Court File and Parties
BELLEVILLE COURT FILE NO.: FS-17-0013 DATE: 20180920 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Deborah Jane Finch, Applicant – and – Paul Michael Finch, Respondent
COUNSEL: Lennox O. Picart, for the Applicant Peter James Robertson, for the Respondent
HEARD: June 18 and 19, 2018
REASONS FOR JUDGMENT
MINNEMA J.
Nature of the Case
1This is the wife’s application for various heads of family law relief not involving children. She is 56 years old and the respondent husband is 58 years old. They married in 1981 and separated on June 9, 2012 after 31 years together. Their two children are now both adults in their thirties. Pre-litigation mediation has been tried. The wife did not issue her application until January 11, 2017. The parties have resolved a number of issues both leading up to and during the course of the hearing.
Issues
2The remaining matters to be decided are narrow. The first class of issues relate to equalization of property, namely whether a fishing boat should be included in the husband’s net family property, their respective tax debts on the date of separation, whether an inheritance received by the wife qualifies as excluded property, and lastly whether or for how long prejudgment interest should be applied to the equalization payment. The second issue is whether there should be post-separation adjustments made for occupation rent.
Additional Background Facts
3The husband was in the military when the parties married. The family had three postings ending up in this area with his last posting to the base in Trenton, Ontario, in 1996. The wife was a stay at home mother until the youngest child started kindergarten. She became employed in Belleville with Kennametal Stellite in 1997 on the switchboard following the last transfer.
4The husband retired in 2006 and began receiving his military pension. Following his retirement the parties remained in this area and the husband immediately commenced working at SPAR Aerospace on the military base. He was still there when the parties separated on June 9, 2012. The wife is still working for Kennametal, now in Customer Service. The husband’s employment at SPAR Aerospace ended soon after separation in November of 2012, but he then worked for Cascade Aerospace commencing February 2013 until the end of May 2014. The husband has been diagnosed with Post Traumatic Stress Disorder (“PTSD”) and began receiving an Earning Loss Benefit in 2017 in addition to his military pension. He is working with a Clinical Care Manager and hopes to someday be able to return to active employment.
5Other than some minor credit card debt and personal tax liabilities, the parties’ only notable debt on the date of separation was an approximately $54,000 mortgage owing on the matrimonial home at 1 Rosslyn Drive, which was being paid (principal plus interest) at a rate of about $1,000 per month.
6When the wife left the home on separation she lived in a hotel for a period before finding an apartment in Belleville. She still resides there at a rent of $1,100 per month. The husband continued to reside at 1 Rosslyn Drive.
7Despite separating the parties did little initially to rearrange their finances. They continued to deposit their earnings into their joint accounts and to pay both joint expenses and personal expenses from those accounts. These included the joint expenses relating to the matrimonial home (mortgage, taxes, insurance, etc.), the wife’s rent, and their credit card debt.
8The parties had discussions and meetings between themselves to try to resolve their matrimonial issues. The wife noted that in February of 2013, about 8 months after the separation, when she was going to meet the husband at the home she was surprised to discover that he had changed the locks, and she called him about it. The husband indicated that he realized that this was wrong, and had them changed back. There is no evidence that her access was subsequently denied. Her snow tires, as one example, remained stored in their garage.
9The husband indicated that sometime in 2013 he contacted Jason Ballas, who was the real estate agent that had sold them either that home or their previous one. He said that as a result there were two showings of the home that year. The parties were not talking at that time, and the husband indicated he left it to Mr. Ballas to communicate with the wife. There was no evidence of any listing agreement and the home did not sell.
10On August 6, 2014 the parties paid off the balance on the mortgage of $32,759.47, having met previously to discuss their options. The wife claims that the husband was the one who wanted to do that to save on interest, and that she pointed out to him that upon discharge he would be living mortgage free and she would still be paying rent. She claims that he said he would pay her, and it was on that basis that she agreed. There were no details related to these conversations or specifically what he said he would pay her. There was no evidence that he ever did pay her or that she ever demanded payment. The husband indicated to the contrary that what happened was that he wanted to extend the mortgage but the wife refused.
11The parties continued to pay the insurance and taxes on the matrimonial home, as well as the wife’s rent, through their joint accounts. Shortly afterwards, around November of 2014, they changed that arrangement. The wife stopped paying money into the joint account and began paying her rent from her own account. The husband began solely paying for the home insurance at around $800 per year and the property taxes at around $3,500 per year. He also paid the wife’s car insurance.
12Still around November of 2014, the wife approached the husband in a text message discussion thread about the need to make some decisions about the house. They met at the house to discuss the matter but nothing was settled. Shortly afterwards the husband was in the process of scheduling a visit with Mr. Ballas at the home and the wife asked him to arrange a time so that she could be there as well. He did not do that. The wife suggests he was acting unilaterally. He suggests that communications were still tense between them and he understood that Mr. Ballas would speak to the wife directly. At some point the wife contacted a different real estate agent on her own, a Mr. Williams, but only to get a sense of the home’s value.
