CITATION: Sullivan v. McCarthy, 2017 ONSC 94

COURT FILE NO.: F1697/10

DATE: 2017/01/04

ONTARIO

SUPERIOR COURT OF JUSTICE

FAMILY COURT

BETWEEN:

Lori Maureen Sullivan

Mr. K. Nathens, for the Applicant

Applicant

• and -

Christopher Edward McCarthy and Trisha McCarthy

Mr. J. Battin, for the Respondents

Respondents

HEARD: May 9, 10, 11, 12, 13, & 16, 2016

McSORLEY J.

Introduction:

[1] The matter before the court involved an amended application brought by Lori Sullivan for an order regarding various properties owned by the parties and proceeds of sale of those properties, spousal support, pre and post judgment interest and costs. In his answer, Mr. McCarthy asked that the applicant’s claims be dismissed; that income be imputed to the applicant for the years 2007 – 2010 in the amount of $30,000.00 U.S.; that the applicant pay child support for three children of the relationship based on her imputed income; and for costs.

Background

[2] The parties filed a statement of agreed facts at Tab 4 of the trial record. That statement sets out the following personal information:

• The applicant is 57 and the respondent is 62 years of age;

• There are three biological children of the relationship, Casey McCarthy and Ryan McCarthy, both born April 14, 1989 and Darcy McCarthy born July 10, 1990;

• The applicant had two children from a previous relationship, Kelly McCarthy, born August 26, 1980 and Aaron Sean McCarthy, born December 10, 1982;

• The two oldest children did not have a relationship with their biological father and the respondent treated those children as his own;

• All five children resided with the parties during the relationship, however all children are now independent;

• The child Casey is a quadriplegic, and lives in subsidized housing and has a disability income;

• The applicant lives in Havana, Florida; the respondent lives in Newfoundland/Labrador with his current wife Trisha McCarthy. Prior to moving to Newfoundland, the respondent operated his own law practice in Ontario.

[3] The statement of agreed facts also sets out information regarding the various properties owned by the parties, individually or with other persons. Some of the information set out below was taken from documents filed in the applicant’s document brief, Exhibit #4. Where the information has been taken from the document brief, the tab number of the document will be noted. The details regarding the properties of the parties is as follows:

Maria Street, Sarnia:

• When the parties met, the applicant had recently separated from her husband in May 1987.

• In December 1987, the applicant purchased a property located at 268 Maria Street, Sarnia. She paid $64,000.00 for the property, by way of a $16,000.00 down payment from accounts receivable related to work she had done for the seller of the property and a $48,000.00 mortgage.

• In September 1988, the applicant transferred the property to her father Larry Benedict Sullivan. The applicant continued to hold the beneficial interest in the Maria Street property.

• The Maria Street property was sold in 2007 for $94,500.00. The net proceeds of approximately $54,000.00 were paid to the applicant. In January 2009, the applicant lent the respondent $10,000.00, which was repaid to her in November 2009.

194 London Road, Sarnia (Sarnia property):

• On March 18, 1998, the respondent’s father, Joseph Edward McCarthy, signed a declaration of trust acknowledging that he held the property at 194 London Road, Sarnia in trust for the respondent as sole beneficiary.

• On March 26, 2010, the respondent sold the property for $132,500.00. Although the applicant agreed that the property should be sold, she did not agree to the sale price.

• The sum of $125,926.14 is held in the trust account of Mackenzie and Mackenzie Lawyers from the proceeds of sale of the Sarnia property. No interest has accumulated on these funds.

Newell Street, Sarnia:

• The purchase price of 1056 Newell Street, Sarnia was $120,000.00.

• The applicant’s father took a mortgage on the Maria Street property for $25,000.00 to use as a down payment on Newell Street and to pay purchase related expenses for the property.

• The balance of the purchase price for Newell Street was obtained by way of a mortgage in the amount of $100,980.00 held by Royal Trust.

• Legal title to the Newell Street property was in the respondent’s name only.

445 Sarnia Road, London (London property):

• The Sarnia Road property was purchased on August 20, 1999 for $208,000.00.

• The property was taken in the respondent’s father’s name.

• The down payment on the property was paid by the respondent’s father and was repaid to him when the Newell street property was sold.

• The family moved into the Sarnia Road property in the fall of 1999.

• On February 17, 2000, the respondent’s father signed a trust declaration stating that he held the Sarnia Road property solely in trust for the respondent.

• Tab 99: On August 13, 2009, (not 1989 or 1999 as set out in the statement of agreed facts) the parties entered into an Agreement and Undertaking.

• The parties agreed that Mr. McCarthy would remortgage the Sarnia Road property for $110,000.00 and use the money to discharge all mortgages, property taxes and liens on the Sarnia Road property and the London Road property and have the properties transferred to his name.

• Mr. McCarthy agreed not to encumber, mortgage, or lien either property, nor convey any interest and remain the sole legal beneficial owner of both properties until settlement or order of the court.

• Mr. McCarthy was also to actively maintain a listing for the London Road property. He was to negotiate a settlement of trust claims with Ms. Sullivan prior to December 15, 2009 or list the Sarnia Road property after necessary work was completed, which work was to be completed by December 15, 2009.

• Finally, the agreement said that if either property was sold, the proceeds were to be held in trust, pending further agreement or order of the court.

• On September 3, 2009, the respondent obtained a private mortgage from Heather and Tony Loedige in the amount of $110,000.00 that was secured against the Sarnia Road property.

• Tab 70: The respondent entered into an agreement of purchase and sale with Jason and Michael Sims to sell the Sarnia Road property for $350,000.00; the sale of the property was unknown to and not approved by the applicant.

• Tab 78: The agreement of purchase and sale dated August 28, 2010 between the respondent and Jason and Michael Sims showed a purchase price of $180,000.00.

• Tab 72: A second agreement of purchase and sale dated September 28, 2010, between the respondent and Jason and Michael Sims showed a purchase price of $ 350,000.00.

• After the sale was completed, $170,000.00 was paid to the respondent from the proceeds of sale and was deposited by him into his law firm trust account.

• On October 6, 2010, the respondent wrote a firm cheque in the amount of $170,000.00 to Absolute Real Estate Management Limited; the applicant was unaware of the respondent receiving the $170,000.00 or that he had paid $170,000.00 to Absolute Real Estate Management Limited and did not approve of this transaction. Absolute Real Estate Management was owned by Michael Sims.

• A further $60,928.16 was held in trust by the real estate lawyer on the respondent’s instructions for the respondent’s “upcoming purchase”; the hold back for the respondent’s purchase of another property was not approved by the applicant; and the hold back was contrary to the agreement and undertaking signed by the respondent.

Hibiscus Avenue, London:

• On October 8, 2010, the respondent and his current wife Trisha McCarthy purchased a property in joint tenancy located at 481 Hibiscus Avenue, London.

• The respondent used the $60,928.16 held back from the sale of the Sarnia Road property, along with a further $10,203.00 for the down payment on the Hibiscus Avenue property.

• The applicant had no knowledge of the respondent’s purchase of this property nor was she aware that the respondent used the $60,928.16 as part of the down payment.

• In November 2010, the applicant’s counsel wrote to the respondent requesting an accounting of the funds from the sale that was contrary to the agreement and undertaking signed.

• The respondent brought a motion to set aside the agreement and undertaking; on January 25, 2011, the respondent’s motion was dismissed and the respondent was ordered to pay to the applicant the sum of $6,475.13, forthwith; these costs had not been paid at the conclusion of the trial.

• On November 26, 2015, the Hibiscus Avenue home was sold for $322,500.00.

• It was agreed that Mr. Battin would hold the net proceeds of sale in the amount of $93,549.83, plus accumulated interest.

• March 10, 2014, the respondent entered into a consumer proposal.

• After the applicant placed a certificate of pending litigation on the Hibiscus Avenue property, CRA placed two liens on the property for a total amount of $63,254.00; CRA agreed to remove the liens on the agreement that the proceeds of sale be held in trust.

Spousal Support:

• The applicant attended the University of Western Ontario after the respondent finished law school and obtained her Bachelor of Fine Arts Degree.

• While attending Western, the applicant ran carpentry and metal fabrication shops and was hired full time when she completed her studies at Western.

• In 2009, the respondent’s income tax return showed gross earnings of $132,222.00, with net earnings showing at $33,473.00.

• In 2010, the respondent’s income tax return showed gross earnings of $184,000.00, with net earnings showing at $50,604.00.

• The respondent currently lives in Newfoundland where he is employed as a Crown attorney earning approximately $129,000.00 per year; his wife Trisha McCarthy is also a Crown attorney in Newfoundland earning similar income to the respondent.

Issues:

[4] The issues before the court are as follows:

a) What are the dates of cohabitation and separation;

b) Were the parties involved in a joint family venture;

c) Is the respondent entitled to a beneficial interest in the Maria Street property;

d) Is the applicant entitled to a beneficial interest in the Hibiscus Avenue property purchased by the respondent with his current wife, for which he used the sum of $60,928.16 from the proceeds of sale of the Sarnia Road property in London, contrary to the Agreement and Undertaking signed by him;

e) How should the proceeds of sale of the London Road property in Sarnia, Ontario and the Sarnia Road property in London, Ontario be divided; and should there be an unequal division of the monies held in trust due to the respondent’s failure to manage and care for the homes; failure to account for rental income; failure to account for the $170,000.00 he received from the proceeds of sale; and depletion of the value of the homes;

f) Is the respondent entitled to retroactive child support for the three youngest children of the parties’ relationship;

g) Is the applicant entitled to spousal support and, if so, in what amount; and

h) Does the applicant have priority over CRA regarding the proceeds of sale of the properties?

The Law:

[5] Both parties filed extensive case briefs. The case law from both parties will be considered with the issues to which the cases apply.

Issue A: What are the dates of cohabitation and separation?

[6] The parties disagreed on both of these dates. The applicant testified that the parties did not move in together until 1990 when they purchased the London Road property in Sarnia. She noted that she had separated from her prior spouse in the spring of 1987 and purchased the Maria Street property in 1987. She lived at Maria Street with her two older children.

[7] Ms. Sullivan testified that she met Mr. McCarthy in 1988 and that he often stayed with her but that he maintained his own residence. In closing arguments, she conceded that it was likely the parties moved in together after the twins were born in April 1989, because the father’s presence was required to assist with the children.

[8] The father agreed that the parties met in 1988 and that the applicant lived on Maria Street with her children and that he maintained his own residence for a time. His evidence was that by the end of the summer in 1988, he was living full time with the applicant.

[9] The applicant’s daughter Kelly was called by the mother to provide evidence. She indicated that the respondent had been her step dad since 1988. It is unlikely that a child would consider someone a step dad unless he was living with the family. Catherine Halsall also provided evidence on the point, indicating that Mr. McCarthy was living at the Maria Street home in the late summer or early fall of 1988.

[10] By the fall of 1988, the applicant was pregnant with the respondent’s children. The mother’s evidence that the parties did not live together until 1990 is not credible, when both her daughter and a neighbor testified that Mr. McCarthy was around all the time and had moved into the home. Therefore the court finds that the date of the commencement of cohabitation was September 1, 1988.

[11] With respect to the date of separation, the parties’ evidence was even more dissimilar, with the applicant claiming the separation occurred in July 2009 and the respondent claiming the separation occurred November 2006.

[12] The only case provided on the issue of date of separation was O’Brien v. O’Brien, 2013 CarswellOnt 12747, 2013 ONSC 5750, [2013] W.D.F.L. 5487. In that case the applicant husband claimed that the marriage ended after an argument about his attending the cottage of his stepson, who the respondent wife did not like. Mr. O’Brien claimed that during the argument he advised the wife that he did not wish to carry on in the marriage. The date claimed by the husband was May 20, 2008.

[13] The wife disagreed with that date claiming that the conversation did not take place. The parties continued to live in the matrimonial home after the May 2008 date. After May 2008, the husband paid the wife $1,500 per month to support her and pay her expenses. Little changed after May 2008 and the parties continued to share the same bed and live under the same roof.

[14] At paragraph 23 of the decision, McDermot J. indicated that there were none of the indicia of separation after May 2008 that is normally seen in such cases. In July 2008, Mr. O’Brien attended with Ms. O’Brien and her daughter for a family picture. The parties continued to celebrate birthdays and holidays together. Mr. O’Brien sent Mrs. O’Brien and her daughter on a Florida holiday in August 2009. The parties attended a production of the Nutcracker in December 2009. They continued to share a bed, but did not have sexual relations. According to Mr. O’Brien, the applicant did not vacate the bedroom until August or September 2011.

[15] Mr. O’Brien filed his income tax return for 2008 indicating he was married. He stated that this was on the advice of his accountant. The respondent’s daughter continued to reside in the home with her mother and the applicant until she was asked to leave in September 2010.

[16] Justice McDermot also found that the respondent wife was aware that the marriage was in trouble, if not over. She transferred her Toronto condominium to herself and her daughter in November 2008. Her explanation for making the transfer close to the date of separation proposed by the husband was found not to be credible.

[17] In August 2009, Mr. O’Brien met with legal counsel and a letter from legal counsel was sent to Ms. O’Brien that the marriage was over. Ms. O’Brien ignored the letters and emails that were sent to her. On September 8, 2010, Mr. O’Brien advised his wife that he wanted to remove Ms. O’Brien’s things from the home. Ms. O’Brien immediately hired a lawyer to deal with that issue.

[18] At paragraph 50 of the judgment, McDermot J. stated that often the decision to separate is not a mutual one. Once one party has decided to permanently separate and has acted on it, the other party has no ability to stop the process or object to it. Justice McDermot went on to discuss the various criteria that would indicate a separation, as summarized by Kelly J. in Lamantia v. Solarino, [2010] O.J. No. 2113 (Ont. S.C.J.), as follows:

a) physical separation often indicated by the spouses occupying separate bedrooms;

b) a withdrawal of one or both of the spouses from the matrimonial obligation with the intent of destroying the matrimonial consortium;

c) the absence of sexual relations (which is not conclusive but a factor to be considered);

d) the discussion of family problems and communication between the parties;

e) the presence or absence of joint social activities;

f) the meal pattern; and

g) the performance of household tasks.

