Court File and Parties
COURT FILE NO.: 40723/18 DATE: 2019-07-03 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LORRAINE ZAPFE, Applicant AND: MARTIN ZAPFE, Respondent
BEFORE: Kurz J.
COUNSEL: W. Douglas R. Beamish, for the Applicant Ken Nathens, for the Respondent
HEARD: June 27, 2019
Endorsement
Background
[1] This is a motion by the Applicant wife (“Lorraine”) for interim spousal support and a non-dissipation order. The parties have consented to the terms of a non-dissipation order. I have already made an Order to go in accordance with the interim consent of June 28, 2019.
[2] With regard to the interim spousal support issue, most facts at this stage are not in dispute. The parties engaged in a 15 ½ year relationship. They began to cohabit in December, 2001. They were married on June 23, 2006. They separated on May 29, 2017. The parties are wealthy.
[3] The Respondent husband (“Martin”) is a very successful businessman. He holds interests in a number of related companies that perform commercial dry walling. The parties agree that for the purposes of this motion, Martin earns $2.09 million per year. They owned a number of properties and lived a prosperous lifestyle.
[4] Lorraine has not worked outside of the home for the past 11 years. She is now 59 years old and is unlikely to ever obtain outside employment. The parties agree that I should impute $30,000 per year in income to Lorraine for the purposes of this motion.
[5] Lorraine has two, now-adult, children that she brought into the parties’ marriage. Martin assisted in raising them. He continues to financially assist those children, although they are no longer dependants.
[6] Following the parties’ separation, Martin has provided a total of $1,759,702 to Lorraine. Of this, $1,202,452 came from the sale of the matrimonial home, all of whose net proceeds were directed to Lorraine. In addition, Martin sold a cottage that he solely owned, and gave Lorraine half of the net proceeds, totalling $150,000. Accordingly, he has made an advance against equalization of $1,352,452.
[7] The balance of the $1,759,702 paid to Lorraine, or $407,250, has been paid to Lorraine as temporary without prejudice spousal support. It was originally paid at the rate of $12,000 per month, then increased to $15,750 per month. Since August 2018, Martin has been paying Lorraine $20,000 per month. All of this is pursuant to interim agreements, so it is taxable in her hands and deductible in his.
[8] Each party has retained his or her own Certified Business Valuator (“CBV) to determine Martin’s income for support purposes and to value his business assets as of the valuation date. Both valuators show that Martin has and continues to earn a significant level of income.
[9] Lorraine retained Martin Pont as her CBV. He offers the following income figures for Martin:
| 2014 | 2015 | 2016 | 2017 |
|---|---|---|---|
| $921,000 | $1,475,000 | $2,766,000 | $3,026,000 |
[10] Mr. Pont’s four year average for Martin is $2,047,000. His average for the last three years that he determined (2015 – 17) is $2,422,333. As the chart above shows, he has not yet determined Martin’s income for 2018.
[11] Martin retained Paul Mandel as his CBV. The years covered by Mr. Mandel’s report do not entirely overlap with those covered by Mr. Pont. That is in part because Mr. Mandel had earlier access to Martin’s 2018 income information. Mr. Mandel began his income determination in 2016 but was able to continue to 2018. He determined Martin’s income for those years is as follows:
| 2016 | 2017 | 2018 |
|---|---|---|
| $2,580,000 | $1,900,000 | $1,800,000 |
[12] Mr. Mandel’s three-year average for Martin is $2,090,000.
[13] One of the main reasons for the year-by-year variation of Martin’s income noted by both experts is the fact that his drywall company deferred income for a very large project that it performed at the Yorkdale mall in 2014 and 2015. The two CBV’s differed in regard to how to deal with the deferred income.
[14] It would be very helpful to the parties and the court if the two experts could meet to discuss their issues regarding the determination of Martin’s income. They could prepare a joint statement setting out the issues on which they agree and those in dispute. On consent, I so order under R. 1 (7.2)(k).