13By this time both parties had contacted a lawyer, and thereafter they continued to consult with counsel from time to time. However, neither chose to have counsel directly involved in trying to resolve their issues. The parties sought disclosure from each other, the wife indicating this was as early as 2014 related to the joint accounts. In March 2015 the parties agreed to work with a mediator. The wife obtained a valuation of the husband’s pension from his employer. The mediation was not successful, and the parties seemed to realize this by September of 2015.
14They had dinner together soon after at Boston Pizza. Each provided two very different accounts of that event and gave disproportionate attention to it in their evidence. The husband’s evidence was that the wife ended the mediation. She then texted him asking if he was willing to continue with it. She also said it had been a tough week and she was hoping they could talk. They arranged to meet at Boston Pizza just to have dinner and conversation. The wife said to the contrary that they met to discuss reinitiating the mediation and to get his cooperation to sell the home and divide the property. She described the meeting as uncomfortable and stressful. She claimed he got angry and yelled at her in the parking lot, which he categorically denies. I do not see anything turning on this evidence, and it is barely relevant. I do query why the wife wanted to meet in the evening at a restaurant and why she felt she would accomplish something at dinner that they could not accomplish in the mediation that had just ended. Her description of the meeting as being akin to intolerable was somewhat incongruent to her being the one initiating it and participating in the arrangements which included dinner.
15Although there was some disagreement as to when the last use of the joint accounts occurred, it appears that for the most part it stopped during the time they were in mediation, around April of 2015. The parties accounted for their respective uses of the joint accounts post-separation on consent by way of an agreed line item in their Comparison Net Family Property Statement (“CNFPS”).
16The wife blames the husband for the delay in selling the house, suggesting that as it was an advantage for him to live in it rent free he was dragging his feet. However, the evidence does not support that. The husband seemed content to sell from the outset using Mr. Ballas. The wife suggested in her evidence that she was not prepared to sell through Mr. Ballas as she felt he would somehow be biased against her. However, she did not communicate that at the time – to the contrary she wanted to meet with Mr. Ballas – and it was not explained how one agent acting for two joint tenants to sell a home created bias. The wife also admitted that she was preoccupied or busy with personal matters for much of 2016 relating to the unfortunate situation of her disabled sister.
17In January 2017 the wife issued her application. This was about 4 ½ years after the separation and it represents the first time any overture from one party to the other involved the use of a lawyer. The husband filed his answer, and with a formal legal proceeding in play and two lawyers involved things began to move relatively quickly. However, the listing of the house did not happen right away. The husband again proposed listing with Mr. Ballas. The wife wanted to get opinions from other agents and consulted with six different ones before the parties agreed on a Mr. Jacobson. It therefore still took about four to five months after the application started to choose the agent and get the house listed. The matrimonial home was sold on July 31, 2017 for $525,000, and the net proceeds are being held in trust. The parties had trouble communicating about the best way to put the net proceeds into an interest bearing account. The matter came to trial in less than a year and a half from the issuing of the application.
Net Family Property
18The property regime following the dissolution of a marriage is found in Part 1 of the Family Law Act, R.S.O. 1990, c. F.3, as amended (“FLA”). Very generally, the exercise is designed to capture the increase in the value of each party’s property between marriage and separation and share that value equally by one adjusting or equalizing payment. As the process is essentially a mathematical formula, with some exceptions or exclusions the bulk of the legal issues often involve determining the value of the assets and debts of each party on both the date of marriage and the date of separation and entering them into the formula. As noted above, the only outstanding issues in this process are valuing one asset (a fishing boat), valuing one debt category (income taxes), and determining one claimed exclusion (an inheritance). The onus of proving a deduction, or the value of an asset, is on the person claiming it: FLA section 4(3) and Homsi v. Zaya, 2009 ONCA 322, [2009] O.J. No. 1552 (Ont. C.A.). Once those issues are dealt with, the last but perhaps most significant item is determining the parameters of the prejudgment interest on the equalization payment.
Disputed Valuation Date Asset – the Fishing Boat
19There is no dispute that the husband bought a “fishing boat”, appearing to consist of boat, motor and trailer, in 2013. Very roughly, this purchase was about a year after the parties separated, but about a year before they stopped using their joint accounts. The wife’s position is that the boat should be included in the husband’s net family property because it was purchased from joint funds. Without addressing whether that would be the proper approach versus a post-separation adjustment, I first turn to the evidence to see if it supports the underlying ‘joint funds’ allegation.