[19] The court found that although Mr. O’Brien told his wife he wished to separate in May 2008, nothing in the marriage changed after that date. However several things changed after Mr. O’Brien saw a lawyer and had a letter delivered to her on October 15, 2009. After that, it was apparent that the husband had taken steps that were unequivocal and which would indicate to the outside world and to any reasonable person that the marriage was over. The court found that when the wife travelled to Australia for work, she was aware that Mr. O’Brien wished to terminate the marriage. The court held that the date of separation was October 15, 2009 because that was the date that Mr. O’Brien provided an unequivocal statement of his intention to separate.

[20] The evidence in the case before the court is very similar. There is no clear date of separation and the parties disagree on what the date should be. It is necessary therefore to examine the evidence, applying the indicia of separation set out above, to determine when the separation actually occurred.

[21] Both parties agreed that the applicant left London to attend school in Florida in August 2006. The applicant testified that she had supported the respondent during his time in law school and that after he completed law school, she wished to continue her own education. She attended the University of Western Ontario where she obtained a Bachelor of Fine Arts degree. She was then accepted to the School of Visual Arts and Dance at Florida State University in Tallahassee, Florida. Mr. McCarthy testified that either during the trip to Florida or while he was in Florida with Ms. Sullivan, he made the comment “that we would likely not be together in three months”.

[22] Mr. McCarthy also testified that after he returned to Canada, he and Ms. Sullivan were in daily contact by email or by telephone. He went to Florida to visit Ms. Sullivan in October 2006 and indicated that it was a nice weekend and they had no problems. If Mr. McCarthy’s evidence is accepted, the separation date was not in July 2006, because both of them were carrying on their relationship as before, from July to at least October 2006. The only difference in their relationship at that time was their physical separation. However, that physical separation had been undertaken for educational purposes, not with the intent of destroying the matrimonial consortium.

[23] According to the applicant, there were hundreds of emails between the parties about the properties and the finances of the family. The applicant provided a sampling of the types of emails that were exchanged between September 2006 and 2009. Some of those emails can be considered angry, as a result of the applicant becoming aware that the properties were not being managed properly. Even in the angry emails, there is no suggestion that the parties were separated; that their relationship was over; or that Mr. McCarthy was not prepared to talk to the applicant about their properties. When Ms. Sullivan complained that taxes and mortgage payments were not being paid, Mr. McCarthy responded by advising that the payments were continuing to be made by him and in one email at Tab 11 of the applicant’s document brief, dated December 28, 2006, Mr. McCarthy indicated that the applicant’s MasterCard balance would be paid within the week, by him.

[24] At Tab 10 of the applicant’s document brief, there is an email from Mr. McCarthy dated December 22, 2006. In it, Mr. McCarthy sets out information about refinancing of the Sarnia Road and London Road properties. At paragraph 3 of the email, he noted that a result of the remortgaging would be that “we get money from the estate”. He went on to say that the money would “go into a joint interest bearing savings account with both you and I on title and to sign. You would be able to access the account on line at any time.” He stated at paragraph 4 of the email that the “rent from London Road, after expenses of $150 per month for taxes and insurance, would be split in two. If we get $1350 per month, $1,200 gets split. One half to the savings account, the other to you as ongoing income.” (bolding added by the court)

[25] At paragraph 6, Mr. McCarthy stated: “The Sarnia Road rents would support this house. Surplus would go into the savings account.” At paragraph 7, he stated: “We would live off the Law practice, which you would be a partner in.” (bolding added by the court) Certainly, as of December 22, 2006, the conversations and planning for the properties support the fact that the parties were not yet separated. The very language used by Mr. McCarthy is indicative of a partnership between them.

[26] In January 2007, Ms. Sullivan sent an email to Mr. McCarthy, set out at Tab 9 of the applicant’s document brief. In it, Ms. Sullivan provided information about money she had sent to her father to repay him for property taxes that he had paid; talked about her classes, how the amount of funds available to her was cutting it very close and that she would not have enough for rent or materials, and finally talked about the weather in Florida. At the same tab, Mr. McCarthy responded by telling the applicant he would be sending $2,900 her way when he received payment on some accounts; talked about work that was needed on the properties; gave her access to two accounts he held, including the passwords, so that she could track money in and out of both of the accounts; told her he had apologized to her father for not paying the property taxes on Maria Street; and spoke about the weather and a water leak at the Sarnia Road property. He indicated that he was awfully tired, but had “miles to go before I can stop” and that he had “too many years to make up for.” At the end of the message, he wrote: “I miss you something awful. As usual, please call me if you have time and a mind to.”

[27] It is clear from this message that Mr. McCarthy was taking responsibility for the mistakes he had made managing the properties owned by the parties in response to the angry messages sent late in 2006. He apologized to Ms. Sullivan’s father and stated that he had “miles to go before he could stop” because “he had too many years to make up for”. He continued to say he missed Ms. Sullivan. If the relationship had ended, Mr. McCarthy would likely not be taking any steps to appease Ms. Sullivan or care about properties that were not in his name. He could have simply said something to the effect that we are separated, come and deal with these properties on your own. He did not do that.

[28] At Tab 8 of the document brief, Mr. McCarthy and his sister exchanged emails about the taxes owing in January 2007. When Mr. McCarthy’s sister suggested that he send the tax bill to her and it would be paid from the Estate account and subtracted from the amount owed to him, Mr. McCarthy declined to deal with the issue in this fashion. In deciding not to go along with the suggestion, Mr. McCarthy told his sister that: “I don’t want to especially lose her altogether, for whatever deep seated reason, and need to calm the immediate situations down with her being able to see what I am up to.” This would suggest that the respondent did not consider the relationship to be at an end. Again, had he believed that their relationship was over, he would have had no reason to take steps to ensure that the relationship continued.

[29] Tab 11 also contained an email from Mr. McCarthy to Ms. Sullivan, dated February 13, 2007. In it, he discussed items he was sending to her and told her he was proud of her and loved her “more than you can imagine”. He continued on, setting out the changes he was making to his life to enhance their relationship with “honesty, respect and a true partnership”. He went on to state that every time she trusted him with some aspect of the property management, it built his confidence. He promised to never “consciously hurt” her again and closed by telling her how much her phone calls meant to him and how much he missed her.

[30] On October 12, 2007, Mr. McCarthy wrote an email to Ms. Sullivan advising her about payments and deposits made with respect to the properties. This email is set out at Tab 100. He indicated that he hoped she was feeling a bit better; advised her to try to slow down a bit for a couple of days and then stated that he wished he was “there to care for you”. There appears to be no suggestion at this time that the parties are not continuing to operate as a couple in dealing with their properties and their intimate personal issues, such as health concerns.

[31] In an email from Ms. Sullivan dated October 30, 2008, also at Tab 11, Ms. Sullivan wrote to Mr. McCarthy and wished him a happy birthday. After giving her birthday wishes, Ms. Sullivan wrote: “I know that things are somewhat difficult between us, but there is one thing that will never change. I care about you and want good things for you”. She went on to state that she wished she “could be there, love, Moe”. In his response, Mr. McCarthy wrote: “things aren’t difficult between us, I don’t think. If you do, I’m in outer space.” The clear reading of these two messages shows that in October 2008, Ms. Sullivan was sending her love to Mr. McCarthy and wishing she could be with him on his birthday and Mr. McCarthy confirmed that there were no difficulties between the two of them. This email exchange supports the position that neither party had yet withdrawn from the relationship nor made an unequivocal statement of an intention to separate as of October 2008.

[32] On March 8, 2009, Ms. Sullivan wrote an email to Mr. McCarthy, set out at Tab 7, indicating that she had heard something on the news about a better way to finance a house. She noted that she had heard the information in the middle of the night and could not read her writing and asked him if it was something they should consider. Mr. McCarthy wrote back and explained the process that Ms. Sullivan was talking about. He explained the difference regarding how they were paying their mortgage and stated that “we only have 5.5 years left on that mortgage anyway …” He goes on to state that “So for us, currently anyway, this plan wouldn’t really help.” This email exchange supports the position that both parties continued to discuss their properties and how best to deal with saving or earning money related to those properties. (bolding added by the court)

[33] One month later, Ms. Sullivan attended the Sarnia Road home. An email at Tab 7, dated April 11, 2009 to Mr. McCarthy, indicated that she had told him she was coming home and could not figure out why he had been acting so oddly once given that information. Her message noted that it was after 5 a.m. and that she had sat at home all night waiting for him and wondering why he had not come home. She advised him that she had walked into a “drink fest” with the young adults being present with “lots of booze and kids – no adults”. She mentioned that two of them ran out the back door when they saw her coming up the front steps. She noted that they left Casey, “if not for me” by himself until their return at 3:30 – 4 a.m.

[34] While she was at the house, she found a bill for a dumpster while trying to find a piece of paper to take a message. She tried to check her email and Mr. McCarthy’s email popped up. It is clear from this message that this was the first time Ms. Sullivan was fully aware of the extent of Mr. McCarthy’s actions regarding the properties, credit cards and his father’s estate. If there was any response to that email, it was not filed. It seems clear that, where in the past, the main problems of the couple related to how the properties were being managed, by April 2011, Ms. Sullivan was learning for the first time that the situation was much worse than she had imagined and noted that Mr. McCarthy had been lying to her and others about her.

[35] In addition to the emails, there were family activities that continued. Ms. Sullivan travelled home to London often while she was attending school to continue work on the properties in Sarnia and London. Even in April 2009, she came home to the Sarnia Road property, a property she considered the family home and was waiting for Mr. McCarthy to come home. Until she found and read his emails, she had no idea why he was acting “oddly” nor why he was not present.

[36] The parties continued to sleep together in 2007 when they were working on the London Road, Sarnia, Ontario property. Mr. McCarthy travelled to Indiana with Ms. Sullivan in 2008 to look for properties with her, something that an estranged partner would have no interest in doing.

[37] In December 2008, the family attended Aaron’s wedding in Florida, followed by a family vacation to Disneyworld. The evidence was not disputed that the couple shared a motel room while there. The parties disagreed about whether they engaged in intimate relations while at the motel. However, there was no explanation given by Mr. McCarthy why he simply did not obtain a separate room, if in fact he and Ms. Sullivan were no longer a couple. It also begs the question why Ms. Sullivan would agree to share a room with him if they were not a couple. It is more likely that although they were having problems regarding the management of the properties while Ms. Sullivan attended school, they still considered themselves to be a couple at the time of Aaron’s wedding.

[38] In January 2009, Ms. Sullivan’s evidence was that she crawled into Mr. McCarthy’s bed and slept with him. His evidence was that he paced the room, but eventually slept in the same bed with Ms. Sullivan.

[39] The incident in April 2009 may have been a turning point, and seems to demonstrate that Mr. McCarthy was making a decision about ending the relationship. Before that, the couple had a difficult but continuing relationship. Between August 2006 and 2009, there was a physical separation of the parties, but it was necessitated by the educational pursuits of Ms. Sullivan to which Mr. McCarthy had acquiesced. They continued to see each other and sleep together when they were able to get together; they attended family functions and travelled together; they discussed their properties and the running of the households; their finances remained intermingled; and Ms. Sullivan came home and continued to work on the properties when she was not required to be in school or in her co-op program. They also continued to discuss the family problems. While April 2009, may well have been the beginning of the end, there was no unequivocal statement of an intention to separate at that time.

[40] That unequivocal ‘statement’ came in July 2009, when Ms. Sullivan, still believing that the parties were a couple and wanting to improve the condition of the family home, came to London to begin working. Mr. McCarthy’s evidence was that with the agreement of their sons, he locked her out of the home, by changing the locks. Not only did Mr. McCarthy include his three sons, 20 year old twins Ryan and Casey and 19 year old Darcy in this decision, he had them in his car watching their mother as she tried to enter the home. Such behavior was inappropriate and certainly should not have included the couple’s sons.

[41] Within one week of being locked out of the house without notice or explanation from Mr. McCarthy, Ms. Sullivan had engaged the services of a solicitor and began the process of attempting to reach an agreement on the various issues between herself and Mr. McCarthy.

[42] All of the evidence demonstrated that it was Ms. Sullivan who was the planner, organizer and administrator in the relationship. The court does not accept that Ms. Sullivan would have stood by aimlessly for years doing nothing if Mr. McCarthy had ended the relationship in 2006. The speed of her actions in July 2009, in obtaining counsel and contacting Mr. McCarthy immediately to resolve the issues created by the end of their relationship, was far more consistent with the person that Ms. Sullivan presented to the court. Mr. McCarthy in retrospect may have reached a conclusion that the relationship was doomed, but during the years 2006 to 2009, he did not behave in a manner consistent with a person who had ended a long term relationship.

[43] For all of these reasons, the court finds that the date that the unequivocal statement of intent to permanently end the relationship occurred on July 17, 2009.

Issue B: Were the parties involved in a joint family venture?

[44] At the commencement of trial, Ms. Sullivan indicated that one of the issues was whether the parties were involved in a joint family venture. In his pleadings, Mr. McCarthy requested that all of Ms. Sullivan’s claims be dismissed, thereby suggesting that she had no beneficial interest in the properties obtained during the relationship. Much evidence was provided about the properties that were purchased over the years; how the family finances were dealt with; what duties each of the parties undertook related to their family obligations during their relationship; and the ongoing discussions held between the parties regarding all issues related to their family. Two of their children gave evidence of the duties undertaken by each parent while they resided together in Sarnia and in London, including household chores, child care, and property maintenance, development and renovations.

[45] Ms. Sullivan filed a book of authorities on all of the issues before the court. The cases set out at tabs 3 to 6 of the applicant’s book of authorities deal with the concepts of constructive trust, resulting trust and joint family ventures.