[15] I will not make the same order regarding the determination of the valuation day value of Martin’s businesses. That issue is not before me and was not argued. However, I strongly suggest to the parties that they arrange to have their experts engage in the same joint valuation process regarding the value of Martin’s businesses.
[16] For the purposes of this motion, the parties agree that I should use an average income figure for Martin of $2,090,000. However that is not the end of my consideration as it is open to me to base support on an income figure for Martin that is partway between the $2,090,000 figure that I am treating as his annual income figure, and the $350,000 ceiling under the Spousal Support Advisory Guidelines (“SSAG”). (See Dancy v Mason, 2019 ONCA 410, at para. 18.)
Issues
[17] In light of the fact that the parties have agreed that Martin’s present income for support purposes is $2,090,000, the issues that I must consider for this motion are:
- What factors should I consider in determining Martin’s interim support obligations for Lorraine?
- Where in the SSAG range should I fix Martin’s interim support obligations to Lorraine?
- Should my order be retroactive to the date of separation, May 29, 2017, as requested by Lorraine?
Issue No 1: What factors should I consider in determining Martin’s interim support obligations for Lorraine?
[18] This court’s jurisdiction to order the payment of spousal support is found in s. 15.2(1) of the Divorce Act (“DA”). That provision allows the court to order periodic and/or lump sum payments as the court thinks reasonable for the support of the recipient spouse. Under s. 15.2 (2) of the DA, the court may make an interim spousal support order. Under the DA s. 15.2 (3), the spousal support order may be made for definite or indefinite periods, or until a specified even occurs. The court may also impose “…terms, conditions or restrictions in connection with the order as it thinks fit and just”.
[19] Section 15.2 (4) of the DA requires the court to “… take into consideration the condition, means, needs and other circumstances of each spouse.” The factors that the court must consider include:
(a) the length of time the spouses cohabited; (b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse.
[20] Under the s. 15.2 (4) of the DA, an interim or final spousal support order should meet the following objectives:
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[21] As the Supreme Court of Canada stated in Moge v. Moge, [1992] 3 SCR 813, all four of the potentially overlapping objectives must be taken into account. None, including self-sufficiency, is paramount or should be given priority to the others. This approach recognizes the great diversity of marriages. It allows the court to take a case by case approach to the determination of spousal support.
[22] The goal of the application of these four objectives is to achieve an equitable sharing of the economic consequences of marriage or marriage breakdown. There is no guarantee that the spouses will share an equal standard of marriage after its dissolution. However, the longer the relationship and the closer the economic union, the greater will be a spouse’s presumptive claim to equal standards of living upon dissolution.
[23] In Bracklow v. Bracklow, [1999] 1 S.C.R. 420, the Supreme Court of Canada recognized that there are three conceptual grounds for entitlement to spousal support: (1) compensatory; (2) non-compensatory; and (3) contractual. The third ground is irrelevant here.
[24] Compensatory support is premised on the notion that some or all of a spouse's entitlement to support may arise out of his or her contributions to the other spouse during their relationship. That contribution may arise out of the roles that the parties assumed. Those roles may confer an advantage on one party (say career enhancement) and a disadvantage to the other (say a spouse giving up, delaying or impairing a career to assume a caregiving role during the relationship). Further a spouse may make a financial contribution to the other's career (such as supporting the spouse through their schooling).
[25] Lorraine has not presented any evidence in this motion that demonstrates her entitlement to a compensatory support claim.
[26] On the other hand, non-compensatory support is based on need and ability to pay. The claim to such support arises out of the relationship itself and the mutual financial interdependence arising from that relationship. A claim to spousal support can arise on this basis even if there is no agreement or claim to compensatory support (see Bracklow, at para. 49). As McLachlin J. wrote in para. 53 of Bracklow:
... [W]here need is established that is not met on a compensatory or contractual basis, the fundamental marital obligation may play a vital role. Absent negating factors, it is available, in appropriate circumstances, to provide just support.