20The husband produced a “Sales Deal Summary” from Bay Marine indicating that boat was delivered on April 6, 2013, the first payment date was May 6, 2013, and the “Finalized Date” was May 9, 2013. The total price was $19,486.85 including fees and taxes. He also produced a statement from his sole business account showing a withdrawal of $17,494.35 on May 6, 2013. In his oral testimony he indicated that was for payment of the balance of the purchase price, after a deposit of $2,000.00 from the same account. The two separate payments are not itemized in the Bay Marine document, which appears to be a summary provided by the vendor sometime later, and not the actual sales document. The wife provided no evidence of her own. In particular, there are no records supporting her suggestion that the source of payment was from the joint accounts.
21In her closing submissions the wife indicated that (1) she had concerns about whether the husband’s recollections were accurate, (2) the source of the monies was not clear, and (3) the husband failed to produce documentation showing the source of the $2,000 down payment.
22Although the math is off by a few dollars (the husband appears to have overpaid by $7.50), in my view the date of the purchase matches the date of the husband’s withdrawal from his business account. His explanation about an earlier $2,000 down payment is sensible. I accept this evidence, and find that the fishing boat was purchased by him not out of joint funds and after the date of separation. I can therefore see no basis for including it in his net family property nor the need for a post-separation adjustment.
Disputed Valuation Date Debts – Income Taxes
23The treatment of the parties’ personal taxes was a very complicated mathematical issue of little consequence. The spread in their positions on the main issue was only $1,000, translating into an equalization difference of $500. The complicating factors are:
(a) As noted the parties separated on June 9, 2012, about five months into the year. (b) The husband subsequently prepared both their 2012 income tax returns, treating the parties as still married. (c) The husband split his pension income between them, and perhaps some investment interest as well, as he had done in previous years. (d) The wife’s total tax debt at the end of the year was about $3,600. She indicated that without the pension income it should have been about $1,250. There is no dispute that the amount of her tax liability for that year attributed to his pension was $2,442. (e) As of the end of the 2012 calendar year the husband owed $17,422 on his personal taxes, as set out in is 2012 Assessment.
24I make a few observations before turning to their respective positions, adding to the complicated nature of this minor issue.
(a) There is no doubt that moving pension income to the wife saved the parties on their overall combined tax liability to some degree, with the husband as the higher income earner. (b) There is no indication it was a huge amount. At some point the wife saw an accountant who told her that a refiling would not make much of a difference, and that there was a cost involved. (c) It is not clear how their relative tax liabilities were actually paid. As they continued to operate through their joint accounts, the only evidence suggests that they were paid from joint funds. (d) The wife acquiesced in this treatment for years. Eventually in 2016 she contacted the Canada Revenue Agency to address it, but was told that she was beyond a limitation period. (e) That delay is consistent with the parties leaving most of their financial arrangements unchanged following separation and carrying on as before.
25The parties’ positions are set out in the Comparison Net Family Property Statement and they also addressed this issue in evidence and submissions. The CNFPS was a document filed on consent, and as noted there is an agreement on figures, just not treatment.
26The parties did not provide any law on this issue. Debts and liabilities are to be deducted from a spouse’s net family property as of the valuation date: FLA section 4(1). These include tax debt up to the valuation date: Luftspring v. Luftspring at para. 4.
27The parties’ position related to the issue does not serve to simplify matters, and indeed adds to the complicated nature of the issue:
(a) The wife did not claim a date of separation deduction for any portion of her $1,250 tax debt not related to the pension. (b) The wife seeks a full deduction for all her taxes for the full year related to the pension. (c) The husband agrees to the wife having a deduction related to the $2,442 in her net family property, but proportionally for the last 7 months of the year only. That is for the period after separation (7/12ths), and not the date of separation value. His rationale is that because the pension was split and accounted for in the equalization process as of the date of separation, she should only get a deduction for the 7 months of the year that they were not together. (d) The husband seeks to deduct his own tax debt proportionally for the first 5 months of the year up to separation (5/12ths) to arrive at the correct date of separation value. (e) The wife is not prepared to allow the husband any deduction for his own date of separation tax debt. There was no real explanation as to why, and I can see no reason for such treatment. While this position shows up in the CNFPS, it was not specifically argued.
28There is no doubt that the husband’s tax liability was somewhat lower for 2012 and the wife’s was higher because of the income splitting. I do not know by how much.
29If the parties were making arguments for post-separation adjustments related to their joint accounts, they did not frame it that way. The pension was a monthly benefit. There is no suggestion, for example, that the bulk of this tax liability was proportionally incurred after separation, such as a situation where there is a large RRSP withdrawal. There is no accounting as to how the post-separation withdrawals from their joint account related to the payment of their respective or combined tax debts. There is plenty of room to speculate about unfairness here, but little evidence.
30In my view, to uncomplicate this messy issue, I return to the fact that this is only a net family property argument, not a post-separation adjustment argument. The tax debts are the tax debts. There is no evidence as to what the debts would have been had the taxes been done properly, but regardless the time for a party to adjust those debts with the third party (CRA) has passed, barred by a limitation period. They owed what they owed.