[46] In Kerr v. Baranow, [2011] 1 S.C.R. 269, [2011] 1 R.C.S. 269, [2011] S.C.J. No. 10, [2011] A.C.S. No. 10, 2011 SCC 10, referred to by both parties, the Supreme Court of Canada discussed how the case of Becker v. Pettkus, 1980 CanLII 22 (SCC), 1980 CarswellOnt 299, 1980 CarswellOnt 644, [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257, 34 N.R. 384, 8 E.T.R. 143, 19 R.F.L. (2d) 165 (S.C.C.), was responsible for an important remedial feature of the Canadian law of unjust enrichment: the development of the remedial constructive trust. At paragraph 50 of the decision, the court stated:

Where the plaintiff can demonstrate a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, a share of the property proportionate to the unjust enrichment can be impressed with a constructive trust in his or her favour (Pettkus, at pp. 852 053; Sorochan, at p. 50). Pettkus made it clear that these principles apply equally to unmarried cohabitants, since “[t]he equitable principle on which the remedy of constructive trust rests is broad and general; its purpose is to prevent unjust enrichment in whatever circumstances it occurs”. (pp.850-51)

[47] At paragraph 81, the court noted that the basis of the unjust enrichment is the retention of an inappropriately disproportionate amount of wealth by one party when the parties have engaged in a joint family venture. Irrespective of the legal title of the properties, the parties in those circumstances are viewed as “creating wealth in a common enterprise that will assist in sustaining their relationship, their well-being and their family life. (McCamus, at p.366)” (Professor J.D. McCamus, The Law of Restitution (loose-leaf), vol. 1 at 4:200.30). The court went on to hold that:

The wealth created during the period of cohabitation will be treated as the fruit of their domestic and financial relationship, though not necessarily by the parties in equal measure. Since the spouses are domestic and financial partners, there is no need for “dueling quantum meruits”. In such cases, the unjust enrichment is understood to arise because the party who leaves the relationship with a disproportionate share of the wealth is denying to the claimant a reasonable share of the wealth accumulated in the course of the relationship through their joint efforts. The monetary award for unjust enrichment should be assessed by determining the proportionate contribution of the claimant to the accumulation of the wealth.

[48] There is no need for the court to assess in minute detail what each partner did during their cohabitation; it is sufficient that they were engaged in a joint family venture. It is also not to be presumed that the wealth acquired by mutual effort will be shared equally. However, where wealth is accumulated as a result of joint effort, as evidenced by the nature of the relationship and their dealings with each other, the law of unjust enrichment should reflect that reality.

[49] At paragraph 87, the court stated that in reviewing the evidence about how the parties actually lived their lives, it is helpful to consider the evidence “under four main headings: mutual effort, economic integration, actual intent and priority of the family”. This was found not to be an exhaustive list but a useful way to approach the “global analysis of the evidence” in determining if the parties formed a true partnership and jointly worked towards important goals.

[50] There is no real disagreement in the evidence that the parties made a mutual effort, working collaboratively together towards common goals. They raised five children together, one of whom was seriously disabled from birth. Both parents were intimately involved in his care; with the mother renovating their homes to create ramps and decks for Casey, and advocating for his physical, mental and emotional care at home, in school and in the community. The father did the cooking and was described by the applicant’s daughter, Kelly, as the “fun guy.” He was responsible for the more physical aspects of Casey’s care. The evidence of both adult children, Kelly and Ryan, created a picture of a couple raising their children, maintaining their home and working together.

[51] When Mr. McCarthy wished to attend law school, Ms. Sullivan supported that decision and rented out the properties in order to increase the disposable income available to the family. Ms. Sullivan did not complete her education until after Mr. McCarthy had finished law school. They discussed the requirement of Ms. Sullivan attending university in Florida to obtain her post graduate degree. In one of her emails, when faced with the knowledge that Mr. McCarthy was telling people that “she bolted” when she went to school, she reminded him how he had travelled with her and how much she had cried because she was going to be parted from him and the family. During the periods of their respective educations, the daily duties in the home changed, but the larger decisions regarding tenants, finances, bills, mortgage payments, other residence costs, and taxes, continued. Until 2009, neither one of the parties was solely responsible for all the decisions regarding the properties in Sarnia and London. It was only after Mr. McCarthy locked Ms. Sullivan out of the family home in London that they began to deal with the properties as a separated couple.

[52] Along with the mutual effort put into the relationship by both parties, it was very clear that their finances and that of the entire family were integrated until 2009. Many of the emails dealt with what bills were due, where the money was to come from to pay these bills and how to manage the properties in which they were both involved. There was evidence that Mr. McCarthy was moving money to ensure that Ms. Sullivan had sufficient funds to pay her bills. In one explanatory email, he discussed where the rent from two properties was going; how it was supporting the costs of the family, while producing savings that would be deposited to an account that both would have access to. Even during the period of time when the parties were having difficulties in their relationship, Mr. McCarthy made it clear that he was dealing with the household income and expenses for the benefit of both himself and Ms. Sullivan.

[53] There was also evidence of the intent of the parties regarding their property. When they purchased property, title was most often taken in the name(s) of one of their fathers. However, in each case, the title was held in trust for either Ms. Sullivan or Mr. McCarthy, depending on which father held title. Over and above the issue of registered title, however, the parties and the children lived in the homes, renovated the homes to meet the family’s need or to create better rental space and used the homes as their base of operations. The two properties where the intent of the parties might be questionable were the Maria Street property, Sarnia, Ontario, owned at the time the parties got together by Ms. Sullivan’s father for her benefit, and the Hibiscus Street property, London, Ontario purchased by Mr. McCarthy and his wife after the separation of the applicant and respondent. More will be said of this.

[54] The final category to be considered is whether and to what extent the parties gave priority to the family in their decision making. The evidence of the adult children were that both parents were present and active in their provision of care. The duties undertaken by each may not have been traditional, but both were active and involved in the care, maintenance and improvement to the properties and the care, guidance, education, medical treatment and emotional support necessary to raise five children. All of the children reached their adulthood with the love and support and guidance of both parents. Kelly and Aaron were self-sufficient at the time of the separation in July 2009. Ryan and Casey were 20 years old and Darcy was 19 years old in July 2009, and had moved out of the family home into their own residences by the end of the summer 2009.

[55] The parties were together for approximately 21 years. Like many married couples, they worked together; raised children; purchased property in which to live and altered such properties to meet the needs of the couple and the children and then to generate income; they had intermingled finances and made important decisions after discussing them together.

[56] There is no question that Ms. Sullivan and Mr. McCarthy were involved in a joint family venture during their relationship from 1988 to 2009. It is important to note that despite his pleadings, the respondent did not disagree that the parties were involved in a joint family venture. He acknowledged that Ms. Sullivan had an interest in some of the properties, and did not attempt to argue that she had no interest in any of them. The real disagreement related to the extent of Ms. Sullivan’s interest.

[57] Before determining Ms. Sullivan’s interest in the proceeds of sale of the two properties noted above, and Mr. McCarthy’s interest in the Maria Street property, it is necessary to set out the property position of the parties at the commencement of their relationship.

268 Maria Street, Sarnia

[58] In 1987, Ms. Sullivan purchased the property at 268 Maria Street, in Sarnia for $64,000.00 – Tab 38. The vendor of the property owed Ms. Sullivan $16,000.00 for work she had done, resulting in her needing the sum of $48,000.00 to complete the sale. Her undisputed evidence was that Mr. McCarthy put no money into the purchase of the Maria Street property.

[59] In 1988, the property was transferred by Ms. Sullivan to her father for the cost of the mortgage. Ms. Sullivan and her two older children continued to reside in the house and her father held the mortgage on it. Ms. Sullivan’s evidence was that she lived in the home with her children until October or November 1990, when it became a rental property. She testified that the house stayed in her father’s name; that she was able to continue to use the shop on the property; and that she and Mr. McCarthy handled all the rental business related to the house. She noted that most of the work was done on the house prior to her knowing Mr. McCarthy, but that when there was work to be done, he did step in to assist. It was Mr. McCarthy’s job to collect and bank the rental payments and/or pay the bills. It was Ms. Sullivan’s evidence that often Mr. McCarthy collected the rent but did not use the money to maintain the properties or pay bills.

194 London Road, Sarnia

[60] On October 31, 1990, the couple purchased 194 London Road, Sarnia for $110,000.00. Ms. Sullivan indicated that this property was purchased because the Maria Street property was too small for the family of seven. The property was registered in the name of the respondent’s father, Joseph Edward McCarthy, as trustee for the respondent. The court believes the registration was completed with Mr. McCarthy Sr. because there was a concern that Mr. McCarthy’s income of $24,000.00 per year would not support the cost of the mortgage, which was $75,000.00.

[61] Although the parties did not agree on the amount, they did agree that Ms. Sullivan put at least $25,000.00 in cash toward the purchase price of the London Road property. Ms. Sullivan testified that she put $35,000.00 using all of the money she had. There was an issue about Mr. McCarthy’s mother’s real estate commission. Ms. Sullivan testified that the respondent’s mother had agreed to contribute the real estate commission to the purchase price of the house, but did not do so. Mr. McCarthy stated that his mother did donate about $10,000.00 in real estate commission.

[62] It is unclear whether Mr. McCarthy’s mother was the real estate agent on the purchase. Generally, the real estate commission is not shown in the purchase price on the transfer documents. The commission is calculated as a percentage of the purchase price and is added to the closing costs. If Mrs. McCarthy was the real estate agent and donated her real estate commission, she would do so by forgoing payment of her commission by the purchasers. While her generosity would benefit the purchasers, her son and Ms. Sullivan, it would not affect the actual purchase price shown on the transfer documents. If Mrs. McCarthy was not the real estate agent on the deal and had offered to give the couple $10,000.00 to cover the commission, that money again would not be applied to the $110,000.00 purchase price set out on the transfer documents.

[63] In his answer, Mr. McCarthy admitted that he put no money into the purchase of the London Road property and that Ms. Sullivan had put up at least $25,000.00 as a down payment. In final argument, Ms. Sullivan submitted that she had put up at least $25,000.00 for the down payment. Without further documentation showing the monetary contribution of each of the parties, the court accepts that Ms. Sullivan paid $25,000.00 in cash toward the down payment of the London Road property.

[64] Ms. Sullivan filed a list of renovations and work that was done on the London Road property. In her evidence she testified that she did most of the work herself or led the work –Tab 60. Ms. Sullivan noted that they created an apartment in the basement that was rented out. Tab 62 shows drawings and plans for decking and ramps. Her document brief contains pictures at Tab 64, including shots of the front decks that she said she designed and built, along with other work she did on the London Road home.

[65] Ms. Sullivan created a castle play yard for the children while at London Road, Sarnia. Filed at Tab 63 was a newspaper article and picture of Ms. Sullivan holding one of her children and with several more on the structure behind her. Not only did her own children enjoy the play set, but many children in the neighbourhood did as well.

[66] Ms. Sullivan filed a letter dated June 12, 2002 from Dennis Halsall, of Mutual Property Management Services, in which he confirms that his firm had hired Ms. Sullivan to do designing and planning of extensive projects in all areas of construction and landscape work. He went on to say that the company found her expertise and ability to effectively and efficiently carry out any project over and above the norm, and highly recommended her for any building project.

[67] It was clear from the evidence that Ms. Sullivan was the planner and most often carried out the renovating and building work that needed to be done. Mr. McCarthy also worked on projects in and around the property, but he was working outside the home every day and as such much of the work fell to Ms. Sullivan. Fortunately, she possessed both the talent and ability to follow through with her projects, which benefitted the family.

Newell Street, Sarnia property and 445 Sarnia Road, London

[68] In November 1992, the parties purchased property on Newell Street in Sarnia for $120,000.00. $25,000.00 was provided by Ms. Sullivan for the down payment of the property. To obtain this money, she had her father remortgage the Maria Street home and provide the cash to Ms. Sullivan. The property was registered in the respondent’s name alone, for reasons that were not explained to the court. The mortgage on the home was guaranteed by Ms. Sullivan and Ms. Sullivan’s father.

[69] In August 1999, the parties purchased the property on Sarnia Road in London for $208,000.00. Title was held by Mr. McCarthy’s father as trustee. The down payment on this home was obtained from Mr. McCarthy Sr. When the Newell Street property sold on November 12, 1999, Mr. McCarthy Sr. was repaid the amount of the down payment that he had provided. Ms. Sullivan’s evidence was that she did substantial work on the Sarnia Road property, creating rooms and apartments that could be rented to students. Sarnia Road in London is a main east/west street that ends at Western Road, where Western University is located. The location made it a perfect spot to provide student housing.

[70] Although there were many persons involved in several transactions, it was clear that the seed money for the purchase of the London Road property in Sarnia and down payment of the Newell Street property in Sarnia came from Ms. Sullivan. Although the down payment on Sarnia Road came from Mr. McCarthy Sr., he was repaid immediately upon the sale of Newell Road. As such, the purchase of the Sarnia Road property in London was possible because of the sale of the Newell Street property. Without Ms. Sullivan’s initial contributions, the parties may not have been able to purchase any property.

[71] As of the end of 1999, the parties held interests in the following properties:

a) Maria Street, Sarnia held in the name of Ms. Sullivan’s father;

b) London Road, Sarnia held in trust by Mr. McCarthy’s father; and

c) Sarnia Road, London held by Mr. McCarthy’s father.

[72] The parties continued to live together with their children at the Sarnia Road property in London. In the summer of 2009, the boys were still living in the home, but making arrangements to find their own living accommodations, which they did by the end of the summer 2009.

Issue C: Is the respondent entitled to a beneficial interest in the Maria Street, Sarnia property?

[73] The Maria Street property was always held by Ms. Sullivan or her father in trust for her. She and her two older children were living there when she met Mr. McCarthy. The court has found that the parties started living together as of September 1988. They remained in that home until moving to 194 London Road, Sarnia in November 1990.

[74] The evidence of Ms. Sullivan was that the parties had always agreed that Mr. McCarthy had no beneficial interest in the Maria Street property because Ms. Sullivan had purchased it prior to knowing the respondent. The respondent made no claim to the Maria Street property or for a division of any of the property in his Answer. However, in his closing arguments, he submitted that one half of the proceeds of sale of the Maria Street property should be credited to him because he contributed to the renovations of that home. He provided no evidence of work or money he put into the Maria Street home, other than the household expenses that he would have been paying for himself and his children in any event because they were living together.