[27] As Professors Carol Rogerson and Rollie Thompson, the authors of the SSAG and the SSAG Revised User’s Guide (“RUG”) note, entitlement is the threshold issue before considering the quantum and duration of spousal support. (See SSAG Revised User’s Guide, note 2, ch. 3, p. 5; see also Emerson v. Emerson, 2017 ONCA 808, at para. 103.)
[28] Here, there is no question that Lorraine is entitled to spousal support. Her entitlement arises in the context of a fifteen and a half year cohabitation and marriage. Martin concedes her entitlement. However he argues that in the absence of evidence of a compensatory claim, her entitlement arises on a non-compensatory basis. I agree.
[29] The starting point for the determination of spousal support is the SSAG (see Fisher v. Fisher, 2008 ONCA 11, at para. 101-103). The starting point for determining income under the SSAG is the definition of income under the Federal Child Support Guidelines (see SSAG, ch. 3.3.2 and Halliwell v Halliwell, 2017 ONCA 349, at para. 90). Here, as stated above, the income figure that the parties rely on has already been set at $2,090,000.
[30] That being said, other considerations apply because of the fact that Martin’s income is above the $350,000 SSAG “ceiling”. The SSAG contains both a “ceiling” and a “floor”. The ceiling defines the upper level and the floor, the lower boundaries of what the SSAG authors call “typical” cases. Those typical cases are ones where the SSAG formulas alone are intended to be used (see RUG, para.11).
[31] The SSAG ceiling is not a hard cap on support payments. Instead it represents the income level at which the SSAG tables are no longer presumptively applicable. When the SSAG ceiling applies, the determination of spousal support involves a case by case consideration of facts, individual adjustment to the SSAG calculations and the increased application of judicial discretion.
[32] The considerations that apply when a payor’s income exceeds the $350,000 ceiling are set out at chapter 11 of both the SSAG and the RUG. Professors Rogerson and Thompson write at ch. 11(b) of the RUG:
• The formulas for amount are no longer presumptive once the payor’s income exceeds the “ceiling”. • The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000. • The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts. • Above the ceiling, spousal support cases require an individualized, fact-specific analysis. It is not an error, however, to fix an amount in the SSAG range, as was done in J.E.H. v. P.L.H., above. Evidence and argument are required. • Where the payor’s income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support, with outcomes falling in the low-to mid range for amount. How far is “not too far above” is still not clear. Somewhere between $500,000 and $700,000, it seems. • Once the payor’s income is “far” above the ceiling, then the amount of support ordered will usually be below the low end of the SSAG range, but SSAG ranges are still calculated and sometimes the outcome will fall within the SSAG range.
In light of these principles, it is critical that counsel do SSAG calculations even in high income cases. It is wise to calculate the ranges for alternative income levels: for the $350,000 ceiling (as a minimum) and for the full income (as a maximum), as well as for a range of intermediate incomes (to assist the court in triangulating an outcome). For a good example of such alternative calculations, see Saunders v. Saunders, 2014 ONSC 2459.
[Emphasis in original.]
[33] The RUG also considers the application of the SSAG to interim support awards, stating, again at ch. 11(b):
A number of the reported high income decisions involve interim or temporary support awards. Interim outcomes are more likely to fall within the formula range, as the goal in the interim period is to maintain the financial status quo: Cork v. Cork, 2013 ONSC 2788. In some of these cases, the estimate of the payor’s income will be low, pushing the amount higher in the range to adjust: Saunders v. Saunders, above; Loesch v. Walji, 2008 BCCA 214.
[Emphasis in original.]
