Court File and Parties
COURT FILE NO.: 17-040 DATE: July 25, 2018
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Wagner v. Kenny BETWEEN: Melanie Wagner, Applicant and Andrew Kenny, Respondent
BEFORE: Honourable Mr Justice Martin James
COUNSEL: M. Peter Sammon for the Applicant Caroline Kelly for the Respondent
HEARD: June 27, 2018
Endorsement
Introduction
[1] This is a motion brought by the applicant for an order freezing funds removed from the parties’ joint investment account and for an accounting of any missing amounts.
[2] The parties were married in Varadero, Matanzas, Cuba and have two children, Aiden age 11 and Bronwyn, age 12.
[3] The applicant is an elementary school teacher and the respondent operated a dairy farm acquired from his parents that he sold in 2007.
[4] The money in question was the product of the sale of the farm and milk quota. The funds were initially placed in a non-registered investment account in the respondent’s name only. At a later date the investments were transferred to an account in their joint names. The account holds a large quantity of stocks and other investments that generate a stream of dividends and interest.
[5] In March, 2018, concerned that the respondent was going to use the money to buy a house or otherwise deplete the funds, the applicant withdrew her previously-given consent to allow the bank to act on the respondent’s instructions only and directed the bank not to permit further withdrawals without her consent. Somehow this did not prevent the bank from permitting the transfer of the entire amount, $484,715.37, on April 23, 2018 into a new account under the respondent’s sole control. He directed the bank to send ongoing statements to the applicant as well as himself.
Position of the Applicant
[6] The position of the applicant is that the money was put in an account in their joint names because the respondent wished her to benefit from the proceeds of sale in recognition of her contribution to the family by way of her salary as a teacher and her child-rearing responsibilities.
[7] The applicant notes that the respondent has not paid child support since separation and questions his purported need to have access to the money pending finalization of the litigation.
[8] The applicant also says that because the respondent acted unilaterally and improperly, he should be deprived of further access to any amount out of the fund on an interim basis.
Position of the Respondent
[9] The position of the respondent is that he took control of the funds because the applicant had attempted to put restrictions in place that would have limited his ability to access the funds. He says the entire amount belongs to him and that he has been making unilateral withdrawals of dividends, interest and capital for years to the knowledge, and with the permission, of the applicant.
[10] He says that the applicant’s name was added to the account for estate planning purposes. She has never withdrawn money from the fund and he never intended to grant a beneficial interest to her. He says that he relies on the fund as his main source of income. He has always declared the income from the fund as his own in his tax filings.
[11] Contrary to the applicant’s assertions, the respondent says he paid most of the household expenses, the parties kept their finances separated and the applicant was secretive about her spending habits.
[12] The respondent alleges bad faith on the part of the applicant and says she brought this motion in response to his request for an assessment under s. 30 of the Children’s Law Reform Act. He notes that the applicant’s request to the bank was made the day after an assessment had been ordered and the respondent had been directed to provide a $9,000 retainer to the assessor.
[13] The respondent also says that the applicant’s equalization entitlement is well-secured and there are adequate assets to protect the applicant’s claim without resorting to controls on the account in question.
Issue
[14] Should the respondent’s access to the funds in the investment account be temporarily limited in some fashion and if so, to what extent?
Discussion
[15] Section 14 of the Family Law Act retains the presumption that a resulting trust is created when property is transferred by one spouse to the other with two exceptions: 1) there is a rebuttable presumption in favour of joint tenancy where spouses formally hold property as joint tenants, and 2) money held in a joint account is deemed to be held as joint tenants. At best, the applicant has a claim for half of the funds.
[16] It is difficult at this stage to assess how the equalization process will impact the financial position of the parties. Presently they are substantially apart on what the equalization picture will look like.
[17] I accept the applicant’s contention that some sort of control ought to be imposed on the account but in my view the applicant is overreaching in her request to freeze the funds entirely and/or to place severe restrictions on the respondent’s ability to manage and access the account. The historical pattern respecting how the parties treated the account is instructive. This pattern includes the following considerations:
a. Only the respondent removed funds; b. The applicant does not appear to have provided investment management or instructions respecting this account; c. The account operated without input from the applicant for many years; d. The applicant permitted transactions to occur without her specific authorization; e. The respondent does not appear to have any other source of income; f. Tax reporting was by the respondent only.
Disposition
[18] A preservation order will issue in relation to one half the value of the account at the date of separation, being $310,133.63. As requested, counsel have provided proposed conditions to be attached to the preservation order. In the circumstances present here, I find the conditions proposed by the respondent more closely reflect the historical pattern of usage and these conditions are to be incorporated into the preservation order.
[19] I recognize that the terms of the preservation order leave the respondent in control of how the account is to be managed, including the portion that may belong to the applicant. Nothing herein should be taken as limiting the applicant’s entitlement to challenge how any funds belonging to the applicant were managed or invested if the returns prove to be unreasonably low.
[20] On the issue of costs, the parties have made reciprocal allegations of bad faith and unreasonableness that they say ought to be taken into account in their favour. Maybe it is true that one or both of the parties was motivated by malevolent intent, certainly they are quick to see that in each other, but there is also “cover” for both sides to claim that they were acting reasonably in the particular circumstances of this motion.
[21] Ms. Wagner can say with some justification that she was at least partially successful on the motion, having obtained a preservation order for part of the funds but in seeking onerous terms, her reach exceeded her grasp.
[22] Mr. Kenny made an offer to settle that compares favourably with the final outcome. It was served after the initial return date for the motion so can it be said that the offer was served before the motion commenced?
[23] I am not prepared to make costs payable at this time. Accordingly, the costs of the motion are fixed in the sum of $5,000 inclusive of disbursements and HST, payable in the cause as determined by the trial judge. One of the factors to be taken into account in determining which party was successful “in the cause” is the question of true ownership of the funds in the investment account and whether the applicant is actually a beneficial owner.