31In my view the husband’s position of apportioning his tax debt to get at a date of separation value seems roughly reasonable, namely 5/12ths of the total debt. Again, the wife’s debt to CRA was her debt to CRA, regardless of how it arose. She should have the same proportional 5/12ths date of separation deduction. I note that this amount is less than the husband’s proposal in the CNFPS. The husband’s position is that she have a deduction of 7/12ths or $1,424, which is higher. However, the wife indicated that her total liability to CRA was roughly $3,600 and the amount proposed by the husband is roughly 5/12ths of that, so I hold him to that number.
32For those reasons, I accept the husband’s numbers in the CNFPS. I would add that the husband claimed a similar 5/12ths debt deduction for his business GST liability with a GST/HST Netfile Confirmation, and I allow that as well.
Disputed Excluded Property – the Wife’s Inheritance
Law and Issue
33There is no dispute that on July 14, 2005 and May 19, 2006, the wife received inheritance funds of $44,400.00 and $2,557.37 respectively totalling $46,957.36. That was roughly about 23 years after they married, and about 7 years before they separated. She deposited the monies into the parties’ CIBC joint savings account (“JSA”).
34The wife claims that amount is to be excluded from her net family property pursuant to FLA section 4(2)1. As noted in Rawluk v. Rawluk, [1986] O.J. No. 735 (H.C.J.) at para. 30 (affirmed by the Ont. C.A. at , [1987] O.J. No. 971 which was in turn affirmed by the S.C.C. at , [1990] 1 S.C.R. 70) “… the only exclusions permitted by this section are for the value of property inherited or gifted that a spouse still owns on the valuation date ... [i]t is not a general exclusion of all inheritances or gifts received by a spouse from third persons.” By agreement, the CIBC joint savings account (“JSA”) had a balance of $79,415.80 on the date of separation. The only issue to be determined is whether part of that is the same inheritance money, namely her claim to tracing pursuant to section 4(2)5.
35Both parties rely on the decision of Townshend v. Townshend, 2012 ONCA 868, where a $25,000 gift to the husband was received and deposited into a joint account in 2001, and subsequently transferred into another joint account in September 2004. The parties separated about 9 months later in May of 2005, and at the time there was $31,000 in that second joint account. The tracing for the first 3 years was conceded, as the wife acknowledged that the $25,000 gift went into the second joint account. So the sole issue was whether the $25,000 could be traced to the $31,000 over a period of 9 months. The wife submitted that the husband could not prove it was the same money because of a lack of disclosure. The Court of Appeal characterized that as an “overly formulistic approach” and held that a “compelling inference arises” despite the lack of evidence, and allowed the husband a $12,500 exclusion.
36The usual approach for tracing monies in investment accounts has been referred to in the case law as the “pro rata method”: see Goodyer v. Goodyer, [1999] O.J. No. 29 (Ont. Gen. Div.) at paragraphs 69 and 70, and Wolfe v. Wolfe at paragraph 53. What this means is that a calculation is made of the ratio of exempt inheritance funds to the non-exempt funds that have been deposited into the account and that ratio is applied to the funds remaining in the account on the date of separation (Wolfe at paragraph 54). As suggested in Townshend, this approach is subject to being relaxed when common sense and a reasonable balance of probabilities calls for a different result: see Henderson v. Casson, 2014 ONSC 720, 2014 O.J. No. 519 (Ont. S.C.J.) at paragraphs 90 and 91.
37After the inheritance or the part of it that remains in the account has been traced, the amount of the exclusion is then to be halved when dealing with a joint account. The reason is that one half of the gift or inheritance loses its exclusionary character as it is presumed to be gifted to the other spouse. The halving after tracing was the approach used in both Townshend and Goodyer. While there are exceptions to that result (for example if the joint account was merely used as a conduit: see Barrett v. Barrett, 2014 ONSC 540), it is accepted by the wife in this case. Her position is that she is only seeking one half of the total inheritance as an exclusion, or $23,478.60.
Tracing of the Inheritance through the Joint CIBC Savings Account
38I make the following general observations:
(a) The date of the initial inheritance deposit (July 14, 2005) to the date of separation (June 9, 2012) was about 7 years, and spanned 83 months. (b) The only records that were in evidence from the JSA were from September 1, 2008 to January 5, 2010. This means that records for 66 months or about 5 ½ years of the tracing period are not available. (c) The gap in evidence includes the first 3 years after the inheritance deposit. The wife indicated that the bank records were no longer available. (d) The second gap of 2 ½ years from the last record to the date of separation is unexplained. The wife indicated that she had records for 2010 and 2011, but they were not referred to or otherwise put into evidence. (e) There is no evidence as to the balance of the JSA on the dates when the inheritance monies were deposited.
