2009 ONCA 395 at para. 8 "[m]odern costs rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330, at para. 22."

[61] There have been three court attendances to deal with the husband’s June motion. Prior costs from the husband’s June motion have been reserved to the final hearing of this motion by two orders: Paisley J order dated June 29, 2017 and Myers J order dated July 17, 2017.

[62] Counsel’s Bill of Costs for the motion totals $21,467.18 on a full recovery basis. The wife seeks a cost order of $17,500 all inclusive.

[63] A significant cost award is justified for a number of reasons. The husband brought his motion before a case conference was held. This was contrary to Family Law Rule 14(4) that states: “No notice of motion or supporting evidence may be served and no motion may be heard before a conference dealing with the substantive issues in the case has been completed.”

[64] Family Law Rule 14(4.2) provides an exception if the court “is of the opinion that there is a situation of urgency or hardship or that a case conference is not required for some other reason in the interest of justice”. The husband’s motion should not have been brought prior to a case conference. The circumstances of his motion did not trigger any of the exceptions under Family Law Rule 14(4.2).

[65] As a result of the two consent orders, most of the relief in the June motion was settled. The husband unreasonably refused to recognize that it was only the “balance of the relief” that was before the court on December 12, 2017. He persisted in his argument that he should receive a $1M payment when the issue was dealt with on consent. As explained in these reasons, there was no justification for doing so. The parties should be focusing on moving this application forward instead of pursuing unnecessary motions.

[66] The issues were important to the wife. The fees and hours incurred by counsel are fair and the work was allocated to junior counsel when appropriate.

[67] I fix the wife’s costs at $12,000 all inclusive. This incudes that the costs that were reserved in the two court orders. In my view this is a fair and reasonable amount.

[68] This application must move forward so that it can be completed without further delay.

Conclusion

[69] In summary, I make the following orders:

(1) The applicant’s motion is dismissed.

(2) The applicant shall pay the respondent costs fixed at $12,000 all inclusive.

(3) No later than January 29, 2018, the parties shall agree on a timetable for moving this application forward. This timetable shall provide for a settlement conference before the end of 2018.

C. Horkins J.

Date: December 18, 2017