[75] If a litigant makes a claim, the nature of the relief requested must be specified. The other litigant(s) must know the case they are required to meet. Without such a pleading a litigant answering the claim has no knowledge that such a request is being made at trial and does not prepare for nor call any evidence on that point. That was the situation Ms. Sullivan found herself in at trial. Mr. McCarthy never sought to amend his answer to include a claim for a beneficial interest in the Maria Street property. The application was first issued in October 2010. Mr. McCarthy filed his Answer in January 2011. The trial did not commence until May 2016. There certainly was sufficient time for Mr. McCarthy to seek permission to amend his Answer. He chose not to do so. This last minute claim was directed more at reducing the amount of money Ms. Sullivan should be paid, rather than any real belief that he had an interest in the property.

[76] Further, Mr. McCarthy did benefit from the Maria Street home as follows: from the rents that went towards the family’s living expenses; the down payments that were applied to other properties and the payment for renovations done by Ms. Sullivan on the London Road home in 2007.

[77] Since a claim for a beneficial interest in the Maria Street property was not made by Mr. McCarthy until the end of the trial, there will be no consideration of the proceeds of sale from the Maria Street home in determining what share of the proceeds currently held in trust will be provided to each party.

194 London Road, Sarnia

[78] This property was purchased in October 1990 in Mr. McCarthy’s father’s name as trustee for Mr. McCarthy. The family lived there from November 1990 until November 1992 when the family bought and moved to Newell Street, in Sarnia. Mr. McCarthy Sr. continued to hold the property in trust for Mr. McCarthy. After the family moved from the home in 1992, the property was supposed to be rented to generate income for the family. According to Ms. Sullivan, it was Mr. McCarthy’s job to collect rents and manage the properties. This was especially true after Ms. Sullivan travelled to Florida for her post graduate degree.

[79] During the time that Ms. Sullivan was in Florida, Mr. McCarthy was not diligent regarding renting the property, caring for and managing the property or ensuring that rent was paid. He kept that information from Ms. Sullivan.

[80] Mr. McCarthy testified about his management of the London Road, Sarnia property while Ms. Sullivan was in Florida. Initially, he found five people who wanted to rent the house for a year. They remained for the first year, but one by one, each of them moved out. The house was vacant for a while. He then said that Jim Brody and his family rented the home, however they were evicted for non-payment of rent and the house was once again empty.

[81] Mr. Jim Wilson was allowed by Mr. McCarthy to rent a basement apartment at 194 London Road, Sarnia from 1998 to 2010. Mr. McCarthy testified that the tenancy grew from a friendship between himself and Mr. Wilson. The agreement was that Mr. Wilson would pay $400 per month, inclusive of utilities. Mr. McCarthy testified that when Mr. Wilson slipped into arrears, he took no steps to attempt to collect the rent, nor did he evict Mr. Wilson from the home.

[82] According to a letter from Mr. Wilson at Tab 5, Mr. Wilson noted that Mr. McCarthy advised him not to mention the rent issue to Ms. Sullivan and that the issue was between himself and Mr. Wilson only. Mr. Wilson also noted that even when he offered to pay utilities, Mr. McCarthy insisted on doing so himself.

[83] Mr. Wilson was present at the London Road property when Ms. Sullivan returned home for the summer of 2007. He noted that when he advised Ms. Sullivan about his rent and utility arrears, she was surprised and claimed to know nothing about it. According to him, Ms. Sullivan worked on the London Road property throughout the summer of 2007.

[84] Ms. Sullivan testified that she discovered major problems with the state of both homes in Sarnia and London. She indicated that Mr. McCarthy had told her he had completed work on the home, but in fact had not done much to put it in a condition to rent. Ms. Sullivan provided pictures taken by her in the summer of 2007 showing the damage to the home and the work that had not yet been done – Tab 64. She testified that she took over the work and performed much of it herself. Tab 64 also contained pictures of the home after renovations had been done. Once the repairs and renovations were completed, the home was “beautiful” according to Mr. McCarthy.

[85] Ms. Sullivan testified that the money for the repairs came out of the rent money collected on the Sarnia Road property in London and also from her proceeds of sale of Maria Street. The Maria Street property was sold in 2007. The net proceeds of $54,000.00 were paid entirely to the applicant. In January 2009, the respondent was lent $10,000.00 from the proceeds of sale of Maria Street (another indication that the parties were not yet separated) and repaid that loan in November 2009.

[86] Mr. McCarthy testified that after the home was cleaned up and renovated, Ms. Sullivan insisted the home be listed for sale, and had it listed with ComFree. Mr. McCarthy believed that they needed a real estate agent and went on to say that in the fall of 2007 the house had been listed with an agent. He added that in the spring of 2008 or 2009, the house was listed with Herman Rohrbacher, although he could not provide copies of any listing agreements. He testified that he did not think of renting the home while it was listed because they did not want to risk more damage. He further indicated that they were no longer in the business of renting anymore and simply wanted to “off load” the property. As a result, the home sat vacant for several years, earning no income for the family.

[87] Mr. McCarthy admitted that he did not visit the property. He admitted that he had been a property manager employed by his father for approximately 10 years in the 1980s. Yet he stated that it was not part of the job of property manager to visit the property. He kept no record books of rents and expenses of the homes. He noted that he was often paid in cash. While this might have been true of a property manager who was employed by a company who owned several rental buildings for which one was paid to find tenants, collect rents, and nothing more, this is not true of a situation where you and your partner own a beneficial interest in the property and its condition and ability to generate income affects your entire family. In the latter case, Mr. McCarthy was not a property manager but a landlord who had a vested interest in maintaining the homes in good condition and renting as much of the properties as he was able.

[88] The London Road, Sarnia home remained held by Mr. McCarthy Sr. until his death. The property was transferred on September 16, 2009 from Mr. McCarthy Sr. to his estate trustees, Julie McCarthy (respondent’s sister) and James McCarthy. On that same date, the estate trustees transferred the property to Christopher McCarthy for no consideration – Tabs 56 and 57.

[89] On March 26, 2010, Mr. McCarthy sold the property at 194 London Road, Sarnia for $132,500.00 – Tab 55. As noted there were property tax arrears in the amount of $4,077.91. There was a suggestion that the 2nd mortgage with RBC had to be paid and a request that Mr. McCarthy be reimbursed for the legal fees in having the properties transferred from his father’s name to his own. It was pointed out that the taxes owing should have been paid, at least in part; and that the 2nd mortgage had been paid by Mr. Carrier in September 2009 from the new mortgage. The taxes were paid and it was agreed that the balance of $125,926.14 would be held in trust and not distributed until there was an agreement or court order.

[90] Despite owning the property for almost 20 years, Mr. McCarthy and Ms. Sullivan realized a profit of only $22,500.00.

445 Sarnia Road, London

[91] 445 Sarnia Road, London was purchased in Mr. McCarthy Sr.’s name in August 1999. The family moved to that property, did a lot of renovation work to accommodate Casey’s confinement to a wheelchair and create rentable space. It continued to be the family home until separation. In addition to being the family home, it was also an income producing home with rooms being rented to students.

[92] Kelly McCarthy testified that when they moved to Sarnia Road, London, “that house was full of students”.

[93] She stated that after the double cohort year in 2003,[^1] her parents fought a lot because Ms. Sullivan did not feel that Mr. McCarthy was advertising the rental rooms enough. Ms. Kelly McCarthy testified that her mother was the ideas person and Mr. McCarthy was supposed to follow through. She noted that most of the ads were online and she did not see the ads very often. Ms. McCarthy stated that her boyfriend at the time was looking for a place to live and there was nothing advertised online or in the university newspaper about vacancies at 445 Sarnia Road, London. She then stated that there was “nothing about our home and we needed tenants”. This statement illustrated that even the children of this relationship knew that the family’s financial welfare depended on the generation of rental income. She went on to say that when she visited the home in 2003 and 2004, she could see there were no tenants. She noted that her father’s friend Tom had moved in and that a tenant named Jay Humber moved in. Otherwise the first floor was empty and the upper floor had only a few tenants.

[94] Mr. McCarthy appeared to take a laissez-faire attitude to renting the homes. People moved in and out at will; they stayed without paying rent; they reported no damages that occurred while they were present in the home; and Mr. McCarthy did not care enough about the homes to visit them regularly to determine their condition. These homes were supposed to generate income for the parties, a necessity especially while Ms. Sullivan was in Florida. She testified that she viewed these properties as their retirement fund and that she certainly would never have spent the kind of money, energy and work on the properties just to have them neglected and lost to a low sale price. The mismanagement of both properties by Mr. McCarthy led to the financial difficulties the parties found themselves in following separation and continuing at the time of trial.

[95] The property on Sarnia Road, London continued to be held by Mr. McCarthy Sr. until his death. Again, on September 16, 2009, Julie McCarthy transferred the property to Christopher McCarthy – Tabs 67 and 68. At tab 69 a mortgage was registered against the Sarnia Road property, pursuant to an agreement reached by the parties, set out below.

[96] As noted earlier in this judgment, Mr. McCarthy locked Ms. Sullivan out of the family home on Sarnia Road in London in July 2009. She immediately hired a lawyer to deal with the property issues. The parties attempted mediation but were unable to resolve the majority of their issues. On August 13, 2009 the parties entered into an agreement “to effect the orderly transfer of Title of the two remaining properties[^2] in question from the estate of Joseph Edward McCarthy to Christopher McCarthy, pursuant to two trust agreements” – Tab 99. The parties agreed:

1. That the respondent would remortgage 445 Sarnia Road, London in the amount of $110,000.00; pay all mortgages, property taxes and liens that existed on the date of remortgaging on both the Sarnia Road property and the London Road property, in exchange for the transfer of both properties from the estate of Edward McCarthy to Christopher McCarthy;

2. That the respondent would not encumber, mortgage or lien either property, nor convey any interest in them and would remain the sole legal and beneficial owner of both properties until settlement of the issues or order of the court;

3. The respondent would actively maintain the listing for sale of 194 London Road, Sarnia. He would either negotiate a settlement of the trust claims with Ms. Sullivan prior to December 15, 2009 or list the property at 445 Sarnia Road, London, following work that was necessary on that property, which work was to be done by December 15, 2009;

4. If either property was sold the net proceeds were to be held in trust by Mackenzie and Mackenzie, pending further agreement of the parties or Order of the court.

[97] There was a great deal of argument over what Mr. McCarthy was entitled to do with the properties. In paragraph 2, he agreed not to encumber, mortgage, lien or convey any interest in them. He was to remain the sole and beneficial owner of both properties. However, paragraph 1 required him to remortgage one of the homes and pay all taxes, liens, etc. on both properties and have them transferred to his name. Paragraph 3 required him to maintain the listing agreement that was already in place for the sale of 194 London Road, Sarnia and if he had not settled the trust issues with Ms. Sullivan prior to December 15, 2009, he was to list the house located at 445 Sarnia Road, London as well.

[98] In reading these three sections together, it is clear that Mr. McCarthy was to repay the money his father put into the properties with the remortgaging of 445 Sarnia Road, and have the title transferred to him. He obtained a mortgage from Tony and Heather Loedige and had that mortgage/charge registered on title on the same day that both properties were transferred from his father’s estate into his name – Tabs 67-69. On that same date, 194 London Road, Sarnia was transferred to his name – Tab 56.

[99] With the $110,000.00 in mortgage funds, Mr. McCarthy was to pay all mortgages, taxes and liens on the properties. According to Tab 61, the following was paid with that money:

Item	Amount
Lender’s fee and interest adjustment:	$2,215.75
Discharge 1st mortgage – CIBC:	$84,189.49
Discharge 2nd mortgage – RBC:	$14,237.23
1st mortgage brokerage fees to Pace Mortgage:	$3,500.00
Title insurance:	$268.92
Francis De Sena:	$613.50
Treasurer of London:	$1,942.09
Legal fees and disbursements:	$1,395.33
Total:	$108,362.31
Balance paid to Chris McCarthy:	$1,637.69

[100] When the balance of $1,637.69 is included in the calculations, the total paid out by Mr. Carriere was $110,000.00. There was no explanation why Mr. McCarthy took the balance of the funds. Certainly, there continued to be household bills that had not been paid off. For example, when the London Road, Sarnia house sold in March 2010, the City of Sarnia was owed $4,077.01. It is unlikely that all of this amount accumulated between September 2009, when Mr. McCarthy obtained the remortgaging funds, and March 2010, when the home was sold.

[101] The City of Sarnia sent Mr. McCarthy a notice of property tax arrears, filed by Ms. Sullivan at Tab 61. That statement showed arrears of taxes on 194 London Road, Sarnia for the years 2007 and prior, 2008 and 2009. Mr. McCarthy was ‘managing’ that house and would have known that he had not paid the taxes.

[102] The Agreement signed in August 2009 clearly stated that all taxes on both properties were to be paid. Although the balance of $1,637.69 would not have paid the entire amount of taxes owing, it would have reduced them. Upon sale of the home, there would have been an additional $1,637.69 available for division had Mr. McCarthy not ‘pocketed’ that money. His evidence was that there was nothing written that said he could not have it. However, he completely ignored the details set out in the Agreement. Mr. McCarthy should have given Mr. Carriere instructions to pay the balance to whatever taxes were owing at the time, as required by the agreement

[103] Although Ms. Sullivan tried to suggest in her cross examination of Mr. McCarthy that paragraph 2 of the agreement prevented him from listing the properties for sale, the balance of the agreement in paragraphs 3 and 4 set out the very mechanism for listing the properties and by what date. Had Mr. McCarthy listed both houses for sale, sold them and had all of the money held in trust, this trial would have been considerably shorter and far less confusing. The real problems occurred after the properties were sold.

[104] Mr. McCarthy brought a motion to set aside the Agreement of August 2009, which was heard in January 2011. The motion was dismissed and Mr. McCarthy was ordered to pay costs of the motion to the applicant.

[105] Although Ms. Sullivan intended to remedy the damages to the property on Sarnia Road, London, much as she had done two years earlier in 2007 for the London Road property in Sarnia, she was stopped from doing so when Mr. McCarthy locked her out of the home in July 2009. Although Mr. McCarthy indicated that he intended to make repairs to the home, he never, in fact, did so.