39I have examined the available records, which again are for only about 17 months of the 83 in question, and from them I note the following:
(a) The first indicated balance in the account was $118,351.62, on September 1, 2008. (b) Not including entries for interest, service charges, corrections, or anything under $20, I count about 82 transactions over the 17 month period, or about 5 transactions on the account per month on average. (c) The bulk of the deposits were identified as “Internet Transfers” or “Credit Memos”, and the bulk of the withdrawals as “Debit Memos”. Over the 17 months there was one withdrawal to each of Hydro One, Municipal Water and Sewer, and Sears Mastercard. (d) The lowest balance in the account was $34,800 on October 8, 2008, although there were a number of transactions that same day, perhaps simultaneously. The highest balance was $147,161.08 on July 29, 2009. For the most part the account hovered somewhere between $50,000 and $80,000.
40There were a few other points about the JSA and its use that came out during questioning:
(a) The wife said that the JSA balance never dipped below $46,957.36. While it was perplexing how she could make that assertion without all the records, I note that she was not challenged or contradicted on that evidence. (b) The mortgage of the parties’ previous home was paid off in 2006 by a lump sum payment from the JSA. The wife had suggested that the mortgage was retired by only regular monthly payments with a yearly top-up, but that seemed improbable given the particulars of the charge. The husband maintained that there was a lump sum transfer of between $30,000 and $50,000 to retire that debt, which I accept as more probable. (c) The purchase of the husband’s Tacoma truck for $27,260.50 in June of 2008 (before the records in evidence) came out of the joint account. (d) In the statements spanning about 13 months from December 2008 to January 2010, about $150,974 went into the account, and about $161,837 went out. (e) The records for June and July of 2009 were significant because the parties sold their previous home and bought what became the matrimonial home as a ‘new build’. Monies traced to the matrimonial home would not be excluded (FLA section 4(2)5). The records show that the balance in the JSA was $87,414.00 beforehand and the wife explained that in June they withdrew $34,000.00 for the down payment. They subsequently deposited $50,000.00 and $35,193.65 separately being the proceeds from the sale of their previous home. Then, at the end of July, they transferred $85,102.86 to pay for the matrimonial home. That left the balance in the account at $56,150.60 at the end of the month (after two further withdrawals of about $3,000 each).
Analysis
41Tracing is a prospective tool and not a retrospective tool: Fotheringham v. Fotheringham, [2004] O.J. No. 77 (Ont. S.C.J.). Put another way, one must start at the original inheritance and follow the transactions forward from there: Goodyer at paragraph 66. Again, the onus of proving that the monies can be traced is on the wife.
42In my view it is impossible to apply the pro rata approach here. Without records for the full period, I am unable to determine the ratio of exempt funds to non-exempt funds that have been deposited. It is obvious from just the periods for which records are available that significant other funds have gone into this account, making it very unlikely that had all the records been available a significant percentage of the remaining funds on the date of separation would be attributable to the inheritance. Further, that amount would still need to be halved given that we are dealing with a joint account.
43The wife has tried with her evidence to suggest that a ‘first in last out’ approach to the exclusion would be fair. Essentially she has argued that as there is no issue that the inheritance funds went into the JSA and as there is no evidence to contradict her assertion that the balance of the account never dipped below the amount of the inheritance, then the money that remained in the account at the date of separation was the inheritance money. There two obvious problems with this argument.
44First, it is not supported by the law. She relies on Townshend, but in that case the tracing spanned only 9 months. Unlike the facts there, I cannot see a “compelling inference” that after 7 years the inheritance monies are what remains in that account. I would add that there was no evidence to support a “common sense” approach to the effect that special treatment of these funds was intended. Indeed, there was an incident when the wife moved a large sum of money from their joint account to her sole account in March of 2015, well after the date of separation. The husband somehow had it moved back into their joint account. In describing her reasoning in making that unilateral transfer, the wife only indicated that she was concerned about the husband’s spending habits. She notably did not say it was related to her inheritance. There is no evidence that any special demarcation of the funds was discussed during or after the marriage.
45Second, even if a ‘first in last out’ treatment was available, there is no evidence of the balance of the account on the dates the inheritance funds ($46,957.36) were deposited, namely July 14, 2005 and May 19, 2006. As noted, the first indicated balance in evidence was $118,351.62 on September 1, 2008. If that difference of over $70,000 was already in the account before the inheritance monies went in, then when balance of the account subsequently dipped to about $50,000 -- as it did many times in the records we do have -- the ‘first in’ monies at the date of separation were clearly not from the inheritance.
46In my view the wife has not met the onus of establishing the exclusion she seeks.
Prejudgment Interest
Issue
47The parties agreed on the value of the husband’s military pension. It is the significant asset that results in the equalization payment. They agreed on the percentage to be deducted for notional taxes. They agreed that the equalization payment would be satisfied by a transfer from the husband’s pension, and they also agreed that gross-up on the equalization payment would therefore be required. The further agreed what the rate would be, and (per a joint submission following the trial attached as Schedule “A”) how it would be calculated. The only remaining related issue was whether or over what period prejudgment interest was to be applied to the equalization payment. They even agreed that for any period the equalization would attract prejudgment interest it would be at an annual rate of 2.4 percent.