[34] In Halliwell, at para. 116, Gillese J.A., writing for the Ontario Court of Appeal stated that in dealing with cases where the payor’s income is above the $350,000 SSAG ceiling, an “additional formula is created”. It is one in which the appropriate range of income inputs for the SSAG calculation is anywhere from the ceiling figure to the actual income figure. Gillese J.A. points to two important factors in the determining the range of income to be used for support: entitlement, which I take to be the basis of entitlement (here non-compensatory) and the amount of the equalization payment.
[35] The court adds at para. 120, quoting from ch. 11 of the SSAG:
What is clear is that the larger stakes at these income levels [above $350,000] and the complexities of the individual cases mean that the Advisory Guidelines [i.e. the SSAG] will have less significance to the outcomes above the ceiling, whether negotiated or litigated.
[36] In Halliwell, the appeal court turned its attention to high property awards. Gillese J.A. stated that it is necessary to determine whether such awards met either or both of the compensatory and non-compensatory bases for support award. That determination is a key factor in the court’s exercise of discretion in cases where the payor’s income exceeds the SSAG ceiling (see paras. 120 -122).
[37] In the recent Ontario Court of Appeal case of Dancy v. Mason, the court confirms and expands upon the applicability of the process set out in Halliwell. That process allows the court to find, in appropriate circumstances, a figure between the $350,000 ceiling and the payor’s actual income as the basis for the SSAG calculations.
[38] As the court wrote at para 18:
… the SSAGs suggest that for payor income over the $350,000 ceiling, there is also a range of appropriate income input from $350,000 to the payor's actual income amount: see SSAGs at s.11.1-11.3 and this court's decision in Halliwell v. Halliwell, 2017 ONCA 349, 138 O.R. (3d) 671. This means that for payor incomes above $350,000, in addition to the low, mid-point and high-end amounts suggested by the SSAGs, there is also a "range" of possible appropriate payor income inputs. In this case, for example, the motion judge could equally appropriately have selected a payor income of $491,000, namely the half-way point between $350,000 and his total income of $632,827. This would have generated a monthly support range from $9,531 to $12,708, placing the actual amount awarded at the "high-end" of that range. [Emphasis added.]
[39] Another approach available in high income cases is the one taken by Shore J. of this court in Climans v. Latner, 2019 ONSC 1311. That was a case of a weak compensatory claim following a 14-year common law relationship with no children. In considering all of the relevant factors, Shore J. decided to apply the full $6.5 million income of the payor husband and a $30,000 annual imputed income to a dependant spouse. Because of the other relevant factors, Shore J. chose to grant support based on just 11% of the net disposable income of the parties, a figure far below the low range of the SSAG.
[40] In doing so, Shore J. looked at the recipient’s budget, eliminated some figures that she felt to be excessive, and then grossed up the remainder for taxes.
[41] In that case, Mr. Latner’s income was about 3.5 times greater than that of Martin in this case.
[42] Lorraine’s counsel, Mr. Beamish, brought the case of Obam Dallaire v. Dallaire, 2017 ONSC 3998 to my attention. That was a case of a 12-year marriage with one child that was in a four day on, four day off shared parenting arrangement. The father earned $570,789 per year while the mother earned $48,789. Beaudoin J. stated at para. 37 that “[t]he parties ought to enjoy similar lifestyles after the breakdown of the relationship.”
[43] However it should be noted that the fact of the shared custody arrangement significantly distinguishes that case from this one. In such cases, there is a default to an equal standard of living for the benefit of the child. As Professors Rogerson and Thompson stated at para 8.6(f) of the RUG,
In shared custody cases, there is a clear default location for amount in the range: the amount of spousal support which would leave the children in each household with roughly similar standards of living. See Rollie Thompson, “The TLC of Shared Custody: Time, Language and Cash” (2013), 32 Canadian Family Law Quarterly 315. This outcome is consistent with the strong statements about similar living standards in Contino v. Leonelli-Contino, 2005 SCC 63.