[106] Mr. Jason Sims was called by Mr. McCarthy. Mr. Sims is a real estate broker. Mr. Sims stated that he owns a lot of properties in London. He testified that he drove around looking for homes that had unshovelled driveways and uncut lawns. When he found property in unkempt condition, he assumed that no one was living at the property. He noted that a client of his had told him about the property on Sarnia Road, London and stated that no one was living there. He said he walked around the property and called Mr. McCarthy.

[107] When Mr. McCarthy arrived, Mr. Sims went through the home. He called it a “horror house.” He testified that he offered Mr. McCarthy approximately $160,000.00 for the house. He then said that he and Mr. McCarthy negotiated back and forth and agreed on the purchase price of $180,000.00. Mr. Sims stated that he felt the amount was too high considering the work that needed to be done, but he felt that he could make a profit on the house once it was fixed up. Mr. Sims made the offer at $180,000.00, on August 28, 2010, filed at Tab 5K of the respondent’s document brief, Exhibit #10. That offer was conditional on financing.

[108] Mr. Sims then stated that he could not get the financing he needed to buy the house due to its condition. He believed that the renovations would cost approximately $100,000.00. On September 28, 2010, Mr. Sims made a new offer set out at Tab 5L of Exhibit #10. The new offer was for $350,000.00 with Mr. McCarthy agreeing to pay $170,000.00 for the needed renovations.

[109] To that end, Mr. McCarthy signed an irrevocable direction to the lawyers acting for the purchasers and sellers, directing that he would pay to Absolute Real Estate Management Ltd. the sum of “One Hundred and Seventy Thousand Dollars ($170,000.00) to compensate it for the renovations completed to the property” (emphasis mine). Mr. Sims stated that his father owned Absolute Real Estate Management Ltd. Mr. Sims testified that after the sale occurred on October 5, 2010, a cheque was given to the company in the amount of $170,000.00, none of which was returned to Mr. McCarthy.

[110] Mr. Sims admitted that the renovations were not completed on the date that the direction was signed by Mr. McCarthy. Mr. Sims indicated that a new roof was put on the home; that he took down a lot of drywall and insulation; filled in an interior pool; rewired it; cut down trees, redid the plumbing and drywall; painted the exterior including soffit and trim; and roughed in the bathroom on the second floor.

[111] Mr. Sims admitted that the renovations were never completed. He estimated the cost of the renovations, but had no quotes or bills for any renovation work and admitted that he had no proof that the renovations cost $170,000.00. There was no evidence that $170,000.00 of renovations were done to the home. A year later the home was sold by Mr. Sims for $350,000.00.

[112] The statement of adjustments at Tab 5N of Exhibit #10 showed the sale price from Mr. McCarthy to Jason Sims for $350,000.00. The vendor, Mr. McCarthy, was given credit for payment of the outstanding taxes for 2010 in the amount of $4,911.95 less his share of $3,936.72, for a balance being paid to Robert G. Carrier, in trust, in the amount of $350,263.85.

[113] At Tab 5P of Exhibit #10, Mr. Carrier’s trust account ledger of October 5, 2010 shows a payment of $170,000.00 to Mr. McCarthy. At Tab 5T of Exhibit #10, the amount of $170,000.00 was deposited to Mr. McCarthy’s law practice trust account. On that same date a certified cheque in the amount of $170,000.00 was made payable to Absolute Real Estate Management. He admitted that using his law firm trust account was contrary to Law Society Rules, but rationalized his actions by saying that in his mind the account was not being used as an active trust account.

[114] Although many of the circumstances surrounding the sale of 445 Sarnia Road, London were questionable, it appears that Mr. McCarthy only received $180,000.00 for the home. It is very likely that the value of the home had diminished due to Mr. McCarthy’s lack of maintenance and care, and due to his desire to “dump” the property so that he could move on with his life, but the court is unable to find that he and Mr. Sims worked out a deal to cheat Ms. Sullivan out of $170,000.00. The financial wrangling was designed to obtain more money from the bank than the bank would have been prepared to provide having regard to the condition of the house.

Issue D: Is the applicant entitled to a beneficial interest in the Hibiscus Avenue property?

[115] There can be no answer to this question other than yes.

[116] Mr. McCarthy and his wife had no ability to raise the amount of cash needed for the down payment on the Hibiscus home. He and his wife were able to raise only $10,203.94. Mr. McCarthy’s friends, Heather and Tony Loedige, provided a mortgage in the amount of $219,850. Mr. McCarthy knew at the time of sale of the Sarnia Road property he would need some cash to put down on the new home. He knew that when he directed Mr. Carrier to hold back $60,928.85 from the proceeds of sale of the Sarnia Road property for the upcoming purchase of the Hibiscus Street property. Mr. McCarthy was also well aware that all monies from the sale of the property in Sarnia and the property in London were to be held in trust pending an agreement or court order.

[117] But as with many things, Mr. McCarthy did not believe the rules applied to him. As a landlord, he felt no obligation to rent his properties, maintain the property, or pay property taxes. As a lawyer, her knew the rules about trust accounts, but ignored them. As a lawyer, he knew what an agreement and undertaking were and what details were contained therein. He knew he was not entitled to use money from the sale of either of the properties until the parties had resolved the issues between them or the court had made an order. Yet, he not only pocketed $1,637.69 from the London Road property, he directed his real estate lawyer to hold back any profit from the Sarnia Road sale for his use on a new home with his wife.

[118] Had Mr. McCarthy left the proceeds of sale where he had agreed to leave them, the court would not have had to even deal with the Hibiscus Avenue home. He and his wife would have been free to sell the home and use whatever profits arose from it for their benefit. But without Ms. Sullivan’s involuntary contribution to the down payment, Mr. and Mrs. McCarthy would have had no home to sell. The McCarthys owned the home for five years. In that time, a profit in excess of $31,400 was achieved.

Issue E: How should the proceeds of sale of the London Road, Sarnia Road and Hibiscus Avenue home be divided; and should there be an unequal interest awarded to Ms. Sullivan due to Mr. McCarthy’s actions in dealing with the properties?

[119] There is no doubt that the condition of the properties deteriorated due to the respondent’s mismanagement. In 2007, Ms. Sullivan returned to London and spent months repairing the damage to the London Road house in Sarnia. When she was finished, the house was restored to a marketable property. It is unfortunate that Mr. McCarthy did not follow up on selling that property so that it did not continue to cost the couple money and so that it would sell at a good price.

[120] It is likely that if Ms. Sullivan had not been locked out of the Sarnia Road home in early July 2009, she could have put that house back in a marketable condition. Mr. McCarthy indicated he would do the repairs, but he did not. Mr. Sims bought the home at a reduced price with the intention of repairing the damage and selling it. He did not make many of the necessary repairs; could not produce receipts for any work that was done; waited a year and then sold it for $350,000.00. It appears that the home did not need to be fully renovated to bring in an interested buyer offering significantly more than Mr. McCarthy accepted.

[121] It would be easy to heap all of the blame on Mr. McCarthy. However, the court is cognizant of the fact that Ms. Sullivan left the country for a significant period of time, albeit with the consent and blessing of Mr. McCarthy. Ms. Sullivan’s evidence was clear that she was the planner, organizer and “ideas” partner in the relationship. Mr. McCarthy appeared to try to do whatever Ms. Sullivan told him to do. In 2006, when Ms. Sullivan learned that the house in Sarnia was empty and the taxes had not been paid, she suggested that money be taken from their savings account to pay the taxes. She then learned that there was no money in the savings account either. She testified that she was shocked and that she was unaware of the problems and the complete lack of funds. She then stated: “he was to have some accountability training”. She stated that she paid as much of the tax bill as she could and he was to get the home renovated and fixed within four months. She indicated she then went back to school without funds and had to get an extra job at the school in order to stay afloat.

[122] Mr. McCarthy’s track record of keeping things afloat was not good. He ended his legal practice. He did not pay HST on his billings and owes CRA a great deal of money. He let the house in Sarnia go to ruin, never visiting the property to determine if it was in satisfactory condition; he did not work hard at finding tenants or keeping them. Those who did rent from him were often in arrears of rent and he let them stay.

[123] When Ms. Sullivan returned in the summer of 2007, she did all the work necessary to put the home in marketable condition. The court assumes this is the same work that Mr. McCarthy had been told to do within four months the previous year. By this time, Ms. Sullivan should have been aware that Mr. McCarthy either could not manage the properties adequately to maintain them and produce an income from them or that he had no interest in doing so. Before leaving again, she should have questioned what would happen in her absence and put measures in place to be advised of negative changes to the property. Her father lived in Sarnia and she had friends in Sarnia. She could have asked someone to do a bi-weekly check on the property and report to her if there were any problems. Instead she relied on Mr. McCarthy to continue to do as she asked, despite the clear evidence that he was not doing so any longer.

[124] She left the area again after she was locked out of the Sarnia Road home in London, thereby allowing Mr. McCarthy to carry on as he had been doing for almost two years. She had completed her schooling and was not employed. Had she stayed past the end of the year, she might have been able to manage the renovations and the listings in order to get a better price than the one accepted by Mr. McCarthy. Had she stayed, Mr. McCarthy might have been happy to have her doing all the work on the properties and not have to worry about them anymore.

[125] By this time the relationship was truly ended, and Mr. McCarthy did what he liked and was no longer listening to what Ms. Sullivan told him to do. The court had the sense that by the time the relationship ended, Mr. McCarthy was tired of everything to do with the relationship and had no interest in spending his time and energy taking care of property he no longer wanted. Having regard to Mr. McCarthy’s track record, the outcome seems almost inevitable.

[126] Some of the responsibility, therefore, must fall to Ms. Sullivan. When she returned in the summer of 2007, the work that Mr. McCarthy was supposed to do within four months had not been done. There were no tenants. It is difficult to understand why Ms. Sullivan thought things would get better when she returned to school in the fall of 2007. It would be unreasonable to suggest that Ms. Sullivan should have stayed home during the fall/winter term in order to get their houses back in order, but it was similarly unreasonable to expect Mr. McCarthy was going to do so, while working and still caring for the three younger boys.

[127] These parties were involved in a joint venture. It was a joint venture that did not turn out well for either of them, but both hold some responsibility for the outcome. Mr. McCarthy’s responsibility was to maintain and rent the properties for the benefit of the family. He failed to do that. Ms. Sullivan’s responsibility was to play a more active role in the management and maintenance of the properties, so that the downslide could be stopped before it was too late. If she was unable to travel to London on long weekends and during school breaks, she should have asked a reliable friend to check out the properties for her. With some current information and knowledge, she may have been able to make better decisions regarding the properties and stopped what Mr. McCarthy called the “bleeding of money”.

[128] There is no doubt that Ms. Sullivan is entitled to an equal sharing of the proceeds of sale of the Sarnia Road, London and London Road, Sarnia properties. She is also entitled to a share of the proceeds of the Hibiscus Avenue home. For the London Road and Sarnia Road properties, she provided cash for down payments or as a contribution to the down payment. She involuntarily contributed at least half of the down payment for the Hibiscus Avenue property, assuming Mr. McCarthy was also entitled to half of the money that was left over from the sale of the Sarnia Road property. She did more than half the work on the properties and was for many years a stay at home mom. She did not complete her education until after Mr. McCarthy finished his. Both parents contributed equally to the care and upbringing of the children, with Ms. Sullivan doing the lion’s share when the children were young and Mr. McCarthy taking over the lion’s share when the boys were teenagers.

[129] The court is not prepared to order an unequal division of the sale proceeds in favour of Ms. Sullivan. Both parties contributed to the success of the properties and both contributed to the failure of the properties. They each have a beneficial interest in the proceeds of sale that are currently being held in trust accounts.

[130] Ms. Sullivan urged the court to attribute a different value to the Sarnia Road property, asking that the amount of $300,000.00 be used. This submission was based on the fact that Mr. McCarthy valued the property at $260,000.00 in 2006 – Tab 102, with a tax value of $309,000.00. His added notes indicated that the property could be worth more than $309,000. He noted that the equity could be in excess of $200,000.00. Ms. Sullivan also submitted that Mr. McCarthy simply wanted to get rid of the property so that he could move on with his life with his wife. There was no expert opinion provided to the court to assist in a determination of fair market value as of the date of sale four years after Mr. McCarthy’s “statement of equity” sent to Ms. Sullivan in December 2006. In order to assess the property at something more than it was sold for, without expert opinion on the issue, requires the court to wade into areas of property values and real estate practices without any evidence to support the value requested. An estimate by Mr. McCarthy in December 2006 is of no help to the court in assessing property values in 2010. Any value other than the sale value would be a guess at best and completely wrong at worst. The court must make determinations on the evidence before it. The party seeking a value different from the sale price must provide solid evidence of a different value in order for the court to accept and apply it. The court is not equipped to reach a value different from the sale price without evidence from someone who knows the southwestern Ontario market and is familiar with neighbourhood comparisons in London and Sarnia. As there was no such evidence, the court is required to use the sale prices as the value of the homes and those values will determine to how much each of the parties is entitled.

[131] With respect to Hibiscus Avenue, Mr. McCarthy argued that he agreed that Ms. Sullivan was entitled to a share of the proceeds of sale of the Sarnia Road home (including the $60,928.16 given to Mr. McCarthy), but that the trail stops with the Sarnia Road home sale and does not continue to the Hibiscus Avenue home. But that home would never have been owned by Mr. and Mrs. McCarthy without Ms. Sullivan’s involuntary contribution. Had the property significantly declined in value from time of purchase in October 2010 to the time of sale in November 2016 or, if the parties had lost money in selling the Hibiscus Avenue property, there might have been no reason to pursue a claim past the proceeds of sale from the Sarnia Road home. But the home increased in value. The profit earned on the sale of the home owned by Mr. and Mrs. McCarthy for a period of five years was greater than the profit from the sale of the London Road home that the parties owned for 20 years. Without Ms. Sullivan’s contribution, there would have been no profit to share. Therefore, Ms. Sullivan is entitled to share in the proceeds of sale of the Hibiscus Avenue home.