Law
48Pursuant to section 128 of the Courts of Justice Act (“CJA”), R.S.O. 1990, c. C.43, a person entitled to the payment of money is entitled to claim interest at the “prejudgment interest rate” calculated from the date the cause of action arose to the date of the order. Section 127(1) defines how the prejudgment interest rate is calculated. Section 128(4)(b) precludes interest on interest. Section 130(1) indicates that it is in the discretion of the court to change either the rate of interest or the duration of interest. Section 130(2) provides factors the court shall take into consideration as follows:
130 (2) For the purpose of subsection (1), the court shall take into account, (a) changes in market interest rates; (b) the circumstances of the case; (c) the fact that an advance payment was made; (d) the circumstances of medical disclosure by the plaintiff; (e) the amount claimed and the amount recovered in the proceeding; (f) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and (g) any other relevant consideration.
49While the granting of prejudgment interest is discretionary, as a general rule the payor spouse is required to pay it on an equalization payment owing to the payee spouse: Burgess v. Burgess (1995), 24 O.R. (3d) 547 and Fielding v. Fielding, 2015 ONCA 901 at paragraph 43. The Burgess decision however adds that “in family law cases … exceptions do exist to the usual award” and both those cases reference an exception where “the payor spouse cannot realize on the asset giving rise to the equalization payment until after trial, does not have the use of it prior to trial [and] the asset generates no income” (Fielding still at para. 43).
50Prejudgment interest is generally applied as a matter of fairness. The different considerations are summarized in A. J. Freedman and P.G. White’s Financial Principles of Family Law (2017 Thomson Reuters Canada Limited (Looseleaf)), and in particular Chapters 46.1 and 46.2. In most cases if prejudgment interest is not awarded, the passage of time (ie. the effects of inflation, lost opportunity cost, etc.) will erode the value of the equalization payment since the date of separation, with the result being that the payor spouse will retain more than required and the payee would receive less. This would in effect create an unequal division of property. The party seeking a result different than the general rules therefore needs to convince the court that its applying prejudgment interest would be unfair.
51As noted the parties have agreed on the interest rate, and they further indicated on consent that they will utilize the actuary and do the math for the formal issued order. All they need from the court is a ruling on whether it will exercise its discretion to depart from the general rule, and specifically a decision regarding from what date if any the equalization payment will begin attracting prejudgment interest (“PJI”).
Positions
52The wife is simply seeking PJI to the date of separation maintaining, per section 128(1), it is “the date the cause of action arose.” She disputes any delay by her, indicating that she attempted to engage to resolve the matter from the outset.
53The husband makes three arguments. First, he points to the delay by the wife in progressing this matter to court, and suggests that delay should disqualify her from PJI or in the alternative limit it to a shorter period as determined to be reasonable by the court. His second argument in closing submissions mirrors to some degree his argument related to occupation rent (discussed further below), namely he asks the court to consider the disparity in incomes. Lastly, he argues that he has overpaid for the past 5 years as he has received his pension income from a decreasing asset while the wife will be getting the date of separation value.
Analysis
54Delay is one defined aspect of conduct in this analysis per section 130(1)(f). However, it is hard to lay the blame for delay solely at the feet of either one of the parties. The reality is that either one could have started the litigation at any time. The evidence supports the wife’s assertion that she was the first one to initiate settlement discussions. The delay benefitted both of them with respect to the increase in value of the jointly owned matrimonial home. It is difficult to rationalize a denial of PJI on the equalization payment to the wife as a penalty against her for delay. With the equalization being primarily based on the husband’s pension, as noted further below it is difficult to determine who benefitted from the delay with respect to that asset. I’m not sure it is the wife, or that the net result is an unequal division of property in her favour.
55I do not see how the disparity of the parties’ incomes is a proper factor in this analysis. Surely that is a matter more appropriately considered in a spousal support claim which, interestingly enough, both parties made but neither pursued at trial. I do note that the husband attempted to rely on the disparity of incomes related to his occupational rent argument, and in some sense he is attempting to play that card twice. I would also note that the parties’ incomes were almost the same during the first three years (2012 to 2015) when not including the husband’s pension income. If his pension income were included since separation he was the higher income earner in all but 2 of the last 6 years.
56It is not clear what the husband means when he says that he has overpaid for the past 5 years as he has received his pension income from a decreasing asset while the wife will get the date of separation value. It appears that he is suggesting that prejudgment interest should be denied because the pension is in pay, and is therefore depreciating. He indicated that he felt the pension was already split for a period following separation, presumably relying on their pooling of their incomes. However, I note that the pension benefits were still received by him, not by both of them. They were his contribution to their pooled resources, not hers. Further, if the pension is indexed, he would have gotten the benefit of that for an extra five years to date on the pension’s full value. I would need actuary or other expert evidence to assist me in understanding why there is a compelling reason on the evidence to deny prejudgment interest in these circumstances. There is no evidence of the nature of the pension (ie. whether it is calculated based on a defined benefit) or whether that would make a difference. The wife was to receive the equalization on the valuation date, and there is an opportunity cost to her not doing so. Without a detriment to the husband being proved, the rationale for denying her prejudgment interest escapes me.