Where neither spouse has repartnered and there are no new children in either household, the starting point should be an amount of spousal support that leaves each household with equal net disposable income. The SSAG range in shared custody cases always includes this 50/50 NDI split, to recognize the importance of this principle. This default outcome can be adjusted, depending upon housing costs and other factors. Sometimes the equal NDI point is in the midrange, but it is just as often lower or higher in the SSAG range.
[44] Those factors do not apply here where Lorraine’s children are now independent adults.
[45] Lorraine’s counsel also brought to my attention a number of cases with exceptionally high income earners (e.g. McCain v. McCain, 2012 ONSC 7344) and/or strong compensatory support claims (e.g. Plese v. Herjavec, 2015 ONSC 7572, which has both elements). These cases are of little application to this case.
[46] Similarly in Saunders v. Saunders, 2014 ONSC 2459, Czutrin J. bases interim support on the income figure that he attributes to the payor, without including the $350,000 ceiling in his calculation. Lorraine’s counsel asks me to rely on this case to do the same here. However that case does little to assist Lorraine because the figure that Czutrin chooses to base support upon is one far lower than the payor’s line 150 income. In fact Czutrin J.’s figure is less than half of that line 150 figure.
[47] Further, Czutrin J. is quite candid in stating that he does not have full financial information for the payor. He leaves it open to the parties to revisit his decision. It is important to note as well that Saunders precedes the Ontario Court of Appeal’s decision in Halliwell.
Issue No 2: Where in the SSAG range should I fix Martin’s support obligations to Lorraine?
[48] Martin’s counsel, Mr. Nathans has, very helpfully, placed a number of SAAG calculations, based on a variety of potential income figures, in a chart found in his factum. This process should be followed more often. For example, the three monthly SSAG figures based on an income of $2,090,000, the figure agreed upon by the parties as Martin’s income for the purposes of this motion, are:
| High: | Mid: | Low: |
|---|---|---|
| $51,500 | $45,062 | $38,625 |
[49] SSAG monthly calculations based on an income of $1,220,000 are
| High: | Mid: | Low: |
|---|---|---|
| $29,750 | $26,031 | $22,312 |
[50] Lorraine argues that the proper figure is $53,000 per month, which is higher than the high range for $2,090,000. Even then, Lorraine would have only about 1/3 of the parties’ net disposable income. Lorraine arrives at this figure by looking at her budget of $24,590.10 per month and grossing it up for taxes. However I have to note that, even without a specific calculation, the pre-tax amount payable would likely be less than $50,000. That assumes that I find that all of her expenses are reasonable in the context of a wealthy, financially dependent spouse who was married to and/or living with a wealthy spouse. She states that the parties lived a lavish lifestyle. She wishes to continue that lifestyle and argues that Martin is capable of and obliged to support it.
[51] Martin denies that claim about their pre-separation lifestyle, but offers little evidence of a more modest lifestyle. At the same time, Lorraine offers no evidence of the amount of money that was spent by either her or the couple prior to separation. That information would have been helpful.
[52] All of that being said, I recognize that, to paraphrase both the author, F. Scott Fitzgerald, and lawyer/commentator, Phil Epstein, the rich are not like the rest of us. While Fitzgerald was not speaking of their spending habits, the point is made that wealthy families have spending patterns that are different from those of most people, including most lawyers and judges.
[53] Here Martin challenges the fact that Lorraine purchased a $1.8 million house, requiring her to take out a mortgage in addition to the house/cottage proceeds. He also challenges annual expenses of:
- $18,000 for clothes, especially since she has no outside employment;
- $6,000 for alcohol and tobacco
- $24,000 in entertainment/recreation
- $18,000 in gifts;
- $36,000 in vacations.
[54] Lorraine answers that these expenses are in line with her pre-separation expenses. But I have no proof to that effect. She has accepted the previous support payments for almost two years before this motion was brought. Without any such proof, and even considering the Fitzgerald/Epstein aphorism, I cannot ignore the fact that some of the expenses seem lavish (for example $84,000 per year in after tax dollars for entertainment/recreation/vacations/gifts/alcohol and tobacco).