[132] Mr. McCarthy had no right to direct his lawyer to give him in excess of $60,000.00 toward the purchase of the Hibiscus Avenue home. Ms. Sullivan had no access to any funds while she was struggling in Florida. Mr. McCarthy took money that was not his and used it to buy a property. Because at least half of the $60,000.00 was Ms. Sullivan’s, he created a constructive trust in her favour. It would be completely unsupportable to not recognize Ms. Sullivan’s beneficial interest in the Hibiscus Avenue home.

[133] With respect to the Hibiscus Avenue home, there are three beneficial owners of that property, including Trisha McCarthy, who was on title and who also contributed to the down payment and maintenance of the home. It would be unjust to reduce her interest in the home to one quarter, which is what would happen if Ms. Sullivan was given a fifty percent interest in the proceeds of sale. It would also be unjust to give Mrs. McCarthy 50% of the proceeds with Mr. McCarthy and Ms. Sullivan getting 25% each. This would reward Mr. McCarthy for his actions by putting 75% of the proceeds into his and his wife’s hands and would punish Ms. Sullivan for something over which she had no control. The most obvious solution is that each of the beneficial owners should receive 33% of the proceeds and the interest that has accrued since the sale.

[134] The money made on the sale of the Hibiscus Avenue home currently being held totals approximately $93,500.00 plus accrued interest. If each of the parties was awarded a 33% interest in the sale proceeds, Ms. Sullivan would be getting her half of the $60,000.00 taken without her consent, plus whatever portion of the interest that has accrued. She is getting both her share of the money that was taken without her consent and a portion of the increase in value of the home. Therefore the proceeds of sale of the Hibiscus Avenue at home will be divided in three equal parts.

[135] The court finds that Ms. Sullivan’s entitlement to the proceeds of sale of the three properties is as follows:

London Road, Sarnia $125,926.14 (sale price)

• $4,077.91 (for taxes that were to be paid by Mr. McCarthy)
• $2,700.00 (tenant hold back claimed by Mr. McCarthy) Total: $132,704.05 divided by 2 = $66,352.03

Sarnia Road, London $180,000.00 (sale price)

• $111,595.00 (mortgage)
• $60,928.16 (money taken by Mr. McCarthy) Total: $7,476.84 divided by 2 = $3,738.42

Hibiscus Avenue, London $318,064.98 (sale price)

• $212,016.00 (mortgage)
• No other fees subtracted because Ms. Sullivan did not consent to purchase or the use of money belonging to her Total: $106,048.98 divided by 3 = $35,349.66

[136] At the time of trial, funds were being held in trust by Mr. Battin and Mackenzie and Mackenzie. The funds held by Mr. Battin were earning interest while the funds held by Mackenzie and Mackenzie were not. The total of the funds without interest was $219,475.97.

[137] The total of Ms. Sullivan’s beneficial interest in the three properties is $105,440.11, plus pre-judgment interest. Once the pre-judgment interest is determined, Ms. Sullivan will be paid $105,440.11 plus the interest out of the funds being held by Mr. Battin and the law firm of Mackenzie and Mackenzie, immediately. In addition, the costs in the amount of $6,475.13 ordered by Bryant J. plus interest will be paid to Ms. Sullivan from Mr. McCarthy’s share of the funds currently held in trust. The balance left before calculation of the pre- and post-judgment interest is approximately $107,560.73. I intend to deal with this balance when I deal with child and spousal support.

Issue F: Is the respondent entitled to retroactive child support for the three children of the parties’ relationship?

[138] In his answer, Mr. McCarthy claimed child support for the three younger boys, Ryan and Casey, born April 14, 1989 and Darcy, born July 10, 1990. That claim was first made in January 2011. Mr. McCarthy sought child support commencing July 2006, the date he claims the parties separated.

[139] Because the parties were never married any consideration of the issue of child support must be determined under the Family Law Act, R.S.O. 1990, c. F.3. Pursuant to s. 31 of the Act, every parent has an obligation to provide support for his or her unmarried child who is a minor or is enrolled in a full time program of education, to the extent that the parent is capable of doing so. Pursuant to s. 33 of the Act, a court making an order for the support of a child shall do so in accordance with the Child Support Guidelines, O. Reg. 391/97.

[140] No request for child support had ever been made by Mr. McCarthy prior to his answer being served and filed. In making a claim in January 2011 for retroactive support back to 2006, he was asking the court to order support for a period of approximately four and a half years. The court has found that the parties separated in mid July 2009. As such, there would be no support payable by either parent to the other prior to that time. At best, Mr. McCarthy might be entitled to a retroactive order for child support commencing in July or August 2009.

[141] Before considering whether retroactive child support should be ordered and for what period, the status of the children must be determined as of mid-July 2009. In the Supreme Court of Canada’s decision of D.B.S. v. S.R.G.; L.J.W. v. T.A.R.; Henry v. Henry; Hiemstra v. Hiemstra, [2006] 2 S.C.R. 231, 2006 SCC 37, the issue of retroactive support was dealt with in great detail. At paragraph 86, the court dealt with the circumstance where an application is brought which concerns a child who is no longer eligible for support under the relevant scheme. In that instance the court was considering the provisions for child support under the Parentage and Maintenance Act, R.S.A. 2000, c. P-1 [rep. 2003, c. F-4.5, s. 129], ss. 7(1), 15, 16, 18 [am. 2003, c. I-05, s. 58(6)].

[142] Under the Parentage and Maintenance Act, the court was given the power to order support only for children under the age of 18 or for certain expenses, within the two years after they were incurred. Although the Family Law Act does not include a provision dealing with expenses incurred for the child in the two years following his/her 18th birthday, it does provide for child support to be paid for every child under the age of 18 or over 18 and enrolled in a full time course of education. The court found that there was more latitude in making such an order under the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) [am. 1997, c. 1], ss. 2(1) “child of the marriage”, (5), 15.1, 17, 25.1, 26.1(2).

[143] But where support, including retroactive support, was only requested pursuant to the Parentage and Maintenance Act, the court stated that “a court will not have the jurisdiction to order support if the child in question was over 18 at the time the application was made, or if certain expenses occurred more than two years in the past.” The claim for child support by Mr. McCarthy can only be made under the Family Law Act. That claim was first made in January 2011.

[144] In order to be eligible for support or retroactive support, the ‘children’ must have been eligible at the time the claim was made. At the time of separation in July 2009, the twins were 20 years old and Darcy was 19 years old. By the end of the summer of 2009, all of the boys were living independently. At the time the claim was made, the twins were 21 years old and Darcy was 20 years old and continued to live independently. None of the children was under the age of 18 at the time of the separation or at the time the claim was made.

[145] Ms. Sullivan provided the only evidence regarding attendance at an educational institution by the boys. She testified that Casey did not finish high school and was no longer in school after 2008. Darcy did not finish high school and was short of a few credits. He went out to work and eventually completed his high school credits. Ryan attended Western part time. There was no evidence regarding times and dates when the boys may have been in post-secondary school, whether they were there full time or what costs they might have incurred. For Mr. McCarthy to seek contribution for those expenses after July 2009, he needed to provide evidence to support the fact that one or more of the boys continued in school past the age of 18 and evidence of the expenses incurred. There was no evidence presented regarding these issues. According to Ryan’s evidence, he had finished his first year at Western University in the spring of 2009. There was no evidence that he continued in school after his first year, although he did indicate that he might return to school at some point in the future. At the time of trial, he was employed and not attending school.

[146] In the case of Louie v. Lastman, 2001 CanLII 28066 (ON SC), 2001 CarswellOnt 1737, [2001] W.D.F.L. 535, [2001 O.J. No. 1889, [2001] O.T. C. 368, 105 A.C.W.S. (3d) 291, 18 R.F.L. (5th) 311, 199 D.L.R. (4th) 741, 54 O.R. (3d) 301, the applicant brought a claim against the respondent father of two of her children for damages for breach of fiduciary duty and unjust enrichment approximately 30 years after their affair ended. The court found that the claim amounted to a claim for previously unclaimed retroactive support. The respondent sought to have the claim dismissed.

[147] The motions judge found that the respondent’s obligation to support the children during their dependency was statutory and there was no separate civil duty of care. The applicant’s claim for breach of fiduciary duty because he had failed to support the children therefore could not succeed. The claim was also defeated by delay. At paragraph 41, Benotto J. found that the applicant’s reason for the delay in making her claims was to protect the children could not extend past the time when both children were adults. Although the court agreed that delay cannot jeopardize a child’s right to support, the claim for support must be made during the child’s dependency, not decades later.

[148] On appeal to the Ontario Court of Appeal by the applicant, the decision of Benotto J. was upheld and the appeal was dismissed. (See Louie v. Lastman, 2002 CanLII 45061 (ON CA), 2002 CarswellOnt 2976, [2002] W.D.F.L. 373, [2002] O.J. No. 3522, 116 A.C.W.S. (3d) 564, 163 O.A.C. 52, 217 D.L.R. (4th) 269, 20 R.F.L. (5th) 108, 61 O.R. 459.)

[149] Although the claim made by Mr. McCarthy was not made decades after the separation, the fact remains that at the time of separation, the children were not eligible for support and at no point became eligible for support between the date of separation and the date the claim was made in January 2011. They were all adults. By September 2009, they were living independently and there was no evidence that any of them attended school full time.

[150] Since the children were not eligible for support at the time the claim was made, they are not eligible for retroactive support. Mr. McCarthy’s claim for support and retroactive support for the boys must fail. It is therefore unnecessary to analyze Ms. Sullivan’s income from 2009 for the purposes of child support.

Issue F: Is the applicant entitled to spousal support and, if so, in what amount?

[151] Ms. Sullivan sought an order for spousal support from the respondent. Although she claimed support from the date of separation in July 2009, she conceded in argument that her spousal support claim was first made in October 2010. At best, any spousal support claim should not be made for a period prior to the date when notice was given.

[152] Ms. Sullivan’s claim was made under the Family Law Act. Pursuant to s. 29, the definition of spouse includes either of two persons who are not married to each other and have cohabited, (a) continuously for a period of not less than three years, or (b) in a relationship of some permanence, if they are the natural or adoptive parents of a child. The parties lived together in excess of 20 years, had three biological children together and raised them together with Ms. Sullivan’s children from a prior marriage. Ms. Sullivan clearly meets the definition of spouse for the purposes of determining spousal support.

[153] Pursuant to s. 33 (7) of the FLA, the purposes of an order for support for a spouse should:

a) recognize the spouse’s contribution to the relationship and the economic consequences of the relationship for the spouse;

b) share the economic burden of child support equitably;

c) make fair provision to assist the spouse to become able to contribute to his or her own support; and

d) relieve financial hardship, if this has not been done by orders under Parts 1 and II.

[154] Pursuant to subsection (9) of s. 33, in determining the amount and duration, if any, of support for a spouse or parent in relation to need, the court shall consider all the circumstances of the parties, including:

a) the dependant’s and the respondent’s current assets and means;

b) the assets and means that the dependant and respondent are likely to have in the future;

c) the dependant’s capacity to contribute to his or her own support;

d) the respondent’s capacity to provide support;

e) the dependant’s and respondent’s age and physical and mental health;

f) the dependant’s needs, in determining which the court shall have regard to the accustomed standard of living while the parties resided together;

g) the measures available for the dependant to become able to provide for his or her own support and the length of time and cost involved to enable the dependant to take those measures;

h) any legal obligation of the respondent or dependant to provide support for another person;

i) the desirability of the dependant or respondent remaining at home to care for a child;

j) a contribution by the dependant to the realization of the respondent’s career potential;

k) if the dependant is a spouse,

i. the length of time the dependant and respondent cohabited;

ii. the effect on the spouse’s earning capacity of the responsibilities assumed during cohabitation;

iii. whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness, disability or other cause to withdraw from the charge of his or her parents;

iv. whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or over who is unable for that reason to withdraw from the charge of his or her parents;

v. any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse were devoting the time spent in performing that service in remunerative employment and were contributing the earnings to the family’s support;

vi. the effect on the spouse’s earnings and career development of the responsibilities of caring for a child; and

l) any other legal right of the dependant to support, other than out of the public money.

[155] At the time of trial, Ms. Sullivan was 56 years old. She and Mr. McCarthy were in a relationship for more than 20 years. During that time, they together raised five children, one of whom was disabled. During the early years of the relationship, it was Ms. Sullivan who took on the child care and housekeeping duties, with some assistance from Mr. McCarthy. Mr. McCarthy worked at various jobs, including as a property manager for his father, as a paralegal, as a sole practitioner and finally as a contract Crown attorney. He is currently employed full time as a Crown attorney in Newfoundland earning approximately $130,000.00 per annum. He is married. His wife also works as a Crown attorney in Newfoundland earning approximately $112,000.00 per annum. Together, Mr. McCarthy and his wife have a yearly income of $242,000.00 per year. Mr. McCarthy provided no evidence that he is supporting his children or that he has done so since they moved out on their own in September 2009.

[156] During the relationship, Mr. McCarthy attended law school. After he was accepted, the family uprooted from Sarnia and moved to London. Much work was done on the Sarnia Road property in order that it would house a family of seven and provide rental income as well. Much of that work was done by Ms. Sullivan. Mr. McCarthy testified that he would likely not be a lawyer without the help and support of Ms. Sullivan.

[157] Ms. Sullivan also attended university and post graduate school during the relationship. Mr. McCarthy supported her in this decision. When she moved to Florida for her post graduate work, Mr. McCarthy took on 100% of the child care, housekeeping duties and financial support for the children. From 2006 to 2009 the three younger boys lived full time with Mr. McCarthy. Ms. Sullivan was unable to send money to London to assist in the care of the children because she was barely supporting herself with some contribution from Mr. McCarthy.

[158] While at Western University, Ms. Sullivan was able to obtain contract employment for three months at a time, for one year. At that time she was filling in for an injured worker. When that worker returned to work, Ms. Sullivan’s contract was ended. A letter from Western dated August 12, 2005 was filed at Tab 25 indicating that she was being offered a three months contract position as a Graphic Specialist 1, earning $20.00 per hour. She noted that the highest amount of income in 2006 was approximately $20,000.

[159] While she was in Florida, Ms. Sullivan received stipends from the institution and was also able to do some work at the school leading shops and facilities and teaching sculpture, to help support herself.