57As a final comment, the husband referred to the decision in O’Brien v. O’Brien, 2017 ONSC 5488 which applies the Burgess exception at para. 75. However, it appears that the equalization payment in that case was based on the “future” interest in a pension. The ages of the parties were not indicated, so there is no sense when the pension would be in pay. In this case, to the contrary, the husband has had use of the pension as an asset that generates income, which in my view would take it outside of the Burgess exception.
Summary - Equalization Payment
58With no variation of share, I find that the husband owes an equalization payment to the wife of $296,382.90, which is the figure from the husband’s column of the CNFPS ($243,923.12) grossed up based on the agreement of the parties as reflected in Schedule “A”. Prejudgment interest shall be calculated on that amount from the date of separation at the agreed rate of 2.4 percent per year.
Post-Separation Expense Adjustment - Occupational Rent
59There is also claim by the wife related to their post-separation finances outside of the equalization of marital property regime under the Family Law Act, namely occupation rent.
Law
60As there was no order for exclusive possession with respect to the matrimonial home, section 24(1)(c) of the FLA regarding occupational rent does not apply. However, there is no dispute that there is a general jurisdiction for dealing with the sharing of the responsibilities between joint tenants, and that occupation rent is available with respect to jointly owned real property. The applicant relies specifically on section 122(2) of the CJA in that regard, and there is a body of case law that also supports that proposition.
61As set out in Griffiths v. Zambosco (2001), 54 O.R. 397 (Ont. C.A.), the occupational rent remedy is discretionary (para. 50) and the test is what is equitable and reasonable in all the circumstances (para. 49). That decision lists a number of factors that may be taken into account, and a more up-to-date expanded list is set out in Virc v. Blair, 2016 ONSC 49 at paragraph 454. I address the relevant ones as raised by the parties below.
Factors and Positions
Limitation Period
62The husband relies on the Limitations Act, 2002, S.O. 2002, Ch. 24, Sch. B, arguing that this claim is caught by the basic limitation period in section 4 which reads as follows:
- Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
63Relying on the limitation period ‘rolling’ in the sense that when applied to rent the claims are for each installment as it becomes due (see Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179 at paragraph 24), the husband asserts that the monthly occupancy rent claims are statute barred prior to January 11, 2015, which is two years prior to the date the application was issued. However he did little beyond citing the Act and making the calculation. The wife in turn did not address this defence at all.
64It is not obvious to me on its face that the Limitation Act applies. To the contrary, section 2(1)(a) indicates that it specifically does not apply to proceedings to which the Real Property Limitations Act, R.S.O. 1990, Ch. L.15 applies. That latter Act in turn indicates at section 4:
- No person shall … bring an action to recover any land or rent, but within ten years next after the time at which the right to … bring such action, first accrued …
65While I appreciate that there could be many legal subtleties brought to bear on this analysis – such as whether the notional occupation “rent” is rent as contemplated by that Act -- the onus was on the husband to establish the two year limitations defence, and in my view on a plain reading of the legislation I am unconvinced he has done so.
Duration of the Occupancy
66There is no dispute that the husband remained in the home from separation until the date it was sold, a period of approximately 5 ½ years.
Evidence as to Market Rent
67The wife despite having ample time to provide evidence as to market value rent as permitted by a ruling at the Trial Management Conference, failed to do so. A mid-trial voir dire denied her attempt to circumvent that order. As such there is no independent evidence of the market rent for the matrimonial home upon which to frame her occupational rent claim.
68Her counsel, however, made a cogent argument to the effect that as the wife’s rent for a small apartment during the relevant time was no less than $1,100 per month, this is evidence that rent for the much more spacious home would be at least that. The wife was therefore seeking occupational rent of $550 per month since the date of separation being half that amount.
69Although the husband is not agreeing to any amount of occupation rent in light of the other factors, for this narrow factor his response is that if any occupational rent is allowed, he should get a credit for half of the home expenses he has paid. The wife did not dispute that. In effect her request is therefore that the overall accommodation costs of both parties pooled and divided equally. If the total yearly expense is calculated as $17,400 (wife’s rent at $13,200, house taxes at $3,400, and house insurance at $800), the husband would be required to pay the wife $4,500 per year to have them each contribute one half of the overall difference of $9,000. That number would be the same if calculated as the husband maintains, namely half of the tax and insurance expenses deducted from a notional occupational rent of $550 per month being half the wife’s rent. If the court were to allow the occupational rent claim after considering the other factors, this formula would of course only apply to the period after the parties stopped paying their personal expenses from the joint funds.