[55] Lorraine continues that the home that she bought is actually less expensive than the home that Martin bought post-separation. Lorraine’s point is a fair one. Martin’s home costs over $2,000,000, inclusive of renovations and improvements. The fact that he gratuitously placed the home in his father’s name is irrelevant to this discussion. I will not consider the mortgage payments that Lorraine currently makes as unreasonable in the circumstances.
[56] Lorraine adds that her expenses are actually lower than those of Martin. That is true as far as it goes. Martin’s monthly expenses, as recorded in his sworn financial statement, are $108,225 per month. But if you remove his allocation for taxes ($73,700) and spousal support ($20,000), his monthly budget ($14,525) is far more modest than that of Lorraine ($24,590.10).
[57] I am also required to consider that Lorraine has already received a substantial advance against equalization of $1,352,452. In addition, the parties agree that she will receive at least a further $2.35 million or so in a further equalization payment (which will be over $3 million if Lorraine is successful). That payment is secured by the non-dissipation order that I made at the beginning of this motion. There is no reason that this matter cannot be resolved by settlement or trial within the next few months.
[58] In considering all of these factors, including the length of the relationship, the non-compensatory nature of support entitlement, the equalization already paid and yet to be paid, as well as the relative budgets of the parties, I find that an interim spousal support quantum of $30,000 per month is reasonable and appropriate in the circumstances. I so order. In doing so, I recognize that any figure simply represents rough justice that may be adjusted up or down at trial, upon a fuller evidentiary record.
[59] The figure I have chosen represents a 50% increase in the support that Lorraine has been receiving on consent since April 1, 2018. It is just over the high end of the mid-way point between $350,000 and $2,090,000 ($29,750). While it is below the low end of the range for the full income of $2,090,000 ($38,625) it is more than 75% of that figure. It also represents a figure that is, on an after tax basis, at least equal to Martin’s present budget, exclusive of taxes and support payments.
Issue No 3: Should my order be retroactive to the date of separation, May 29, 2017, as requested by Lorraine?
[60] In the circumstances of this case, including the consensual and voluntary support payments to date, the partial equalization payments made to date, as well as the fact that Mr. Pont has not calculated Martin’s income for 2018, I will defer the issue of retroactive support to trial. I am hopeful that this decision will offer the parties some guidance if they wish to resolve that issue prior to trial.
Order to Issue:
[61] For the reasons set out above, I order as follows:
- The parties shall arrange to have their CBV’s, Martin Pont and Paul Mandel, meet to discuss any issues regarding the determination of Martin’s income and prepare a joint statement setting out the issues on which they agree and those in dispute.
- Commencing on July 1, 2019 and continuing on the first date of each succeeding month until further order, Martin will pay to Lorraine temporary spousal support of $30,000 per month.
- The issue of retroactive spousal support is deferred to trial.
[62] I also strongly suggest that the parties arrange to have Mr. Pont and Mr. Mandel engage in the same joint valuation process regarding the value of Martin’s businesses, as they will do regarding his income.
Costs
[63] If the parties are unable to determine the costs of this motion, they may make submissions of up to 3 pages, double spaced, 1” margins, along with a bill of costs/cost outline/authorities and any offers to settle. In light of the results and the requests, as well as the fact that I am unaware of any offers to settle, it is unclear who the more successful party is in this motion. However the interim order that I made is far closer to the position of Mr. Zapfe than that of Ms. Zapfe.
[64] Unless the parties agree otherwise, Mr. Nathans will file his costs submissions within 14 days and Mr. Beamish shall respond within a further 14 days. There will be no reply without leave.
[65] In light of the fact that it is the summer and I will not be available throughout August, 2019, if either or both counsel wish to extend the dates for their costs submissions, they may agree to do so. In that case, I will honour their request if they inform me in writing of the extended dates to which they agree.