[160] At the end of her Master’s program, Ms. Sullivan went to Indiana to attend Purdue University to complete an eight month program that would provide her with skills associated with the program she had done in Florida. A letter dated November 21, 2008 at Tab 26, indicated that Ms. Sullivan was a full time appointed bi-weekly employee at Herron School of Art and Design, located on campus in Indianapolis, Indiana as a Sculpture Technician. The letter also indicated that her employment would last from October 2008 to June 2009. Ms. Sullivan testified that at the end of this program, she would have remained in Indiana if she had been offered a job, but that did not happen.

[161] Ms. Sullivan’s evidence was she graduated from her Master’s program in 2008 at the time of the financial collapse in the U.S. and Canada. She indicated that art programs were the first programs that are limited or eliminated during periods of financial crisis. It became impossible for her to find work. She testified that she sent out hundreds of applications in both Canada and the U.S. She stated that she did not travel for interviews, but that she had interviews over the telephone. She indicated that she was continuing to apply for jobs and that there are more jobs now than there were in 2008. However, she noted that sculpture is mostly a male dominated area and that her age and her hand injuries have prevented her from finding work.

[162] With respect to the hand injury, Ms. Sullivan testified that Mr. McCarthy threw a remote at her, hitting the back of her hand in 2007. She did not seek medical attention for that injury at the time. She testified that when she returned to Florida, she had her hand x-rayed and it was found that some small bones were broken. She noted that it was not catastrophic. She provided no medical records to support this claim.

[163] Then in the latter part of 2010, she crushed her left hand in a ladder. She attended hospital in Florida and was told the third and fourth fingers were broken. The fingers were splinted and Ms. Sullivan was told to keep the splints on for six weeks and then exercise. On January 28, 2011, Ms. Sullivan attend London Health Sciences Centre complaining of continued pain and an inability to straighten her fingers manually. The diagnosis according to the health records filed at Tab 93 noted that there was degenerative change post fracture of left middle and small fingers. An x-ray showed that the bones appeared diffusely mildly osteopenic, but that there was no evidence of acute fracture or dislocation throughout the hand. There was no soft tissue swelling seen. No recommendations were made except for Ms. Sullivan to follow up if the pain worsened.

[164] Ms. Sullivan stated that she would love to continue doing renovations, but for years following her injury to her left hand she could not do simple things. She said that she could not do renovations the way she did before her injury and although she keeps applying for jobs, she has to be careful, noting that she could not run a shop anymore, because she could not even change a table saw. Her evidence was that she has no job; was not able to do renovations the way she had in the past; has applied for many jobs and has not been successful in obtaining one; she has no property; no income and a lot of debt.

[165] Mr. McCarthy argued that income should be imputed to Ms. Sullivan although he did not dispute her evidence regarding her job search; provided no evidence of the types of jobs she can do or what persons with her training and skills can earn. In the case of Bourassa v. Magee, 2015 ONCJ 534, 2015 CarswellOnt 14949, the court dealt with the issue of imputing income on a motion to change brought by the respondent father regarding child support. In that case, the recipient parent sought to impute income to the respondent due to the respondent’s alleged underemployment and/or his unemployment.

[166] At paragraph 66, the court held that courts have a significant degree of discretion when imputing income. At paragraph 67, it was noted that:

The onus is on the party seeking to impute income to establish that the other party is intentionally underemployed or unemployed. The person requesting an imputation of income must establish an evidentiary basis upon which this finding can be made.

[167] There is no question that Ms. Sullivan is entitled to some support as a result of the length of the relationship, the duties undertaken by her, her undisputed support of Mr. McCarthy during his law school years and the vast discrepancy in their ability to earn income at present. There is no question that Ms. Sullivan cannot work as she did in the past. However, she is a very talented builder, designer and artist. At her age and stage of life, she may have to work on the design end of renovations and leave the heavy lifting to sub-contractors that she hires. The evidence of both parties was that Ms. Sullivan was the ideas and action partner. She often put those ideas to work and created beautiful homes. She was able to take playground equipment that was to be discarded and turned it into a castle in her yard that all the neighbourhood children wanted to play on. That kind of talent can still be harnessed to earn income, even though she may not be able to do all of the physical work that goes with it. Ms. Sullivan struck the court as an energetic, smart and capable woman and it is somewhat surprising that in all the years since she finished her education in June 2009, she has not been able to find employment or set up her own business where she is in charge of the ideas and designs and hires people to carry out her vision. She testified that the injury to her left hand was improving. At the very least, Ms. Sullivan should be employed at minimum wage doing something to contribute to her own support until she is able to find employment in her chosen field. On that basis, the court is prepared to impute the sum of $20,000.00 per year from 2009 to the present. As the support is being ordered only for the period after the claim was made, it is a prospective award, not a retroactive one, although such an award will create immediate arrears.

[168] If the court compares the incomes of the parties since the separation in 2009, it is clear that Ms. Sullivan needs support and that Mr. McCarthy has an ability to pay that support. The incomes of the parties was as follows:

YEAR	Mr. McCarthy	Ms. Sullivan
2009	Gross: $135,222 Net: $ 33,473.50	$20,000 (as per applicant’s evidence)
2010	Gross: $184,000 Net: $ 50,604.00	No Information
2011	$46,888.49	$1
2012	$43,346.54	$1
2013	Gross: $74,487.50 Net: $55,838.08	$1
2014	Gross: $38,200 Net: $17,948.46	$0
2015	Gross: $36,600 Net: $27,425.26	No Information
2016	Estimated: $130,000.00	No Information

[169] With respect to the years since 2014, Ms. Sullivan said she has not filed income tax returns because she has had no income. She is living on $800 per month that she receives from her family. She lives in a trailer on property she purchased years ago with the remaining money she had from the proceeds of sale of Maria Street, Sarnia.

[170] In the DivorceMate calculations, Mr. Nathens asked the court to impute income to Mr. McCarthy for the years 2010 to 2015 in the amount of $60,000.00 per year. That submission was based on the fact that Mr. McCarthy did not provide evidence of his records that would support his calculation of net income from his gross income. He had a duty to provide full financial disclosure. In 2009, he grossed $135,222 and in 2010, he grossed $184,000. He appeared to be doing well in his private practice but gave that up. He was able to earn $60,000.00 as duty counsel and it is difficult to accept that he made less than this in private practice.

[171] Much of Ms. Sullivan’s evidence spoke to her impression that Mr. McCarthy was not a successful businessman, or property manager and clearly was unable to deal with the family finances. If I accept Ms. Sullivan’s description of Mr. McCarthy, it is difficult to assume he made more money than is shown on his income tax returns. For the years 2009 and 2010, where his gross income was well over $100,000.00, I am prepared to impute the amount of $60,000.00 as Mr. McCarthy’s income.

[172] In 2011, he showed employment income and business income at the full rate of $46,888, with no deductions for expenses. As such, the court should accept his income tax information as being accurate, without some other evidence to the contrary from Ms. Sullivan.

[173] In 2012, his professional income was reduced by less than $10,000.00 or 26% of his gross income. This amount does not seem unreasonable and as such his line 150 income of $43,346 will be used to determine spousal support for the year 2012.

[174] In 2013, his gross income was $74,487. His net income was shown as $55,838, which was a 25% reduction for expenses, which again does not seem to be unreasonable. Therefore his line 150 income of $55,838 will be used to determine spousal support for the year 2013.

[175] In 2014, his gross income was only $38,200. Based on that gross figure, the court cannot impute $60,000.00 to Mr. McCarthy. However, in that year, Mr. McCarthy claimed $20,251 in expenses, representing 53% of his gross income. There was no explanation as to why his business expenses more than doubled in 2014. If the 26% figure is used, which is consistent with his previous two years of tax reporting, his expenses would have been approximately $9,932, which would increase his income to approximately $28,000.00. For the year 2014, Mr. McCarthy’s income will be imputed at $28,000.00 and used to determine the spousal support for that year.

[176] In 2015, his employment income was $13,430 and his gross business income was $36,600. He deducted $22,600 or 62% of his gross income. Even if the court was to use the gross business income without deducting business expenses, the gross amount earned that year did not total $60,000. On that basis, the court cannot impute $60,000.00 to Mr. McCarthy. However, the 62% reduction of his gross professional income was again not explained, nor were any records produced of his expenses. Therefore the court will reduce his gross business income by 26% or $9,516, creating a new income amount of approximately $40,000.00, which will be used to determine spousal support for that year.

[177] In 2016, Mr. McCarthy earned approximately $129,000.00. That amount will be used to determine his ongoing spousal support obligations.

[178] Having imputed some income to both parties, the amounts set out below for the purposes of calculating spousal support are as follows:

Year	Mr. McCarthy	Ms. Sullivan
2009	$ 60,000	$ 20,000
2010	$ 60,000	$ 20,000
2011	$ 46,888	$ 20,000
2012	$ 43,346	$ 20,000
2013	$ 55,838	$ 20,000
2014	$ 28,000	$ 20,000
2015	$ 40,000	$ 20,000
2016	$ 129,000	$ 20,000

[179] Mr. Nathens provided Spousal Support Advisory Guidelines (SSAG) calculations through DivorceMate. However, the court has imputed different amounts of income to the parties than Mr. Nathens used in his calculations. Therefore, the court ran the DivorceMate calculations using the amounts shown in the table above for each year. Additionally, the court used the correct taxation years for calculation, as shown in the top right hand corner, beside the words “Tool One” rather than the year 2016 for each year’s calculation.[^3] The court has attached the DivorceMate calculations to this judgment as Appendix A.

[180] According to the SSAG, in the years 2009 and 2010, using the incomes shown above, the range for spousal support is $1,000.00 per month to $1,133.00 per month. Given that Ms. Sullivan will be receiving a significant lump sum of money from the properties, it is fair that the mid-point amount be used for support. The claim for support was made at the end of October 2009. The mid-point amount for each of the years 2009 and 2010 is $1,167.00 per month. Mr. McCarthy is obligated to pay the sum of $1,167.00 per month from November 1, 2009 to December 31, 2010, for a total in those two years of $16,338.00.

[181] For the year 2011, the mid-point SSAG amount is $784.00 per month. That amount will be paid for the months of January 2011 to December 2011 inclusive, for a total in 2011 of $9,408.00.

[182] For the year 2012, the mid-point SSAG amount is $681.00 per month. That amount will be paid for the months of January 2012 to December 2012 inclusive, for a total in 2012 of $8,172.00.

[183] For the year 2013, the mid-point SSAG amount is $1,045.00 per month. That amount will be paid for the months of January 2013 to December 2013 inclusive, for a total in 2013 of $12,540.00.

[184] For the year 2014, the mid-point SSAG amount is $ 233.00 per month. That amount will be paid for the months of January 2014 to December 2014 inclusive, for a total in 2014 of $ 2,796.00.

[185] For the year 2015, the mid-point SSAG amount is $583.00 per month. That amount will be paid for the months of January 2015 to December 2015 inclusive, for a total of $6,996.00.

[186] For the year 2016, the mid-point SSAG amount is $3,179.00 per month. That amount will be paid for the months of January 2016 to December 2016 inclusive, for a total of $38,148.00.

[187] The total spousal support payable by Mr. McCarthy to Ms. Sullivan for the years 2009 to the end of 2016 totals $94,398.00. Once Ms. Sullivan has received the amounts related to property in the amount of $105,440.11 and the costs ordered by Bryant J., plus pre-judgment interest, the remainder will be used to pay the arrears of spousal support created by this order. If there is any amount left after payment of these sums, it will be paid to Mr. McCarthy. If the amount remaining does not cover the arrears of support, a monthly amount will be added to the ongoing support until the arrears are paid in full.

[188] The court is aware that Ms. Sullivan requested a lump sum payment of support rather than periodic support. This claim was based on the fact that the parties live in different jurisdictions, and that Mr. McCarthy has not followed previous agreements and orders.

[189] Section 34 (b) provides the jurisdiction to order a lump sum amount of support.

[190] Ms. Sullivan referred to three cases regarding lump sum support payments. In the case of Stannett v. Green, 2014 CanLII 96 (ONSC), the court found that the applicant was unable to work due to depression and anxiety. She had used her inheritance and her RRSPs to meet her financial needs. The court also found that the applicant had made some poor financial decisions that contributed to her depletion of assets. The court did not accept the respondent’s evidence of his income. The expenses that he claimed to have met were not possible on the income that he reported. As a result, income was imputed to the respondent at $75,000.00 per year.

[191] Because the applicant lived in another jurisdiction (U.S.), as does Ms. Sullivan, the court held that a clean break was preferable. The court had determined that the mid-point amount on the SSAG was the appropriate amount to be paid. For the purpose of a lump sum award, the SSAG mid-point was $73,021 and the high point was $83,235. The duration of support was 5 to 10 years. The court chose the mid-point of that range as well due to the fact that interim support had been paid for 2.5 years prior to the trial. As a result, the court ordered a lump sum spousal award in the amount of $80,000.00, which was to be paid from the respondent’s share of the sale of one of the properties.

[192] This case is similar due to the parties living in different jurisdictions and needing a clean break. The differences are as follows: the duration of spousal support according to SSAG is for an indefinite duration, subject to variation and possibly review. The court has already made a support order back to the date the application was started in 2009, that will leave no money in trust after interest is factored in to provide Mr. McCarthy with any funds with which to pay a lump sum award of support. In the case above, Mr. Green was still entitled to his share of the sale proceeds of one of the properties, from which a lump sum support order could be paid. Mr. McCarthy owes a great deal of money to the government. He has no ability to pay a lump sum amount of spousal support in addition to the arrears that have been created by this order and which will be paid by way of lump sum.

[193] Ms. Sullivan is concerned about enforcing an order for periodic support. The same concerns arise if Mr. McCarthy is ordered to pay a lump sum in the requested amount of $100,000.00 that he is completely unable to pay, after all of the monies held in trust have been distributed to Ms. Sullivan.

[194] In Davis v. Crawford, 2011 ONCA 294, 2011 CarswellOnt 2512, [2011] W.D.F.L. 2861, [2011] W.D.F.L. 2992, [2011] O.J. No. 1719, 106 O.R. (3d) 498, 277 O.A.C. 200, 332 D.L.R. (4th) 508, 95 R.F.L. (6th) 257, the Ontario Court of Appeal discussed the factors to be considered in determining whether an award of lump sum spousal support is appropriate.