Timing of the Claim
70As noted above, the wife indicated that the husband agreed to pay her some unspecified amount when the mortgage was discharged in August of 2014. Other than that discussion, there is no evidence of any payment and no evidence of demand or an expectation for payment until the application was issued in 2017. Indeed, there is no dispute that the first time occupation rent is mentioned was in the application. I note again the incident mentioned in paragraph 44 above, and point out that the wife did not suggest the husband’s alleged failure to pay her something related to rent was the reason she unilaterally moved a large sum of funds from their joint account.
71The husband’s position is that the wife should not be permitted to ‘bank’ occupation rent by not addressing it for such a long span of time: see O’Brien v. O’Brien, 2017 ONSC 5488 at paragraph 68. There is no real explanation as to why she waited so long to make her claim. It took the parties almost 3 years to get to mediation which ended in the fall of 2015, and it was a full year after that before the application was issued. The wife suggested that looking after arrangements for her disabled sister consumed much of her 2016 – a feeling of being “overwhelmed” was referred to in her closing submissions – although she also indicated that she met with a lawyer in early 2016, then in June of that year, and again “multiple times” that fall.
Inability of the Wife to Realize on her Equity
72The evidence does not establish any serious or concerted push by the wife to have the home sold. Indeed, she appeared to be somewhat indecisive. Even after she started her application it took at least four months to choose a real estate agent.
Efforts to Sell the Home
73In the Virc decision, drawing from Higgins v. Higgins, 2011 ONSC 3011, the expanded version of this factor is “[w]hether the non-occupying spouse moved for the sale of the home and, if not, why not.” This is similar to the previous factor and again, other than both parties individually contacting a real estate agent at different points in time before the application, nothing was done by the wife to force a sale, notwithstanding that she had been in contact with a lawyer.
Support/Carrying Charges/Conduct
74This heading is a melding of several of the expanded factors noted in Virc and Higgins, which can be summarized loosely as an attempt to get to the overall financial fairness.
75Summarizing the facts very generally, for a period of time following separation the parties kept pooling their money and using the joint accounts for their housing expenses, including the mortgage, taxes and insurance on the matrimonial home, and the wife’s rent. When the mortgage was paid off, this arrangement became more advantageous for the husband, but they agreed to that together. No specific arrangement was made between them to adjust or make payments to the wife. That was short lived in any event, as soon afterwards the joint accounts were closed and the husband began to pay the property taxes of roughly $3,500 per year and home insurance of roughly $800 per year on his own, as well as the wife’s car insurance. He also indicated that in addition he was solely responsible for the maintenance of the property, although there was no evidence what that entailed.
76Connected to these events was the parties’ relative incomes. Although the husband was receiving his pension which was in pay on the date of separation, it was valued as an asset and is being split through the equalization process. As a result the husband in assessing relative incomes has backed out his pension income as double dipping, which makes sense and there was no objection to that treatment from the wife. Following the period when they continued to pool incomes to contribute to their mutual living expenses, the wife’s yearly Line 150 income for the years 2015 to 2017 averaged about $64,000 while the husband’s was about $15,000. This disparity might have been a consideration by the wife in her lack of urgency to bring her claim. Indeed, the husband claimed spousal support in his answer. He did not pursue it specifically at trial (there was no evidence of entitlement) but chose instead to have the relative equities of their financial circumstances weighed in the context of the occupational rent and prejudgment interest claims.
Increased Value
77As noted the husband indicates that along with paying the taxes and insurance in the last several years before sale, he solely paid for maintenance on the home. Again, there was no dollar value. However, he accepted the wife’s value of the home as of the date of separation as $375,000, and as the house was sold for $525,000 the increase in value during his occupancy was $150,000.
78It is not clear to me that this sizeable investment growth is attributable to specific action by the husband as opposed to changes in the real estate market. However, the wife will benefit as a joint owner from the increase in value: see Ward v. Ward, 2011 ONSC 570 at paragraph 29. In other words, even after discounting for the general effects of inflation, there was some advantage to her in delaying a disposition related to the home.
Analysis/Disposition
79I cannot see how it would be fair to allow occupation rent during the years the parties were paying living expenses out of pooled resources. For the three or so years after that I cannot see the fairness of the husband paying even $4,500 per year to the wife when she was the higher income earner, delayed in bringing her occupational rent claim, and benefitted from the fortuitous growth in the property’s value as a result of the delay. In my view the equities for an occupational rent award are not established, and I deny the request.
Divorce
80On consent, the parties are divorced.
Decision
81Orders to go as set out above. The results here are somewhat mixed. However, if the parties want to address me on costs I will accept brief written submissions from each provided that they are received within twenty days. Both parties are also permitted to make a two page costs reply within five days after receiving the other’s submissions.
Mr. Justice Timothy Minnema