[195] The court found that it was well accepted and undisputed that a lump sum award should not be made in the guise of support for the purpose of redistributing assets. It can be made to relieve financial hardship if this has not already been done by orders regarding property. The court went on to say that an important consideration in determining whether to make a lump sum spousal support award is whether the payor has the ability to make a lump sum payment without undermining the payor’s future self -sufficiency.

[196] At paragraph 67, the court listed the advantages of a lump sum spousal support order as: terminating ongoing contact between the spouses; providing capital to meet an immediate need on the part of a dependant spouse; ensuring adequate support is paid where there is a real risk of non-payment of periodic support; lack of financial disclosure or where the payor has the ability to pay a lump sum but not periodic support; and satisfying immediately an award of retroactive support.

[197] The disadvantages of such an award were listed at paragraph 68, including the real possibility that the means and needs of the parties will change over time, leading to the need for a variation; the fact that the parties will be effectively deprived of the right to apply for a variation of the lump sum award; and the difficulties inherent in calculating an appropriate award of lump sum spousal support.

[198] In this case, Ms. Sullivan will be getting a lump sum amount of support in order to satisfy the support ordered back to the time of the application in October 2009. This amount together with her share of the property, and costs previously awarded, amounts to $206,313.24. When prejudgment interest is factored in, it is extremely unlikely that there will be any money left in the trust accounts. As indicated by the Court of Appeal, a very important consideration is the ability of the payor to pay such an award. In this case, Mr. McCarthy does not have that ability. Currently based on his present income, he is able to pay periodic support and going forward, spousal support should be paid monthly. Mr. McCarthy is a government employee whose wages can be easily attached if necessary to ensure payment. Mr. McCarthy will receive a tax deduction for the amounts paid periodically, which should make the amount ordered more bearable.

[199] Without reviewing the third case presented by Ms. Sullivan, I am satisfied that ongoing support should be ordered on a periodic basis rather than as a lump sum.

Issue H: Does the applicant have priority over CRA regarding the proceeds of sale of the properties?

[200] The final issue for determination is whether the applicant has priority over the CRA regarding the proceeds of sale of the properties. Mr. McCarthy took no position on this issue. Ms. Sullivan referred to the case of Trang v. Nguyen, 2011 ONSC 7076, a decision of McKinnon J. of the Superior Court of Ontario.

[201] In that case, the debtors owed income tax and GST to CRA. The CRA registered two certificates of liens against the debtor’s lands on April 12, 2005 and May 11, 2007. The CRA’s interest materialized pursuant to s. 223 of the Income Tax Act. A sister of the debtors argued that she held an equitable mortgage against the properties jointly owned by the debtor and his wife. CRA argued that their liens ranked in priority to such equitable declarations and the plaintiff and applicant sought a declaration that CRA’s liens did not rank in priority to the equitable claims. In that case, Ms. Trang’s equitable claims were unregistered.

[202] The court held that the liens registered by CRA were not “charges” within the meaning of the Ontario Land Titles Act. The court held that the CRA interest in the lands materialized under the provisions of the Income Tax Act, s. 223. That section provided that where an amount payable by a debtor has not been paid, the Minister may certify the amount payable by the debtor. On production of this certificate to the Federal Court, the certificate can be registered and when registered has the same effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the Court against the debtor for the debt, plus interest to the day of payment. McKinnon J. found that the effect of the provisions of registration was that the CRA had filed the equivalent of a judgment of the Ontario Superior Court and that the interest of CRA was the same as that of a judgment creditor, no more and no less.

[203] McKinnon J. disagreed with the CRA that their “liens” amounted to charges within the meaning of the Ontario Land Titles Act. Referring to s. 93(1) of the Ontario Land Titles Act, she noted that:

A registered owner may in the prescribed manner charge the land with the payment at an appointed time of any principle sum of money either with or without interests or as security for any other purpose and with or without a power of sale.

[204] McKinnon J. went on to note that subsection 93(4) provided that:

A registered charge is … a security upon the land thereby charged to the extent of the money or money’s worth actually advanced or supplied under the charge. …

[205] The motions judge held that the provisions above meant that only a registered owner may place a charge upon real property and that the charge provides security upon the land to the extent of the actual money or money’s worth advanced under this charge. Justice McKinnon held that it was clear the CRA was not a registered owner of the lands and that it had not advanced money or money’s worth to secure its debt. He found that the CRA was not a bona fide purchaser or mortgagee for value as it did not advance monies nor did it acquire title for valuable consideration. It merely registered liens which were the equivalent of judgments post-dating the equitable interest of the plaintiff.

[206] At paragraph 28, McKinnon J. stated, in part:

… In Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70 (S.C.C.), it was held that a property interest arising under a constructive trust can be recognized as having come into existence not when the trust is judicially declared but from the time when the unjust enrichment arose. In Stevens v. Stevens, (2006), 2006 CanLII 23141 (ON CA), 214 O.A.C. 201 (Ont. C.A.) the Ontario Court of Appeal determined that a declaration of a constructive trust interest in a property was effective as of the date when the trust arose and could support a vesting order that would give that interest in property priority over an execution creditor.

[207] The appeal by the CRA to the Ontario Court of Appeal was dismissed.

[208] In this case two liens were registered on title of the Hibiscus property: on February 2, 2012 in the amount of $33,379 and July 10, 2013 in the amount of $29,875. Ms. Sullivan’s constructive trust interest arose immediately upon Mr. McCarthy taking $60,928.16 from the sale of the Sarnia Road home and using it to purchase the Hibiscus Avenue home. Not only was the $60,928.16 not entirely Mr. McCarthy’s money, his taking it to use for his purchase of the home was contrary to an agreement reached between the parties in August 2009. Mr. McCarthy used funds that belonged to Ms. Sullivan without her knowledge or consent, while under an agreement not to do so, and purchased a new property. His actions created the constructive trust interest for Ms. Sullivan as soon as the deal closed.

[209] Mr. McCarthy closed the purchase of the home on October 8, 2010. It was on that date that Ms. Sullivan’s constructive trust interest arose. Her interest arose more than a year before the first lien was registered and almost three years before the second lien was registered. In these circumstances, the court finds that Ms. Sullivan’s interest in the proceeds of sale of the Hibiscus property takes priority over either of the liens registered by CRA, including liens they have now placed on the monies held in trust. Ms. Sullivan’s claims will be satisfied prior to the claims by CRA.

[210] A further issue that has arisen, as a result of the spousal support order that provides for ‘prospective’ periodic support for periods that have long passed, relates to whether such support is deductible by the respondent and whether the applicant must include the amounts in her income for taxation purposes. Because the periodic support has been ordered back to the date of the application and will be paid as a lump sum from the respondent’s portion of the proceeds of sale of the homes, there is a question as to whether the nature of the support has been changed. Neither party made submissions on this point.

[211] In the case of Wade v. Wade, [2016] O.J. No. 1203, 2016 ONSC 1056, Vogelsang J. dealt with this very issue. In that case, counsel for the applicant argued that the spousal support be discounted to take the effect of taxation into account. At paragraph 33, Vogelsang J. noted that the problem had been discussed by Philip Epstein Q.C. in (2015) 46 Fam.L.News. 3 where he wrote:

Tax Deductibility for a Lump Sum Payment for Retroactive Periodic Support

James v. R., 2013 CarswellNat 1460 (T.C.C. [General Procedure]): This case, decided in 2013, was a decision of the Honourable Justice Campbell Miller of the Tax Court of Canada and decides that a lump sum payment for retroactive period support paid pursuant to a court order is deductible to the payor and taxable to the recipient. Although this case was decided in 2013, there was some considerable doubt that CRA would continue to apply its principles and accept that the issue was a settled issue. As a result of its recent tax bulletins, CRA has signaled a general acceptance of the Tax Court of Canada’s decision in James and made it clear that where a lump sum amount meets the requirements of a periodic support amount, it is deductible by the payor and included in the income of the recipient. The recipient, however, has the availability of a special tax calculation in order to reduce the impact of receiving a retroactive amount in one lump sum and, theoretically, driving the recipient into a much higher tax bracket.

Simply put, if a payor has been previously ordered to make periodic support payments and does not pay them on a timely basis and subsequently pays a lump sum to catch up the support payments or where a lump sum payment is ordered by a court as retroactive periodic support, this amount will be deductible by the payor and taxable in the hands of the recipient. An amount paid as a single lump sum will generally not qualify as being payable on a periodic basis. However, there may be circumstances where a lump sum amount paid in a tax year will be regarded as qualifying as a periodic payment where it can be identified that: the lump sum amount is paid pursuant to a court order and in conjunction with an existing obligation for periodic support whereby the payment represents the acceleration or advance or future support payable on a periodic basis for the sole purpose of securing the funds to the recipient, or the lump sum is paid pursuant to a court order that establishes a clear obligation to pay retroactive periodic maintenance for a specified period prior to the date of the court order.

[212] In the case before Miller J., the husband paid to the wife $169,775.00, representing the retroactive spousal support ordered by the British Columbia Court of Appeal. This amount arose because the Court of Appeal found that the husband had considerably underpaid during the relevant period. As the tax court noted:

The British Columbia Court of Appeal did order payment in respect of periods before the date of its order – many periods. It also ordered $9,000 on a periodic basis, monthly, going forward. It did not order a lump sum; it was silent as to how the increase of $3,250 per month ($9,000 minus $5,750) was to be paid. It would be fair to presume a lump sum was likely contemplated, and certainly that is how Mr. James did in fact pay. Would it change the nature of the order to increase monthly amounts had Mr. James written 54 cheques for $3,250? The combination of the Sills concept, the authority of the British Columbia Court of Appeal to make an order for payment of support “in respect of any period before the order is made”, the binding nature of such an order on all the world (“Dale”), leads me to conclude that given how the British Columbia Court of Appeal framed its order, it was ordering increased payments for each of the preceding 54 month periods, and as such, the requirement for payable on a period basis is met. The legal obligation, even if considered to be created currently, is an obligation to make good the periodic payments, but more on this later.

[213] Mr. Epstein went on to note in the newsletter that:

Counsel will have to carefully consider this decision in making their presentation to the court. It affects whether the judgment should be netted down. If the payor is going to get the deductibility and the recipient is going to pay the tax, it seems to me that netting down is no longer necessary. However, in determining how netting down is to be calculated, it is important to bear in mind the availability of the special tax calculation for the recipient, and for that, counsel have to look at form T1198, Statement of Qualifying Retroactive Lump Sum Payment, and have their accountant assist in determining the appropriate tax rate to be considered.

[214] In the case before me, the tax deduction of periodic payments by Mr. McCarthy is very important to him. Such deductions will assist him in reducing his debt to CRA. The inclusion of the ordered support in Ms. Sullivan’s income will have less of an effect on her because the support is the only income she is going to have for those years. It is unlikely that the inclusion of each year’s spousal support will create much of a tax obligation for Ms. Sullivan.

[215] There are two options available: 1) the parties can agree as to what percentage of the amount owing in periodic support should be “netted down” or make submissions to the court on that point; or 2) the parties can assess with their accountants and CRA what effect the order will have on the deductibility and support inclusion for their clients and file the appropriate forms with CRA using the full amount as ordered. If the parties cannot agree how to proceed, they may make submissions to the court. Arrangements to make those submissions shall be made by counsel with the trial coordinator.

[216] Despite the need to deal with the tax considerations noted above, the court is prepared to order that Ms. Sullivan receive the amounts due to her for her share of the proceeds of the properties, pre-judgment interest, her costs ordered by Bryant J. and a portion of the spousal support. The remainder of the funds, if any, will be held until the tax consequences are determined and the parties either reach an agreement or return to court to make submissions.

[217] For the reasons above, a final order will issue as follows:

1. The applicant will be immediately paid the following sums from the funds currently held in the trust accounts of Mackenzie and Mackenzie and James Battin, Barrister and Solicitor:

a) $105,440.11 plus pre-judgment interest in satisfaction of her interest in the properties 194 London Road, Sarnia, 445 Sarnia Road, London and 481 Hibiscus Avenue, London;

b) $6,475.13 plus interest representing the costs ordered by Bryant J.; and

c) $50,000.00 in partial satisfaction of the spousal support ordered for the period November 1, 2009 to and including December 1, 2016.

2. The balance of the funds shall continue to be held in trust pending agreement regarding the tax consequences of the support ordered as set out above or further order of the court.

3. Commencing January 1, 2017 and payable on the first day of each month thereafter, the respondent shall pay to the applicant for her support the sum of $3,179.00 per month.

4. In the event that, following an agreement or order regarding the tax consequences of the spousal support there are not sufficient funds left in the trust accounts noted above to pay all of the arrears created by this order, the balance of arrears owing will be paid at the rate of $750.00 per month until paid in full, commencing March 1, 2017.

[218] If the parties cannot settle the issue of costs, they may make written submissions, no longer than five pages. The applicant will serve and file her submissions regarding costs by January 31, 2017 and any necessary reply by March 31, 2017. The respondent will serve and file his submissions regarding costs by March 1, 2017.

“Justice Margaret McSorley”

Justice Margaret McSorley

Released: January 4, 2017

CITATION: Sullivan v. McCarthy, 2017 ONSC 94

COURT FILE NO.: F1697/10

DATE: 2017/01/04

ONTARIO

SUPERIOR COURT OF JUSTICE

FAMILY COURT

BETWEEN:

Lori Maureen Sullivan

Applicant

• and -

Christopher Edward McCarthy and Trisha McCarthy

Respondents

REASONS FOR JUDGMENT

McSORLEY J.

Released: January 4, 2017

[^1]: 2003, Ontario eliminated grade 13, resulting in all grade 12 and grade 13 students graduating at the same time and seeking post-secondary placements and housing. This resulted in increased housing needs.

[^2]: In August 2009, the parties had a beneficial interest in 194 London Road, Sarnia and 445 Sarnia Road, London

[^3]: Except for the year 2009, as the DivorceMate Tool did not provide any years prior to 2010.